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Appeal No. LXVI of 1949. Appeal from the High Court of judicature, Bombay, in a reference under section 66 of the Indian Income tax Act, 1022. K.M. Munshi (N. P. Nathvani, with him), for the appel lant. ' M.C. Setalvad, Attorney General for India (H. J. Umrigar, with him), for the respondent. 1950. May 26. The judgment of the Court was delivered by MEHR CHAND MAHAJAN J. This is an appeal against a judgment of the High Court of Judicature at Bombay in an income tax matter and it raises the question whether munici pal property tax and urban immoveable property tax payable under the relevant Bombay Acts are allowable deductions under section 9 (1) (iv) of the Indian Income tax Act. The assessee company is an investment company deriving its income from properties in the city of Bombay. For the assessment year 1940 41 the net income of the assessee under the head "property" was computed by the Income tax Officer in the sum of Rs. 6,21,764 after deducting from gross rents certain payments. The company had paid during the relevant year Rs. 1,22,675 as municipal property tax and Rs. 32,760 as urban property tax. Deduction of these two sums was claimed under the provisions of section 9 the Act. Out of the first item a deduction in the sum of Rs. 48,572 was allowed on the ground that this item represented tenants ' burdens paid by the assessee, otherwise the claim was disal lowed. The, appeals of the assessee to the Appellate As sistant Commissioner and to the Income tax Appellate Tribu nal were unsuccessful. The Tribunal, however, agreed to refer two questions of law to the High Court of Judicature at Bombay, namely, (1) Whether the municipal taxes paid by the applicant company are an allowable deduction under 555 the provisions of section 9 (1) (iv) of the Indian Income tax Act; (2) Whether the urban immoveable property taxes paid by the applicant company are an allowable deduction under section 9 (1) (iv) or under section 9 (1) (v) of the Indian Income tax Act. A supplementary reference was made covering a third question which was not raised before us and it is not there fore necessary to refer to it. The High Court answered all the three questions in the negative and hence this appeal. The question for our determination is whether the munic ipal property tax and urban immoveable property tax can be deducted as an allowance under clause (iv) of sub section (1) of section 9 of the Act. The decision of the point depends firstly on the construction of the language employed in sub clause (iv) of sub section (1) of section 9 of the Act, and secondly, on a finding as to the true nature and character of the liability of the owner under the relevant Bombay Acts for the payment of these taxes. Section 9 along with the relevant clause runs thus: (1) The tax shall be payable by an assessee under the head ' income from property ' in respect of the bona fide annual value of property consisting of any buildings or lands appurtenant thereto of Which he is the owner, . . subject to the following allowances, namely : (iv) where the property is subject to a mortgage or other capital charge, the amount of any interest on such mortgage or charge; where the property is subject to an annual charge not being a capital charge, the. amount of such charge; where the property is subject to a ground rent, the amount of such ground rent; and, where the property has been acquired, constructed, repaired, renewed or recon structed with borrowed capital, the amount of any interest payable on such capital; . . . " It will be seen that clause (iv) consists of four sub clauses corresponding to the four deductions allowed 556 under the clause. Before the amending Act of 1939, clause (iv) contained only the first, third and fourth sub clauses. Under the first sub clause interest is deductible whether the amount borrowed on the security of the property was spent on the property or not. There is no question of any capital or other expenditure on the property. The expression "capital charge" in the sub clause cannot connote a charge on the capital, that is, the property assessed. That would be a redundancy as the opening words themselves clearly indicate that the charge is on the property. We are therefore of opinion that capital charge here could only mean a charge created for a capital sum, i.e., a charge to secure the discharge of a liability of a capital nature. In 1933 the Privy Council decided the case of Bijoy Singh. Dudhuria vs Commissioner of Income tax, Calcutta (1 ). It was not an assessment under section 9 but an assess ment on the general income of an assessee who was liable to pay maintenance for his step mother which had been charged on all his assets by a decree of Court. It was not a li ability voluntarily incurred by him but one cast on him by law. The Privy Council held that the amount paid by him in discharge of that liability formed no part of his real income and so should not be included in his assessment. Though the decision proceeded on the principle that the outgoings were not part of the assessee 's income at all, the framers of the amending Act of 1939 wanted, apparently, to extend the principle, so far as the assessment of property was concerned, even to cases where obligatory payments had to be made out of the assessee 's income from the property charged with such payments, and the second sub clause, namely, "where the property is subject to an annual charge not being a capital charge, the amount of such charge" was added. It is this sub clause which the appellant invokes in support of its claim to deduction of the municipal and urban, property taxes in the present case. In view of the opening words of the newly added sub clause, the expression "capital charge" also used therein cannot have reference to a charge on the property, and we think it must (1) I.L.R. 60 cal. 557 be understood in the same sense as in sub clause (1); that is to say, the first sub clause having provided for deduc tion of interest where a capital sum is charged on the property, this sub clause provides for a deduction of annual sums so charged, such sums not being capital sums, the limiting words being intended to exclude cases where capital raised on the security of the property is made repayable in instalments. In Commissioner of Income tax, Bombay vs Mahomedbhoy Rowji (1), a Bench of the Bombay High Court considered the meaning of these words. As regards "annual charge," Beau mont C.J. observed as follows : "The words, I think, would cover a charge to secure an annual liability." Kania J., as he then was, said as follows : "I do not see how a charge can be annual unless it means a charge in respect of a payment to be made annually." This construction of the words has been followed in the judgment under appeal. In Gappumal Kanhaiya Lal vs Commissioner of Income tax (2) (the connected appeal before us), the Bench of the Allahabad High Court agreed with the construction placed on these words in the Bombay case, i.e., the words "annual charge" mean a charge to secure an annual liability. It is therefore clear that there is no conflict of judicial deci sions as to the meaning of the phrase "annual charge" occur ring in section 3 (1) (iv) and the meaning given is the natural meaning of these words. As to the phrase "capital charge", Beaumont C.J. in the case above referred to took the view that the words mean a charge on capital. Kania J., however, took a different view and observed that he was not prepared to accept the sugges tion that a document which provides for a certain payment to be made monthly or annually and charged on immoveable property or the estate of an individual becomes a capital charge. In the Allahabad judgment under appeal these (1) I.L.R. (2) I.L.R. 1944 All. 558 words were considered as not meaning a charge on capital. It was said that if an annual charge means a charge to secure the discharge of an annual liability, then, capital charge means a charge to secure the discharge of a liability of a capital nature. We think this construction is a natu ral construction of the section and is right. The determination of the point whether the taxes in dispute fall within the ambit of the phrase "annual charge not being a capital charge" depends on the provisions of the statutes under which they are levied. Section 143 of the City of Bombay Municipal Act, 1888, authorises the levy of a general tax on all buildings and lands in the city. The primary responsibility to pay this property tax is on the lessor (vide section 146 of the Act). In order to assess the tax provision has been made for the determination of the annual rateable value of the building in section 154. Section 156 provides for the maintenance of an assessment book in which entries have to be made every official year of all buildings in the city, their rateable value, the names of persons primarily liable for payment of the property tax on such buildings and of the amount for which each building has been assessed. Section 167 lays down that the assess ment book need not be prepared every official year but public notices shall be given in accordance with sections 160 to 162 every year and the provisions o+ the said sec tions and of sections 163 and 167 shall be applicable each year. These sections lay down a procedure for hearing objections and complaints against entries in the assessment book. From these provisions it is clear ' that the liabil ity for the tax is determined at the beginning of each official year and the tax is an annual one. It recurs from year to year. Sections 143to 168 concern themselves with the imposition, liability and assessment of the tax for the year. The amount of the tax for the year and the liability for its payment having been determined, the Act then pre scribes for its collection in the chapter "The collection of taxes. " Section 197 provides that each of the property taxes shall be payable in 559 advance in half yearly instalments on each first day of April and each first day of October. The provision as to half yearly instalment necessarily connotes an annual li ability. In other words, it means that the annual liability can be discharged by half yearly payments. Procedure has also been prescribed for recovery of the instalments by presentment of a bill, a notice of demand and then distress, and sale. Finally section 212 provides as follows : "Property taxes due under this Act in respect of any building or land shall, subject to the prior payment of the land revenue, if any, due to the provincial ,Government thereupon, be a first charge . . upon the said build ing or land . " It creates a statutory charge on the building. Urban immove able property tax is leviable under section 22 of Part VI of the Bombay Finance Act, 1932,on the annual letting value of the property. The duty to collect the tax is laid on the municipality and it does so in the same manner as in the case of the municipal property tax. Section 24 (2) (b) is in terms similar to section 212 of the Bombay Municipal Act. It makes the land or the building security for the payment of this tax also. For the purposes of section 9 of the Indian Income tax Act both these taxes, namely, the munici pal property tax as well as the urban immoveable property tax are of the same character and stand on the same foot ing. Mr. Munshi, the learned counsel for the appellant con tended that both the taxes are assessed on the annual value of the land or the building and are annual taxes, although it may be that they are collected at intervals of six months for the sake of convenience, that the income tax itself is assessed on an annual basis, that in allowing deductions all payments made or all liabilities incurred during the previ ous year of assessment should be allowed and that the taxes in question fell clearly within the language of section 9 (1) (iv). The learned Attorney General, on the other hand, argued that although the taxes are assessed for the year the liability to pay them arises at the beginning 560 of each half year and unless a notice of demand is issued and a bill presented there is no liability to pay them and that till then no charge under section 212 of the Act could possibly arise and that the liability to pay being half yearly in advance, the charge is not an annual charge. It was also suggested that the taxes were a capital charge in the sense of the property being security for the payment. We are satisfied that the contentions raised by the learned Attorney General are not sound. It is apparent from the whole tenor of the two Bombay Acts that the taxes are in the nature of an annual levy on the property ' and are assessed on the annual value of the property each year. The annual liability can be discharged by half yearly instalments. The liability being an annual one and the property having been subjected to it, the provisions of clause (iv) of sub sec tion (1) of section 9 are immediately attracted. Great emphasis was laid on the word"due" used in section 212 of the Municipal Act and it was said that as the taxes do not become due under the Act unless the time for the payment arrives, no charge comes into existence till then and that the charge is not an annual charge. We do not think that this is a correct construction of section 212. The words "property taxes due under this Act" mean property taxes for which a person is liable under the Act. Taxes payable during the year have been made a charge on the property. The liability and the charge both co exist and are co exten sive. The provisions of the Act affording facilities for the discharge of the liability do not in any way affect their true nature and character. If the annual liability is not discharged in the manner laid down by section 197, can it be said that the property cannot be sold for recovery of the whole amount due for the year ? The answer to this query can only be in the affirmative, i.e., that the proper ty is liable to sale. In Commissioner of Income tax, Bombay vs Mahomedbhoy Rowji(1) Beaumont C.J., while rejecting the claim for the deduction of the taxes, placed reliance on (1) I.L.R. 561 section 9 (1) (v) which allows a deduction in respect of any sums paid on account of land revenue. It was observed that land revenue stands on the same footing as municipal taxes and that as the legislature made a special provision for deduction of sums payable in regard to land revenue but not in respect of sums paid on account of municipal taxes that circumstance indicated that the deduction was not allowable. For the same purpose reference was also made to the provi sions of section 10 which deal with business allowances and wherein deduction of any sum paid on account of land reve nue, local rates or municipal taxes has been allowed. In the concluding part of his judgment the learned Chief Jus tice said that it was not necessary for him to consider what the exact meaning of the words was and that it was suffi cient for him to say that it did not cover municipal taxes which are made a charge on the property under section 212 of the Bombay Municipal Act. Without determining the exact meaning of the words used by the statute it seems to us it was not possible to arrive at the conclusion that the taxes were not within the ambit of the clause. It is elementary that the primary duty of a Court is to give effect to the intention of the legislature as expressed in the words used by it and no outside consideration can be called in aid tO find that intention. Again reference to clause (v) of the section is not very helpful because land revenue is a charge of a paramount nature on all buildings and lands and that being so, a deduction in respect of the amount was mentioned in express terms. Municipal taxes, on the other hand, do not stand on the same footing as land revenue. The law as to them varies from province to province and they may not be necessarily a charge on property in all cases. The legis lature seems to have thought that so far as municipal taxes on property are concerned, if they fall within the ambit of clause (iv), deduction will be claimable in respect of them but not otherwise. The deductions allowed in section 10 under the head "Income from business" proceed on a different footing and a construction of section 9 with the aid of section 10 is apt to mislead. 562 Kania J. in the above case in arriving at his conclusion was influenced by the consideration that these taxes were of a variable character, i.e., liable to be increased or re duced under the various provisions of the Municipal Act and that the charge was in the nature of a contingent charge. With great respect, it may be pointed out that all charges in a way may be or are of a variable and contingent na ture. If no default is made, no charge is ever enforceable and whenever there is a charge, it can be increased or reduced during the year either by payment or by additional borrowing. In Moss Empires Ltd. vs Inland Revenue Commissioners (1) it was held by the House of Lords that the fact that certain payments were contingent and variable in amount did not affect their character of being annual payments and that the word, "annual" must be taken to have the quality of being recurrent or being capable of recurrence. In Cunard 's Trustees vs Inland Revenue Commissioners (2) it was held that the payments were capable of being recur rent and were therefore annual payments within the meaning of schedule D, case III, rule 1 (1), even though they were not necessarily recurrent year by year and the fact that they varied in amount was immaterial. The learned Attorney General in view of these decisions did not support the view expressed by Kania J. Reliance was placed on a decision of the High Court of Madras in Mamad Keyi vs Commissioner of Income tax, Madras(3), in which moneys paid as urban immoveable property tax under the Bombay Finance Act were disallowed as inadmis sible under section 9 (1) (iv) or 9 (1) (v) of the Indian Income tax Act. 'This decision merely followed the view expressed in Commissioner of income tax, Bombay vs Mahomedb hoy Rowji (4)and was not arrived at on any independent or fresh reasoning and is not of much assistance in the deci sion of the case. The Allahabad High Court (1) (2) [1948] 1 A.E.R. 150. (3) I.L.R. (4) I.L.R. 563 in Gappumal Kanhaiya Lal vs Commissioner of Incometax (1) (the connected appeal) took a correct view of this matter and the reasoning given therein has our approval. The result is that this appeal is allowed and the two questions which were referred to the High Court by the Income tax Tribunal and cited above are answered in the affirmative. The appellants will have their costs in the appeal. Appeal allowed.

The charge created in respect of municipal property tax by section 212 of the City of Bombay Municipal Act, 1888, is an "annual charge not being a capital charge" within the mean ing of section 9 (1) (iv) of the Indian Income tax Act, 199.2, and the amount of such charge should therefore be deducted in computing the income from such property for the purposes of section 9 of the Indian Income tax Act. The charge in respect of urban immoveable property tax created by the Bombay Finance Act, 1939 is similar in character and the amount of such charge should also be deducted. The expression "capital charge" in s.9(1) (iv) means a charge created for a capital sum,that is to say, a charge created to. ' secure the discharge of a liability of a capi tal nature; and an "annual charge" means a charge to secure an annual liabili ty. 554

Pursuant to the directions of the Income tax Appellate Tribunal, the Income tax Officer, determined the assessee 's capital gains under section 12B of the Income tax Act, 1922. He did not, however, make any order under section 23(3) of the Act, nor did he issue a notice of demand under section 29 of the Act. The assessee filed an application before the Commissioner of Income tax, under section 33A(2) of the Act, for revising the computation made by the Income tax Officer drawing his attention to a decision of the Bombay High Court in Baijnath 's case, , as to how the capital gains should be ascertained. That decision was based upon a consideration of the very documents which were the basis of the assessees ' claim. The Commissioner dismissed the revision petition as not maintainable, as well as on merits, ignoring the Bombay decision. Meanwhile, the assessee filed an application requesting the Income tax Officer to issue a notice of demand under section 29, to enable him to file an appeal, but the Officer declined to do so. The assessee filed a writ application in the High Court for issuing appropriate writs to the Commissioner and the Income tax Officer, but the High Court dismissed it in limine. In his appeal to this Court, the assessee contended that (i) the High Court erred in holding that the affidavit filed in support of the writ petition was not in accordance with law, and that even if there were any defects the High Court should have given him an opportunity to rectify them, and (ii) the High Court erred in distinguishing the Bombay decision and in holding that there was no force in the revision filed before the Commissioner, and that, the High Court should have directed the Commissioner to entertain the revision and dispose of it in accordance with law by giving suitable directions to the Income tax Officer. The respondent raised a preliminary objection that as the order of the Commissioner was an administrative act, article 226 of the Constitution could not be invoked. HELD:(i) As no appeal lay to the Appellate Assistant Commissioner against the calculations made by the Income tax Officer, the Commissioner had powers under section 33A(2) to revise the Income tax Officer 's order. The jurisdiction conferred on the Commissioner by the section is a judicial one, The nature of the jurisdiction and the rights decided carry with them necessarily the duty to act judicially in disposing of the revision. Further, the fact that a Division Bench of one of the High Courts in India had taken a view in favour of the assessee, indicated that the question raised was arguable and required serious consideration. Therefore, a writ of certiorari quashing the order of the Commissioner dismissing the assessee 's revision petition, should be issued. [544E G; 548D] 537 Sitalpore Colliery Concern Ltd. vs Union of India, , Additional Income tax Officer, Cuddapah vs Cuddapah Star Transport Co. Ltd. and Suganchand Saraogi vs Commissioner of Income tax, , overruled. Even if the Commissioner only made an administrative order in refusing, to give any direction to the Income tax Officer, the assessee would still be entitled to approach the High Court under article 226, and a writ of mandamus directing the Income tax Officer to discharge his statutory duty of passing the order and issuing the notice of demand in accordance with law, should be issued. [546C E] (ii)The affidavit filed on behalf of the assessee was complete and compiled with the rules made by the High Court. The affidavit spoke only of matters which were within the deponent 's own knowledge, because, the phrase "deponent 's own knowledge" is wide enough to comprehend the knowledge derived from a perusal of relevant documents. Even if the affidavit was defective in any manner, the High Court instead of dismissing the petition in limine should have given the assessee, a reasonable opportunity to file a better affidavit. [547F G, H] (iii)The High Court was also in error in holding that the decision of the Bombay High Court was given on different facts, for the facts in both cases were the same and they arose out of the same transaction. [548B C]

In 1865, the Government of Bombay called upon the prede cessor in title of the Corporation of Bombay to remove some markets from a certain site and vacate it, and on the appli cation of the then Municipal Commissioner the Government passed a resolution approving and authorising the grant of another site to the Municipality. The resolution stated further that "the Government do not consider that any rent should be charged to the Municipality as the markets will be, like other public buildings, for the benefit of the whole community. " The Corporation gave up the sites on which the old markets were situated and spent a sum of over 17 lacs in erecting and maintaining markets on the new site. In 1940 the Collector of Bombay, overruling the objection of the Corporation, assessed the new site under section 8 of the Bombay City Land Revenue Act to land revenue rising from Rs. 7,500 to Rs. 30,000 in 50 years. The Corporation sued for a declaration that the order of assessment was ultra vires and that it was entitled to hold the land for ever without payment of any assessment. The High Court of Bombay held applying the principle of Ramsden vs Dyson(1) that the Government had lost its right to assess the land in question by reason of the equity arising on the facts of the case in favour of the Corporation and there was thus a limitation on the right of the Government to assess under section 8 of the said Act: Held per KANIA C.J., DAS, CHANDRASEKHARA AIYAR and BOsE JJ. (PATANJALI SASTRI J. dissenting) that the Govern ment was not, under the circumstances of the case, entitled to assess land revenue on the land in question. Per KANIA C.J., DAS and Bose JJ. Though there was no effectual grant by the Government passing title in the land to the Corporation by reason of non compliance with the statutory formalities, yet, inasmuch as the Corporation had never the less taken possession of the land in terms of the Government resolution and continued in such possession openly, uninterruptedly and as of right for over 70 years, the Corporation had acquired the (1) (1866)L.R. 44 limited title it had been prescribing for during the period, that is to say, the right to hold the land in perpetuity free of rent, but only for the purposes of a market and for no other purposes. The right acquired included as part of it an immunity from payment of rent which constituted a right in limitation of the Government 's right to assess in excess of the specific limit established and preserved by the Government Resolution within the meaning of section 8 of the Bombay City Land Revenue Act (II of 1876) there being for the purposes of this case no distinction between rent and revenue. Per CHANDRASEKHARA AIYAR J. If the Resolution of 1865 can be read as meaning that the grant was of rent free land the case would come strictly within the doctrine of estoppel enunciated in section 115 of the Indian Evidence Act. Even otherwise, if there was merely the holding out of a promise that no rent will be charged in the future the Government must be deemed to have bound themselves to fulfil it. The right to levy assessment is a prerogative right of the Government and it is hard to conceive of a ease where it could be said to be lost by adverse possession. A court of equity must prevent the perpetration of a legal fraud. PATANJALI SASTRI J. (contra) The principle of Ramsden vs Dyson cannot prevail against statutory requirements regarding disposition of property or making of contracts by Government. No question of estoppel by representation arises, as the Government made no representation of fact which it now seeks to deny. Nor can any case of estoppel by acquiescence be rounded on the facts of the case as there was no lying by and letting another run into a trap. No right of exemption has been established either on the basis of express or implied contract or on the basis of equitable principles of part performance or estoppel by acquiescence. The right to levy land revenue is no part of the Govern ment 's right to property but a prerogative of the Crown and adverse possession of the land could not destroy the Crown 's prerogative to impose assessment on the land.

The respondent Company was assessed to wealth tax for the assessment year 1957 58 and the respondent claimed deduction of an amount laid out for setting up a new unit. The licence for setting up the new unit was granted in 1955; the construction of the factory building was completed by December 1957; the erection of the machinery and plant was completed in several stages commencing from June 1957; the licence for working the factory was obtained in June 1958; and time given to complete the project also was extended by Government up to March 17, 1959. The Wealth Tax Officer disallowed the claim on the ground that the unit was, set up prior to the date on which the Wealth Tax Act came into force, ie., April 1, 1957. This order was upheld in appeals. But in reference, the High Court answered the question in favour of the assessee, for, it proceeded on the basis that the unit was completed and became ready to go into business after the Act had come into force. HELD : The assessee was entitled to the claim as it satisfied the condition laid down in cl. (xxi) of section 5(1) of the Act. The criterion for determining the period of exemption is based on the commencement of the operations for establishment of the unit. These operations for establishment of the unit cannot be simultaneous with the setting up of the unit, but must precede the actual setting up of the unit. [1764 G H] The word "set up" in clause (xxi) of section 5(1) of the Act, is equivalent to the word "established" but operations for establishment cannot be equated with the establishment of the unit itself or its setting up. The applicability of the, proviso has, therefore, to be decided by finding out when the company commenced operations for establishment of the unit, which operations must be antecedent to the actual date on which the company is held to have been set up for purposes of the principal clause.[1764 D E] Western India Vegetable Products, Limited vs Commissioner of Income tax, Bombay City, referred to. In the present case, the Tribunal proceeded on the basis that whatever be the exact date of commencement of the operations for establishment of Ibis unit,, it was certainly before April 1, 1957 and that fact by itself is sufficient to entitle the assessee to claim the exemption. The Commissioner cannot be allowed to raise a new question and ask this Court to decide that the date of commencement of the operation for establishment of the unit by the respondent was different from that accepted by the Tribunal. That question was not raised and dealt with by the Tribunal, [766 E] Commissioner of Income tax, Bombay vs Scindia Steam Navigation Co., Ltd., ; relied on.

The appellant company was a dealer in ghee and groundnut oil etc. The Deputy Commercial Tax Officer assessed it to sales tax for the year 1948 49 on a turnover of Rs. 28,69,151 and odd. Similarly for the year 1949 50 the appellant was assessed to sales tax on a turnover of Rs. 28,72,o83 and odd. The appellant challenged these assessments and its appeal before the Commercial Tax Officer having failed the two matters came up in second appeal before the Sales Tax Appellate Tribunal. In the Tribunal the appellant did not place any materials in support of its contentions and the two appeals were disposed of by the Tribunal holding that the appellant was correctly assessed to sales tax. In respect of the aforesaid orders of the Tribunal the appellant filed applications for review under section 12A(6)(a) of the Madras General Sales Tax Act, 1939 (Mad. Act IX Of 1939), taking the plea that in the first case the materials could not be placed before the Tribunal as there was none to instruct the appellant 's advocate in English or Telegu, and in the second case the relevant correspondence was mixed up with other records. The Tribunal rejected the applications for review on the ground that a failure to produce the necessary materials in support of a plea taken before it, due either to gross negligence or deliberate withholding, did not come within the reason of section 12A(6)(a) of the Act. The High Court upheld the decision of the Tribunal. On appeal by special leave in one case and a certificate of the High Court in the other: Held, that the provision in section 12A(6)(a) of the Madras General Sales Tax Act, 1939 (Mad. Act IX Of 1939), permits a review when through some oversight, mistake or error the necessary facts, basic or evidentiary, were not present before the Court when it passed the order sought to be reviewed, but a party was not 805 entitled to ask for a review when it had deliberately or intentionally withheld evidence in support of a claim made by it. State of Andhra vs Sri Arisetty Sriyamulu, A.I.R. 1057 Andhra Pradesh 130, not approved.

The respondent 's appeal against an order of assessment was rejected by the Appellate Assistant Commissioner and he, thereafter appealed to the Appellate Tribunal. The Tribunal, after having granted some adjournments, dismissed the appeal for default in appearance On a day fixed for the hearing, purporting to do so under rule 24 of the Appellate Tribunal Rules, 1946. The High Court directed the Tribunal to refer two questions to itself one relating to the merits and the other to the effect whether rule 24 of the Appellate Tribunal Rules, 1946, in so far as it enables the Tribunal to dismiss an appeal in default in appearance, is ultra vires. A special bench of the High Court took the view that under section 3 3 (4) the Tribunal was bound to dispose of the appeal on the merits, whether the appellant was present or not. On appeal to this Court, HELD : It follows from the language of section 33(4) and in particular the use of the word "thereon" that the Tribunal has to go into the correctness or otherwise of the points decided by the departmental authorities in the light of the submissions made by the appellant. This can only be done by giving a decision on the merits on questions of fact and law and not by merely disposing of the appeal on the ground that the party concerned had failed to appear. [824 C D] The provisions contained in section 66 about making a 'reference on questions of law to the High Court would be rendered nugatory if a power is attributed to the Appellate Tribunal by which it can dismiss an appeal, which has otherwise been properly filed, for default, without making an order thereon in accordance with section 33(4). So far as the questions of fact are concerned the decision of the Tribunal is final and reference can be sought to the High Court only on questions of law. The High Court exercises purely advisory jurisdiction and has no appellate or revisional powers. The advisory jurisdiction can be exercised on a proper reference being made and that cannot be done unless the Tribunal itself has passed a proper order under section 33(4). [824 E H] Rule 24 clearly comes into conflict with section 33(4) and in the event ,of repugnancy between the substantive provisions of the Act and a rule, it is the rule which must give way to the provisions of the Act. [825 H] Shri Bhagwan Radha Kishen vs Commissioner of Income tax, U.P. ; Ruvula Subba Rao & Ors. vs Commissioner of Income tax Madras, ; Mangat Ram Kuthiala & Ors. vs Commissioner of Income tax, Punjab, ; Hukumchand Mills Ltd. vs Commissioner of Income tax, Central Bombay, ; Commissioner of Income 819 tax Madras vs Mtt. section Ar. Arunachalam Chettiar, and Commissioner of Income tax, Bombay vs Scindia Stearn Navigation Co. Ltd. ; , referred to.

The appellant firm filed appeals against orders assessing it to income tax and super tax for the years 1945 1946 and 1946 1947 beyond the time prescribed by section 30(2) of the Income tax Act. The appeals were numbered, and notices were issued for their hearing under section 31. At the hearing of the appeals before the Appellate Assistant Commissioner, the Department took the objection that the appeals were barred by time. The appellant prayed for condonation of delay, but that was refused, and the appeals were dismissed as time barred. The appellant then preferred appeals against the orders of dismissal to the Tribunal under section 33 of the Act, and the Tribunal dismissed them on the ground that the orders of the Assistant Commissioner were in substance passed under section 30(2) and not under section 31 of the Act and that no appeal lay against them under section 33 of the Act. On a reference under section 66(1) of the Act the High Court held that the orders of the Appellate Assistant Commissioner were made under section 30(2) and were not appealable under section 33 of the Act. On appeal by special leave to the Supreme Court the question for determination was whether an order dismissing an appeal presented under section 30 as out of time was one under section 30(2) or under section 31 of the Act because if it was the former there was no appeal provided against it; if it was the latter it was open to appeal under section 33. Held that the orders of the Appellate Assistant Commissioner fell within section 31. A right of appeal is a substantive right and is a creature of the statute. section 30(1) confers on the assessee a right of appeal against certain orders and an order of assessment under section 23 is one of them. The appellant had therefore a substantive right under section 30(1) to prefer appeals against orders of assessment made by the Income Tax Officer. 167 An appeal presented out of time is an appeal and an order dismissing it as time barred is one passed in appeal. Section 31 is the only provision relating to the hearing and disposal of appeals and if an order dismissing an appeal as barred by limitation as in the present case is one passed in appeal it must fall within section 31 and as section 33 confers a right of appeal against all orders passed under section 31, it must also be appealable. To fall within section 31 it is not necessary that the order should expressly address itself to and decide on the merits of the assessment and it is sufficient that the effect of the order is to confirm the assessment as when the appeal is dismissed on a preliminary point. An order rejecting an appeal on the, ground of limitation after it had been admitted is one under section 31, though there is no consideration of the merits of the assessment. Held therefore that the orders of the Appellate Assistant Commissioner holding that there were no sufficient reasons for excusing the delay and rejecting the appeals as time barred would be orders passed under section 31 and would be open to appeal, and it would make no difference in the position whether the orders of dismissal were made before or after the appeals were admitted. Commissioner of Income tax, Madras vs Mtt. `r. section Ar. Arunachalam Chettiar, ([1953] S.C.R. 463), explained. Case law discussed.

In respect of the assessment for the assessment year 1974 75, the appellant assessee preferred an appeal before the Appellate Assistant Commissioner. During the hearing of the appeal, the assessee raised an additional ground as regards its liability to Purchase Tax and claimed a deduc tion of Rs.11,54,995. After giving an opportunity of hearing to the Income Tax Officer, the Appellate Assistant Commis sioner allowed the said claim. The Revenue preferred an appeal before the Income Tax Appellate Tribunal. The Tribunal held that the Appellate Assistant Commissioner had no jurisdiction to entertain any additional ground not raised before the Income Tax Officer and set aside the order of the Appellate Assistant Commis sioner. The assessee 's application for making reference to the High Court was refused by the Tribunal. The High Court also rejected the assessee 's application for calling the state ment of the case and reference from the Tribunal. Hence, this appeal by special leave. Disposing of the appeal, the Court, HELD: 1.1 The declaration of law is clear that the power of the Appellate Assistant Commissioner is co terminus with that of the Income Tax Officer. If that be so, there appears to be no reason as to why the appellate authority cannot modify the assessment order on an additional ground even if not raised before the Income Tax Officer. No exception could be taken to this view as the Act does not place any restric tion or limitation on the exercise of appellate power. Even otherwise an Appellate Authority while hearing appeal against the order of a subordinate authority has all the powers which the original 341 authority may have in deciding the question before it sub ject to the restrictions or limitation if any prescribed by the statutory provisions. In the absence of any statutory provisions to the contrary the Appellate Authority is vested with all the plenary powers which the subordinate authority may have in the matter. [155G H; 156A B] 1.2 If the Appellate Assistant Commissioner is satisfied he would be acting within his jurisdiction in considering the question so raised in all its aspects. Of course, while permitting the assessee to raise an additional ground, the Appellate Assistant Commissioner should exercise his discre tion in accordance with law and reason. He must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The satisfac tion of the Appellate Assistant Commissioner depends upon the facts and circumstances of each case and no rigid prin ciples or any hard and fast rules can be laid down for this purpose. [157D F] Commissioner of Income Tax vs Mc Millan & Co., ; ; Commissioner of Income Tax, U.P. vs Kanpur Coal Syndicate,, ; Kedarnath Jute Mfg. Co. Ltd. vs Commissioner of Income Tax (Central), Calcutta, ; relied on. Commissioner of Income Tax, Bombay vs Shapporji Patton Ji Mistry, ; Addl. Commissioner of Income Tax Gujarat vs Gurjargravures ?. Ltd., ; distinguished. Rai Kumar Srimal vs Commissioner of Income Tax, West Bengal 111, , approved. Narrondas Manordass vs Commissioner of Income Tax, [1957] 31 referred to. 2. In the instant case, the assessee was assessed to Purchase Tax. The appellant disputed the demand and filed an appeal before the Appellate Authority and obtained stay order. The assessee thereafter claimed deduction for the amount of Rs.11,54,995 towards his liability to pay Purchase Tax as deduction for the assessment year 1974 75. The asses see had not actually paid the Purchase Tax as it had ob tained stay from the Appellate Authority; nonetheless its liability to pay tax existed, and it was entitled to deduc tion of Rs. 11,54,995. [158B C] 3. Since the view taken by the Income Tax Appellate Tribunal is 342 not sustainable in law, the order of the Tribunal is set aside and the matter is remitted to the Tribunal to consider the merit of the deduction permitted by the Appellate As sistant Commissioner. If the Tribunal thinks it necessary, it may remand the matter to the Appellate Assistant Commissioner (Deputy Commissioner of Appeals) for hearing [158F H]

Civil Appeal No.94 of 1949. 107 834 Appeal from a judgment and decree of the High Court of Judi cature at Patna in Appeal from Appellate Decree No. 97 of 1946 (Mannohar Lall and Mukherji JJ.) dated 23rd Decem ber, 1947, confirming the judgment of the District Judge of Purulia in Appeal No. 159 of 1944. S.P. Sinha (P. K. Bose, with him) for the appel lant. N.C. Chatterjee and Panchanan Ghosh (Chandra Narayan Naik, with them) for the respondent. 1950. December 1. The Judgment of the Court was deliv ered by PATANJALI SASTRI J. This appeal arises out of a suit brought by the respondent in the court of the Subordinate Judge, Dhanbad, for recovery of arrears of royalty and cess from the appellant and another alleged to be due under a compromise decree passed on the 6th March, 1923, in a previ ous suit between the predecessors in interest of the par ties. The only plea which is material for the purpose of this appeal is that the compromise decree not having been registered was inadmissible in evidence. The courts below held that the document did not require registration and gave effect to its terms in decreeing the suit. The second defendant has preferred this appeal. The facts are not now in dispute and may be briefly stated. On 11th March, 1921, one Kumar Krishna Prasad Singh (hereinafter referred to as Kumar) granted a perma nent lease of the right to the underground coal in 5,800 bighas of land belonging to him to Shibsaran Singh and Sitaram Singh (hereinafter referred to as the Singhs) by a registered patta stipulating for a salami of Rs. 8,000 and royalty at the rate of 2a. per ton of coal raised subject to a minimum of Rs. 8,000 and for certain other cesses and interest. On 7th June, 1921, Kumar executed another perma nent patta leasing the right to the coal in 500 bighas out of the 5,800 bighas referred to above to one Prayngji Bal lavji Deoshi and his son Harakchand Deoshi (hereinafter referred to as the Deoshis). By this document. 835 the Deoshis agreed inter alia to pay royalty at the rate of 2a. per ton on all classes of coal raised subject to a minimum of Rs. 750 a year. The Singhs feeling themselves aggrieved by the latter transaction brought a title suit (No. 1291 of 1921) in the Court of the Subordinate Judge of Dhanbad for a declaration of their title and for possession of the 500 bighas leased to the Deoshis under the aforesaid patta of 7th June, 1921. To that suit Kumar was made a party as defendant No. 3, the Deoshis being defendants 1 and 2. The suit was however cornpromised on 6th March, 1923, by all the parties and a decree based on the compromise was also passed on the same day. The interest of the Singhs was brought to sale in 193S in execution of a decree obtained against them and was purchased by the plaintiff who insti tuted the presnt suit on 3rd October, 1942, claiming the royalty and cesses payable under the compromise decree for the period from Pous 1345 to Asadh 1349 B.S. from defendants 1 and 2 as the representatives of the Deoshis who entered into the compromise of March, 1923. In order to appreciate the contentions of the parties, it is necessary to set out the relevant terms of the compro mise decree which are as follows : "The plaintiffs (the Singhs) within two months from this date shall pay Rs. 8,000 as salami to defendant No. 3 (Kumar). Otherwise all the terms of the compromise Will stand cancelled and the plaintiffs shall not be competent to claim any right to or possession over the.land covered by the patta dated 11th March, 1921. The patta which defend ant No. 3 executed in favour of the plaintiffs in respect of 5,800 bighas of coal land in village Rahraband shall remain in force, and the plaintiffs will get a decree of declara tion of their right and title to the 500 bighas of coal land in dispute but defendants 1 and 2 (the Deoshis) shall hold possession as tenants. Besides the terms mentioned below, defendants 1 and 2 shall remain bound by all the remaining terms under which they took settlement of the 500 bighas of coal land from defendant No. 3 under 836 patta and Kabuliyat, and both the defendants 1 and 2 shall possess the same under the plaintiffs from generation to generation and all the terms of the said patta and Kabuliyat shall remain effective and in force between them. Both the defendants 1 and 2 shall remain bound to pay to the plain tiffs commission at the rate of 2a. per ton on all sorts of coal instead of 2a. a ton as stated before in the patta of 5,800 bighas of land settled with the plaintiffs. The plaintiffs shall pay to defendant No. 3 in future the mini mum royalty of Rs. 6,000 instead of Rs. 8,000 as stipulated in the original patta of 11 th March 1921 and commission at the rate of la. a ton in place of 2a. a ton as stipulat ed in the patta of March 21 . Unless the plaintiffs pay to the defendant No. 3 Rs. 8,000 within 2 months from this day they shall not be competent to take out execution of this decree, nor shall they be competent to take posses sion of the land in dispute. The defendants 1 and 2 within one month from the date of payment of Rs. 8,000 as aforesaid to defendant No. 3 shall execute a new Kabuliyat in favour of the plaintiff in respect of the modified terms stated above, i.e., on the condition to pay commission at the rate of 2a. per ton. In the new patta which defendant No. 3 will execute in favour of the plaintiffs he shall embody the condition that the annual minimum royalty will be Rs. 6,000 instead of Rs. 8,000 and commission will be at the rate of la. 9p. per ton in place of 2a. per ton as mentioned in the aforesaid patta. If the defendant No. 3 does not execute the parts on the aforesaid modified terms in favour 'of the plaintiffs within the time aforesaid and both the defendants 1 and 2 also do not execute a kabuliyat on the aforesaid modified terms, then this very rafanama shall be treated as the parts and kabuliyat, and the plaintiffs in accordance with the terms of the rafanama shall pay to defendant No. 3, Rs. 6,000 only as minimum royalty and commission at the rate of la. per ton with respect to 5,800 bighas and shall continue to realise commission at the rate of 2a. 6p. per ton from defendants 1 and 2 who shall remain bound to pay the same. " 837 The answer to the question whether this compromise decree requires registration depends on the legal effect of the changes in the status quo ante of the parties brought about by the document. A careful analysis reveals the following alterations : (1) In the lease to the Singhs, the rate of royalty or commission was reduced from 2a. per ton of coal raised to la. per ton and the minimum royalty was reduced from Rs. 8,000 to Rs. 6,000 while the area of coal land in their khas possession was reduced by 500 bighas. (2) In the lease to the Deoshis the rate of royalty or commission was enhanced from 2a. per ton to 2a. per ton and tiffs was made payable to the Singhs. The Singhs and the Deoshis were brought into a new legal relationship, the former accepting the latter as tenants holding the disputed 500 bighas under them in consideration of the latter agreeing to pay the enhanced royalty to the former. (4) The whole arrangement was made conditional on the Singhs paying Rs. 8,000 to Kumar within 2 months from the date of the compromise, it being expressly provided that the Singhs were not to be entitled to execute the decree or to take possession of the disputed area of 503 bighas which evidently had not till then passed into their possession. Now, sub section (1) of section 17 of the , enumerates five categories of documents of which regis tration is made compulsory which include" (d) leases of immoveable property from year to year, or for any term exceeding one year, or reserving a yearly rent;". Sub sec tion (2) however provided that "nothing in clauses (b) and (c) of sub section (1)applies to . (vi) any decree or order of court. " It may be mentioned in passing that this clause was amended with affect from the 1st April, 1930, by the , so as to exclude from the scope of the exception compromise decrees comprising immovable property other than that which is the subject matter of the suit. But 838 the amendment cannot affect the document here in question which came into existence in 1923. Before the amendment, the clause was held to cover even compromise decrees comprising immovable property which was not the subject matter of the suit: [Vide Hemanta Kumari Debi vs Midnapur Zamindari Co. ( ')]. That decision applies to the present case and obviates the objection that because the compromise in question covered also the remaining 5,300 bighas which were not the subject matter of the title suit of 1921, it was outside the scope of the exception in sub section (2), clause (vi). The only question, therefore, is whether the compromise decree is a "lease" [which expression includes "an agreement to lease" by the definition in section 2 (7)] within the meaning of el. (d) of sub section (1). It is obvious that if the compromise decree fails within clause (d) of sub section (1) it would not be protected under clause (vi) of sub section (2) which excepts only documents falling under the categories (b) and (c) of sub section (1). The High Court was of opinion that, on a proper construction of the terms of the compromise, it did not fall under clause (d). Mano har Lall J., who delivered the leading judgment, observed: "It was a tripartite agreement embodied in the decree of the court and was, therefore, exempt from registration. It will be oh.served also that so far as the defendants were con cerned, their possession of the 500 bighas was not inter fered with and they still remained in possession as the lessees, but instead of paying the royalty to the plaintiffs it was agreed between all the parties that the defendants would pay the royalty in future to Shibsaran and Sitcram. If the matter had stood there, the learned Advocate for the appellant could not have seriously contested the position, but he vehemently argued that when the agreement was not to pay the same amount of royalty or commission as previously agreed to but an altered amount of royalty and commission, the document should be held to fall within the mischief of section 17 (1)(d)of the (1) P.C. 839 . The answer to this contention is, as I have stated just now, to be found in the Full Bench decision of this court :" [see Charu Chandra Mitra 's case ()]. It was there held that a mere alteration of the rent reserved does not make the transaction a new lease so as to bring it within clause (d)of subsection (1). We are unable to share this view. It oversimplifies the compromise transaction which, in our opinion, involves much more than a mere alteration of the royalties stipulated for in the previous pattas executed by Kumar. Nor can we accept the suggestion of Mr. Chatterjee for the respondents theft the compromise operated as an assignment to the Singhs by Kumar of the latter 's reversion under the "lease granted to the Deoshis and all that the latter did was to acknowledge the Singhs as their landlords and attern to them. On tiffs view it was said that the transaction would not fall under clause (d), although it would fall under clause (b) but then would be saved by the exception in clause (vi) of sub section (2). The argument, however, overlooks that Kumar had leased the area of 5,800 bighas to the Singhs by his patta dated 11th March, 1921, and the compromise by providing that the Singhs should pay the reduced royalty of 1a. per ton in respect of the whole area preserved Kumar 's reversion intact. He could not therefore be deemed to have assigned any part of his inter est in 5,800 bighas as landlord to the Singhs who continue to hold the entire extent as tenants under him. What the compromise really did was. as stated already, to bring the Singhs and the Deoshis into a new legal relationship as underlessor and under lessee in respect of 500 bighas which were the subject matter of the title suit; in other words, its legal effect was to create a perpetual underlease be tween the Singhs and the Deoshis which would clearly fall under clause (d) but for the circumstance that it was to take effect only on condition float the Singhs paid Rs. 8,000 to Kumar within 2 months (1) 840 thereafter. As pointed out by the Judicial Committee in Hemanta Kumar 's case (1) "An agreement for a lease, which a lease is by the statute declared to include, must, in their Lordships ' opinion, be a document which effects an actual demise and operates as a lease . The phrase which in the context where it occurs and in the statute in which it is found, must in their opinion relate to some document which creates a present and immediate interest in the land. " The compromise decree expressly provides that unless the sum of Rs. 8,000 was paid within the stipulated time the Singhs were not to execute the decree or to take possession of the disputed property. Until the payment was made it was impossible to determine whether there would be any under lease or not. Such a contingent agreement is not within clause (d) and although it is covered by clause (b). is excepted by clause (vi) of sub section ( '2). We therefore agree with the conclusion of the High Court though on dif ferent grounds and dismiss the appeal with costs. Appeal dismisseel.

An agreement for a lease, which a lease is by the Indian declared to include, must be a document which effects an actual demise and operates as a lease. It must create present and immediate interest in land. Where a litigation between two persons A and B who claimed to be tenants under C was settled by a compromise decree the effect of which was to create a perpetual underlease between A and B which was to take effect only on condition that A paid Rs. 8,000 to C within a fixed period: Held, that such a contingent agreement was not "a lease" within el. (a) of section 17 (t) of the Indian , and even though it was covered by cl. (b) of the said sec tion it was exempt from registration under el. (vi) of subs. (2) of section 17. Hemanta Kumari Debi vs Midnapur Zamindari Co. (I P.C.) relied on.

The respondent imported 2,000 drums of mineral oil and the appellant confiscated 50 drums and imposed a personal penalty. The appeal of the respondent was dismissed by the Central Board of Revenue. The respondent filed a petition under article 226 of the Constitution in the Calcutta High Court. A Full Bench of the High Court held that the High Court had no jurisdiction to issue a writ against the Central Board of Revenue in view of the decision in the case of Saka Venkata Subbha Rao. However, as the Central Board of Revenue had merely dismissed the appeal against the 564 order of the appellant, the High Court further held that it had jurisdiction to pass an order against the appellant. The appellant came to this Court after obtaining a certificate. Held that the appellant had merged into that of the Central Board of Revenue and hence no order could be issued against the appellant. It is only the order of the appellate authority which is operative after the appeal is disposed of. It is immaterial whether the appellate order reverses the original order, modifies it or confirms it. The appellate order of confirmation is as efficacious as an operative order as an appellate order of reversal or modification. As the appellate authority in this case was beyond the territorial jurisdiction of the High Court, it was not open to the High Court to issue a writ to the original authority which was within its jurisdiction. Election Commission, India vs Saka Vankata Subba Rao, , A. Thangal Kunju Mudatiar vs M. Venkitachalam Poiti, ; , Commissioner of Income tax vs M/s. Amritlal Bhogilal & Co. [1959] section C. R. 713 and Madan Gopal Rungta vs Secretary to the Government of Orissa, (1962) (Supp.) 3 S.C.R. followed. Barkatali vs Custodian General of Evacuee Property, A. 1. R. , overruled. Joginder Singh Waryam Singh vs Director, Rural Rehabilitation, Pepsu, Patiala, A. 1. R. 1955 Pepsu 91, Burhanpur National Textile Workers Union vs Labour Appellate Tribunal of India at Bombay, A. I. R. , and Azmat Ullah vs Custodian, Evacuee Property, A.I.R. 1955 All 435, approved. State of U. P. vs Mohammed Nooh, ; , distinguished.

The petitioners, who were land owners of Himachal Pradesh, challenged the constitutional validity of the Himachal Pradesh Abolition of Big Landed Estates and Land Reforms Act, 1953 (Himachal 15 of 1954), said to have been passed by the Legislative Assembly of the State of Himachal Pradesh functioning under the Himachal Pradesh and Bilaspur (New State) Act (32 Of 1954). The impugned Act was introduced as a bill in the first session of the Legislative Assembly of the Old Himachal Pradesh elected under the Government of Part C States Act (49 Of 1951). Before the bill could be passed, the Himachal Pradesh and Bilaspur (New State) Act (32 Of 1954) came into force on July 1, 1954, abolishing the old Act and uniting the two States into one. While the Legislative Assembly for the New State was yet to be constituted, on July 7, 1954, the Governor issued the following notification, " The Lieutenant Governor, in exercise of. the powers conferred by Section 9 of the (49 Of 1951), has been pleased to direct that the Second Session, 1954, Of the Himachal Pradesh Legislative Assembly will commence from Monday, the 16th August, 1954, at 9 30 a.m. in the Council Chamber, Simla 4. " It was at this session that the impugned Act was passed. Its provisions were said to be drastic and to infringe articles 14, 19 and 31 Of the Constitution. It was contended on behalf of the petitioners that apart from violating those Articles, the impugned Act was void as it had not been passed by a duly constituted legislature. It was sought to be contended on behalf of the respondent that under the new Act the members of the Old Legislative Assembly must be deemed to constitute the legislature for the New State and it was as such called by the Governor. Held, that the contention raised by the respondent was with out substance and must be negatived. It was apparent that the so called Assembly which the Governor had convened and which purported to pass the impugned Act was not the Legislative Assembly of the New State constituted under the Himachal Pradesh and Bilaspur (New State) Act (32 Of 1954) and as such the Act could not be regarded as a valid piece of legislation.

The respondent had agreed to transport coal from the appel lant 's colliery to the railway station. The appellant had to keep the road in repair and arrange for petrol and had to make the payment for the actual coal despatched by the 10th of the following month. The appellant complained that he was suffering loss as the respondent had slowed down the work and the respondent complained that by not arranging for the petrol, not keeping the road in repairs and not making payments of amounts due the appellant had made it impossible to fulfil the contract. The quantity of coal transported was a fact within the knowledge of the appellant and the agreement merely provided for payment of the bills by 10th of the following month, without stating expressly that the presentation of bill was a condition precedent to the payment. The appellants contended that time was not of the essence of the contract and in any case the payment of the bills depended upon the presentation of bills in time and also challenged the award of the interest. Held, that in commercial transactions time is ordinarily of the essence of the contract and was made so in the contract and when this important condition of the agreement was broken, section 55 of the Indian Contract Act could be invoked by the aggrieved party and he was entitled to rescind the contract. In the present case by withholding the payment of the bills cl. (5) of the contract was breached by the appellant. Held, further, that interest for a period prior to the com mencement of suit is claimable either under an agreement or usage of trade or under a statutory provision or under the Interest Act for,% sum certain where notice is given These 640 conditions not being satisfied and this being not a case in which Court of Equity grants interest, interest was not awardable as damages. Held, further, that interest pendente lite being in the discretion of Court, should be fixed in accordance with the circumstances and practice of the Court and should not be too high. Bengal Nagpur Railway Co. Ltd. vs Ruttanji Ramji, (1937) L.R. 65 I.A. 66, referred to.

The plaintiff respondent instituted a suit in the court of the Additional Subordinate Judge, Gauhati, against the Union of India and the Northern Frontier Railway represented by the General Manager, having its headquarters at Pandu. Pandu is within the jurisdiction of the Subordinate judge. The claim was for the recovery of a sum of Rs. 8,250/ on account of nondelivery of the goods which had been consigned to the plaintiffs firms, The consignment was booked from Kalyanganj station of defendant No. 2 fair carriage to Kanki, a station of the same defendant. It was alleged in the plaint that the cause of action arose at Pandu within the jurisdiction of the Court, where the defendant railway had its principal place of business by virtue of its headquarters being at Pandu. The suit was resisted by the defendants on the ground that the court bad no jurisdiction to entertain the suit. Relying on the decision of the Assam High Court in P. C. Biswas vs Union of India, A. I. R. , the court of first instance held that the principal place from which the railway administration in a particular area is carried on is the principal place of business for the purpose of jurisdiction under section 20 of the Code of Civil Procedure, 1908, and decided the issue in favour of the plaintiff. The revision petition filed by the appellants was rejected by the High Court. The present appeal was filed with special leave granted by this Court. It was contended in the appeal by the appellants that the running of the railway by the Union of lndia could not be said to amount to carrying on of business and that therefore the fact that the headquarters of Northern Frontier Railway Administration was at Pandu within the jurisdiction of the 625 Court at Gauhati did not give the Court jurisdiction under section 20 of the Code of Civil Procedure. Held that articles 19 (6) and 298 of the Constitution clearly indicate that the State can carry on business and can even exclude citizens completely or partially from carrying on that business. The running of railways which is a business when carried on by private companies or individuals does not cease to be a business when they are run by the Government. It is the nature of the activity which determines the character of an activity. The fact as to who runs it and with what motive cannot affect it. 'Profit element ' is not a necessary ingredient of carrying on of business, though usually business is carried on for profit. The fact that the Government runs the railways for providing cheap transport for the people and goods and for strategic reasons will not convert what amounts to carrying on of business into an activity of the State as a sovereign body. The Union of India carries on the business of running railways and can be sued in the court of the Subordinate judge of Gauhati within whose territorial jurisdiction the headquarters of one of the railways run by the Union is situated. Case Law reviewed. State of Bombay vs Hospital Mazdoor Sabha [1960] 2 S.C.R. 866, The Corporation of the City of Nagpur vs Ito Employees, ; and Satya Narain vs District Engineer, P. W. D., A. I. R.

A Hindu father executed a registered deed of trust giving away his properties to public charities and appointed himself and two others as trustees. The son in assertion by his right to a moiety share therein started to alienate them. There was litigation between the trustees and the son which ultimately ended in a compromise decree for partition between the father and the son, the two other trustees having retired pending litigation. After the death of both the father and the son a suit was brought under 1123 section 92 of the Code of Civil Procedure for the framing of a scheme for the administration of the trust. The trial court held that the trust deed had been substituted by the compromise decree which itself created a trust and decreed the suit on that basis. On appeal by two of the defendants who were transferees in possession of some of the properties in suit, the High Court affirmed the decision of the trial court holding that the compromise decree created a trust for public charities in respect of the properties allotted to the third plaintiff, meaning the father. The said defendants appealed to this Court. The principal question for decision was one of construction of the compromise decree, whether it created a trust or a charge. The relevant terms of the compromise decree were as follows: " that as regards the aforesaid schedule property, the third plaintiff should be the 'sole trustee ' till his lifetime for the purpose of conducting the charities described in the trust deed, dated 17th March, 1919, and he should utilise the income derived therefrom for the charities according to the necessity and should enjoy the said property till his lifetime without rights to gift, sale etc. , therein ; that after his death, the said entire property should pass on to his grandson Ramalingeswara Rao subject to the (performance of) the aforesaid kainkaryams (charities) ; that if the third plaintiff should die before the expiry of the minority of the aforesaid Ramalingeswara Rao arrangement should be made to have a guardian appointed through Court for the property made to pass to the said Rainalingeswara Rao, the said guardian should take possession of the property and conduct the aforesaid charities and deliver possession of the same to the said Ramalingeswara Rao as soon as the minor attains majority ; that, thereafter the said Ramalingeswara Rao should conduct the above mentioned charities and enjoy the properties :" Hald, that the courts below were in error in construing the compromise decree in the way they did and the appeal must succeed. There can be no doubt from the terms of the compromise decree read as a whole that what was intended to be created was a charge and not a trust in respect of the properties allotted to the father which retained their private character. The principles of Hindu Law applicable to questions relating to charitable trust are well settled. Whether or not a dedication to charity is complete must depend on the intention of the donor which has to be gathered from the terms of the document in any particular case read as a whole. If the dedication is complete, a trust is created, if not, a charge follows. The mere use of the word 'trust ' or 'trustee ' cannot by itself be conclusive as to the intention of the donor and the real test is whether private title 1124 over the property is sought to be extinguished by a complete transfer of it to the charity. Maharani Hemanta Kumati Debi vs Gauri Shankar Tewari, (1940) L. R. 68 I.A. 53, Jadu Nath Singh vs Thakur Sita Ramji, (1917) L.R. 44 I.A. 187, Pande Har Narayan vs Surja Kunwari, (1921) L.R. 48 I.A. 143, Sonatun Bysack vs Sreemutti juggul soondyee Dossee, 8 Moo. I.A. 66 and Gopal Lal Sett vs Purna Chandya Basak, (1921) L.R. 49 I.A. 100, applied.

The appellant assessee is a company carrying on the business of manufacturing and selling Textile at Porbunder (formerly a princely State) in Saurashtra in the State of Gujarat. No income tax was levied by the former Porbunder State prior to 1948. In 1949 the princely State of, Porbund er integrated into newly formed Saurashtra State. In 1949 the State of Saurashtra promulgated the Saurashtra Income Tax Ordinance wherein provision for grant of depreciation based on written down value was made. On 26.1.1950, State of Saurashtra became a part of the Union of India as a Part 'B ' State and thus the Income Tax Act, 1922 became applicable to the State of Saurashtra from 1st April 1950 under the Fi nance Act, 1950. The said Saurashtra Income Tax Ordinance was repealed under Sec. 13 of the Finance Act, 1950. Section 12 of that Act provided for removal of difficulties, if any, arising in giving effect to the Income Tax Act. The Central Govt. on 2.12.50 issued an order known as "Taxation Laws (Part B States) Removal of Difficulties) Order 1950". Clause 2 of the said order provided the manner in which the aggre gate depreciation allowance and written down value were to be computed. On March 9, 1953, the Central Government in the exercise of its powers under Sec. 60A of the Indian Income Tax Act, 1922, added an Explanation to the said clause (2). The vires of the said Explanation was challenged before the Andhra Pradesh High Court which held that the Explanation referred to above was ultra vires the powers of the Central Government under Sec. 60A of the Income Tax Act. Commissioner of Income Tax, Hyderabad vs D.B.R. Mills Ltd., Thereupon, the Central Government issued another notifi cation dated the 8th May, 1956 in exercise of its powers under Section 12 of the Finance Act 1950, whereby an Expla nation in identical terms as the earlier Explanation was added to Clause (2) of the Removal of Difficulties Order, 1950. The validity of the said Explanation added by the notification dated 8th May, 1956 was upheld by this Court in The Commissioner of Income tax, Hyderabad vs Dewan Bahadur Ramgopal Mills Ltd., ; On the appeal from the said decision of the High Court 2 of the Andhra Pradesh in Commissioner of Income tax, Hydera bad vs D.B.R. Mills, The assessee was assessed under the Indian Income Tax Act from 1940 41 in respect of the income arising or deemed to arise in British India from 1940 41 onwards. For these years its income was assessed on receipt basis but in calcu lating the world income depreciation was taken into consid eration for arriving at the income outside British India. The assessee was also assessed for the assessment year 1949 50 under the Saurashtra Income Tax Ordinance, 1949. From 1950 51 it was assessed under the Income Tax Act. The assessment years concerned in this case are 1957 58, 1958 59 and 1959 60, the corresponding previous years being the Calender years 1956, 1957 and 1958 respectively. The case of the assessee is that during the course of the assessment of its income, depreciation was allowed for the assessment year 1950 51 and thereafter on the original cost of the assets as reduced by the depreciation allowance given under the Sau rashtra Income Tax Ordinance 1949. The respective written down values for the assessment years 1951 52 and 1952 53 were fixed on the basis of the written down value for the assessment year 1950 51. But later the concerned Income Tax Officer rectified the calculations of depreciation allowance by further reducing the written down value of the assets of the assessee. The Income Tax Officer took the written down value for the assessment years 1940 41 as the starting point. The assessee was not satisfied with this rectification. Its contention was that the depreciation for the previous years should have been calculated only on the basis of Clause (2) of the Taxation Laws (Part B States) (Removal of Difficulties) Order 1950, which provided for computation of the aggregate depreciation allowance on the basis of the deduction which was actually allowed under the Saurashtra Income Tax Ordinance, 1949. Regarding the explanation, the assessee contended that it was ultra rites the powers of the Central Government as it was not necessary for the removal of any difficulty. The contentions of the assessee were rejected by the Income Tax authorities as well as by Income Tax Appellate Tribunal. It was contended by the assessee before the Tribu nal that the decision of this Court in Commissioner of Income Tax Hyderabad vs Dewan Bahadur Ramgopal Mills Ltd., ; was no longer good law in view of the later decision of this Court in Straw Products Ltd. vs Income Tax Officer "A" Ward, Bhopal and Ors., The Tribunal having rejected the said contentions, at the in stance of the assessee a reference was made to the Gujarat High Court in which the following question was raised: 3 "Whether on the facts and in the circumstances of the case. the Tribunal was justified in holding that the depreciation allowable and not 'actually allowed ' under the Saurashtra Income tax Ordinance, 1949, should be taken into account in computing the aggregate depre ciation allowance and written down value under Sec. 10(2)(vi) of the Income Tax Act 1922. " The High Court held that in its advisory jurisdiction under the Income Tax Act, it could not go into the question of the vires of the said Explanation and therefore answered the question against the assessee. Therefore, the appellant filed Special Civil Application 1797 of 1972 in the High Court. The Division Bench of the High Court in its judgment disposing of the said special Civil Application pointed out that the decision of this Court in the Commissioner of Income Tax, Hyderabad vs Dewan Bahadur Ramgopal Mills, case, referred to above had upheld the validity of the Explanation in question. The High Court further opined that some of the arguments which did not find favour with this court in the said case were accepted by a Bench of 7 Learned Judges in the Straw Products Ltd. vs Income Tax Officer, "A" Ward, Bhopal and Ors., The High Court fur ther pointed out that in its decision in the said case of Straw Products this court had considered the decision in Dewan Bahadur Ramgopal Mills Ltd. and explained that on the facts of that case a difficulty had arisen and it was for removing that difficulty that the Order of 1956 was issued. For the said reason the High Court considered that decision was good law and following the same, it dismissed the Spe cial Civil Application. Hence this appeal by the assessee. In this appeal the Explanation added by the Central Government by its notification dated May 8, 1956 as well as the assessments made on the assessee for the assessment year 1957 58 to 1959 60 have been assailed. It was inter alia contended on behalf of the assessee that there was no diffi culty which had arisen in giving effect to the provisions of the Indian Income Tax Act in the State of Saurashtra and hence the pre condition on which the Central Government was authorised to make an Order under the Removal of Difficul ties Order and add the Explanation in question had never come into existence and as such the Explanation was without the authority of Law, invalid and of no legal effect. It was further contended by the assessee that under the scheme of the Income Tax Act, generally speaking, almost the entire cost of a capital asset used for purposes of business or profession should 4 be allowed to be written off by way of depreciation, whether worked on the basis of straight line method or written down value. The assessee disputed the mode of assessment and the applicability of the Explanation. Following this Court 's decision in Dewan Bahadur Ramgo pal Mills ' Ltd. ; this Court dismissing the appeal, HELD: The Saurashtra Income Tax Ordinance was repealed by Section 13 of the Finance Act 1950 and not by any provi sion in the Indian Income Tax Act. The basic and normal scheme of depreciation under the Indian Income Tax Act is that it decreases every year, being a percentage of the written down value which in the first year is the actual cost and in succeeding years actual cost less all deprecia tion actually allowed under the Income Tax Act or any Act repealed thereby etc. [18D E] Commissioner of Income Tax Hyderabad vs Dewan Bahadur Ramgopal Mills Ltd., ; The Saurashtra Income Tax Ordinance having been repealed not by the Indian Income Tax Act but by Sec. 13 of the Finance Act 1950, a difficulty had come into existence, and hence it could not be said that the Government had no good basis to come to the conclusion that a difficulty had, in fact, arisen. [18F G] Madeva Upendra Sinai vs Union of India & Ors., [1975] 98 I.T.R. 209.

FACTS challenge in this appeal is to the judgment of a division bench of the madhya pradesh high court dismissing the writ appeal filed by the appellant on the ground that it was not maintainable. the appeal was filed u/s.2(1) of the m.p.uchacha nyayalay (khand nyaypeth ko appeal) adhiniyam,2005. it was held that the order was passed in exercise of power of superintendence u/art.227 of the constitution of india,1950 (in short the 'constitution') against which the letters patent appeal is not maintainable. ARGUMENT learned counsel for the appellant submitted that the order of this court is very clear and the conclusions of the high court that merely limitation was waived is contrary to the clear terms of the earlier order of this court. additionally it is submitted that the prayer in the writ petition was to quash the order passed by the assistant commissioner,commercial tax. ISSUE whether to quash the order of assessment passed by the assistant commissioner,commercial tax levying purchase as well as entry tax. ANALYSIS the writ petition was styled u/art.227 of the constitution is of no consequence. it is the nature of the relief sought for and the controversy involved which determines the article which is applicable. a bare reading of the order shows that the direction was to consider the lpa on merits and time was granted to prefer the lpa within three weeks. the high court's order is unsustainable. the high court seems to have gone by the nomenclature gone by the nomenclature i.e.the discription given in the writ petition to be one u/art.227 of the constitution. the high court did not consider the nature of the controversy and the prayer involved in the writ petition. by art.226 the power of issuing prerogative writs possessed by the chartered high courts prior to the commencement of the constitution has been made wider and more extensive and conferred upon every high court. in umaji keshao meshram v. radhikabai [air 1986 sc 1272 1986 indlaw sc 651. it was noted as follows. u/art.226 an order,direction or writ is to issue to a person,authority or the state. in a proceeding under that article the person,authority or state against whom the direction,order or writ is sought is a necessary party. under article 227,however,what comes up before the high court is the order or judgment of a subordinate court or tribunal for the purpose of ascertaining whether in giving such judgment or order that subordinate court or tribunal has acted within its authority and according to law. the nature of the exercise of the power under article 226,however,remains the same as in the case of the power of issuing prerogative writs possessed by the chartered high courts. it was open to the respondent to invoke the jurisdiction of the high court both u/arts.226 and 227 of the constitution of india. once such a jurisdiction was invoked and when his writ petition was dismissed on merits,it cannot be said that the learned single judge had exercised his jurisdiction only u/art.226 of the constitution of india. this conclusion directly flows from the relevant averments made in the writ petition and the nature of jurisdiction invoked by the respondent as noted by the learned single judge in his judgment,as seen earlier. consequently,it could not be said that cl.15 of the letters patent was not attracted for preferring appeal against the judgment of the learned single judge. it is also necessary to note that the appellant being the respondent in letters patent appeal joined issues on merits and did not take up the contention that the letters patent appeal was not maintainable. for all these reasons,therefore,the primary objection to the maintainability of the letters patent appeal as canvassed by learned counsel for the appellant,has to be repelled. the high court was not justified in holding that the letters patent appeal was not maintainable. in addition,a bare reading of this court's earlier order shows that the impugned order is clearly erroneous. STATUTE s.2 of the m.p.uchacha nyayalay (khand nyaypeth ko appeal) adhiniyam,2005 reads as follows: "2(1. an appeal shall lie from a judgment or order passed by the one judge of the high court in exercise of original jurisdiction u/art.226 of the constitution of india,to a division bench comprising of two judges of the same high court. provided that no such appeal shall lie against an interlocutory order or against an order passed in exercise of supervisory jurisdiction u/art.227 of the constitution of india.

iminal Appeal No. 40 of 1951, 127 Appeal from the Judgment and Order dated the 1st June, 1951, of the High Court of Judicature in Assam (Thadani C.J. and Ram Labhaya J.,) in Criminal Reference No. I of 1951, arising out of Judgment and Order dated the 15th November, 1950, of the Court of the Additional District Magistrate, Lakhimpur, in Case No. 1126C of 1950. Jindra Lal for the appellant. Nuruddin Ahmed for the respondent. October 23. The Judgment of the Court was delivered by CHANDRASEKHARA AIYAR J. Rameshwar Bhartia, the appellant, is a shopkeeper in Assam. He was prosecuted for storing paddy without a licence in excess of the quantity permitted by the Assam Food Grains Control Order, 1947. He admitted storage and possession of 550 maunds of paddy, but pleaded that he did not know that any licence was necessary. The 'Additional District Magistrate recorded a plea of guilty, but imposed him a fine of Rs. 50 only, as he considered his ignorance of the provisions of the Food Grains Control Order to be genuine. The stock of paddy was left in the possession of the appellant by the Procurement Inspector under a Jimmanama or security bond executed in his favour. He was subsequently unable to produce it before the court, as the whole of it was taken away by a Congress M.L.A. for affording relief to those who suffered in the earthquake, and so, the appellant was ordered to procure a similar quantity of paddy after taking an appropriate licence, and to make over the same to the procurement department payment of the price. The District Magistrate, being moved to do so by the procurement department, referred the case to the High Court under section 438, Criminal Procedure Code, for enhancement of the sentence, as in his opinion the sentence was unduly lenient and the Jimmanama, which was admittedly broken, should have been forfeited. 128 The reference was accepted by the High Court, and the sent ence was enhanced to rigorous ' imprisonment for six months and a fine of Rs. 1,000. As regards the Jimmanama, the case was sent back to the trial court for taking action according to law under section 514, Criminal Procedure Code, for its forfeiture. The appellant applied to the High. Court for a certificate under article 134 (1) (c) of the Constitution that the case was a fit one for appeal to this Court. This application was granted. Out of the three points urged for the appellant, two were rejected, but the third one was accepted as a good ground, namely, that there was a contravention of the provisions of section 556, Criminal Procedure Code and that consequently the, trial before the Additional District Magistrate was void. One of the contentions urged before us was that Shri C.K. Bhuyan was not a "Director" at all and therefore there was no valid sanction under section 38 of the Order. A notifications dated 16th May) 1950, and published in the Assam Gazette of the 24th May, 1950, was produced before us to show that Sri C.K. Bhuyan was an Additional Deputy Commissioner and it was conceded by the appellant 's counsel before the High Court that if he was a Deputy Commissioner, he would be a Director under the Order, as all Deputy Commissioners in Assam were notified as Directors for the purposes of the Order. Mr. Jindra Lal sought to draw a distinction between a Deputy Commissioner and an Additional Deputy Commissioner in this respect, but there is no warrant for the same,, apart from the circumstance that it is a question of fact which has to be investigated afresh, and which we cannot allow to be raised now for the first time. The primary question to consider in this appeal is whether there has been any infringement of Section 556, Criminal Procedure Code, and a consequent want of jurisdiction in the court which tried the offence. The facts relevant to this question lie 129 within a narrow compass. The Procurement Inspector sent a report , Ist July,1950 about the nature of the offence ; he wrote out a short note the, subject, and requested that the accused might be prosecuted and the Assistant Director of Procurement, Dibru garh, might be authorised to dispose of the paddy immediately to avoid loss due to deterioration, Sri 0. K. Bhuyan,who was the then District Magistrate Lakhimpur, made the following order: "Prosecution sanctioned under section 7 (1) of ,the Essential Supplies (Temporary Powers) Act, 1946, for violation of sections 3 and 7 of the Assam Food Grains Oontrol Order, 1947. " The case happened to be tried by the same gentleman in his capacity as Addtional District Magistrate, and the accused was convicted as aforesaid. The argument for the appellant was that having sanctioned the prosecution, Sri C.K. Bhuyan became "personally interested" in the case within the meaning of section 556, and was therefore incompetent to try the same. It was contended that the trial was not only irregular but illegal. There is no question that "personal interest" within the meaning of the section is not limited to private interest, and that it may well include official interest also. But what is the extent of the interest which will attract the disability is a subject which different views are possible and have been taken. Section 556 itself indicates the difficulty. The Explanation to the section runs in these terms: "A Judge or Magistrate shall not be deemed a party, or personally interested, within the , meaning of this section, to or in any case by reason only that be is a Municipal Commissioner or otherwise concerned therein in a public capacity, or by reason only that he has viewed the place in which an offence, is alleged to have been committed, or any other place .in which any other transaction material to the case 'is alleged to have occurred, and made an inquiry III connection with the case. " 130 This shows that to be connected with a case in a public capacity is not by itself enough to render the person incompetent to try it. Even if he had made an enquiry in connection with this case, it would not matter. But look at the illustration: "A, as collector, upon consideration of information furnished to him, directs the prosecution of B for a breach of the excise laws. A is disqualified from trying this case as a Magistrate. " It is evident from the words of the illustration that if a prosecution is directed by a person in one capacity, he shall not try the case acting in another capacity as a Magistrate. The explanation and illustration lend some support to the view that there is a distinction between a passive interest and an active interest, and that it is only in the latter case that the disqualification arises or intervenes. Under sub section (3) (a) of section 2 of the Assam Food Grains Control Order "Director" means "the Director of Supply, Assam, and includes, for the purpose of any specific. provision of this Order, any other officer duly authorised in that behalf by him or by the Provincial Government by notification in the Official Gazette. " Section 38 provides: No prosecution in respect of an alleged contravention of any provision of this Order shall be instituted without the sanction of the Director. " A little confusion is likely to arise from the employment of the word " Director" in the Control Order and the word "directs" in the illustration to section 556 of the Code '. It has to be borne in mind that a sanction by the Director within the meaning of the Code does not necessarily mean "a direction given by him that the accused should be prosecuted. " In both cases of sanction and direction, an application of the mind is necessary, but there is this essential difference that in the one case there is a legal impediment to the prosecution if there be no sanction, and in the other case, there is a positive order that 131 the prosecution should be launched. For a sanction, all that is necessary for one to be satisfied about is the existence of a prima facie case. In the case of a, direction, a further element that the accused deserves to be prosecuted is involved. The question whether a Magistrate is personally interested or not has essentially to be decided the facts in each case. Pecuniary interest, however small, will be a disqualification but as regards other kinds of interest, there is no measure or standard except that it should be a substantial one, giving rise to a real bias, or a reasonable apprehension the part of the accused of such bias. , The maxim " Nemo debet esse judex in propria sua causa" applies only when the interest attributed is such as to render the case his own cause. The fulfllment of a technical requirement imposed by a statute may not, in many cases, amount to a mental satisfaction of the truth of the facts placed before the officer. Whether sanction should be granted or not may conceivably depend upon consideration extraneous to the merits of the case. But where a prosecution is directed, it means that the authority who gives the direction is satisfied in his own mind that the case must be initiated. Sanction is in the nature of a permission while a direction is in the nature of a command. Let us now examine some of the decisions the subject. For the appellant, strong reliance was placed the judgment of the Privy Council in Gokulchand Dwarkadas vs King(1), and it was argued the basis of some of the observations of the Judicial Committee that a sanction was an important and substantial matter and not a mere formality. The facts in that case were that while there was a sanction of the Government for a prosecution under the Cotton Cloth and Yarn Control, Order, there was nothing in the sanction itself, or in the shape of extraneous evidence, to show that the sanction was accorded after the relevant facts were placed before the sanctioning authority. To quote their Lordships ' own words; (1) (1948) 52 C.W.N.325. 132 "There is no evidence to show that the report of the Sub Inspector to the District Superintendent of Police, which was not put in evidence, was forwarded to the District Magistrate, nor is there any evidence is to the contents of the endorsement of the District Magistrate, referred to in the sanction, which endorsement also was not put in evidence. The prosecution was in a position either to produce or to account for the absence of the 'report made to the District Superintendent of Police and the endorsement of the District Magistrate referred to in the sanction, and to call any necessary oral evidence to supplement the documents and show what were the facts which the sanction was given. " It is in this connection that their Lordships em phasise that the sanction to prosecute is an important step constituting a condition precedent, and observe: "Looked at as a matter of substance it is plain that the Government cannot adequately discharge the obligation of deciding whether to give or withhold a sanction without a knowledge of the facts of the case. Nor, in their Lordships ' view, is a sanction given without reference to the facts constituting the offence a compliance with the actual terms of clause 23. " This, however, is no authority for the position that a sanction stands the same footing as a direction. It is true that the facts should be known to the sanctioning authority ; but it is not at all necessary that the authority should embark also an investigation of the facts, deep or perfunctory, before according the sanction. The decision lends no support to the view that wherever there is a sanction, the sanctioning authority is disabled under section 556 of the Code from trying the case initiated as a result of the sanction. the other hand, there is plenty of support for the opposite) view. In the very early case of The Government of Bengal vs HeeraLall Dass and Others(1), at a time when there (1) (1872) 17 Weekly Reporter, Criminal Rulings, 39. 133 was no such statutory provision as section 556 of the Code but, only the general rule of law that a man could not be judge in a case in which he had an interest, the facts were that a Sub Registrar, who was also an Assistant Magistrate, having come to know in his official capacity as a registering officer that an offence under the Registration Act had been committed, sanctioned a prosecution, and subsequently tried the case himself. A Full Bench consisting of Sir Richard Couch C. ' J. and five other learned Judges came to the conclusion, after an examination of some of the English cases, that the trial was not vitiated. The learned Chief Justice said: "In this case, I think, the Sub Registrar has not such an interest in the matter as disqualifies him from trying the case; and I may observe with reference to some of the arguments that have been used as to the Sub Registrar having made up his mind, and that the accused would have no chance of a fair trial, that the sanction of the superior officer, the Registrar, is required before the prosecution can be instituted, and certainly I do not consider that the prosecution will not be instituted unless the Sub Registrar has made up his mind as to the guilt of the party. It is his duty, when he comes to know that an offence has been committed, to cause a prosecution to be instituted, by which I understand that there is prima facie evidence of an offence having been committed, that there is that which renders it proper that there should be ail enquiry, and the Registrar accordingly gives his sanction to it ; and certainly, I cannot suppose that, because an officer in his position sanctions the institution of a prosecution, his mind is made up as to the guilt of the party and . that he is not willing to consider the evidence which may be produced before him when he comes to try the case. In this case, there appears to 'be no such interest as would prevent the case from going" before the Magistrate as the trying authority . 134 In Queen Empress vs Chenchi Reddi(1) it was pointed out that when there was only an authorisation and not a direction, there was no supervening disability ; and the case of Girish Chunder Ghose vs The QueenEmpress(2) was distinguished, the ground that there the Magistrate had taken a very active part in connection with the case as an executive officer. The Bombay High Court went even a step further in the case reported in Emperor vs Bavji(3), where the Magistrate who tried the case had earlier held a departmental enquiry and forwarded the papers to the Collector with his opinion that there was sufficient evidence to justify a criminal prosecution. As he did no more than express an opinion that there was evidence, which he, had neither taken nor sifted, which made a criminal prosecution desirable, it was held that the Magistrate was not disqualified from holding the trial, though, no doubt it would have been more expedient had the Collector sent the case for disposal to another of his subordinates. As stated already, the question whether the bar under section 556 comes into play depends upon the facts and circumstances of each particular case, the dividing line being a thin one somewhat but still sufficiently definite and tangible, namely, the removal of a legal impediment by the grant 'of sanction and the initiation of criminal proceedings as the result of a direction. In the present case before us, we have nothing more than a sanction, and consequently we are unable to hold that the trial has become vitiated by reason of the provisions of section 556, Criminal Procedure Code. The other point taken behalf of the appellant is a more substantial one. The security bond was taken from him not by the court but by the Procurement Inspector. It is true that it contained the undertaking that, the seized paddy would be produced before the court, but still it was a promise made to the particular official and not to the court. The High (1) Mad. 238. (3) (19O3) (2) Cal. 857. 135 Court was in error in thinking that section 514, Criminal Procedure Code, applied. Action could be taken only when the bond is taken by the court under the provisions of the Code such as section 91 for appearance, the several security sections or those relating to bail. Clause (1) of section 514 runs: "Whenever it is proved to the satisfaction of the, Court by which a bond under this Code has been taken, or of the Court of a Presidency Magistrate or Magistrate of the first class, or when the bond is for appearance before a Court, to the satisfaction of such Court, that such bond has been forfeited, the Court shall record the grounds of such proof, and may call upon any person bound by such bond to pay the penalty thereof, or to show cause why it should not be paid. " The language is perfectly clear; the power to forfeit and the imposition of the penalty provided for in the later parts of the section arise only if the preliminary conditions are satisfied. There was no argument addressed to us that the High Court in suggesting that action should be taken under section 514 for forfeiture of the bond acted in the exercise of its inherent powers under section 561 A. It did not purport to exercise any such power; and, moreover, there will then arise the question whether when the Code contains an express provision a particular subject, there could be any resort to inherent jurisdiction, under a general provision. We have got an additional circumstance in the appellant 's favour in this case that the seized paddy was taken away by a member of the Legislative Assembly for giving relief to those affected by the earthquake, and if that is true, as it seems to be from the letter written by the ' M.L.A. to the Additional District Magistrate the 1st November, 1950, it appears to us harsh, if not unjust, to ask him to produce the same paddy or a similar quantity of paddy. The order of the High Court sending back the case to the 136 Magistrate for taking action according to law under section 514 will, therefore, stand set aside. We generally do not interfere in the matter of sentence, but in this case we find that the Magistrate has held that the appellant 's plea that he was ignorant of the provisions of the Assam Food Grains Control Order, 1947, was a genuine one. Having regard to this circumstance and the fact that from a fine of Rs. 50 to 6 months ' rigorous imprisonment and a fine of Rs. 1,000 is a big jump, we think it is appropriate that the sentence of imprisonment imposed by the High Court should be set aside and we order accordingly. The fine of Rs. 1,000 will stand. Sentence reduced.

The question whether a Magistrate is "personally interested" in a ease within the meaning of section 556, Criminal Procedure Code, has essentially to be decided the facts of each case. Where an officer as a District Magistrate exercising his powers under section 7(1) of the Essential Supplies (Temporary Powers) Act, 1946, sanctioned the prosecution of a person for violation of sections 3 and 7 of the Assam Food Grains Control Order, 1947, and the same officer as Additional District Magistrate tried and convicted the accused, and it was contended that as the officer had given sanction for prosecution he was "personally interested" in the case within the meaning of section 656, Criminal Procedure Code, and the trial and conviction were therefore illegal: Held, that bymerely giving sanction for prosecution he did not become personally interested" in the case and the trial and conviction were not illegal. In both cases of sanction and direction to prosecute, an application of the mind is necessary, but there is this essential difference that in the one case there is a legal impediment to the prosecution if there is no sanction and in the other case there is a positive order that the prosecution should be launched. For a sanction, all that is necessary for one to be satisfied about is the existence of a prima facie case. In the case of a direction, a further element that the accused deserves to be prosecuted is involved. Whether sanction should be granted or not may conceivably depend considerations extraneous to the merits of the case. But where a prosecution is directed, it means that the authority who gives the sanction is satisfied in his own mind that the case must be initiated. Sanction is in the nature of a permission, while direction is in the nature of a command. Gokulchand Dwarka Das vs The King , Government of Bengal vs Heera Lall Dass and Others (1872) 17 W. R. Cr. 39, Queen Empress vs Chenchi Reddi (1901) I.L.R. , Girish Chunder vs Queen Empress (1893) I.L.R. , and Emperor vs Ravji , referred to.

The appellant, a firm dealing in buying and selling jute with headquarters at Calcutta, used to purchase raw jute grown in Orissa and despatch them in bags from Cuttack and Dhanmandal Railway Station to the Railway Mills Siding Station in Calcutta. The goods were booked in the name of the buyer "KB & Co" through its licensed broker "EIJ & HE Ltd." and on the arrival of the goods the buyer inspected the goods and if they were found in accordance with the specifications mentioned in the agreement of sale, accepted them and paid their price. On the basis of these concluded transactions of sale the respondent State, levied sales tax under section 3(a) of the on the basis that the sales were interstate sales. Since the assessing authorities negatived the contention of the appellant that the sale was merely an internal sale which took place in the State of West Bengal and since the Tribunal refused to make a reference, the appellant moved the High Court under section 24(3) of the Orissa Sales Tax Act to direct the Tribunal to make a statement of the case to the High Court. The Tribunal referred two points, viz., (i) Did the title to the goods pass in Orissa or in West Bengal and (ii) Even if the title in the goods passed in West Bengal, whether in the facts and circumstances of this case, the transaction constituted "sale in the course of inter state trade" ? The High Court held that although the title in the goods passed in West Bengal and the sale took place there, since the sale occasioned the movement of goods from Orissa to West Bengal it was an inter State sale, and, therefore, it was clearly governed by section 3(a) of the . Affirming the judgment of the High Court and dismissing the appeals by special leave, the Court, ^ HELD: (1) The definition of "sale" in section 2(g) of the postulates the following conditions. (i) There must be a transfer of property in goods by one person to another; (ii) The transfer must be for cash or for deferred payment or for any other valuable consideration; and (iii) That such a transfer includes a transfer of goods on the hire purchase or other system of payment by instalment etc. The word "sale" defined in cl. (g) of section 2 and used in section 3(a), 4(2) (a) and (b) is wide enough to include not only a concluded contract of sale but also a contract or agreement of sale provided the agreement of sale stipulates that there was a transfer of property or movement 940 of goods. An agreement to sell by which the property did not actually pass was also an element of sale. [944H, 945A, C, G] Bengal Immunity Co. Ltd. vs The State of Bihar and others, , relied on. Sales Tax Officer, Pilibhit vs Budh Prakash Jai Prakash, 5 S.T.C. 193, 196, followed. (2) When the statute uses the words "sale or purchase of goods", it automatically attracts the definition of "sale of goods" as given in section 4 of the , and is to some extent pari materia to section 3 of the so far as the transactions of sale is concerned. The inevitable conclusion that fellows from the combined effect of the interpretation of section 3 of the and section 4 of the is that an agreement to sell is also an essential ingredient of sale provided it contains a stipulation of transfer of goods from the seller to the buyer. [946E F, 947A] (3) Since the word "sale" appearing in section 2(g) as also in section 3(a) of the Act includes an agreement to sell provided the said agreement contains a stipulation regarding passing of the property, if there is a movement of goods from one State to another, not in pursuance of the sale itself, but in pursuance of an agreement to sell, which later merges into a sale, the movement of goods would be deemed to have been occasioned by the sale itself wherever it takes place. When the movement of goods start, they shed the character of either unascertained goods or future goods. For the purpose of application of section 3(a) of the , the question whether the contract is a forward contract or not makes no material difference. [947B, C D, 948F] (4) A statutory provision cannot be interpreted in a way which defeats the very object of the Act. It is equally well settled that the Legislature does not waste words or introduce useless or redundant provisions. The contention that section 3(a) of the was redundant or would apply to contingencies which may not happen at all, is not correct. [948D] Indian Chamber of Commerce vs C.I.T., West Bengal II Calcutta, 1976(1) SCR 830, applied. (5) The following conditions must be satisfied before a sale can be said to take place in the course of interstate trade or commerce: (i) that there is an agreement to sell which contains a stipulation express or implied regarding the movement of the goods from one State to another. (ii) that in pursuance of the said contract the goods, in fact, move from one State to another; and (iii) that ultimately a concluded sale takes place in the State where the goods are sent which must be different from the State from which the goods move, because the tax is on sale and not on an agreement to sell or a forward contract. If these conditions are satisfied then by virtue of section 9 of the it is the State from which the goods move which will be competent to levy the tax under the provisions of the . The question whether the agreement to sell is in respect of ascertained or unascertained goods, existing or future goods, make no difference whatsoever so far as the interpretation of section 3(a) of the Central Sales Tax is concerned. [949A C, E] Cement Distributors (P) Ltd. vs Deputy Commercial Tax Officer, Lalgudi and others, 23 S.T.C. 86, 94, distinguished. Larsen and Toubro Ltd., Madras 2 & others. vs Joint Commercial Tax Officer, 20 S.T.C. 150, 186 & 187; The State of Madras vs N. K. Nataraja Mudaliar ; , 391; Tata Iron and Steel Co. Ltd. vs section R. Sarkar and others ; , 391; State Trading Corporation of India Ltd. vs State of Mysore, , 797 798; Tata Engineering & Locomotive Co. Ltd. 941 vs The Assistant Commissioner of Commercial Taxes & Anr., ; , 866; M/s. Kelvinator of India Ltd. vs The State of Haryana , 560; The State of Tamil Nadu vs The Cement Distributors (P) Ltd. and others and Oil India Ltd. vs The Superintendent of Taxes and others, referred to.

The appellant and its workmen, represented by their unio.n called the Indoxco Labour Union, Jamshedpur, made a joint application to the Government referring certain disputes to the Industrial Tribunal. The application stated that the number of workmen employed in the undertaking affected were those employed in the company 's factory at Jamshedput, and that the same number were likely to be affected by the disputes. The Government referred the disputes to the Industrial Tribunal, and the notification also stated that the disputes were between the management of the appellant company 's factory at Jamshedpur and their workmen represented by Indoxco Labour Union. Two of the demands were (1) payment of overtime to office staff should be 1 1/2 times the ordinary rate .and (2) the union representatives should be allowed special leave to attend law courts for matters connected with the workers and the management, to attend the annual conventions of their federation, to attend to Executive Committee meetings of the union federation and the conventions of the central organisation i.e., INTUC. The union at a general meeting, held prior to the reference, had passed a resolution changing the name of the union to Indian Oxygen Workers Union and making the workmen of all the establishments of the Appellant company in Bihar eligible for its membership. By a letter the union informed the appellant company at Jamshedpur of this amendment. The Tribunal held that (i) the award in this case was to apply to all of the workmen and could not be restricted to the workman working at Jamshedpur; (ii) 11/2 times the ordinary wages 'for overtime work exceeding 39 hours but not exceeding 48 hours per week should be paid; and if the overtime exceeded 48 hours per week, the company would be liable to pay double the ordinary rate of wages; and (iii) the appellant company had been allowing without loss of pay the representatives of the workmen to attend proceedings before conciliation officers and Industrial Tribunals, and that this concession was sufficient; therefore the Tribunal rejected the demand for special Leave with pay to attend the law courts; but held the union 's representatives were to be given special leave to attend (a) meetings of its executive committee, (b) meetings of the federation of the union, (c) the annual convention of that federation when held at Jamshedpur and (d) the convention of the INTUC. In appeal to this Court, HELD: (i) The award was operative only in respect of the workmen of the appellant company 's factory at Jamshedpur and not the workmen of its other establishments. [561 C D] The agreement by which the parties agreed to refer the said disputes for adjudication was between the management of the appellant company 's factory at Jamshedpur. and the wo 'rkmen employed in that factory and represented by their said union, the Indoxco Labour Union. Under the notification of the Government also 'the disputes referred to the Tribunal 551 were those set out in the said agreement. Even assuming that the Indoxco Labour Union validly amended its constitution so as to extend its membership to the company 's other workmen in its other establishments, inasmuch as the disputes referred to. the Tribunal were only those set out in the said agreement, any award made by the Tribunal in respect of those disputes must necessarily be confined to the disputes refered to it, the parties to those disputes and the parties who had agreed to refer those disputes for adjudication. There is nothing to show in that notification that other workmen of the company had raised similar demands. or that there were any disputes existing or apprehended which were included in that reference. [555 D G] The Union did not produce any evidence to show that the amendments purported to have been carried out by the resolution were sent to the Registrar as provided in sections 6(g), 28(3), 29 and 30(3) of the Trade Union Act and regulation 9 of the Central Trade Union Regulation, nor did it produce any communication of the Registrar notifying the fact of his having registered the said amendments. The only evidence it produced was its letter to the appellant company which indicated that the Registrar notified to the union of his having registered the said amendments. The Tribunal 's conclusion, therefore, that the union 'section constitution, was duly amended or that the Indian Oxygen Workers Union represented the workmen of the company 's factory at Jamshedpur and that consequently it made no difference that the name of Indoxco Labour Union as representing the workmen concerned was mentioned in the said agreement and the said statement and not that of the Indian Oxygen Workers Union is erroneous and cannot be sustained. Any award, therefore, made by the Tribunal in these circumstances can operate only in respect of the workmen of the appellant company 's factory at Jamshedpur and the Tribunal 's extension of that award to workmen in the company 's other establishments was clearly without jurisdiction. [557 D G] The Associated Cement Companies Ltd. vs Their Workmen, ; a 'nd Ramnagar Cane and Sugar Co. Ltd. vs Jatin Chakravorty, , distinguished. (ii) Under the conditions of service of the co.mpany, the total hours of work per week were 39 hours. The Bihar Shops and Establishments Act fixes the maximum number of hours of work allowable thereunder, i.e. 48 hours a week, and provides for double the rate of ordinary wages for work done over and above 48 hours. But no reliance can be placed on the provisions of that Act for the company 's contention that it cannot be called upon to. pay for overtime work anything more than its ordinary rate of wages if the workmen do work beyond 39 hours but not exceeding 49 hours a week. Any workman asked 'to work beyond 39 hours would obviously be working overtime and the company in fairness would be expected to pay him compensation for such overtime work. If the company pays at the ordinary rate of wages for work done beyond 39 hours but not exceeding 48 hours work a week, it would be paying no extra compensation at all for the work done beyond the agreed hours of work. The company would thus be indirectly increasing the hours of work and consequently altering its condition of service. [558 C F] If after taking into consideration the fact of the comparatively higher scale of wages prevailing in the appellant company, the Tribunal fixed the rate for overtime work at 11/2 times the ordinary rate of wages, it is impossible to say that the Tribunal erred in doing so or acted unjustly. (iii) The demand for special leave must be disallowed. 552 The appellant company. has been allowing those,of its workmen who are the union 's representatives to attend without loss of pay proceedings before conciliation officers and industrial tribunals. In conceding the demand of the union for more leave the Tribunal does not appear to have considered the adverse effect on the company 's production if furthern absenteeism were to be allowed especially when the crying need of the country 's economy is more and more production. In awarding this demand the Tribunal also did not specify on how many ' occasions the executive committee meetings of the union and other meetings would be held when the company would be obliged to give special leave with pay to the union 's representatives. Similarly, there is no knowing how many delegates the union would send to attend the conventions of the federation and the INTUC. The Tribunal could not in the very nature of things specify or limit the number of such meetings for such an attempt would amount to interference in the administration of the union and its autonomy. Its order must of necessity, therefore, have to be indefinite with the result that the appellant company would not know before hand on how many occasions and to how many of its workmen it would be called upon to grant special leave. Further, in case there are more than one union in the company 's establishment, the representatives of all such unions would also have to be given such leave to attend the aforesaid meetings. In considering such a demand, the question as to why the meetings of the executive committee of the union cannot be 'held outside the hours of work should be considered. It was said that it may not be possible always to do so if an emergency arises. But emergencies are not of regular occurrence and if there be one, the representatives can certainly sacrifice one of their earned leave. Similarly the meetings of the federation and the annual conventions of the INTUC too can be artended by the union 's delegates by availing themselves of their earned leave. [559 D E; 560 C H] J. K. Cotton and Spinning and Weaving Mills vs Badri Malt, [19641 3 S.C.R. 724, referred to.

The appellant (in Criminal Appeal No. 553/89) was prose cuted for selling adulterated supari with admixture of saccharin. He filed a petition in the Kerala High Court under section 482 of the Criminal Procedure Code for quash ing the criminal proceedings which was dismissed by a single judge. Against the decision of the single judge an appeal was filed in this Court. The appellant (In Criminal Appeal No. 283/91) was also prosecuted for selling adulterated Supari but was acquitted by the Chief Judicial Magistrate, Palakkad. On appeal the Kerala High Court set aside his acquittal and convicted him under section 16(1) (a) (i) of the Prevention of Food Adul teration Act and sentenced him to imprisonment for 6 months and a fine of Rs.1000. Against the order the Kerala High Court an appeal was filed in this Court. The appellant (In Criminal Appeal No. 284/91) was con victed ruder section 7(i) and (v) read with sections 16(i) (a) (ii) of the prevention of Food Adulteration Act for sale of adulterated supari with admixture of saccharin. He filed a Revision Petition in the Kerala High Court and a Single Judge dismissed the same. Against the order of the Single Judge an appeal was filed in this Court. The facts in the connected civil appeal (Nos. 3708 13/89) are that a batch of writ petitions was filed in the Andhra Pradesh High 391 Court for a declaration that the admixture of saccharin in supari was in accordance with Rule 44 of the Prevention of Food Adulteration Rules, 1955 and for restraining the re spondents from interfering with the business of sale of supari. A Division Bench of the High Court allowed the writ petitions. Against the decision of the Division Bench Union of India has filed appeals in this Court. Civil Appeal No. 1897/91 is directed against the order of the Division Bench of the Kerala High Court which held that the learned Single Judge should have declined jurisdic tion for the reason that the relief claimed was of a general character for a declaration that the admixture of saccharin in Roja Scented betelnut is not a blanket ban under Rule 47 read with Appendix 'B ' of the Prevention of Food Adultera tion Rules, 1955. Criminal Appeal No. 722/91 is directed against the order of the High Court of Kerala setting aside the order of acquittal passed by the trial court and remanding the matter to the trial court for fresh disposal according to law. The High Court did not agree with the submission that the arti cle of Supari was not adulterated as saccharin could be added to Supari. Accordingly it held that saccharin could not be added to supari and consequently remanded the matter to the trial court for fresh disposal according to law. In appeals to this court it was contended on behalf of the accused that on the construction of Rule 44(c) it per mits sale of Article of food which contains artificial sweetener with the standard as laid down in Appendix 'B ' to Prevention of Food Adulteration Rules, 1955. Disposing the appeals, this Court, FIELD: 1. Rule 44(g) of the Prevention of Food Adultera tion Rules, 1955 indicates that sale of any article of food which contains artificial sweetener is banned. The ban is lifted only if such artificial sweetener is permitted to be added to the article of food for which standards have been laid down in Appendix 'B ' to the Rules. Rule 47 in other form specifically bars saccharin or any other article of artificial sweetener to be added in any article of food, except where the addition of such artificial sweetener is permitted in accordance with the standards laid down in Appendix ' 'B '. Thus both Rules 44(g) and 47 constitute a total blanket ban on the addition of any artificial sweeten er including saccharin to any article of food 392 unless standards for that article of food is prescribed which authorises the use of such an artificial sweetener. [398 G, 399 A B] 2. The prescription of standard of saccharin or any artificial sweetener in Appendix 'B ' is really irrelevant. It is not the question of standard being prescribed for saccharin which is irrelevant what is relevant is the stand ard being prescribed in Appendix 'B ' of the article of food which is being sold and which standard permits user of saccharin. This is the real intention of the legislature while enacting Rule 44(g) of the Rules. [399 E F] 3. What one has to see is the article of food in which the artificial sweetener is sought to be added. The article which was being sold should contain a standard and the standard should permit artificial sweetener to be added. If the standards for that article of food is provided in Appen dix 'B ' to the Rules and such standards permit the addition of saccharin or any other artificial sweetener, then and then only saccharin or any other artificial sweetener could be added and not otherwise. [399 A C] 4. Admittedly no standard has been laid down for Pan Masala or Supari i.e. the article of food which was being sold. Therefore, the exception permitted by clause (g) of Rule 44 has no application and no relevance. [398 H, 399 A] Pyarali K. Tejani vs Mahadeo Ramchandra Dange and Ors., ; , explained and applied. State of Maharashtra vs Ranjitbhai Babubhai Suratwalla, ; Thummalapudi Venkata Gopala Rao vs The State. , M/s Wahab and Co. a proprie tary concern represented by its ' proprietor N.A. Wahab son of N. Mohammad Sheriff vs Food lnspector. Tiruchirappalli Municipal Corpn., Trichy. [1990] L.W. (Crl.) 437; Kailash vs The ,State of Rajasthan, ; State of Assam vs Ram Karani anti Ors., (1987) 3 All India Prevention of Food Adulleration Journal 153; Ujjain Municipal Corpn. , Ujjain vs Chetan Das, (1985) I F.A.C. 46, overruled. State by public prosecutor vs K.R. Balakrishnan, ; Food Inspector vs Usman. ; Krishna Chandra (In jail) vs State of Uttar pradesh, , approved.

The appellant State of West Bengal was carrying on trade as owner and occupier of a market at Calcutta without obtaining a licence as required under section 218 of the Calcutta Municipal Act, 1951. The respondent Corporation of Calcutta filed a complaint against the State for contravention thereof. The trial Magistrate, accepting the State 's contention that the State was not bound by the provisions of the Act acquitted the State. on appeal, theHigh Court convicted the State and sentenced it to a fine, holding thatthe State was as much bound as a private citizen to take out a licence. In appeal to this Court the appellant, relying on this Court 's decision inDirector of Rationing vs Corporation of Calcutta, ; ,contended that the State was not bound by the provisions of a statute unless it was expressly named or brought in by necessary implication and this common law rule of construction, accepted as the law in India was "law in force" within the meaning of article 372 of the Constitution and that in any event by necessary implication the State was excluded from the operation of section 218 of the Act. Held:Per Subba Rao C.J., Wanchoo, Sikri, Bachawat, Ramaswami, Shelat, Bhargava and Vaidialingam, JJ. (Shah, J. dissenting) : The State was not exempt from the operation of section 218 of the Calcutta Municipal Act, 1951 and was rightly convicted. Per Subba Rao C. J. Wanchoo, Sikri, Ramaswami. Shelat, Bhargava and Vaidialingam, JJ. (i) The Common Law rule of construction that the Crown is not, unless expressly named or clearly intended, bound by a statute,, was not accepted as a rule of construction throughout India and even in the Presidency Towns, it was not regarded as an inflexible rule of construction. It was not statutorily recognized either by incorporating it in different Acts or in any General Clauses Act; at the most, it was relied upon as a rule of general guidance in some parts of the country. The legislative practice establishes that the various legislatures of country provided specifically, exemptions in favour of the Crown 171 whenever they intended to do so indicating thereby that they did not rely upon any presumption but only on express exemptions. Even those courts that accepted it considered it only as a simple canon of construction and not as a rule of substantive law. In the City of Calcutta there was no universal recognition of the rule of construction in favour of the Crown. The Privy Council, in Province of Bombay vs Corporation of the City of Bombay, (1946) L.R. 73 I.A. 27 gave its approval to the rule mainly on concession made by counsel. [180 D G; 183 H; 184 E F; 186 D G] The archaic rule based on the prerogative and perfection of the Crown has no 'relevance to a democratic republic it is inconsistent with the rule of law based on the, doctrine of equality and introduces conflicts and anomalies. The normal construction, namely, that an enactment applies to citizens as well as to State unless it expressly or by necessary implication exempts the State from its operation, steers clear of all the anomalies and is consistent with the philosophy of equality enshrined in the Constitution. B] If a rule of construction accepted by this Court is inconsistent with the legal philosophy of the Constitution it is the duty of this Court to correct its self and lay down the right rule. This Court must more readily do so in constitutional matters than in other branches of law. [176 B C] Director of Rationing vs Corporation of Calcutta, ; ,, reversed. Province of Bombay vs Corporation of the City of Bombay, (1946) L.R. 73 I.A. 271, held inapplicable. Bengal Immunity Co. vs State of Bihar, , referred to. Case law discussed. (ii)Even assuming that the common law rule of construction was accepted as a canon of interpretation throughout India the rule is not "law in force" within the meaning of Article 372 of the Constitution. There is an essential distinction between a law and a rule of construction. A rule of construction adopted to ascertain the intention of the legislature is not a rule of law. [187 D] (iii)The State is not excluded from the operation of section 218 of the Act by necessary implication. The State is not the payer as well as the receiver of the fine, or the fine, when levied goes to the municipal fund. Though the expression fine ' is used, in effect and substance, section 541 is a mode of realization of the, fee payable in respect of the licence. The provision for imprisonment in default of fine is only an enabling provision and the court is not bound to direct the imprisonment of the defaulter. [189 D H; 190 A B] Per Bachawat, J : (i) This Court should have in Director of Rationing and Distribution vs Corporation of Calcutta, , refused to recognise the rule that the Crown is not bound by a statute save by express words or by necessary implication. In India the Crown never enjoyed the general prerogative of overriding a statute and 'standing outside it. The doctrine of the general immunity of the Crown from the operation of statutes so far as it is based upon the 'royal prerogative was never imported into India. Nor is there any compelling reason why the courts in India should not give full effect to the general words of a statute on the basis of some artificial rule of construction prevailing in England. The bulk of the Indian legislation proceeds upon the assumption that the Government will be bound unless the contrary is stated. The 172 rule,as rule of construction, never gained a firm foothold in untilthe Privy Council decision in Province of Bombay vs Municipal Corporation for the City of Bombay, (1946) L.R. 73 I.A. 271, in 1946, till which time there was no settled course of decisions of the Indian courts necessitating or justifying the application of this rule to the construction of Indian statutes; and even in this decision the propriety of applying the rule to Indian legislation was not considered. The imposition of this strict rule of construction by the Privy Council was received very unfavourably in India till this Court 's decision in the Director of Rationing case wherein Province of Bombay was held to have laid down the correct law. But subsequent decisions of this Court disclosed a tendency to relax and soften the rigour of the rule. Further, in a country having a federal system of government it is difficult to apply the rule of Crown exemption from statutes. This rule was not in force in India and therefore was not "law in force" within the meaning of article 372 of the Constitution. [201 D E; 202 C; 210 A B, C D; C, H; 210 H; 211 F] This Court has power to reconsider its previous decisions and this is a fit case where this power should be exercised. [211 E] Director of Rationing vs Corporation of Calcutta, ; , reversed. Province of Bombay vs Municipal Corporation for the City of Bombay, (1946) L.R. 73 I.A. 271, held inapplicable. Shivenkata Seetararnanjaneya Rice & Oil Mills vs State of Andhra Pradesh, ; and Bengal Immunity Co. vs State of Bihar, , referred to. Case law discussed. (ii)On a question of construction of a statute no rational distinction can be made between the trading and non trading activities of the State. [210 G] (iii)There is nothing in the Act to indicate that the State should be excluded from the purview of section 218(1) 'requiring the taking out of a licence on payment of the prescribed fee and section 5441(1) providing the remedy for the recovery of fee in face of default. If the State is to be exempt from the application of section 541(1)(b) it would lead to the anomaly that the State is liable to pay the licence fee but the Municipality will have no remedy for the recovery of the fee. Also, the fact that under section 547(A) the court is competent to direct imprisonment in default of fine is no reason why section 5411 1) (b) should not be applied to the State. The special provisions of section 541(2) indicate that the fine realizable under section 541 is receivable by the Municipality. It follows that the State Government is the payer but is not the receiver of the fine. The fine, when levied, is taken by the Municipality in full satisfaction of the demand on account of the licence fee. [212 H; 213B] State of Bihar vs Rani Sonavati Kumari ; , relied on. Shah, J. (Dissenting); (i) The English Common Law rule that the Crown is not, unless expressly named or clearly intended, bound by a statute, is a rule of construction and was settled law in India before the Constitution. [197 F; 198 D] The Common Law of England was adopted in this country subject to local variations and the personal law of the parties and the courts which functioned in the former British India territory were enjoined to cases not governed by any specific statutory rules according to equity and good conscience,, which meant rules of English Common Law 173 in so far as they were applicable to Indian society. Them was practically a consistent course of decisions of the High Courts in India, prior to the Constitution, in support of the view, affirmed by the Judicial Committee in Province of Bombay vs Municipal Corporation of the City of Bombay, (1946) L.R. 73 I.A. 271, that the rule that the Crown is not unless expressly named or clearly intended bound by a statute applied to India. It was accepted as a rule of interpretation ofstatutes applicable to all statutes governing state action, authority or property. A difference may have prevailed in Parts of the territories now comprising theIndian Union. But this is not peculiar to this rule of interpretation adoptedby the Courts in British India. Where uniform statutes do not apply differences do arise and must be determined according to the law and jurisdiction inherited by the courts administering justice. The present case concerns the administration of law in the town of Calcutta which has for more than two centuries been governed by the English Common Law as adopted by the various Acts, Regulations and finally by the Letters Patent. [191 A D; 192 D E; D F] Director of Rationing and Distribution vs The Corporation of Calcutta, ; , followed. Province of Bombay vs Municipal Corporation of the City of Bom. bay, L.R. 73 I.A. 271, applied. State of West Bengal vs Union, [1964] 1 S.C.R. 371 Srivenkata Seetaramanjaneya Rice & Oil Mills vs State of Andhra Pradesh, ; , Builders Supply Corporation vs Union of India, ; , referred to. Case law referred to. There is no reason to hold that the rule which previously applied to the interpretation of a statute ceased to apply. on the date on which the Constitution came into force. The Constitution has not so fundamentally altered our concept of 'State ' as to abandon the traditional view about State privileges, immunities and rights because they had a foreign origin and on the supposed theory of equality between the State and its citizens. The guarantee of equal protection clause of the Constitution does not extend to any differential treatment which may result in the application of a special rule of interpretation between the State and the citizens nor has the Constitution predicated in all respects equality in matters of interpretation between the State and its citizens. A State can, in the interest of public good, select itself for special treatment. This being so, there is no reason to suppose that a Statute which was framed on the basis of a well settled rule of pre Constitution days which accorded the State a special treatment in the matter of interpretation. of statutes must be deemed to have a different meaning on the supposition that the Constitution has sought to impose equality between the State and the citizens. [198 H 199 F] The fact that in the Indian federal set up sovereignty is divided between the Union and the States, and in the application of the rule that the State is not bound by a Statute, unless expressly named or clearly implied, conflict between the State enacting a law and the Union,, or another State, may arise, does not give rise to any insuperable difficulty which renders the rule inapplicable to the changed circumstances, for, it is the State which enacts a legislation in terms general which alone may claim benefit of the rule of interpretation and not any other State. [199 G] (ii)The rule of interpretation being a settled rule is "law in force" within Me meaning of article 372 of the Constitution. A rule is not any 174 the less a rule of law because it is a rule for determination of the intention of the legislature and for its application requires determination of facts and circumstances outside the statute. Acceptance of the proposition that a decision of the highest judicial tribunal before the Constitution, is law, does not involve the view that it is immutable. A statue may be repealed, ' and even retrospectively, it would then cease to be in ,operation; a decision which in the view of this Court is erroneous may be overruled and may cease to be regarded as law, but till then it was law in force. [198 D G] (iii)The application of the rule cannot be restricted to cases where an action of the State in its sovereign capacity is in issue. In the context of modem notions of the functions of a welfare State, it is difficult to regard any particular activity of the State as exclusively trading. [200 A B] (iv)The State of West Bengal was not bound by the provisions relating to the issue of licences for occupation or conduct of a market. [200 F] There is no, express reference to the State, nor is there anything peculiar in the nature purpose and object or in the language used in the enactment relating to the issue of licences, which may suggest that the State must by necessary implication be bound by its provision. [200 E]

The three respondents, who were the General Manager, the Assistant Manager and the Secretary of the Laxmi Devi Sugar Mills Ltd., were charged under sections 12, 13 and 26 of the United Provinces Shop and Commercial Establishment Act, 1947, for contravening the provisions of the Act relating to holidays, leave and maintenance of certain registers regarding a class of field workers employed by the company to guide, supervise and control growth and supply of sugar cane for use in the factory. It was contended on their behalf that those employees were workers within the meaning of the and the United Provinces Shop and Establishment Act did not apply to them. The Judicial Magistrate rejected that contention and convicted the respondents under section 26 of the Act and sentenced them to pay a fine of Rs. 30 each. On a reference by the Sessions judge recommending that the said convictions and sentences may be set aside, the High Court acquitted the respondents. The State Government appealed to this Court by Special Leave. Held, that the order of acquittal passed by the High Court was erroneous. The provisions of the were intended to benefit only workers employed in a factory and since field workers guiding, supervising and controlling growth and supply of sugar cane for use in the factory were not employed in the factory, the did not apply to them and they fell within the definition of " Commercial Establishment " under the United Provinces Shop and Commercial Establishment Act, 1947.

A Jagirdar executed a deed on August 5, 1949 in favour of the appellant for the sale of logs of a specified girth to be obtained from cutting the trees in his forests. On February 19, 1951 the Forest Officer of the ' respondent State prevented the appellant and the Jagirdar from cutting the trees. On the coming into force of the Madhya Pradesh Act 1 of 1951, the, interest of the Jagirdar in his estate vested in the respondent State. The appellant instituted a suit in June 1954 against the respondent Stateand the Jagirdar for breach of contract and claimed compensation (i) for logs which were cut but which he could not remove; (ii) for logs which were cut but were stated to have 'been lost due to the negligence of the respondent; and (iii) logs from the standing timber which had not been cut or could not be cut by the appellant from the jagirdar 's villages. The ' respondent State contested the suit on the ground inter alia that the deed could not be enforced against it because of the vesting of the Jagir under the Act in the State and that the contract created a mere personal liability against the Jagirdar. The Trial Court granted the appellant a decree for compensation under all the heads claimed at a rate per log determined by the Court. The High Court in appeal disallowed the appellant 's claim, under items (ii) and (iii). In appeal to this Court by certificate it was contended on behalf of the appellant that the rate of compensation determined was inadequate; that the High Court erred in disallowing compensation four the logs which were cut *but were lost, and that it had wrongly disallowed the claim for value of logs of timber which the appellant was entitled to, but could not cut because of the restrictions imposed by the ' State. HELD: Dismissing the appeal, (i) On the evidence, the High Court had rightly disallowed the claim in respect of logs cut but which were stated to have been lost. (ii) Where a thing is attached to, or forms part of, land at the time of the contract and which is to be severed by the buyer, under section 18 of the the property in the thing passes in the absence of a contract to the contrary to the buyer on the severance of the thing from, the land. Again under section 21 of the Act, even if there be: a contract for the sale of specific goods, but the seller is obliged under the terms of the contract to do something to the goods for the purpose of putting them into, a deliverable state, the property passes only when the thing agreed to be done is done and the buyer is informed thereof. [453 D] In the present case the contract by its terms was for the sale of logs out of trees in the forest with a girth of two feet or more; but the timber had to be cut and had to be put in a deliverable state,. Before the trees. 446 were cut and the logs appropriated to the contract, the estate of the Jagirdar vested in the State of Madhya Pradesh. The, appellant 's claim to cut standing trees in the forests of the Jagir after they vested in the State was therefore rightly negatived. [456 F G] Badische Anilin Fabrik vs Hickson, at p. 421; KurseH vs Timber Operators and Contractors Ltd., ; Chhotabhai Jethabhai Patel & Company vs The State of Madhya Pradesh, ; ; Shrimati Shantabat vs State of Bombay & Ors. 11959] S.C.R. 265; Mahadeo vs The State of Bombay, [1959] Supp. (2) S.C.R. 339: .State of Madhya Pradesh vs Yakunuddin, [1963] S.C.R. 13; referred tO.

% The question which arose for determination in this case was whether a Letters Patent Appeal would lie to a Division Bench of the High Court of Gujarat from an interlocutory order of a Single Judge of that High Court in the course of the trial of an election petition filed under the Representation of the People Act, 1951. The appellant and respondents Nos. 1 to 6 were candidates at an election held to fill a seat in the Legislative Assembly of the Gujarat State. The appellant was declared elected. Thereupon, the 1st respondent filed an election petition in the High Court, challenging the validity of the election of the appellant on a number of allegations, and in order to establish his case, he filed an application before the Single Judge who was trying the election petition, to direct the Returning Officer to produce all the records of the election, mentioned in the application, and prayed for permission to inspect the same. The appellant opposed the prayers made by the 1st respondent. The Single Judge declined to grant the application made by the Ist respondent. Against the order of the Single Judge, the Ist respondent preferred an appeal under clause 15 of the Letters Patent of the Gujarat High Court. The Division Bench of the High Court allowed the appeal to the extent indicated in its judgment, overruling the contention of the appellant that the appeal was not maintainable as there was no provision in the Act, permitting an appeal to the Division Bench of the High Court against an interlocutory order of a Single Judge hearing an election petition filed under the Act. Aggrieved by the decision of the Division Bench, the appellant moved this Court for relief by special leave. Allowing the appeal, setting aside the judgment of the Division 1044 Bench of the High Court and dismissing the Letters Patent Appeal while expressing no opinion on the merits of the case, the Court, ^ HELD: The only point urged in this appeal by the appellant was that the appeal filed under clause 15 of the Letters Patent of the High Court against the interlocutory order passed by the Single Judge was not maintainable and, therefore, the judgment of the Division Bench was liable to be set aside. [1048C D] Under the provisions of the Act as amended and the provisions of the Constitution of India, no Court exercising power under any ordinary law other than the Judge of a High Court who had been assigned the work of trying an election petition under sub section (2) of section 80 A of the Act and the Supreme Court which was empowered to hear an appeal against any order passed by the judge of the High Court under section 98 or section 99 of the Act, could decide any question arising out of an election petition. The power of the Supreme Court under the provisions of the Constitution was, however, unaffected by any of the provisions of the Act. It meant that when an election petition was pending in the High Court, only the judge who was asked to try the election petition could deal with the questions arising in it and no other judge or judges of the High Court could deal with them. When an order was passed under section 98 or section 99 of the Act by a judge of the High Court in an election petition, it was subject to the appellate jurisdiction of the Supreme Court under section 116 A of the Act, Article 136 of the Constitution being excluded in view of the express provisions of section 116 A of the Act, and being resorted to by any party aggrieved by any order passed by the judge trying an election petition not falling under section 98 or section 99 of the Act. It followed that the Division Bench of the High Court, which was entitled to hear an appeal against any order of a Single Judge under clause 15 of the Letters Patent of the High Court, which was an ordinary law, could not hear an appeal against any interlocutory order passed in the course of the trial of an election petition by the Judge trying the election petition, since the Division Bench was not specified in the Act as an appellate authority which could deal with questions arising out of an election petition filed under the Act. [1053G H; 1054A D] Under clause 15 of the Letters Patent, an appeal no doubt lay from an order of a Single Judge of the High Court exercising Original Jurisdiction to the High Court itself irrespective of the fact that the judgment was preliminary or final or that it was one passed at an interlocutory stage, provided it satisfied certain conditions, but the said 1045 provision could not be extended to an election petition filed under the Act. Conferment of the power to try an election petition under the Act did not amount to enlargement of the existing jurisdiction of the High Court. The jurisdiction exercisable by the Single Judge under the Act was a special jurisdiction conferred on the High Court by virtue of Article 329(b) of the Constitution. In view of the limited nature of the appeal expressly provided in section 116 A of the Act, it should be held that any other right of appeal (excluding that under the Constitution) was taken away by necessary implication. Therefore, it was difficult to subscribe to the view that when once the jurisdiction to try an election petition was conferred on the High Court, all other powers incidental to the ordinary original jurisdiction exercised by a single Judge of a High Court would become applicable to an election petition under the Act. If the Parliament had intended that the Division Bench of the High Court should exercise its appellate jurisdiction under clause 15 of the Letters Patent of the High Court, probably, it would not have enacted sub section (7) of section 86 of the Act, having regard to the well known tendency of one or the other party to an election petition preferring appeals against the interlocutory orders to the Division Bench. If such appeals against the interlocutory orders to the High Court, were permitted, perhaps, no election dispute would be finally settled till the next election became due. As regards the jurisdiction to try an election petition and the right of appeal of the parties to an election petition, the provisions of the Act (apart from the provisions in the Constitution) constituted a complete code and no Judge or Judges other than the Single Judge of the High Court, who was asked to try an election petition, and the Supreme Court, exercising the appellate powers under section 116 A of the Act in respect of orders passed under section 98 or section 99 of the Act or under Article 136 of the Constitution in respect of other orders, could have any jurisdiction to deal with any matter arising out of an election petition filed under the Act. The Court disagreed with the view expressed on this question by the Gujarat High Court in Dr. Chotalal Jivabhai Patel vs Vadilal Lallubhai Mehta & Ors., (12 Gujarat Law Reporter 850), and overruled that decision of the High Court. The Court also overruled the decision of the Madras High Court in Kadiravan alias Shamsudeen vs B. Thirumalaikumar, ILR (1970) 2 Mad. 183 and the decision of the Madhya Pradesh High Court in Laxmi Narayan Nayak vs Ramratan Chaturvedi & Ors, AIR 1986 Madhya Pradesh 165 which had taken the same view as in Dr. Chotalal Jivabhai Patel 's Case (supra). The Court agreed with the view expressed by the Allahabad High Court in Siaram vs Nathuram & Ors., [1968] ALL. L.J. 576 and by the Rajasthan High Court in Ramdhar vs Shanwar Lal, AIR which held that by necessary 1046 implication an appeal to the High Court from an interlocutory order of the Single Judge of the High Court in the course of trial of an election petition filed under the Act, was excluded. [1054G H; 1055A H; 1056A H] The Division Bench of the High Court of Gujarat had no jurisdiction to hear the appeal filed by the Ist respondent against the interlocutory order passed by the Single Judge who was trying the election petition. Judgment of the Division Bench of the High Court set aside, Letters Patent Appeal dismissed. [1057B] Dr. Chotalal Jivabhai Patel vs Vadilal Lallubhai Mehta Shamsudeen vs B. Thirumalai Kumar, ILR ; and Laxmi Narayan Nayak vs Ramratan Chaturvedi and Ors., A.I.R. 1986 Madhya Pradesh 165, overruled. Siaram vs Nathuram and Ors., [1968] All. L.J. 576 and Ramdhan vs Bhanwarlal, A.I.R. approved. N.P. Ponnuswami vs Returning Officer, Namekkal Constitutency and others; , ; Shah Babulal Khimji vs Jayaban D. Kania & Anr., ; and National Telephone Company Ltd. vs Post Master General, [1913] A.C.546, referred to.

Appeal No. 388 of 1960. Appeal by special leave from the judgment and order dated February 3, 1959, of the Patna High Court in Election Appeal No. 10 of 1958. section P. Varma, for the appellant. L. K. Jha and D. Govardhan, for respondent No. 1. L. K. Jha and K. K. Sinha, for respondent No. 2. 1960. November 17. The Judgment of the Court was delivered by 471 GAJENDRAGADKAR, J. Is the appellant Ram Padarath Mahto disqualified for membership of the Bihar Legislature under section 7(d) of the Representation of the People Act, 1951 (hereafter called the Act)? That is the short question which arises for our decision in the present appeal by special leave. The appellant was one of the candidates for the Dalsinghsarai Constituency in the District of Darbhanga in Bihar for the State Legislature. The said Constituency is a Double Member Constituency; it was required to elect two members, one for the general and the other for the reserved seat for scheduled castes in the Bihar Legislative Assembly. It appears that the said Constituency called upon voters to elect members on January 19, 1957. January 29, 1957 was fixed as the last date for the filing of the nomination papers. The appellant filed his nomination paper on January 28, 1957, and on the next day seven other members filed their nomination papers. On February 1, 1957, the nomination paper filed by the appellant was rejected by the returning officer on two grounds; he held that the appellant being an Inspector of Co operative Societies was a Government servant at the material time and so was disqualified from standing for election. He also found that the appellant was a member of a joint and undivided Hindu family which carried on the business of Government as stockiest of grain under a contract between the Government of Bihar and a firm of the joint family known as Nebi Mahton Bishundayal Mahto. Thereafter the election was duly held, and Mr. Mishri Singh and Mr. Baleshwar Ram, respondents 1 and 2 were declared duly elected to the general and reserved seat respectively. The validity of this election was challenged by the appellant by his Election Petition No. 428 of 1957. To this petition he impleaded the two candidates declared to have been duly elected and five others who had contested in the election. Before the Election Tribunal the appellant urged that he was not in the employ of the Government of Bihar at the material time. He pointed out that he had resigned his job on January 13, 472 1957, and his resignation had been accepted on January 25, 1957, relieving him from his post as from the later date. He also contended that there was a partition in his family and that he had no share or interest in the contract in question. Alternatively it was argued that even if the appellant had an interest in the said contract it did not fall within the mischief of section 7(d) of the Act. These pleas were traversed by respondents 1 and 2 who contested the appellant 's election petition. The Election Tribunal found that the petitioner was not a Government servant on the day he filed his nomination paper, and so according to it the returning officer was wrong in rejecting his nomination paper on the ground that he was a Government servant at the material time. The Election Tribunal rejected the appellant 's case that there was a partition in the family, and held that at the relevant time the appellant continued to be a member of the joint Hindu family which had entered into the contract in question with the Government of Bihar. However, in its opinion, having regard to the nature of the said contract it was not possible to hold that the appellant was disqualified under section 7(d), and so it came to the conclusion that the returning officer was in error in rejecting the appellant 's nomination paper on this ground as well. In the result the Tribunal allowed the election petition, declared that the nomination paper had been improperly rejected, and that the election of the two contesting respondents was void. Against this decision the two contesting respondents filed two appeals in the High Court at Patna (Election Appeals Nos. 9 and 10 of 1958). The High Court has confirmed the finding of the Tribunal that the appellant was not a Government servant at the material time. It has also agreed with the conclusion of the Tribunal that at the relevant time the appellant was a member of the undivided Hindu family. On the construction of the contract, however, it differed from the view adopted by the Tribunal, and it has held that as a result of the said contract the appellant was disqualified under section 7(d) of the Act. This finding 473 inevitably led to the conclusion that the appellant 's nomination paper had been properly rejected. On that view the High Court did not think it necessary to consider whether the Tribunal was right in declaring void the election of not only respondent 1 but of respondent 2 as well. It is against this decision of the High Court that the appellant has come to this Court by special leave; and the only question which is raised on his behalf is that the High Court was in error in coming to the conclusion that he was disqualified under section 7(d). The decision of this question naturally depends primarily on the construction and effect of the contract in question. Section 7 of the Act provides for disqualification for membership of Parliament or of State Legislatures. Section 7(d), as it stood at the material time and with which we are concerned in the present appeal provides,, inter alia, that a person shall be disqualified for being chosen as, and for being, a member of the Legislative Assembly of a State, if whether by himself or by any person or body of persons in trust for him or for his benefit or on his account, he has any share or interest in a contract for the supply of goods to, or for the execution of any works or the performance of any services undertaken by, the appropriate Government. On the concurrent findings recorded by the High Court and the Tribunal it cannot now be disputed that the appellant has interest in the contract in question; so that the first part of section 7(d) is satisfied. The High Court has found that the contract attracts the last part of section 7(d) inasmuch as according to the High Court the Government of Bihar had undertaken to discharge the service of supplying grain to the residents of Bihar and the firm of the appellant 's family had entered into a contract for the performance of the said services. The last part of section 7(d) postulates that the appropriate Government has undertaken to perform certain specific services, and it is for the performance of such services that the contract had been entered into by a citi zen. In other words, if a citizen has entered into a contract with the appropriate Government for the 60 474 performance of the services undertaken by the said Government he attracts the application of section 7(d). This provision inevitably raises two questions: what are the services undertaken by the appropriate Government? Has the contract been entered into for the performance of the said services? At this stage it is necessary to consider the material terms of the contract. This contract was made on February 8, 1956, between the Governor of Bihar who is described as the first party and the firm which is described as the second party. The preamble to the contract shows that the first party had to stock and store foodgrains in Darbhanga District for sale in pursuance of the Grain Supply Scheme of the Government for which a proper custodian and bailee for reward was necessary. It also recites that the second party had applied to become such custodian and bailee of such stock of foodgrains as the first party shall deliver to the second party in one lump or from time to time on terms and in the manner expressly specified under the contract, or as may be necessarily implied. Clause 1 of the contract provides that the second party shall, at the direction of the first party, take over foodgrains from the railway wagons or from any place as directed by the first party; thereafter the second party had to cause the grains to be stored in his godown at Dalsinghsarai and had to redeliver the same to the first party after weighing either at the second party 's godown approved by the first party or at any other place as directed by the first party. The movement of the grain had to be done by the second party himself or by a transport contractor appointed by the first party. Clause 2 imposed on the second party the liability to maintain a register and keep accounts as prescribed thereunder. Under cl. 3 the second party undertook to keep such stocks and establishments as may be necessary at his own expense. Clause 4 imposed upon the second party the obligation to protect the stock of foodgrains or to make good the losses except as thereinafter provided: Clauses 5 to 8 are not material for our purpose. Clause 9 provides that the second party shall deposit the sum of 475 Rs. 5,000 in a Savings Bank account which has been pledged to the District Magistrate, Darbhanga, and comply with the other conditions specified in the clause. Clause 10 deals with the remuneration of the second party. It provides that the first party shall be liable to pay to the second party remuneration for the undertaking in this agreement at the rate of Re. 1 per( cent on the value of the stocks moved or taken over from his custody under the orders or directions of the first party or his agent calculated at the rate fixed by the Government from time to time for wholesale sales of grain. The clause adds that no remuneration shall be payable to the second party if the first party takes over the whole of the balance stock lying with the second party for reasons of the termination of the agreement. The rest of the clauses need not be recited. It would thus be seen that the agreement in terms is one of bailment. The State Government wanted to entrust the work of stocking and storing foodgrains to a custodian or bailee. In that behalf the appellant 's firm made an application and ultimately was appointed a bailee. There is no doubt that by this contract the firm has undertaken to do the work of stocking and storing foodgrains belonging to the State Government; and if it can be reasonably held that the service undertaken by the State Government in the present case was that of stocking the foodgrains the contract in question would obviously attract the provisions of section 7(d). Mr. Varma, however, contends that the service undertaken by the State Government is the sale of foodgrains under its Grain Supply Scheme; and he argues that unless the contract shows that it was for sale of the said goods it cannot attract the provisions of section 7(d). Unfortunately the scheme adopted by the State Government for the supply of grain has not been produced before the Election Tribunal, and so the precise nature and extent of the services undertaken by the State Government fall to be determined solely by reference to the contract in question. It is true that the contract relates to the stocking and storing of foodgrains which the State Government wanted to sell to the residents of Bihar; but can it be said 476 that stocking and storing of foodgrains was such an integral or essential part of the selling of goods that a contract for stocking and storing foodgrains should necessarily be regarded as a contract for their sale? In our opinion, it is difficult to accept the argument that stocking and storing of foodgrains is shown to be such an essential and integral part of the supply scheme adopted by the State Government. Theoretically speaking stocking and storing foodgrains cannot be said to be essential for the purpose of carrying out the scheme of sale of foodgrains, because it would conceivably be possible for the State Government to adopt a scheme whereby goods may be supplied without the State Government having to store them; and so the work of stocking and storing of foodgrains may in some cases be conceivably incidental to the scheme and not its essential part. It is significant that sale of goods under the contract was never to take place at the godown of the firm. It had always to take place at other selling, centers or shops; and thus, between the stocking and storing of goods and their sale there is an element of time lag. The only obligation that was imposed on the firm by this contract was to be a custodian or bailee of the goods, keep them in good order and deliver them after weighment as directed by the first party. It cannot be denied that the remuneration for the bailee has been fixed at the rate, of Re. 1 per cent on the value of the stocks moved or taken over from his custody; but that only shows the mode or method adopted by the con tract for determining the remuneration including rent of the godowns; it cannot possibly show the relationship of the contract with the sale of goods even indirectly. Can it be said that the contract entered into by the State Government for purchasing foodgrains from agriculturists who grow them or for transporting them after purchase to the godowns are contracts for the sale or supply of goods? Purchase of goods and their transport are no doubt preparatory to the carrying out of the scheme of selling them or supplying them, and yet it would be difficult to hold that contracts entered into by the State Government with the agriculturists or the transport agency is a contract for the 477 sale of goods. We have carefully considered the material terms of this contract, and on the record as it stands we are unable to accept the conclusion of the High Court that a contract of bailment which imposed on the bailee the obligation to stock and store the foodgrains in his godown can be said to be a contract for the purpose of the service of sale of grain which the State Government had undertaken within the meaning of section 7(d). It appears that before the High Court it was not disputed by the appellant that the service whose performance had been undertaken by the State Government consisted in the supply of grain to the people of the State of Bihar; and the High Court thought that from this concession it inevitably followed that the firm had a share and was interested in the contract for the performance of the service undertaken by the Government of Bihar. It seems to us that the concession made by the appellant does not inevitably or necessarily lead to the inference drawn by the High Court. If the service undertaken by the State Government is one of supplying grain how does it necessarily follow that a contract by which the bailee undertook to store the grain was a contract for the supply of grain? It may sound technical, but in dealing with a statutory provision which imposes a disqualification on a citizen it would be unreasonable to take merely a broad and general view and ignore the essential points of distinction on the ground that they are technical. The narrow question is: if the State Government undertook the work of supplying the grain, is the contract one for the supply of grain?; in our opinion, the answer to this question must be in the negative; that is why we think the High Court did not correctly appreciate the effect of the contract when it held that the said contract brought the appellant 's case within the mischief of section 7(d). In coming to its conclusion the High Court thought that its view was supported by a decision of this Court in N. Satyanathan vs K. Subramanyan (1). In that case the appellant who was a contractor had entered into an agreement with the Central Government (1) ; 478 whereby he had offered to contract with the Governor General for the provision of a motor vehicle service for the transit and conveyance of all postal articles for the period specified in the contract, and the Governor General had accepted the offer. As a consideration for the same the Government had agreed to pay to the contractor Rs. 200 per month during the subsistence of the agreement "as his remuneration for the service to be rendered by him". It appears that on this contract two questions were raised before this Court. First it was urged that it could not be said that the Central Government had undertaken any service within the meaning of section 7(d) of the Act when it made arrangements for the carriage of mailbags and postal articles through the contractor. This contention was rejected on the ground that though the Government was not bound in the discharge of its duties as a sovereign State to make provision for postal mail service, it had in fact undertaken to do so under the Indian Post Offices Act for the convenience of the public. "It cannot be gainsaid", observed Sinha, J., as he then was, "that the postal department is rendering a very useful service, and that the appellant has by his contract with the Government undertaken to render that kind of service on a specified route"; and he added, "the present case is a straightforward illustration of the kind of contract contemplated under section 7(d) of the Act". This straightforward illustration, in our opinion, clearly brings out the class and type of contracts which fall within section 7(d) of the Act. Government must undertake to render a specified service or specified services and the contract must be for the rendering of the said service or services. That was precisely what the contract in the case of N. Satyanathan (1) purported to do. It is difficult to see how this case can be said to support the conclusion of the High Court that the contract for stocking and storing of goods is a contract for rendering the service of supplying and selling the same to the residents of the place. In this connection Mr. Jha, for the respondents, has drawn our attention to a decision of the Madras High (1) ; 479 Court in V. V. Ramaswamy vs Election Tribunal, Tirunelveli (1). In that case the Court was concerned with four contracts by which the contracting party agreed "to hold the reserve grain stock belonging to the Government of Madras, safely store it, and dispose of it according to the directions of the Government". In other words, it was a contract not only for the stocking and storing of foodgrains but also of disposing of it, and that naturally meant that the contract was for service which the State Government had undertaken to perform. This decision cannot assist the respondents in the present appeal. In the result we hold that the High Court was not justified in reversing the finding of the Tribunal that the contract in question did not attract the provisions of section 7(d) of the Act. The appeal must, therefore, be allowed and the order passed by the High Court set aside. We cannot finally dispose of the matter, because one question still remains to be considered, and that is whether the conclusion that the appellant 's nomination paper had been improperly rejected would lead to the decision that the election of not only respondent 1 but also respondent 2 should be declared to be void. The Election Tribunal has declared the whole election to be void, and in their respective appeals filed before the High Court both the respondents have challenged the correctness of that finding. The High Court, however, thought that since in its opinion the nomination paper of the appellant had been properly rejected it was unnecessary to deal with the other point. The point will now have to be considered by the High Court. We would, therefore, set aside the order passed by the High Court and remand the pro ceedings to it in order that it may deal with the other question and dispose of the appeals expeditiously in accordance with law. In the circumstances of this case we direct that the parties should bear their own costs in this Court. Costs in the High Court will be costs in the appeal before it. Appeal allowed.

The appellant was a member of a joint Hindu family which carried on the business of Government stockists of grain under a contract with the Government of Bihar. His nomination for election to the Bihar Legislative Assembly was rejected on the ground that he was disqualified under section 7(d) of the Representation of the People Act, 195T, as he had an interest in a contract for the performance of services undertaken by the Bihar Government. The appellant contended that the service undertaken by the Government was the sale of foodgrains under the Grain Supply Scheme and the contract was not for the sale of such foodgrains and did not attract the provisions of section 7(d). Held, that the contract was not one for the performance of any service undertaken by the Government and the appellant was not disqualified under section 7(d). A contract of bailment which imposed on the bailee the obligation to stock and store the foodgrains in his godowns was not a contract for the purpose of the service of sale of grain which the Government had undertaken. The Government had undertaken the work of supplying grain but the contract was not one for the supply of grain. N. Satyanathan vs K. Subramanyam, ; and V. V. Ramaswamy vs Election Tribunal, Tirunelveli, , distinguished.

The respondent was appointed as a Sub Inspector of police in a temporary post in 1955. He was discharged from service on July 13, 1957. A Writ Petition filed by him in the Allahabad High Court was allowed on August 4, 1959 and consequently he was re instated in service on December 15, 1959. Thereafter, on January 21, 1960 his services were terminated on the ground that they were no longer required by the State. A suit for declaration that the said order of termination was null and void was decreed in his favour by the trial court which was affirmed in appeal and also by the High Court in second appeal. Allowing the State appeal by special leave the Court, ^ HELD: 1. The considerations which prevailed with the High Court in reaching its findings on the application of Article 311(2) of the Constitution and the bona fides of the superior authority in making the impugned order of termination simpliciter are not warranted in law. [1130D] 2. The order terminating the services was order of termination simpliciter passed in accordance with the rules applicable to temporary Government servants. After the original order of discharge was quashed by the High Court, the respondent was reinstated, allowed increment in pay and one month 's salary in lieu of notice under the 'general rules for termination of services of temporary government servants was also given. [1128F G] 3. It was open to the superior authority to terminate the respondent 's services on the ground on which it did so. And the evidence disclosed no personal motive had influenced the order or that it was passed by way of punishment. A departmental enquiry is not required under the law. Instead of instituting disciplinary proceedings against the government servant, the suitability for retention in service could be decided. [1128H, 1129A, E] State of U.P.v. Ram Chandra Trivedi; , ; Champaklal Chimanlal Shah vs The Union of India, , Jagdish Mitter vs Union of India, A.I.R. 1964 S.C. 449 and State of Punjab & Anr. vs Shri Sukh Raj Bahadur, ; ; referred to. Union of India & Ors. vs R. section Dhaba, , State of Bihar & Ors. vs Shiva Bhikshuk Mishra and R. section Sial vs The State of U.P. and Ors., ; applied. The State of Bihar vs Gopi Kishore Prasad, A.I.R. 1960 SC 689 and Madan Gopal vs The State of Punjab, [1963] 3 SCR 716; distinguished. 1127

Under Rule 2 of the Bihar Public Works Department Code, the Governor of Bihar took a decision on 7.4.1958 providing that 25% of the posts of Assistant Engineers in the Bihar Engineering Service, Class II (the Service) were to be filled by promotion, subject to availability of suitable hands, from Overseers in the Bihar Subordinate Engineering Service (Irrigation Department) and 75% of the posts were to be filled by direct recruitment to the Service. Respondents No. 1 to 5 in both these appeals were appointed as Assistant Engineers in the Service on the recommendation of the Bihar Public Service Commission in the year 1961; and the appellants (in Civil Appeal No. 233 of 1978(respondents No. 6 to 23 in Civil Appeal No. 232 of 1978), who had been working as Overseers in the Bihar Subordinate Engineering Service (Irrigation Department) were promoted to the posts of Assistant Engineers in the Service in 1962 and thereafter. However, by orders dated 12.7.1975, 20.1.1976 and 9.4.1977, the Government changed the date of promotion of the appellants to the dates prior to the appointment of respondents No. 1 to 5 in the Service, making the former Senior to the letter. Respondents No. 1 to 5 filed writ petition before the High Court challenging the seniority conferred on the appellants from the retrospective date and contended that the orders giving promotions to the appellants from a date earlier to date of their promotion in the Service purported to affect prejudicially respondents No. 1 to 5 's right inasmuch as they were appointed to the Service earlier to the promotion of the appellants; and that the seniority had to be reckoned amongst the officials working as Assistant Engineers in the Service from the date of their appointment or promotion to the said Service. The appellants contended that they were entitled to be promoted retrospectively on the 411 basis of reservation of 25% of the Cadre posts in the Service till 1958. The High Court. holding that the orders promoting the appellants with retrospective effect were bad, quashed the same and allowed the writ petition. Hence the present appeals. On consideration of the legality and validity of the orders of the Government giving promotions to the appellants from a date earlier to the date of their entry into the Service as Assistant Engineers, and its effect on the inter se seniority amongst the appellants and respondents No. 1 to 5, who were directly appointed as Assistant Enginers in the Service before the appellants entered in the said Service. Dismissing the appeals, this Court, HELD: 1. The Government Orders dated 12.7.1975, 20.1.1976 and 9.4.1977 which purported to give promotion to the appellants retrospectively were arbitrary, illegal and inoperative inasmuch as these seriously affected rspondents No. 1 to 5. The appellants were not borne in the cadre of Assistant Engineers even in officiating capacity at time when rspondents No. 1 to 5 were directly recruited to the post of Assistant Egineer. As such, the promotee appellants could not be under any circumstance given seniority over the directly recruited respondents No. 1 to 5. The judgment of the High Court in quashing the impugned Government Orders was, therefore, unexceptionable. [418F H; 420A] 2.1 No person can be promoted with retrospective effect from a date when he was not borne in the Cadre so as to adversely affect others; and amongst members of the same grade, seniority is reckoned from the date of their initial entry into the service. [419F] 2.2 Seniority inter se amongst the Assistant Engineers in Bihar Engineering Service, Class II would be considered from the date of the length of service rendered as Assistant Engineers. Therefore, the appellants could not be made senior to respondents No. 1 to 5 by the impugned Government Orders as they entered into the said Service in 1962 and thereafter by promotion subsequent to respondent No. 1 to 5 who were directly recruited in the quota meant for them. There was nothing to show that the appellants could be deemed to be recruited in 1958 quota and that these vacancies were carried forward. [419G; 418E F] A.K. Subraman and Ors. vs Union of India and Ors., , relied on. 412 V.B. Badami vs State of Mysore and Ors., [1976] 1 SCR 815 and Gonal Bihimappa vs State of Karnataka, [1987] Supp. SCC 207, held inapplicable. D.K. Mitra and Ors. vs Union of India and Ors., [1985] Supp. SCC 243, referred to.

The appellant who had agricultural income from his Zamindari was assessed to income tax for the four assessment years, 1944 45, to 1947 48. The income tax authorities did not include in his assessable income, interest received by him on arrears of rent, in view of a decision of the Patna High Court, but subsequently this view of law was reversed by the Privy Council. On August 8, 1948, the Income tax Officer issued notices under section 34of the Indian Income tax Act, 1922, for assessing the escaped income. Before the notices were issued the Income tax Officer had not put the matter before the Commissioner for his approval as the section then did not require it and the assessments were completed on those notices. In the meantime, certain amendments were made to the Indian Income tax Act by Act 48 of 1948, which received the assent of the Governor General on September 8, 1948. The Amending Act substituted a new section in place of section 34, which among other changes, added a proviso to the effect that "the Income tax Officer shall not issue a notice. unless he has recorded his reasons for doing so and the Commissioner is satisfied on such reasons that it is a fit case for the issue of such notice", and also made it retrospective by providing that the new section "shall be deemed to have come into force on the 30th day of March, 1948". The question was whether the notices issued by the Income tax Officer on August 8, 1948, without the approval of the Commissioner, were rendered void by reason of the operation of the amended section 34. The Commissioner claimed that section 6 of the , saved the assessments as well as the notices. Held, that section 6 of the , was in applicable as the Amending Act of 1948 indicated a different intention within the meaning of that section, inasmuch as the amended section 34 of the Indian Income tax Act, 1922, provided that it shall be deemed to have come into force on March 30, 1948. Lemm vs Mitchell, ; , distinguished, 761 Held, further, that the notices issued by the Income tax Officer on August 8, 1948, and the assessments based on them were invalid. Venkatachalam vs Bombay Dyeing & Mfg. Co., Ltd., ; , applied.

Election for the office of Pramukh of a block was held under the provision of the Uttar Pradesh Kshettra Samitis and Zilla Parishads Adhinayam, 1961. On one of the ballot papers, the second respondent had a third preference recorded in his favour and a second preference in favour of another candidate who was eliminated at one stage. The Returning Officer did not count the third preference in favour of the second respondent and found at the final counting that the appellant and the second respondent had secured an equal number of votes. He therefore drew a lot as per the Instructions in Schedule II and declared the second respondent duly elected. The appellant then filed an election petition on various grounds before the District Judge who dismissed it, holding that the Returning Officer erred in not crediting the second respondent with the third preference and that if that was done there was no necessity for drawing lots at all and that the second respondent should have been declared elected as a result of the counting itself. The appellant 's writ petition challenging the District Judge 's order was dismissed. In appeal to this Court he contended that: (1) under rr. 37 and 39 the trial of an election petition takes place in two parts; first, to judge whether the returned candidate 's election is void and then to decide whether any other candidate should be declared to be duly elected, that it was only in the latter case the returned candidate had the right to claim that ballot papers not already counted in his favour should be so counted, and that therefore, the District Judge had no jurisdiction to count the ballot paper containing the third preference in favour of the second respondent; and (2) the ballot paper was an 'exhausted paper ' within Instruction 1(5) of Schedule II to the Rules, and that therefore the District Judge erred in law in counting it in favour of the second respondent. Held: (1) The District Judge was entitled, to go into the question whether the uncounted ' ballot paper should have been counted in favour of the second respondent. [249G] According to r. 37(a) read with r, 40 which generally applies the procedure in the Civil Procedure Code to the trial of election petitions under the Act, and r. 43 which deals with the findings of the trial Judge, the returned candidate can take any defence to show that he has been validly elected. He could therefore allege and prove that certain votes should have been counted in his favour. [249E G] Jabar Singh vs Genda Lal, ; , explained.243 244 (2) The fact that the Candidate with the second preference in the uncounted ballot Paper *as eliminated at one stage, did not make the ballot paper an 'exhausted paper ' within the definition in the Rules. The second respondent was a continuing candidate, as per the Rules, and,there was a preference recorded for him on the ballot paper arid the District fudge was right in holding that it should have been counted in his favour, by the Returning Officer. [250A C]

The State filed an application under section 378(3) of the Cr.P.C, 1973, for leave to appeal against the acquittal of the respondents, of the charges under section 302 and 302/149 I.P.C., by the Trial Court. The application, although made under section 378(3) contained all the requisites for a memoran dum of appeal. The High Court granted the appellant leave to the appeal, but dismissed the appeal filed thereafter, on the ground that it had not been filed within ninety days of the date of judgment appealed from, and was therefore time barred under article 114(a) of the . Allowing the appeal by special leave the Court, HELD (1) The High Court has not laid down any rules in the matter of application for leave to appeal by the State. The matter will have to be decided in terms of section 378(1) and (3) of the Code of Criminal Procedure, 1973. An appeal can be filed by the State within ninety days from the date of the order of acquittal, and a prayer may be included in that appeal for entertaining the appeal under sub section (3) of section 378 Cr. The appeal may otherwise become time barred if the High Court takes more than ninety days for disposal of the application for leave, and refuses to exercise its jurisdiction to condone the delay. The right conferred under the section cannot be put in peril by an interpretation of section 378, Cr. P.C. which is likely to affect adversely or even perhaps to destroy that right. [141 C H] (2) The fact that the appellant 's application mentioned section 378(3) is not decisive of the true character of the application which to all intents and purposes was a memoran dum of appeal. [142 C D]

By an office memorandum of the Central Government issued on the 4th January 1957, in respect of posts filled by promotion through competitive examinations limited to departmental candidates, reservations at 12 1/2% and 5 1/2% of vacancies were provided for Scheduled Castes and Scheduled Tribes respectively. By an earlier office memorandum of the 7th May 1955, in regard to promotions on the basis of seniority subject to fitness and those by selection, no reservations were provided but certain concessions were allowed to members of the backward classes. After the decision of the Supreme Court in the case of the General Manager, Southern Railway vs Rangachari, ; , the matter was reviewed by the Central Government and it was advised that there was no consti tutional compulsion to make reservations for Scheduled Castes and Scheduled Tribes in posts filled by promotion and the question whether the reservation should be continued or withdrawn was entirely a matter of public policy. Subsequent to the review, by a further office memorandum issued on the 8th November 1963 the Government notified its decision inter alia, that there would be no reservation for Scheduled Castes and Scheduled Tribes in appointments made by promotions to Class I and II services as these required a higher degree of efficiency and responsibility; but that such reservations would continue in certain grades and services in Class III and Class IV. The petitioner was a class III employee of the Railway Board Secretariat Service and claimed promotion to the post of a Section Officer in Class II on the basis of the provision for reservations made in the Government 's Memorandum of January 4, 1957. By a writ petition under article 32 of the Constitution he challenged the latest office memorandum of November 8, 1963 and prayed for a restoration with retrospective effect of the office memoranda issued on May 7, 1955 and January 4, 1957. It was contended on his behalf, inter alia (i) that the impugned order violated the guarantee given to the backward classes under article 16(4) of the Constitution; article 16(4) was not an exception engrafted on article 16 but was in itself a fundamental right granted to the Scheduled Castes and Scheduled Tribes. (ii) that the order was discriminatory,, because (a) it made a discrimination by making Provision for reservation in certain types of Class III and Class IV services only and not in Class II and I Services, (b) reservation was kept within Class III and Class IV for appointments for which there was direct recruitment and for promotions made by (1) selection, or (2) on the 722 result of a competitive examination limited to departmental candidates, but no reservation was provided for in respect of appointments made by promotion on the basis of seniority cum fitness; and (c) there was discrimination between the employees belonging to Scheduled Castes and Scheduled Tribes in the Railway Service and similar employees in the Central Secretariat Service on the ground that a competitive departmental examination for promotion to the grade of Section Officers was not held by the Railway Board for the years 1955 63 but such an examination was held for the Central Secretariat Service and 74 employees belonging to the Scheduled Castes and Scheduled Tribes secured the benefit of the provisions for reservation. Held: (i) Article 16(4) does not confer any right on the petitioner and there is no constitutional duty imposed on the Government to make a reservation for Scheduled Castes and Scheduled Tribes, either at the initial stage of recruitment or at the stage of promotion. Article 16(4) is an enabling provision and confers a discretionary power on the State to make a reservation of appointments in favour of a backward class of citizens which, in its opinion, is not adequately represented in the Services of the State [734 B D]. General Manager, Southern Railway vs Rangachari, ; , referred. (ii) The impugned order was not discriminatory. (a) In view of the requirement of efficiency in the higher echelons of service it is obvious that the classification made in the impugned order between Classes I and II where no reservation was made and Classes III and IV where reservation was provided for, was reasonable. [735 B, C]. (b) It is well established that there can be a reasonable classification of employees for the purpose of appointment by promotion and the classification as between direct recruits and promotees is reasonable [734 H 735 A]. Mervyn Coutindo vs Collector of Customs, Bombay, ; and section G. Jaisinghani vs Union of India, ; referred to. (c) The petitioner being an employee of the Railway Board was governed by the rules applicable to the officers in the Service to Which he belonged. The employees of the Central Secretariat Service belonged to a different class and it could not be said that there was any discrimination against the petitioner in violation of article 14. [734 F G].

The respondents, who lost the State Assembly elections as candidates of the Mezo National Front(MNF) from different constituencies of Mizoram, challenged the election of the Congress (I) candidates on the ground of corrupt practices in the High Court. The appellants the returned candidates raised certain preliminary objections regarding the maintainability of each petition. On the basis therefore two preliminary issues were raised for consideration. The appellants moved for striking off the pleadings. Thereupon, the original petitioners the respondents applied for amendment of their election petitions which was strongly opposed by the appellants. The preliminary objections, the applications for striking off the pleadings and the amendment applications were heard together. The two preliminary issues raise were (i) whether the election petitions were in conformity with the requirements of Section 81 and 83 753 of the Representation of the Peoples Act, 1951 and the Rules framed thereunder by the High Court and (ii) whether rule 1 and the other related rules and notes thereto enabling the filing of the Election Petition before the Stamp Reporter assigned to the election court by the Chief Justice were ultra vires Article 329 of the Constitution and Section 169 read with Sections 80, 80A and 81 of the R.P. Act. The appellants contended that the election petitions being photo copies, could not be treated as election petitions as contemplated by law; that the copies of petitions served on them were not attested to be true copies of the original petitions as required by Section 81(3); that the election petitions were not signed and verified in the manner laid down by the Code of Civil Procedure inasmuch as the source of information had not been disclosed in the verification or in the affidavit in Form 25 as required by rule 94A of the Conduct of Election Rules, 1961 (the Rules); that no schedule of material particulars of corrupt practice had been annexed to the affidavit purporting to be under Form 25, and that the presentation of the election petitions before the Stamp Reporter was inconsistent with Sections 80, 80A and 81 of the R.P. Act and Article 329 of the Constitution. The averments in each election petition were identical. The High Court rejected the preliminary objections and party allowed the applications for striking off the averments in the election petitions and partly permitted certain amendments to the election petitions, against which order the present appeals are filed in this Court under Article 136 of the Constitution. The returned candidate the appellant contended that paragraph 3 of the election petition was the most crucial paragraph inasmuch as it disclosed the names of towns and villages as well as the period during which the alleged corrupt practices were committed had been deliberatedly omitted from the verification clause and the affidavit; that failure to mention paragraph 3 of the election petition in both the verification clause of the petition and the affidavit was fatal and cannot be cured after the expiry of the limitation period of 45 days; that the affidavit was not in Form No. 25 prescribed under Rule 94A of the Rules and since Section 83 of the R.P. Act is mandatory and failure to adhere to Form No. 25 was fatal, as the doctrine of substantial compliance had no place in election law but even if that doctrine could be invoked, the respondent failed to make substantial compliance; that the election petitions being photocopies could not be entertained as valid 754 election petitions; that copies of the election petitions served on the returned candidates were not attested as true copies of the original as required by Section 81(3); that the election petitions and the schedule and annexures were not signed and verified as required by the Code; that an election dispute founded on the allegation of corrupt practice being quasi criminal in nature calls for strict adherence to the requirements of election law as was evident from Section 86(I) of R.P. Act which provided for dismissal of an election petition which failed to comply with the requirements of Section 81, 82 or 117 of the statute; and that if the Code did not apply to Mizoram, it applied to an election petition because section 83(I)(c) obligates that an election petition `shall be signed by the petitioner and verified in the manner laid down in the Code for the verification of pleadings '. This Court partly allowing the appeals, HELD: 1. Our election law being statutory in character must be strictly complied with since an election petition is not guided by ever strictly complied with since an election petition is not guided by ever changing common law principles of justice and notions of equity. Being statutory in character it is essential that it must conform to the requirements of our election law. But at the same time the purity of election process must be maintained at all costs and those who violate the statutory norms must suffer for such violation. If the returned candidate is shown to have secured his success at the election by corrupt means he must suffer for his misdeeds. [772B D] 2. A charge of corrupt practice has a two dimensional effect; its impact on the returned candidate has to be viewed from the point of view of the candidate 's future political and public life and from the point of view of the electorate to ensure the purity of the election process. There can, therefore, be no doubt that such an allegation involving corrupt practice must be viewed very seriously and the the High Court should ensure compliance with the requirements of Section 83 before the parties go to trial. [783D E] 3. What is essential is that the petitioner must take the responsibility of the copy being a true copy of the original petition and sign in token thereof. No particular form of attestation is prescribed; all that the sub section enjoins is that the petitioner must attest the copy under his own signature to be a true copy of the petition. By certifying the same as true copy and by putting his signature at the foot thereof, the petitioner of each election petition had clearly complied with the letter and spirit of section 81(3) of the R.P. Act. [786A B] 755 4. Section 86(I) mandates that the High Court `shall ' dismiss an election petition which does not comply with the provisions of Section 81 or Section 82 or Section 117 of the R.P. Act. The language of this sub section is quite imperative and commands the High Court, in no uncertain terms, to dismiss an election petition which does not comply with the requirements of section 81 of section 82. [773B D] 5. Election of a returned candidate can be rendered void on proof of the alleged corrupt practice. In addition thereto he would incur a subsequent disqualification also. This harshness is essential if we want our democratic process to be clean, free and fair. Eradication of corrupt practice from our democratic process is essential if we want it to thrive and remain healthy. Our democratic process will collapse if unhealthy corrupt practices like appeals to voters on basis of caste, creed, community religion, race, language, etc., are allowed to go unchecked and unpunished. Use of corrupt practices in elections to secure short term gains at the cost of purity of our democratic process must be frowned at by every right thinking citizen. [773D F] 6. It is for that reason that the law has provided for double jeopardy to deter candidates, their agents and others from indulging in such nefarious practices, their agents and others from indulging in such nefarious practices. But while there is sufficient justification for the law to be harsh with those who indulge in such practices, there is also the need to ensure that such allegations are made with a sense of responsibility and concern and not merely to vex the returned candidate. It is with this in view that the law envisages that the particulars of such allegations shall be set out fully disclosing the name of the party responsible for the same and the date and place of its commission. A simple verification was considered insufficient and, therefore, the need for an affidavit in the prescribed form. These procedural precautions are intended to ensure that the person making the allegation of corrupt practice realises the seriousness thereof as such a charge would be akin to a criminal charge since it visits the party indulging in such practice with a two fold penalty. [773E H] 7. If full particulars of an alleged corrupt practice are not supplied, the proper course would be to give an opportunity to the petitioner to cure the defect and if he fails to that opportunity that part of the charge may be struck down. [775F G] 8. Once the amendment sought falls within the purview of section 86(5), the High Court should be liberal in allowing the same unless, in the facts and circumstances of the case, the Court finds it unjust and 756 prejudicial to the opposite party to allow the same. Such prejudice must, however, be distinguished from mere inconvenience. [775G H] 9. The power conferred by section 86(5) cannot be exercised to allow any amendment which will have the effect of introducing a corrupt practice not previously alleged inthe petition. If it is found that the proposed amendments are not in the nature of supplying particulars but raise new grounds, the same must be rejected but if the amendments are sought for removing vagueness by confining the allegations to the returned candidate only such an amendment would fall within the parameters of section 86(5) of the R.P. Act. [789B D] 10. Clause(c) of sub section 83 provides that an election petition shall be signed by the petitioner and verification of the pleadings. Under section 83(2) any schedule or annexure to the pleading must be similarly verified. Order 6 Rule 15 is the relevant provision in the Code. Sub rule (2) of Rule 15 says that the person verifying shall specify with reference to the numbered paragraphs of the pleading, what he verifies on his own knowledge and what he verifies upon information received and believed to be true. The verification must be signed by the person making it and must state the date on and the place at which it was signed. The defect in the verification can be (i) of a formal nature and not very substantial (ii) one which substantially complies with the requirements and (iii) that which is material but capable of being cured. [776A C] 11. The object of requiring verification of an election petition is clearly to fix the responsibility for the averments and allegations in the petition on the person signing the verification and at the same time discouraging wild and irresponsible allegations unsupported by facts. [776C D] 12. In cases where corrupt practice is alleged in the petition, the petition shall also be supported by an affidavit in the prescribed form, i.e. Form No. 25 prescribed by Rule 94A of the Rules. [776D E] 13. While defective verification or a defective affidavit may not be fatal, the High Court should ensure its compliance before the parties go to trial so that the party required to meet the charge is not taken by surprise at the actual trial. [783E F] 14. The charge of corrupt practice has to be proved beyond reasonable doubt and merely preponderance of probabilities. 757 Allegation of corrupt practice being quasi criminal in nature, the failure to supply full particulars at the earliest point of time and to disclose the source of information promptly may have an adverse bearing on the probative value to be attached to the evidence tendered in proof thereof at the trial. Therefore, even though ordinarily a defective verification can be cured and the failure to disclose the grounds or sources of information may not be fatal, failure to place them on record with promptitude may lead the court in a given case to doubt the veracity of the evidence ultimately tendered. If, however, the affidavit of the schedule or annexure forms an integral part of the election petition itself, strict compliance would be insisted upon. [783G 784B] 15. The requirements of section 81(3) are mandatory and failure to comply with them would render the petition liable to summary dismissal under section 86(I) of the R.P. Act. [784G] 16. If a document does not form an integral part of the election petition but is merely referred to in the petition or filed in the proceedings as evidence of any fact, failure to supply a copy thereof will not prove fatal. Therefore the maintainability of an election petition will depend on whether the schedule or annexure to the petition constitutes an integral part of the election petition or not. If it constitutes an integral part it must satisfy the requirements of section 81(3) and failure in that behalf would be fatal. But if it does not constitute an integral part of the election petition, a copy thereof need not be served along with the petition to the opposite party. [787A C] 17. The High Court is directed to issue directions to the election petitioner of each petition to remove the defects within such time as it may allow and if they or any of them fail to do so, pass appropriate consequential orders in accordance with law. [789A B] Gurumayam section Sarma vs K. Ongbi Anisija Devi, Civil Appeal No. 659 of 1957 dated 9.2.1961; State of Nagaland vs Rattan Singh; , ; V.L.Rohlus vs Deputy Commissioner, Aizawal, ; Raj Narain vs Indira Gandhi; , at 1307: ; ; Manphul Singh vs Surinder Singh, [1973] 2 SCC 599 at 608; K.M. Mani vs P.J. Antony, ; ; Samant N. Bal Krishna vs George Fernandez, ; ; D.P. Mishra vs Kamal Narayan Sharma, ; ; Balwan Singh vs Lakshmi Narain, ; Murarka Radhey Shyam vs Roop Singh Rathore; , ; State of Bombay vs Purushottam Jog Naik; , ; The Barjum Chemicals Ltd. The Company Law 758 Board, [1966] Supp. SCR 311; K.K. Nambiar vs Union of India, ; at 125; Jadav Gilua vs Suraj Narain Jha, AIR 1974 Patna 207; M/s Sunder Industries Ltd. vs G.E. Works, AIR 1982 Delhi 220; K.K. Somanathan vs K.K. Ramachandran, AIR 1988; Kerala 259; Kamalam vs Dr. Syed Mohammad, ; ; M/s. Sukhwinder Pal vs State of Punjab, ; ; Z.B. Bukhari vs Brij Mohan, ; Prabhu Narayan vs K.K. Srivastava, ; ; Satya Narain vs Dhuja Ram, ; ; M. Karunanidhi vs Dr. H.V. Hande, ; Mithlesh Kumar Pandey vs Baidyanath Yadav, [1984] 2 SCR 278; Rajender Singh vs Usha Rani, [1984] 3 SCC 339; U.S. Sasidharan vs K. Karunakaran; , and Ch. Subba Rao vs Member, E.T. Hyderabad, Referred to. When by the same statute the words `Election Commissioner ' were substituted by the expression `High Court ' with effect from December 14, 1966. Even though by the said Amendment Act jurisdiction was conferred on High Court in place of the Election Commission, surprisingly the title of chapter II continues to read `Presentation of election petitions to Election Commission '. Parliament will well to correct this slip by substituting the words `High Court ' for the expression `Election Commission ' to bring it in conformity with the changes introduced by Act 47 of 1966. [768E F]

Appeal No. 198 of 1954. Appeal from the judgment and order dated October 16, 1952, of the former Nagpur High Court in Misc. Petn.; No. 1231 of 1951. M. section K. Sastri, for the appellant. H. L. Khaskalam, B. K. B. Naidu and I. N. Shroff, for the respondent. 64 502 1960. November 18. The Judgment of the Court was delivered by IMAM, J. This is an appeal from the judgment of the Nagpur High Court dismissing the appellants petition under articles 226 and 227 of the Constitution of India. The High Court certified under article 132(1) of the Constitution that the case involved a substantial question of law as to the interpretation of the Constitution. Hence the present appeal. The appellant was the Ruler of the State of Baster. After the passing of the Indian Independence Act, 1947, the appellant executed an Instrument of Accession to the Dominion of India on August 14, 1947. Thereafter, he entered into an agreement with the Dominion of India popularly known as "The Stand Still Agreement". On December 15, 1947, he entered into an agreement with the Government of India whereby he ceded the State of Baster to the Government of India to be integrated with the Central Provinces and Berar (now the State of Madhya Pradesh) in such manner as the Government of India thought fit. Con sequently the Governments in India came to have exclusive and plenary authority, jurisdiction and powers over the Baster State with effect from January 1, 1948. The Legislature of the State of Madhya Pradesh passed the Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act, 1950 (Madhya Pradesh Act 1 of 1951), hereinafter referred to as the Act, which received the assent of the President of India on January 22, 1951. The preamble of the Act stated that it was one to provide for the acquisition of the rights of proprietors in estates, mahals, alienated villages and alienated lands in Madhya Pradesh and to make provisions for other matters connected therewith. Under section 3 of the Act, vesting of proprietary rights in the State Government takes place on certain conditions,, mentioned in that section, being complied with. The definition of 'proprietor ' is stated in section 2 cl. (m) and it is "in relation to 503 (i) the Central Provinces, includes an inferior proprietor, a protected thekadar or other thekadar, or protected headman; (ii) the merged territories, means a maufidar including an ex Ruler of an Indian State merged with Madhya Pradesh, a Zamindar, Ilaquedar, Khorposhdar or Jagirdar within the meaning of wajib ul arz, or any sanad, deed or other instrument, and a gaontia or a thekadar of a village in respect of which by or under the provisions contained in the wajib ul arz applicable to such village the maufidar, the gaontia, or the thekadar, as the case may be, has a right to recover rent or revenue from persons holding land in such village;". The definition of 'mahal ' is stated in section 2(j) and it is "mahal", in relation to merged territories, means any area other than land in possession of a raiyat which has been separately assessed to land revenue, whether such land revenue be payable or has been released, compounded for or redeemed in whole or in part;". Before the High Court the appellant contended that he was still a Sovereign Ruler and absolute owner of the villages specified in Schedules A and B of his petition under articles 226 and 227 of the Constitution. He urged that his rights had been recognized and guaranteed under the agreements entered into by him with the Government of India. The provisions of the Act, therefore, did not apply to him. It was further contended that the provisions of the Act did not apply to a Ruler or to the private property of a Ruler which was not assessed to land revenue. He relied on article 6 of the Instrument of Accession and the first paragraph of article 3 of the Merger Agreement. The High Court held that if the petitioner 's rights under article 6 of the Instrument of Accession and article 3 of the Merger Agreement had been infringed it was clear from the provisions of article 363 of the Constitution that interference by the courts was barred in disputes arising out of these two instruments. The High Court was also of the opinion that article 362 of the Constitu tion was of no assistance to the appellant. 504 After referring to the definition of the word 'proprietor ' in the Act, the High Court was of the opinion that the word 'maufidar ' in section 2(m) of the Act had not been used in any narrow or technical sense. A 'maufidar ' was not only a person to whom a grant of maufi lands had been made but was also one who held land which was exempt from the payment of "rent or tax". It accordingly rejected the contention on behalf of the appellant that the word 'maufidar ' is necessarily confined to a grantee from the State or Ruler and therefore a Ruler could not conceivably be a maufidar. The High Court also rejected the contention on behalf of the appellant that as he was a "Ruler" within the meaning of that expression in article 366(22) of the Constitution he did not come within the expression 'ex Ruler ' as contained in the definition of the word 'proprietor ' in the Act. The expression 'Ruler ' as defined in article 366(22) of the Constitution applied only for interpreting the provisions of the Constitution. The expression 'ex Ruler ' given in the Act must therefore be given the ordinary dictionary meaning. According to Shorter Oxford English Dictionary, 'Ruler ' means "one who, or that which, exercises rule, especially of a supreme or sovereign kind. One who has control, management, or head ship within some limited sphere". The High Court accordingly took the view that although the appellant did exercise such a rule in the past he ceased to exercise it in his former Domain after the agreements of accession and merger had come into operation. Accordingly the appellant must be regarded as an ex Ruler and as he was also a maufidar he fell within the definition of the word 'proprietor ' in the Act. The question whether the villages mentioned in Schedules A and B of the petition under articles 226 and 227 of the Constitution fell in any of the categories, "Estates, Mahals, Alienated lands", was also considered by the High Court. In its opinion they did not fall within the category of Estates or Alienated lands but they did fall within the category of Mahals. According to the definition of 'Mahal ' in section 2(j) of the Act the same must be separately assessed to land 505 revenue. According to the appellant they had not been assessed to land revenue but this was denied on behalf of the State of Madhya Pradesh. The High Court was of the opinion that in these circumstances it was for the appellant to establish that the villages in question had never been assessed to land revenue but no evidence had been led to this effect. On the contrary, according to the High Court, it would appear from the documents on the record that the villages known as 'Bhandar villages ' had been assessed to land revenue. As the rest of the villages in Schedule A and the villages in Schedule B, upto the date of the High Court judgment, had not been recognized as the private property of the appellant by the Government of India as required by the second and third paragraphs of the Merger Agreement, the appellant could not assert his ownership over them. The High Court, accordingly, dismissed his petition under articles 226 and 227 of the Constitution. Two questions in the main were urged before us (1) whether the appellant is a proprietor within the meaning of that expression in the Act and (2) whether the villages in question came within the definition of the word 'mahal ' contained in the Act. On behalf of the appellant it had also been urged that the Act could not defeat the rights of the appellant guaranteed under article 3 of the Merger Agreement. It seems clear to us, however, that in view of the provisions of article 363(1) of the Constitution any dispute arising out of the Merger Agreement or the Instrument of Accession is beyond the competence of the courts to enquire into. The High Court rightly decided this point against the appellant. With reference to the first point we would first consider whether the appellant is an ex Ruler for the purposes of the Act. That he is so factually cannot be denied, since he ceded his State to the Government of India to be integrated with the Central Provinces and Berar (now the State of Madhya Pradesh) in such manner as the Government of India thought fit. He further ceded to the Government ' of India full and exclusive authority, jurisdiction and powers in relation 506 to the governance of his State when he agreed that the administration of that State would be transferred to the Government of India as from January 1, 1948. The question is whether his recognition for the purposes of the Constitution as Ruler by virtue of the provisions of article 366(22) of the Constitution of India continues his status as a Ruler for purposes other than the Constitution. article 366(22) states: " "Ruler" in relation to an Indian State means the Prince, Chief or other person by whom any such covenant or agreement as is referred to in clause (1) of article 291 was entered into and who for the time being is recognised by the President as the Ruler of the State, and includes any person who for the time being is recognised by the President as the successor of such Ruler". Article 291 refers to the privy purse payable to Rulers. It states: "Where under any covenant or agreement entered into by the Ruler of any Indian State before the commencement of this Constitution, the payment of any sums, free of tax, has been guaranteed or assured by the Government of the Dominion of India to any Ruler of such State as privy purse (a) such sums shall be charged on, and paid out of, the Consolidated Fund of India; and (b) the sums so paid to any Ruler shall be exempt from all taxes on income. " Article 291 refers to any covenant or agreement entered into by the Ruler of any Indian State before the commencement of the Constitution. The covenant or agreement referred to in this Article certainly includes the Instrument of Accession and the Merger Agreement. The effect of the Merger Agreement is clearly one by which factually a Ruler of an Indian State ceases to be a Ruler but for the purposes of the Constitution and for the purposes of the privy purse guaranteed, he is a Ruler as defined in article 366(22) of the Constitution. There is nothing in the provisions of article 366(22) which requires a court to recognise such a person as a Ruler for purposes outside the Constitution. In our opinion, the High Court rightly held that 507 the appellant was an ex Ruler and that article 366(22) of the Constitution did not make him a Ruler for the purposes of the Act. As the appellant was an 'ex Ruler ', he was within the class of persons who were by name specifically included in the definition of 'proprietor ' and therefore clearly within the scope of the Act. That the appellant was not only an ex Ruler but a maufidar appears to us to be clear. The ordinary dictionary meaning of maufi is "Released, exempted, exempt from the payment of rent or tax, rent free" and maufidar is "A holder of rent free land, a grantee". It was common ground in the High Court that the villages in question were exempt from the payment of rent or tax. In our opinion, the High Court rightly took the view that the expression 'maufidar ' was not necessarily confined to a grantee from a State or a Ruler of a State. A maufidar could be a person who was the holder of land which was exempted from the payment of rent or tax. In our opinion, the appellant certainly came within the expression 'maufidar ' besides being an ex Ruler ' of an Indian State merged with Madhya Pradesh. It is, however, contended on behalf of the appellant that the most important part of the definition was the concluding portion where it was stated that in the case of a maufidar he must be a person who by or under the provisions contained in the wajib ul arz applicable to his village, had the right to recover rent or revenue from persons holding land in such village. It was contended that even if the appellant was a maufidar, there was nothing to show that with reference to any village held by him it was entered in the wajib ul arz, that he had a right to recover rent or revenue from persons holding land in such village. In the petition under articles 226 and 227 of the Constitution, filed by the appellant in the High Court, it was nowhere asserted that even if he was regarded as a maufidar it was not entered in the wajib ul arz with respect to any of his maufi villages that he had a right to recover rent or revenue from persons holding land in such villages. From the judgment of the High 508 Court it would appear that no such argument was advanced before it. In the application for a certificate under article 132(1) of the Constitution we can find no mention of this. In the statement of the case filed in this Court also there is no mention of this fact. There is thus no material on the record to establish that the appellant as a maufidar had no right to recover rent or revenue from persons holding land in his villages. The burden was on the appellant to prove this fact which he never attempted to discharge. It is impossible therefore to accept this contention on behalf of the appellant raised for the first time before us in the course of the submissions made on behalf of the appellant. Regarding the second point arising out of the definition of 'Mahal ', the High Court definitely found that the petitioner had given no evidence to establish that the villages in question were not assessed to land revenue. On the contrary, at least with reference to the Bhandar villages documents on the record showed that these villages had been assessed to land revenue. Since it was a question of fact whether the villages had been assessed to land revenue, which was denied on behalf of the State of Madhya Pradesh, the High Court rightly held that the contention of the appellant in this respect could not be accepted. As for the other villages, in Schedules A and B of the petition of the appellant under articles 226 and 227 of the Constitution the High Court, in our opinion, rightly held that the petition was not maintainable as these villages had not yet been recognised by the Government of India as the private property of the appellant. In our opinion, the appeal accordingly fails and is dismissed with costs. Appeal dismissed.

The appellant was the Ruler of the State of Baster which was later integrated with the State of Madhya Pradesh. He was recognised by the President as a Ruler under article 366(22) of the Constitution. The respondent resumed certain lands belonging to the appellant under the Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act, 1950. The appellant contended that he was still a Ruler and not an ex Ruler and as such did not come within the definition of "proprietor" given in the Act. Held, that the appellant was an ex Ruler for the purposes of the Act and was within the class of persons who were by name included in the definition of 'proprietor ' and was within the scope of the Act. Factually the appellant was an ex Ruler. He was a Ruler for the purposes of the privy purse guaranteed to him. There was nothing in article 366(22) which required a court to treat such a person as a Ruler for purposes outside the Constitution. Further, the appellant was also a maufidar in respect of the lands acquired which were exempt from the payment of rent or tax. The expression "maufidar" was not necessarily confined to a grantee from a State or a Ruler of a State; he could be the holder of land which was exempted from payment of rent or tax.

In 1945 one R who was the thekadar of the proprietary rights of a village, sued the appellants and the respondents, other than the first respondent Board of Revenue, for their ejectment under section 171 of the U.P. Tenancy Act. alleging that the appellants had illegally sub let the lands to the respondents. The appellants and the respondents made a on cm denying the alleged 'sub letting and stating that the entries in the village records about the respondents being sub tenants were erroneous. The suit was dismissed in March, 1946, I.e., towards the end of 1353 F on the ground that there was no sub letting and the entries were not correct No attempt was made by anyone to bring the village records in harmony with this decision and the respondents continued to figure as sub tenants in these records. On his attention being drawn to this, the Lekhpal, on his own authority, removed the entries in favour of the respondents from the records for the year ending 1358 F but the entries for the year 1356 F were left undisturbed as it was not within the Lekhpal 's jurisdiction to alter these. After the U.P. Zamindari Abolition and Land Reforms Act came into force in 1952 i.e., at the beginning of 1360 F, on the strength of the Khasra and Khatauni of 1356F, the respondents claimed Adhivasi rights under section 20(b)(i) of the Act and. file six suits praying for the recovery of possession of the lands under 'section 232 of the Act. They lost the suits before the sub Divisional Officer and Additional Commissioner of Varanasi but succeeded in appeals to the Board of Revenue. The appellants thereafter filed writ petitions for quashing the orders of the Board; and the High Court although of the view that the impugmed orders of the Board of Revenue were wrong, held that the Board had jurisdiction to interpret section 20(b) as it thought proper; and as the orders passed by it were final without being subject to any appeal. they could not be quashed by certiorari as being mere errors of law. In appeal to this Court, it was contended, inter alia, on behalf of the appellants that (i) the correctness of the entry in the record of rights of 1356 F could be gone into and was capable of challenge in a court of law exercising jurisdiction under article 226; (ii) in the present case there was an adjudication in March 1946 that the 'respondents were not subtenants; consequently, unless they showed that they had thereafter become sub tenants, the benefit of the entry in their favor in 1356 F could not be availed of by them; (iii) in the Khasra of 1356 F the respondents were only recorded as sub tenants but not as occupants and could not therefore get the benefit of section 20 (b) (i) of the Act. HELD: Dismissing the appeals. The record of rights for the year 1356F had not been corrected afterwards. The court had to go by the entry in the record of rights and 499 no enquiry need be made as to when the respondents became sub tenants after the decision in the suit filed by R. As between the tenant and the sub tenant, the entry in the record of rights in favour of the sub tenant made him the occupant entitled to the adhivasi rights under section 20 of the Act. [5O4 G H] The Upper Ganges Sugar Mills Ltd. vs Khalil ul Rahman and others; , ; Amba Prasad vs Abdul Noor Khan Sukh Ram & Ors. , ; and Nanakchand vs Board of Revenue U.P. ; applied.

The respondent admitted the execution of two Hundis in suit which were tendered and marked as exhibits but denied consideration and raised the plea that the hundis exhibited were inadmissible in evidence as at the time the suit was filed in 1949 they had not been stamped according to the Stamp Law. When the hundis were executed in December, 1946, the Marwar Stamp Act of 1914 was in force and sections 9 and 11 of that Act authorised the court to realise the full stamp duty and penalty in case of unstamped instruments produced in evidence, whereupon the documents were admissible in evidence. The High Court pointed out that after coming into force of the Marwar Stamp Act, 1947, (Similar to Indian Stamp Act) which had amended the 1914 Act, the hundis in question could not be admitted in evidence in view of the provision of section 35 proviso (a) of the Marwar Stamp Act, 1947, even on payment of duty and penalty and the appellant could not take advantage of section 36 of the 1947 Stamp Act, because 'the admission of the two hundis was a pure mistake as the Trial Court had lost sight of the 1947 Stamp Act and the appeal Court could go behind the orders of the Trial Court and correct the mistake made by, thAt Court. Held, that once the Court, rightly or Wrongly decided to 43 334 admit the document in evidence, so far as the parties were concerned, the matter was closed. The court had to judicially determine the matter as soon as the document was tendered in evidence and before it was marked as an exhibit in the case, and once the document had been marked as an exhibit and the trial had proceeded on that footing section 36 of the Marwar Stamp Act, 1947, came into operation, and, thereafter, it was not open either to the trial court itself or to a court of appeal or revision to go behind that order. Such an order was not one of those judicial orders which are liable to be revised or reviewed by the same court or a court of superior jurisdiction. Ratan Lal vs Dau Das, I.L.R. , disapproved.

The areas in question which were parts of two estates belonging to the appellants, called Gangole A and Gangole C, were situated in what was known as the Godavari Agency tract which was governed by the Scheduled Districts Act, 1874. By section 92 of the Government of India Act, 1935, no Act of the Provincial Legislature was applicable to certain areas in which the Godavari Agency was included, unless the Governor by public 536 notification so directed. The Madras Estates (Abolition and Conversion into Ryotwari) Act, 1948, was enacted in 1948, and on August 15, 1950, the Government of Madras issued a notification under section 1(4) Of the Act by which, among other estates, Gangole A and Gangole C in their entirety were purported to be taken over, specifying September 7, 195o, as the date on which the vesting was to take place. But as no action as contemplated by section 92 of the Government of India Act, 1935, had been taken to render the Madras Act of 1948 applicable to the Godavari Agency tract, only parts of the Gangole estates were within the operation of that Act, while there were portions of the estates which were outside its purview and operation. When this legal situation was noticed another notification was issued on September 5, 1950, by which the areas in question were excluded from the scope of the notification dated August 15, 1950. In exercise of the power under para 5(2) Of the Fifth Schedule to the Constitution, Madras Regulation IV of 1951 was passed on September 8, 1951 by which, inter alia, the Act Of 1948 was made applicable to the areas in which the two Gangole estates were situate with retrospective effect from April 19, 1949. On January 14, 1953, the Government of Madras issued a notification vesting those portions of the Gangole estates to which the Act Of 1948 was extended. The appellants challenged the legality of the notification on the ground that the various provisions of the Madras Estates (Abolition and Conversion into Ryotwari) Act, 1948, showed that the Act contemplated the taking over of estates as a unit and not in parts, while what the Government had done in the present case was to deal with the two estates of Gangole A and Gangole C as if each one of them were really two estates, one that which lay in the Godavari Agency tract and the other outside that area, and had issued notifications in respect of these units separately. Held, that the first notification dated August 15, 1950, as modified by that dated September 5, 1950, was valid and effective in law to vest the portion of the estate to which it related in the State Government. Held further, that the notification dated January 14, 1953, was equally valid. The action taken by the Government in issuing the said notification was in conformity with the scheme of the Act of 1948 that the entirety of the estate should be taken over.

One B who held a large number of shares in the appellant company, transferred two blocks of 100 shares each to his son and daughter in law. The transferees applied to the company to register the transfers. Purporting to act under article 47B of the Articles of Association of the company the directors of the company resolved not to register the transfers. Against this resolution the transferees preferred appeals to the Central Government under section III(3) of the . The Central Government, without giving any reasons for its decision, set aside the resolution of the directors and directed the company to register the transfers. The company obtained special leave to appeal against the decision of the Central Government under article 136 of the Constitution and appealed to the Supreme Court on the ground that the Central Government acted in excess of its jurisdiction or otherwise acted illegally in directing the company to register the transfers. The respondents raised a preliminary objection that the Central Government exercising appellate powers under section III of the Act (before its amendment in 1960) was not a tribunal exercising judicial functions and was not subject to the appellate jurisdiction of the Supreme Court under article 136. Held, that the appeal was competent to the Supreme Court by special leave against the decision of the Central Government under section III (3) Of the . The Central Government, when exercising powers under section III was a tribunal within the meaning of article 136 and was required to act judicially. A person aggrieved by the refusal to register transfer of shares had two remedies under the Act, viz., (1) to apply to the court for rectification of the register under section 155 or (2) to prefer an appeal under section III. The power of the Court under section 155, which has necessarily to be exercised judicially, and the power of the Central Government under section III have to be exercised subject to the same restrictions. In both cases it has to be 340 decided whether the directors have acted oppressively, capriciously corruptly or malafide. The decision has manifestly to stand those objective tests and has not merely to be founded on the subjective satisfaction of the authority. In an appeal under section III(3) there is a lis or dispute between the contesting parties relating to their civil rights, and the Central Government has to determine the dispute according to law in the light of the evidence and not on grounds of policy or expediency. There was thus a duty imposed on the Central Government to act judicially. The proviso to sub section (8) of section III which provided for the award of reasonable compensation in lieu of the shares in certain circumstances also fortifies that view. Shivji Nathubhai vs The Union of India, ; , Re Bell Brothers Ltd. Ex Parte Hodgson, , The Province of Bombay vs Kusaldas section Advani, [1950] S.C.R. 621, The King vs London County Council, and The Bharat Bank Ltd., Delhi vs Employees of the Bharat Bank Ltd., Delhi, ; , referred to. In an appeal under section 111(3) of the Act the Central Govern ment has to determine whether the exercise of the discretion by the directors refusing to register the transfer is malafide, arbitrary or capricious and whether it is in the interest of the company. The decision of the Central Government is subject to appeal to the Supreme Court under article 136; the Supreme Court cannot effectively exercise its power if the Central Government gives no reasons in support of its order. The mere fact that the proceedings before the Central Government are to be treated as confidential does not dispense with a judicial approach, nor does it obviate the disclosure of sufficient grounds and evidence in support of the order. In the present case no reasons have been given in Support of the orders and the appeals have to be remanded to the Central Government for rehearing. In re Gresham Life Assurance Society, Ex Parte Penney, (1 872) Law Rep. 8 Ch. 446 and In re Smith and Fawcett, Ltd., L. R. , referred to. Per Hidayatullah, J. The appeal to the Supreme Court under article 136 was competent. The Act and the Rules showed that the function of the Central Government under section 11(3) was curial and not executive; there was provision for filing a memorandum of appeal setting out the grounds, for the company making representations against the appeal, for tendering evidence and award of costs. There was provision for a hearing and a decision on evidence. The Central Government acted as a tribunal within the meaning of article 136. Huddart, Parker & Co. Pyoprietar Ltd. vs Moorehead, (108) ; , Shell Company of Australia vs Federal Commissioner of Taxation, , Rex vs Electricity Commissioners, Royal Aquarium and Summer and Winter Garden 341 Society vs Parkinson, , Shivji Nathubai vs The Union of India; , and Province of Bombay vs Kushaldas section Advani, ; , referred to. But special leave should not ordinarily be granted in such cases. The directors were not required to give reasons for their decision and there was a presumption that they had acted properly and in the interest of the company. In the appeal under section 111 of the Act all allegations and counter allegations were confidential and the Central Government could not make them public in its decision. An appeal against such a decision could rarely be effective. In the present case the appeal under section III(3) was confined to the ground that the refusal to register was without giving any reasons; there was no question of confidential allegations and there was no evidence to consider. The Articles of Association gave the directors absolute discretion to refuse to register the transfers without giving any reasons and there was a presumption that the directors had acted honestly. There was thus no reason for the Central Government to reverse the decision of the directors. In re Gresham Life Assurance Society; Ex Parte Penney, (1872) Law Rep. 8 Ch. 446, In re Hannan 's King (Browning) Gold Mining Company Limited, and Moses vs Parkar Ex parte Moses, , referred to.

The petitioners challenged the constitutional validity of the Bombay Tenancy and Agricultural Lands (Vidarbha Region and Kutch Area) Act, 1958, which extended the provisions of the Bombay Tenancy and Agricultural Lands (Amendment) Act, 1956, to Vidarbha and Kutch. That Act was declared valid by this Court in Sri Ram Narain Medhi vs The State of Bombay, [1950] Supp. 1 S.C.R. 489, and one of the reason , for doing so was that the lands covered by that Act fell within the definition of the word 'estate ' contained in the Bombay Land Revenue Code, 1879. The lands in question in the present petitions were situated in Amraoti and Yeotmal and the existing law relating to land tenures in force in that area was the Madha Pradesh Land Revenue Code, 1954. This Code did not employ the word ,estate ' and it was contended by the petitioners that the impugned Act was not within the protection of article 31A of the Constitution. Held, that the contention must fail. Although the Madhya Pradesh Land Revenue Code, 1954, did not employ the word 'estate ', the relevant definition contained in sections 2(17) and 2(18) of impugned Act and sections 2(7), 2(20) of the Code read with sections 145 and I46 thereof leaves no manner of doubt that the lands in the possession of the petitioners were tenures and in substance ,in estate. Since the petitioners held the lards tinder the State and paid land revenue for them, the lands fell within the class of local equivalents of the word 'estate. ' as contemplated by article 31A(2)(a) of the Constitution.

The respondent gave notice to the appellants terminating the lease of agricultural land situated within two miles of the limits of the Municipality and filed a suit for eviction. The suit was contested, inter alia, on the ground that under the provisions of the Bombay Tenancy Act, 1939, the defendants had acquired tenancy rights. The civil Judge, inter alia, held that the 1939 Act was repealed by the Bombay Tenancy and Agricultural Land Act, 1948, which did not apply to the suit land, as it was within two miles of the limits of the Surat Borough Municipality and decreed the suit. On appeal, the District Judge held that the 1948 Act applied to the Suit land and set aside the decree of the trial Court. In second appeal by the plaintiff, the High Court held that the suit land was within two miles of the limits of the Municipality and therefore, the 1948 Act did not apply to the suit land. On appeal by Special Leave the appellants contended that their rights under the 1939 Act were saved and preserved under section 89(2) of the 1948 Act with the result that the lease extended to 10 years under the 1939 Act was saved thereunder, and by reason of the Bombay Tenancy and Agricultural Lands (Amendment) Act, 1952, which brought the suit land within the scope of the 1948 Act, their rights so preserved came to be governed by the provisions of he 1948 Act and, therefore, they could not be evicted except in the manner prescribed by the provisions of the Act. The respondent contended that the saving provision in section 89(2) of the 1948 Act operates only if there is no express provision to the contrary and that the saving of the appellant 's right would be otiose, as he could not enforce his right under the 1948 Act. Held:(i) Before the suit was disposed of, the 1952 Act came into force, and by reason of the extension of the 1948 Act to the suit land, the respondent could not evict the appellants except in the manner prescribed by the 1948 Act. (ii)The respondent 's contention must be rejected. There is an express provision found in section 88(1) of the 1948 Act, in as much as it says that the provisions of sections 1 to 87 will not apply to the area in question. (iii)As there was a right recognized by law there was a remedy and, therefore. in the absence of any special provisions indicating a 774 particular forum for enforcing a particular right the general law of the land would naturally take its course. The High Court, therefore, was wrong in holding that the appellants could not claim the benefit of the provisions of the 1948 Act. Sakharam (a) Bapusaheb Narayan Sanas vs Manikchand Motichand Shah ; relied on.

In 1951 three pieces of land belonging to the appellant situated in Bihar were acquired by the State of Bihar for a public purpose. When appeals against the judgment of the District Judge enhancing the compensation payable in respect of these lands were pending before the Patna High Court the West Bengal (Transfer of Territories) Act, 1956 came into force in consequence of which the acquired lands stood transferred to the State of West Bengal. The appeals pending before the Patna High Court were, however, not transferred to the Calcutta High Court, nor was the State of West Bengal substituted in place of the State of Bihar. The Patna High Court dismissed tho State 's appeals. In the execution petitions the appellant impleaded the State of Bihar as the judgment debtor but the State of Bihar raised an objection that since the lands were then situated is the State of West Bengal it was that State which was liable to pay the decretal amounts. Upholding this contention the executing court dismissed the execution petition. This was upheld by the High Court. Allowing the appeal, ^ HELD: Section 17 of the Act enjoins that only such proceedings pending in the High Court of Patna immediately before the appointed day as are certified by the Chief Justice of that High Court having regard to the place of accrual of the cause of action and other circumstances, have to be transferred to the High Court of Calcutta which means that if there is no such certification they have to be disposed of by the High Court of Patna even though the cause of action might have accrued in any part of the transferred territories as that court continues to exercise jurisdiction over those cases. [862 E G] In the instant case since there was no such certificate the High Court of Patna rightly disposed of the appeals. [882 G] 879 Under section 47 of the Act the State of West Bengal should be deemed to have been substituted for the State of Bihar even though no such order had been passed on a formal application for substitution. When the law says that something should be deemed to have been done, the legal fiction should be carried to its logical end to achieve the desired result. The decrees must, therefore, be deemed to have been passed by the High Court of Patna against tho State of West Bengal when the appeals were dismissed by the Patna High Court. [882 H; 883 A C] By virtue of Section 47 the State of West Bengal would be bound by the decrees or orders made in respect of matters referred to therein against the State of Bihar both before and after the appointed day even though the State of West Bengal is not formally brought on record in the place of State of Bihar. In all such cases the State of Bihar should be considered as effectively representing the State of West Bengal. [883 D E] There is no merit in the submission that the interest accrued on the amounts of compensation uptodate or upto the date on which the notices were served on the State of West Bengal should be disallowed. The executing court cannot go behind the decree. [883 B C]

Appeals Nos. 155 to 160 of 1956. Appeals from the judgments and orders of the Bombay High Court dated July 6, 1954, in Special Civil Applications Nos. 393, 395, 409 and 632 of 1954; July 19, 1954, in Special Civil Application No. 1205 of 1954; and July 30, 1954, in Special Civil Application No. 1309 of 1954. Purshottam Trikamdas, V. M. Limaye, E. Udayaratnam and section section Shukla, for the appellants. H. N. Sanyal, Additional Solicitor General of India, N. P. Nathwani, K. L. Hathi and R. H. Dhebar, for the respondents. 1960. October 3. The Judgment of the Court was delivered by WANCHOO J. These six appeals on a certificate granted by the Bombay High Court raise a common question as to the constitutionality of the Bombay Personal Inams Abolition Act, No. XLII of 1953, (hereinafter called the Act) and will be disposed of by this judgment. The appellants hold personal inams which are covered by Bombay Acts Nos. 11 and VII of 1863. The Act was attacked on a number of grounds in the High Court of which only two have 945 been urged before us, namely, (i) that the property which has been dealt with under the Act is not an estate and (ii) that no compensation has been provided in the Act for taking away the property of the appellants: The writ petitions were opposed by the State of Bombay and the main contention on its behalf was that the Act was protected under article 31 A of the Constitution. Before we deal with the two points raised before us, we should like briefly to refer to the rights which holders of personal inams had by virtue of Bombay Acts Nos. II and VII of 1863. Act No. 11 extended to certain parts of the Presidency of Bombay and dealt with holders of lands in those parts who were holding lands wholly or partially exempt from the payment of government land revenue. The Act provided for the cases of holders of such lands whose title to exemption had not till then been formally adjudicated. It laid down that if such holders of lands consented to submit to the terms and conditions prescribed in the Act in preference to being obliged to prove their title to the exemption enjoyed by them, the Provincial Government would be prepared to finally authorise and guarantee the continuance, in perpetuity, of the said land to the said holders, their heirs and assigns upon the said terms and subject to the said conditions. The main provision of the Act in this respect was that such holders of land would be entitled to keep their lands in perpetuity subject to payment of (i) a fixed annual payment as nazrana in commutation of all claims of the Crown in respect of succession and transfer which shall be calculated at the rate of one anna for each rupee of assessment and (ii) a quit rent equal to one fourth of the assessment. There were other provisions in the Act for those cases where the holders of such lands were not prepared to abide by the conditions of the Act and wanted their claims to be adjudicated; but we are not concerned with those provisions for present purposes. Thus the main right which the holders of lands got by Act 11 was that they held their lands on payment of one fourth of the assessment instead of full 946 assessment plus further one sixteenth of the assessment; thus they paid in all five annas in the rupee of the full assessment and retained eleven annas in the rupee for themselves. Act No. VII dealt with similar holders of lands in the remaining parts of the Presidency of Bombay, and made similar provisions with this difference that such holders of lands were to pay two annas for each rupee of the assessment as quit rent under section 6. Thus those who came under Act VII paid only two annas in the rupee of the assessment and retained fourteen annas in the rupee for themselves. We now turn to the provisions of the Act. By section 2(c) inamdar " is defined as a holder of personal inam and includes any person lawfully holding under or through him. Section 2(d) defines an " inam village or " inam land " while section 2(e) defines " personal inam Section 3 provides that the Act will not apply to certain inams including devasthan inams or inams held by religious or charitable institutions. The Explanation to the section lays down that by the term " inams held by religious or charitable institu tions " will be meant devasthan or dharmadaya inams granted or recognized by the ruling authority for the time being for a religious or charitable institution and entered as such in the alienation register kept under section 53 of the Bombay Land Revenue Code, 1879 (hereinafter called the Code), or in the records kept under the rules made under the . Thus so far as religious or charitable institutions were concerned those inams which they held from the very beginning as devasthan or dharmadaya inams and which were entered in the relevant records were out of the provisions of the Act. Section 4 extinguishes all personal inams and save as expressly provided by or under the provisions of the Act, all rights legally subsisting on the said date in respect of such personal inams were also extinguished subject to certain exceptions which are, however, not material now. Section 5 provides that all inam villages or inam lands are and shall be liable to the payment of land revenue in accordance with the provisions of the Code or the 947 rules made thereunder and the provisions of the Code and the rules relating to unalienated lands shall apply to such lands. It further provides that an inamdar in respect of the inam land in his actual possession or in possession of a person holding from him other than an inferior holder (subject to an exception which we shall mention just now) would be primarily liable to the State Government for the payment of land revenue due in respect of such land held by him and shall be entitled to all the rights and shall be liable to all obligations in respect of such land as an occupant under the Code or the rules made thereunder or any other law for the time being in force. Thus by section 5 the holder of a personal inam became for all practical purposes an occupant under the Code liable to pay full land revenue and the advantage that he had under Acts II and VII of 1863 of paying only a part of the land revenue and retaining the rest for himself was taken away. The exception which we have refer. red to above was where the inferior holder holding inam land paid an amount equal to the annual assess ment to the holder of the personal inam, such inferior holder would be liable to the State Government and would become an occupant of the land under the Code. Section 7 then vests certain lands like public roads, paths and lanes, the bridges, ditches, dikes and fences, the bed of the sea and harbours, creeks below high water mark and of rivers, streams, nallas, lakes, wells and tanks, and all canals, water courses, all standing and flowing water, all unbuilt village sites, all waste lands and all uncultivated lands (excluding lands used for building or other non agricultural purposes) in the State Government and extinguishes the rights of inamdar in them. Section 8 deals with right to trees and section 9 with right to mines and mineral products. Section 10 provides for compensation for extinguishment of rights under section 7 while section 11 gives a right of appeal from the order of the Collector under section 10. Sections 12 to 16 deal with procedural matters and section 17 provides for payment of compensation for extinction or modification of an inamdar 's right which may not be covered by section 10. Sub section (5) 948 of section 17 however says that " nothing in this section shall entitle any person to compensation on the ground that any inam village or inam land which was wholly or partially exempt from the payment of land revenue has been under the provisions of this Act made subject to the payment of full assessment in accordance with the provisions of the Code ". Section 17 A provides for the issue of bonds while section 18 provides for the application of the Bombay Tenancy and Agricultural Lands; Act, 1948, to any inam village or. inam land or the mutual rights and obligations of an inamdar and his tenants. Section 19 provides for making of rules and section 20 deals with repeals and amendments. It will be seen from this analysis of the Act that the main provisions are sections 4, 5 and 7. So far as section 7 is concerned, there is provision for compensation with respect to lands vested in the State by virtue of that section. But no compensation is provided for the rights extinguished by as. 4 and 5. As we have seen already the main right of an inamdar was to hold his lands on payment of land revenue which was less than the full assessment and it is this right which has been abolished by sections 4 and 5 and the inamdar will now have to pay the full assessment. No compensation has been provided for the loss which the inamdar suffers by having to pay the full assessment. This brings us to the first contention. On behalf of the appellants it is urged that what sections 4 and 5 extinguish is the right of the inamdar to appropriate to himself the difference between the full assessment and the quit rent, and this is not an estate within the meaning of Art, 3 1 A of the Constitution. The relevant provisions in article 31 A for present purposes aref these: " 31 A (1) Notwithstanding anything contained in article 13, no law providing for (a) the acquisition by the State of any estate or of any rights therein or the extinguishment or modification of any such rights, or (b). . . . (c). . . . 949 (d). . . . (e). . . . shall be deemed to be void on the ground that it is in consistent with or takes away or abridges any of the rights conferred by article 14, art 19 or article 31 ; Provided. . . (2) In this article (a) the expression ' estate ' shall, in relation to any local area, have the same meaning as that expression or its local equivalent has in the existing law relating to land tenures in force in that area, and shall also include any jagir, inam or muafi or other similar grant and in the States of Madras and Kerala any janmam right; (b) the expression 'rights ' in relation to an estate shall include any rights vesting in a proprietor, sub proprietor, under proprietor, tenure holder, raiyat, under raiyat or other intermediary and any rights or privileges in respect of land revenue ". It will be, clear from the definition of the word estate " in article 31 A(2)(a) that it specifically includes an " inam " within it. As such it would be in our opinion idle to contend that inams are not estates within the meaning of the expression " estate " for the purpose of article 31 A. The Act specifically deals with inams and would thus be obviously protected under article 31 A from any attack under article 14, article 19 or article 31. It is, however, urged that the right of the inamdar to appropriate to himself that part of full assessment which was left over after he had paid the quit rent to the Government is not a right in an estate. This contention also has no force. Inams being estates, the right of the inamdar to retain part of the full assessment over and above the quit rent payable to the Government arises because he holds the inam estate. The right therefore can be nothing more than a right in an estate. Besides the definition of the expression " rights " in article 31 A(2)(b) makes the position clear beyond all doubt, for it provides that the rights in relation to an estate would include any rights or privileges in respect of land revenue 121 950 Even if it were possible to say that the right of the inamdar to appropriate to himself the difference between the full assessment and the quit rent was not a right in an estate as such, it would become a right in an estate by virtue of this inclusive definition for the inamdar 's right could only be a right or privilege in respect of land revenue. Besides, it is clear that the right in question falls under section 3(5) of the Code and as such also it is an estate under Art.31 A. The contention of the appellants therefore that inams dealt with by the Act are not covered by the expression " estate " in article 31 A fails. Their further contention that their right to retain the difference between full assessment and quit rent is not a right in an estate also fails. The Act therefore when it extinguishes or modifies the rights of inamdars in the inam estates is clearly protected by article 31 A. The next contention is that the Act does not provide for compensation and is therefore ultra vires in view of article 31. We find, however, that the Act has provided for compensation under section 10 so far as that part of inam lands which are vested in the State by section 7 are concerned. Further section 17 provides for compensation in a possible case where anything has been left out by section 7 and the inamdar is entitled to compensation for it. It is true that by sub section (5) of section 17 no compensation is to be paid for the loss to the inamdar of what he used to get because of the difference between the quit rent and the full assessment. It is how ever clear that article 31 A saves the Act from any attack under article 31 which is the only Article providing for compensation. In this view of the matter the constitutionality of the Act cannot be assailed on the ground that it provides no compensation for extinction of certain rights. There is no force in these appeals and they are hereby dismissed with costs. One set only of hearing costs. Appeals dismissed.

The appellants held personal inams which were governed by Bombay Acts Nos. II and VII of 1863 by virtue of which they held their lands on payment of land revenue which was less than the full assessment. After. coming into force of the Bombay Personal Inams Abolition Act, 1952, the appellants who were affected by it Challenged the validity of the Act on the grounds, inter alia, (i) that the property which had been dealt with under the Act was not an estate inasmuch as what sections 4 and 5 extinguished was the right of the inamdar to appropriate to himself the difference between the full assessment and 944 the quit rent and this was not an estate within the meaning of article 31 A of the Constitution of India, and (2) that no compensation bad been provided in the Act for taking away the property of the appellants. Held: (i) that the right of the inamdar to appropriate to himself the difference between the full assessment and the quit rent was a right in respect of land revenue and was therefore a right in an estate by virtue of the definition in article 31 A(2)(b). Such a right also fell under section 3(5) Of the Bombay Land Revenue Code, 1879, and as such it was an estate under article 31 A. Accordingly, the Act when it extinguished or modified the rights of inamdars in inam estates was protected by article 31 A. (2) that sub section (5) Of section 17 of the Act under which no compensation was to be paid for the loss to the inamdar of what he used to get because of the difference between the quit rent and the full assessment, was not invalid as article 31 A saved the Act from any attack under article 31 which was the only Article providing for compensation.

These appeals arose out of a representative suit filed on behalf of the creditors of defendants I to 6 who hat executed a trust deed on August 26, 1936, conveying their properties to three trustees with authority to dispose of the one and distribute the ale proceeds ratably amongst the creditors. The trust deed required "the three trustees to act according to the decision arrived at either unanimously or by majority." The trustees accepted the trust and conveyed all the properties except the family house in administration of the trust. Two of the sale deeds in favour of two of the creditors, defendants 13 and 14, a mortgagee creditor, in the suit were executed by only two or the trustees . In a suit brought by the said defendants 1 to 6 for administration of trust the trial court passed a preliminary decree. The High Court on appeal remanded the matter to the trial court for a finding as to the market value of the lands sold. The trial court submitted its finding. At this stage defendants 1 to 6 withdrew the suit which we dismissed. The present suit under O. I, r. 8 of the Code of Civil Procedure we filed on October 29, 1947, before such withdrawal. The claimed made therein, inter alia, were for a declaration that the properties in question were still impressed with the trust, for the removal the surviving trustee and appointment of an a administrator to realise the amount, recover position of the properties and re sell them. The trial Judge passed a decree infavour of the plaintiffs . The High Court in substance confirmed that decree but modified it by awarding simple interest 207 instead of compound Interest decreed in favour of defendant 14. The two sale deeds, executed by only two of the trustees, were declared invalid and it was found that the third trustee did not give his consent to it. The sale deed in favour of defendant 12 was declared invalid on the ground that he had intermeddled with the trust estate and had thus become a trustee de sou tort. The courts below also rejected the pleas of limitation and res judicata raised on behalf of the defendants. Some of the creditor detendants appealed. After the appeals had been admitted by this Court the High Court amended the decretal order by substituting the words 'mesne profits ' by 'net profits ' under sections 151 and 152 of the Code of Civil Procedure. ^ Held, that the question whether article 120 or article 134 of Indian Limitation Act applied to a case had to be decided on the case made in the plaint, read as whole and properly construed. Since the present suit was not one for a mere declaration but for possession of property, having been valued and framed as such, deliverable to the administrator, it was governed by article 134 and not by article 120 of the Act and was thus within time. It was not correct to say that section 63 of the Indian Trust Act was exhaustive as to the remedies available to a beneficiary under a private trust or that claim for constructive possession, such as was made in the present suit, was prohibited under that section. Rani Chhatra Kumari Devi vs Prince Mohan Bikram Shah, Pat. 851, distinguished. Subbaiya Pandaram vs Mohammad Mustapha merachayar , (1923) L. R. 50 IE A. 295, A Subramania Iyer vs P. Nagarathna Naicker , (1910)20 Mad. L. J. 151 and Masjid shahid Ganj vs Shiromani Gurdwara Prabandhak Committee Amritsar (1940) L. R. 67 I. A. 251, referred to. Nor could the suit be said to be barred by res judicata since it did not fall within the scope of section II of the Code of civil Procedure. The suit being one under o. 1, r. 8 of the Code, it could not be said that defendants I to 6, plaintiff in the earlier suit, and the creditors, plaintiffs in the present suit, where the same party or parties claiming through each other. Clause 23 of the trust deed, properly construed, conformed to the provision of section 48 of the Trusts Act that where there are more trustees than one, they must all join in the execution of the trust, and did not provide for an exception to that rule, even though it provided that decisions by the trustees need not a ways be unanimous but could be by majority as well. Such sale deeds as had been executed by 208 two of the trustees only must therefore fail. The alternative. case of consent given by the third trustee to the transaction could be of no avail since it could not be substantiated by evidence Lala man Mohan Das vs Janaki Man Prasad, (1944) L. R. 72 I. A. 39, referred to. The High Court had jurisdiction under sections 151 and 152 of the Code of Civil Procedure to correct the obvious error in the decretal order even though the appeals from the said decree had already been admitted by this Court. Nor could the amendment be challenged on merits. Although a successful plaintiff would not normally be entitled to mesne profits for more than three years in view of article 109 of the Limitation Act, the court had jurisdiction in the case of a trust to make appropriate direction in the decree, while awarding net profiles to the trust and interest to the mortgagee, in adjustment of the equities between them. Salgur Prasad V Har Narain Das (1932) L.R. 59 I. A. 147, Bhagwat Dayal Singh vs Debi Dayal Sahu, (1908) L. R. 35 I. A. 48 and Jagannath Prasad Singh Chowdhury vs Surajmal Jalal , (1926) L. R. 54 I. A. 1, referred to. Even slight intermeddling with the trust estate is sufficient to make a person trustee de son tort. Since in the instant case, the acts of intermeddling by one of the defendant covered a fairly long period, the courts below were right in holding that the sale in his favour must be set aside as one in favour, of a trustee de son tort.

Certain lands were situated in the erstwhile State of Baroda before it became a part of the State of Bombay by merger. The Bombay Tenancy and Agricultural Lands Act, 1948, was extended to Baroda on August 1, 1949. Suits were filed in the Civil Court by appellants landlord , against the respondents who were their tenants on the ground that the latter became trespassers with effect from the beginning of the new agricultural season in May, 1951. Decrees for possession were passed by the Civil Court in favour of landlords and the same were confirmed by the first appellate court. However, the High ' Court accepted the appeals and dismissed the suits. It was held that under the provisions of section 3 A(1) of the Bombay Tenancy Act, 1939, as amended, a tenant would be deemed to be a protected tenant from August 1, 1950 and that vested right could not be affected by the notification dated April 24, 1951 issued under section 89 (1) (d) of the Act of 1948 by which the land in suit was excluded from the operation of the Act. The notification dated April 24, 1931 had no retrospective effect and did not take away the protection 708 afforded to tenants by section 3A. The landlords came to this Court by special leave. It was conceded that the appellants ' suits for possession would fail if the Act applied to the tenancies in question, because in that case only revenue courts had jurisdiction to try them. However, reliance was placed on notification dated April 24,1951 which excluded the land in suit from the operation of the Act. It was also contended on behalf of appellants that the subsequent notification cancelling the first one, could not take away the rights which had accrued to them as a result of the first notification. Held, that the notification dated April 24, 1951 was cancelled by another notification dated January 12, 1953. The second notification was issued when the matter was still pending in the first court of appeal. The suits had therefore to be decided on the basis that there was no notification in existence which would take the disputed lands out of the operation of the Act. The first appellate court was wrong in holding that the suits had to be decided on the basis of facts in existence on the date of filing of the suits. Held, further, that the second notification cancelling the first one did not take away any rights which had accrued to the landlords. If the landlords had obtained an effective decree and had succeeded in ejecting the tenants as a result of that decree which may have become final between the parties, that decree may not have been re opened and the execution taken thereunder may not have been recalled. However, it was during. the pendency of the suit at the ap pellate stage that the second notification was issued cancelling the first and the court was bound to apply the law as it was on the date of its judgment. Held, also, that clauses (a), (b) and (c) of section 88(1) applied to things as they were on the date of the commence ment of the Act of 1948 whereas clause (d) authorised the State Government to specify certain areas as being reserved for urban non agricultural or industrial development, by notification in the Official Gazette, from time to time. It was specifically provided in clauses (a) to (c) that the Act, from its inception, did not apply to certain areas then identified, whereas clause (d) had reference to the future. The State Government could take out of the operation of the Act such areas as in its opinion should be reserved for urban nonagricultural or 'industrial development. Clause (d) would come into operation only upon such a notification being issued by the State Government. In Sukharam 's case, this Court never intended to lay down that the provisions of 709 clause (d) were only prospective and had no retrospective operation. Unlike clauses (a) to (c) which were clearly prospective, clause (d) had retrospective operation in the sense that it would apply to land which would be covered by the notification to be issued by the Government from time to 2 time so as to take that land out of the operation of the Act of 1948, granting the protection. So far as clauses (a) to (c) were concerned, the Act of 1948 would not apply at all to lands covered by them, but that would not take away the rights conferred by the Act of 1939 which was repealed by the Act of 1948. Section 89(2) specifically preserved the existing rights under the repealed Act. Sukharam 's case was about the effect of clause (c) on the existing rights under the Act of 1939 and it was in that connection that this Court observed that section 88 was prospective. However clause (d) is about the future, and unless it has the limited retrospective effect indicated earlier, it will be rendered completely nugatory. The intention of the legislature obviously was to take away all the benefits arising out of the Act of 1948 (but not those arising from the Act of 1939) as soon as the notification was made under clause (d). Sakharam vs Manikchand Metichand Shah, ; , explained.

The appellants who were descendants of a former ruling chief and had lost their exemption from land revenue as a result of the operation of section 3 of the C.P. & Berar Revocation of Land Revenue Exemptions Act, 1948, applied for a pension or money grant under the provisions of section 5 of the Act. their petition was rejected by the State Government without reasons being recorded. They filed a writ petition under article 226 but the High Court held that the granting of a pension was completely within the discretion of the Government and the petition was therefore incompetent. In appeal before the Supreme Court the appellants contended that rejection of their petition without any reasons being given amounted to no decision at all, and that once the conditions for the grant of a pension were satisfied it was obligatory on the State Government to make a grant of money or pension. On behalf of the State Government reliance was placed on the words of section 5(2) that after enquiry in respect of the applications the Government 'may pass such orders as it deems fit ' and the directory word 'may ' used in section 5(3) itself. HELD: (i) Sub section (2) and (3) of section 5 must be considered separately. Under sub section (2) all the applications for grant of money or pensionhad to be considered and Government could deal with them in several ways. Notwithstanding its apparent discretion section 5(2) only enabled Government to pass orders as fit the occasion. [683 E H]. In sub section (3) special classes namely religious and charitable institutions etc. and descendants of ruling chiefs had to be dealt with and therefore the discretion stood modified. The rules highlighted the distinction between the two sub sections because they provided for special enquiries in cases falling under sub section (3) [683 A D]. Enabling provisions sometimes acquire a compulsory force and in the present instance on the existence of the condition precedent, the grant of money or pension became obligatory on the Government notwithstanding that in sub section (2) the Government had power to pass such orders as it thought fit and in sub section (3) the word 'may ' was used. Except in those cases where there were good grounds for not granting the pension, Government was bound to make a grant to those who fulfilled the desired conditions and the word 'may ' in the third sub section though apparently discretionary had to be read as 'must '. [684 B H]. Maxwell on Interpretation of Statutes, referred to. (ii)In passing orders on the appellants ' application Government had to act in a quasi judicial manner. The appellants had to be given an 679 opportunity to state their case and were also entitled to know why their claim had been rejected. [685 B D]. M/s. Hari Nagar Sugar Mills Ltd. vs Shyam Sundar Jhunjhunwala and Others ; , referred to. Order of the State Government set aside.

The Education Society of Bombay (respondent No. 1) has been running a recognised Anglo Indian School called Barnes High School at Deolali which receives aid from the State of Bombay. J and G are its Directors. English is used in the said school as the medium of instruction. The mother tongue of the Anglo Indians is English. The State of Bombay issued a circular order on 6th January, 1954, headed " Admission to Schools teaching through the medium of English. " The operative portion of the order enjoined that no primary or secondary school shall from the date of the order admit to a class where English is used as the medium 569 of instruction any pupil other than a pupil belonging to a section of citizens the language of which is English namely, Anglo Indians and citizens of non Asiatic descent. One P, a citizen of India and member of Indian Christian Community alleging English to be the mother tongue of his daughter, and one M, a citizen of India and member of Gujrati Hindu Community alleging Gujrati to be the mother tongue of his son, were refused admission to the school for their respective wards on the basis of the aforesaid order dated 6th January, 1964. The Society and its two Directors presented an application under article 226 of the Constitution in the High Court of Bombay praying for the issue of a Writ in the nature of Mandamus restraining the State of Bombay and its officers from enforcing the said order and to allow the petitioners to admit in the school any children of non Anglo Indian citizens or citizens of the Asiatic descent and to educate them through the medium of English. Similar applications were made by P and his daughter and by M and his son. All these applications were consolidated, heard together and accepted by the High Court which made an order as prayed. The State of Bombay came in appeal before the Supreme Court. Held: (1) that the impugned order denying the right of students who are not Anglo Indians or are of Asiatic descent to be admitted to a recognised Anglo Indian School (in this case the Barnes High School) which receives aid from the State and which imparts education through the medium of English is void and unenforceable as it offends against the fundamental right guaranteed to all citizens by article 29(2) of the Constitution, because (a)The language of article 29(2) of the Constitution is wide and unqualified and covers all citizens whether they belong to the majority or minority group. (b)The protection given by the said article extends against the State or anybody who denies the right conferred by it. (a)The said article confers a special right on citizens for admission into the educational institutions maintained or aided by the State. (d)The marginal note referring to minorities does not control the plain meaning of the language in which article 29(2) has been couched. The word " namely " imports enumeration of what is comprised in the preceding clause. In other words it equates what follows with the clause described before. (2)Barnes High School at Deolali and other Anglo Indian School shave a right to admit non Anglo Indian students and students of Asiatic descent inasmuch as article 337 proviso 2 imposes an obligation on the Anglo Indian Schools to make available at least 40 per cent. of the annual admissions to non Anglo Indian students as a condition precedent of their receiving grant from the Government and the impugned order is unconstitutional as it 73 570 prevents the Anglo Indian schools from performing their constitutional obligation and exposes them to the risk of forfeiting their constitutional right to the special grant. In view of the fundamental right guaranteed to a minority like the Anglo Indian community under article 29(1) to conserve its own language, script and culture and the right to establish and administer educational institutions of its own choice under article 30(1) there is implicit therein the right to impart instruction in its own institutions to the children of its own community in its own language and the State by its police power cannot determine the medium of instruction in opposition to such fundamental right. Bhola Prasad vs The King Emperor ([1942] F.C.R. 17, 25), The Queen vs Burah , The State of Madras vs Srimathi Champakam Dorairajan ( [1951] S.C.R. 525), Pierce vs Society of Sisters of Holy Names (268 U.S. 508), Yusuf Abdul Aziz vs State (A.I.R. , Sm. Anjali Boy vs State of West Bengal (A.I.R. , The State of Bombay vs Narasu Appal Mali (A.I.R. 1952) Bom. 84), Srinivasa Aiyar vs Saraswathi Ammal (A.I.R. 1952 Vad. 193), Dattatraya Motiram More vs State of Bombay (A.I.R. , Punjab Province vs Daulat Singh (1946 L.R. 73 I.A. 59), Robert V. Meyer vs State of Nebraska (262 U.S. 390), August Bartels vs State of Iowa ; and Ottawa Separate Schools Trustees vs Mackell (L.R. 1917 A.C. 62) referred to.

Held, per MAHAJAN, MUKHERJEA, DAs and CHANDRASEKHARA AIYAR, JJ. (PATANJALI SASTRI C.J. dissenting). Section 12 of the Bombay Public Safety Measures Act, 1947, in so far, at any rate, as it authorises the Government to direct particular "cases" to be tried by a Special Judge appointed under the Act does not purport to proceed on any classifica tion and therefore contravenes article 14 of the Constitution and is void under article 13 on the principles laid down in the cases of State of West Bengal vs Anwar Ali Sarkar ([1952] S.C.R. 284) and Kathi Raning Rawat vs Tht State of Saurash tra ([1952] S.C.R. 435). The appellants who were accused of having committed murder and other serious offences were directed by the Government of Bombay by an order made on the 6th August, 1949, to be tried under the Bombay Public Safety Measures Act by a Special Judge appointed under the Act, charges were framed against them on the 13th January, 1950, and they were convicted in March, 1950. On appeal it was contended before the High Court that the trial and conviction were illegal as the Bombay Public Safety Measures Act was void under article 13 read with article 14of the Constitution which came into force on the 26th January, 1950, but the High Court held that as the proceedings against the accused had commenced before the Constitution, the provisions of articles 13 and 14 did not apply and the conviction was not illegal. Held,by a majority, that although substantive rights and liabilities acquired or accrued before the date of the Constitution remain enforceable, it cannot be held that after that date, those rights or liabilities must be en forced under the particular procedure that was in force before that date, although it has since that date been repealed or come into conflict with the fundamental right to equal protection of the laws guaranteed by the 711 Constitution, as there is no vested right in procedure. The fact of reference of "cases" to the Special Judge before the Constitution came into force has no reasonable relation to the objects sought to be achieved by the Act, the discrimi nation therefore continued after the Constitution came into force and such continuation of the application of the dis criminatory procedure to the cases of the appellants after the date of the Constitution constituted a breach of the fundamental right guaranteed by article 14, and the appellants were therefore entitled to be tried under the ordinary procedure after the date of the Constitution. PATANJALI SASTRI C.J. (contra). Granting that section 12 of the Bombay Act must, in view of the decision in Anwar Ali Sarkar 's case, be held to be discriminatory and void in so far as it empowers the State Government to refer individual cases to a Special Judge for trial, the trial of the appel lants which had validly started before the Special Judge who had been empowered to try the case cannot be vitiated by the Constitution subsequently coming into force. The provisions of the Constitution relating to fundamental rights have no retrospective operation and do not affect a criminal prose cution commenced before the Constitution came into force. The jurisdiction of the Special Judges validly created and exercised before the Constitution and their competence to try the cases referred to them cannot be affected by the special procedure becoming discriminatory. The correct view is that article 14 does not affect pending trials even in matters of procedure. Moreover the appellants against whom proceedings had been commenced before the Special Judge, were not in the same situation as others and there was nothing discriminatory in a law which permits them to be tried under the special procedure which was applicable to them when the proceedings were started against them.

After the estates and tenures of proprietors or tenure holders had passed to and became vested in the State by virtue of the Bihar Land Reforms Act, 1950, the Revenue Authorities interfered with the rights of those ex proprietors and ex tenureholders to hold Melas on lands which were occupied by them thereafter as occupancy raiyats and collected tolls from such Melas on behalf of the Government whereupon those intermediaries made applications to the High Court for writs restraining the Government from such interference which were allowed by the High Court. During the pendency in this Court of these appeals preferred by the Officers of the State of Bihar against the order of the High Court the Bihar Land Reforms Amendment Act, 1959, was passed amending the Bihar Land Reforms Act of 1950 with retrospective effect by which the word Mela was added after the words jalkars, hats and bazars in section 4, cl. (b) of the amended Act. Further amendments provided inter alia that the State Government and not the intermediaries except with the consent of the State Government shall have the right to hold such Melas. The main question arising for decision in these appeals and certain other applications made to this Court under article 32 of the Constitution of India was whether the amending legislation violated articles 14, 19 and 31 of the Constitution. Held, that the Bihar Land Reforms Amendment Act, 1959, is a law providing for the acquisition by the State of rights in an "estate" within the meaning of article 31A of the Constitution and even if it is assumed that it abridges the rights conferred by articles 14, 19 and 31 of the Constitution its provisions are not void on that ground. The amending legislation was within the legislative com petence of the Legislature under article 246 of the Constitution and after its amendment the legislative list permitted the State 383 Legislature to enact a law of acquisition even without a public purpose. The State of Bihar vs Sir Kameshwar Singh, [1952] S.C.R. 889, considered.

H & S filed a suit against the appellant for recovery of money and during the pendency of the suit a document was executed on the 7th February, 1949, whereby H & S transferred to the respondents all book and other debts due to them together with all securities for the debts and all other property to which they were entitled in connection with their business in Bombay. One of the book debts was the subject matter of the suit, but there was no mention in that document of the suit or the decree to be passed in the suit. The respondents did not take any steps under Order XXII, rule 10, of the Code of Civil Procedure to get themselves substituted as plaintiffs in the place of H & S, but allowed the suit to be continued in the name of the original plaintiffs, and on the 15th December, 1949, a decree was passed in favour of H & S against the appellant. On the 25th April, 1951, the respondents filed in the City Civil Court, Bombay, an application for execution of the decree under Order XXI, rule 11 of the Code, and a notice under Order XXI, rule 16 was issued by the Court calling upon H & S and the appellant to show cause why the decree should not be executed by the transferees, the respondents. The appellant contended inter alia that as the respondents were only the assignees of the debt which was the subject: matter of the suit and not of the decree itself they were not entitled to execute the decree. Held, that the respondents as the transferees of the debt which was the subject matter of the suit were entitled to make an application for execution of the decree under section 146 of the Code of Civil Procedure as persons claiming under the decree holder. The effect of the expression " save as otherwise provided in this Code" contained in section 146 is that a person cannot make an application under section 146 if other provisions of the Code are applicable to it. Per DAs and IMAM JJ., BHAGWATI J. dissenting. Order XXI, rule 16, by the first alternative, contemplates the actual transfer by an assignment in writing of a decree after it is passed and while a transfer of or an agreement to transfer a decree that may be passed in future may, in equity, entitle the transferee to claim the beneficial interest in the decree after it is passed, such 1370 equitable transfer does not render the transferee a transferee of the decree by assignment in writing within the meaning of Order XXI, rule 16. Per DAS J. The transfer in writing of a property which is the subject matter of a suit without in terms transferring the decree passed or to be passed in the suit does not entitle the transferee to apply for execution of the decree under Order XXI, rule 16, as a transferee of the decree by an assignment in writing. If by reason of any provision of law, statutory or otherwise, interest in property passes from one person to another, there is a transfer of the property by operation of law. There is no warrant for confining transfers "by operation of law" to the three cases of death, devolution or succession or to transfers by operation of statutory laws only. If the document in question could be construed to be a transfer of or an agreement to transfer the decree to be passed in future, then on the decree being passed, by operation of equity, the respondents would become the transferees of the decree by operation of law within the meaning of Order XXI, rule 16. Per BHAGWATI J. Section 5 of the Transfer of Property Act defines a "transfer of property" as an act by which the transferor conveys property in present or in future to the transferee or transferees. The words "in present or in future" qualify the word "conveys" and not the word "property" in the section. A transfer of property that is not in existence operates as a contract to be performed in the future which may be specifically enforced as soon as the property comes into existence. It is only by the operation of this equitable principle that as soon as the property comes into existence and is capable of being identified, equity taking as done that which ought to be done, fastens upon the property and the contract to assign becomes a complete equitable assignment. There is nothing in the provisions of the Code of Civil Procedure or any other law which prevents the operation of this equitable principle, and an assignment in writing of a decree to be passed in future would become a complete equitable assignment on the decree being passed and would fall within the "assignment in writing" contemplated by Order XXI, rule 16 of the Code. A mere transfer of property as such does not by itself spell out a transfer of a decree which has been passed or may be passed in respect of that property and it would require an assignment of such decree in order to effectuate the transfer. But where the property is an actionable claim within the meaning of the definition in section 3 of the Transfer of Property Act and is transferred by means of an instrument in writing, the transferee could by virtue of section 130 of the Transfer of Property Act step into the shoes of the transferor and claim to be the transferee of the decree and apply for execution of the decree under Order XXI, rule 16 of the Code of Civil Procedure. Per IMAM J. There must be a decree in existence which is transferred before the transferee can benefit from the provisions 1371 of rule 16. The ordinary and natural meaning of the words of rule 16 can carry no other interpretation and the question of a strict and narrow interpretation of its provisions does not arise. Case law reviewed.

iminal Appeal No. 68 of 1958. Appeal by special leave from the judgment and order dated July 11, 1957, of the Allahabad High Court (Lucknow Bench), Lucknow, in Criminal Appeal No. 515 of 1955, arising out of the judgment and order dated October 31, 1955, of the Special Judge, Anti corruption, Lucknow, in Criminal Case No. 2/3/32/45 of 1953 55. Frank Anthony, Udai Pratap Singh and P. C. Agarwala, for the appellant. G. C. Mathur and O. P. Lal, for the respondent. December 15. The Judgment of the Court was delivered by GAJENDRAGADKAR J. This appeal by special leave Gajendragadkar j. has been filed by C. 1. Emden (hereinafter called the appellant) who has been convicted under section 161 of the Indian Penal Code and under section 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 contract at the same place for the removal of cinders 76 594 from ash pits and for loading coal. This contract 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 contract 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 contract 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 many 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 contract 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 no money 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. Shukla 's statement was then recorded before a magistrate and it was decided to lay a trap. Accordingly, a party consisting 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 comparatively secluded. He then asked Shukla to pay the money and Shukla gave him a bundle containing the marked currency notes 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 595 appellant and asked him to produce the amount paid to him by Shukla. The appellant then took out the currency notes from his pocket and handed them over to the magistrate. It is on these facts that charges under section 161 of the Indian Penal Code and section 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 corroborated, 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 section 4 of the Act had to be raised and that the said presumption had not been rebutted by the evidence led by the defence. Accordingly, the learned judge convicted the appellant of both the offences charged and sentenced him to suffer one year 's rigorous imprisonment and to pay a fine of Rs. 500 under section 161 of the Code and two years ' rigorous imprisonment under section 5 of the Act. Both the sentences were ordered to run concurrently. The appellant challenged the correctness and propriety of this order by his appeal before the High Court of Allahabad. The High Court saw no reason to interfere with the order under appeal because it held that, on the facts of the case, a statutory presumption under section 4 had to be raised and that the said presumption had not been rebutted by the appellant. In other words the High Court did not consider the prosecution evidence apart from the presumption since 596 it placed its decision on the presumption and the failure of the defence to rebut it. In the result the conviction of the appellant was confirmed, the sentence passed against him under section 161 was maintained but the sentence under section 5(2) of the Act was reduced to one year. The sentences thus passed were ordered to run concurrently. 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 section 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 article 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 corruption. Section 4(1) provides that where in any trial of an offence punishable under section 161 or section 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 contrary 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 consideration or for a consideration which he knows to be inadequate. Mr. Anthony, for the appellant, contends 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 article 14 has been considered by this Court on several occasions; as a result of the decisions of this Court it is well estab. lished that article 14 does not forbid reasonable classific ation for the purposes of legislation; no doubt it forbids class legislation; but if it appears that the 597 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 article 14 (Vide: Shri Ram Krishna Dalmia vs Shri Justice section R. Tendolkar (1). In the present case there can be no doubt that the basis adopted by the Legislature in classifying one class of public servants who are brought within the mischief of section 4(1) is a perfectly rational basis. It is based on an intelligible differentia and there can be no difficulty in distinguishing the class of persons covered by the impugned section from other classes of persons who are accused of committing other offences. Legislature presumably realised that experience in courts 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 not very easy to establish the charge of bribery beyond a reasonable doubt. Legislature felt that the evil of corruption amongst public servants posed a serious problem and bad to be effectively rooted out in the interest of clean and efficient administration. That is why the Legislature decided to enact section 4(1) with a view to require the raising of the statutory presumption as soon as the condition precedent prescribed by it in that behalf is satisfied. The object which the Legislature thus wanted to achieve is the eradication of corruption 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, no hesitation in holding that the challenge to the vires of section 4(1) on the ground that it violates article 14 of the Constitution must fail. Incidentally, we may refer ' to the decision of this Court in A. section Krishna vs The State of Madras (2) in which a similar challenge to the vires of a statutory presumption required to be raised under section 4(2) of the Madras Prohibition Act, 10 of 1937, has been repelled. (1) ; (2) ; 598 That takes us to the question of construing section 4(1). When does the statutory presumption fall to be raised, and what is the content of the said presumption? Mr. Anthony contends that the statutory presumpion 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 construction of the words " any gratification other than, legal remuneration " used in section 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 contrary is proved within the meaning of section 4(1) it must be borne in mind that the onus of proof on the appellant is not as heavy as it is on the prosecution in a criminal trial. Let us first consider when the presumption can be raised under section 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 section 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 not include the receipt of trivial gratification or thing which is covered by the exception prescribed by sub section The argument is that in prescribing the condition precedent for raising a presumption the Legislature has advisedly used the word " gratification " and not money or gift or other consideration. In this connection reliance has been placed on the corresponding provision contained in section 2 of the English Prevention of Corruption Act, 1916 (6 Geo. 5, c. 64) which uses the words "any money, gift, or other consideration ". The use of the 599 word gratification emphasises that it is not 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 contention no doubt is supported by the decision of the Rajasthan High Court in The State vs Abhey Singh (1) as well as the decision of the Bombay High Court in the State vs Pandurang Laxman Parab (2). On the other hand Mr. Mathur, for the State, argues that the word " gratification " should be construed 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 conceded by now that in most of the cases it would be the payment of money which would cause gratification to the accused; but he contests the suggestion that the word " gratification " must be confined only to the payment of money coupled 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 vs Pundlik Bhikaji Ahire (3) and by the Allahabad High Court in Promod Chander Shekhar vs Rex (4). Paragraph 3 of section 161 of the Code provides that the word " gratification " is not restricted to pecuniary gratification or to gratifications estimable in money. Therefore " gratification " mentioned in section 4(1) cannot be confined only to payment of money. What the prosecution has to prove before asking the court 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 not legal remuneration then the condition prescribed by the section is satisfied. In the context of the remuneration legally payable to, and receivable by, a (1) A.I.R. (2) xi. (3) (4) I.L.R. 1950 All. 600 public servant, there is no difficulty in holding that where money is shown to have been paid to, and accepted by, such public servant and that the said money does not constitute his legal remuneration, the presumption has to be raised as required by the section. If the word " gratification " is construed 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 no doubt be suggested that the object which the statutory presumption serves on this construction is that the court may then presume that the money was paid by way of a bribe as a motive or reward as required by section 161 of the Code. In our opinion this could not have been the intention of the Legislature in prescribing the statutory presumption under section 4(1). In the context we see no justification for not giving the word " gratification " its literal dictionary meaning. There is another consideration which supports this construction. 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 section 165 of the Code; and there. is no doubt that one of the essential ingredients of the said offence is that the valuable thing should have been received by the accused without consideration or for a consideration which he knows to be inadequate. It cannot be suggested that the relevant clause in section 4(1) which deals with the acceptance of any valuable thing should be interpreted to impose upon the prosecution an obligation to prove not only that the valuable thing has been received by the accused but that it has been received by him without consideration or for a consideration 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 construction of this part of section 4(1) it would be unreasonable to hold that the word " gratification " in the same clause imports the necessity to prove not only the payment 601 of money but the incriminating character of the said payment. It is true that the Legislature might have used the word " money " or " consideration " 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 no justification for adding any clause to qualify the word " gratification"; the view for which the appellant contends in effect amounts to adding a qualifying clause to describe gratification. We would accordingly hold 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 content 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 contends that the test which can be legitimately applied in deciding whether or not 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 considered by courts in India and in England on several occasions. We may briefly indicate some of the relevant decisions on this point. In Otto George Gfeller vs The King(1) 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 considered by the jury. In that connection Sir George Rankin observed that the appellant did not (1) A.I.R. 1943 P.C. 211. 77 602 have to prove his story, but if his story broke down the jury might convict. In other words, the jury might think that the explanation given was one which could not be reasonably true, attributing a reticence or an incuriosity or a guilelessness to him beyond anything that could fairly be supposed. The same view was taken in Rex vs Carr Briant (1) where it has been observed that in any case where either by statute or at common law some matter is presumed against an accused, " unless the contrary is proved the jury should be directed that it is for them to decide whether the contrary is proved, that the burden of proof required is less than that required at the bands 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 constitute sufficient ground for a verdict " (p. 611),(Also vide: Regina vs Dunbar (2)). It is on the strength of these decisions that Mr. Anthony contends that in deciding whether the contrary has been proved or not under section 4(1) the High Court should not have applied the same test as has to be applied in dealing with the prosecution case. The High Court should have inquired not whether the explanation given by the appellant is wholly satisfactory but whether it is a reasonably possible explanation or not. On behalf of the State it is urged by Mr. Mathur that in construing the effect of the clause " unless the contrary is proved " we must necessarily refer to the definition of the word " proved " prescribed by section 3 of the Evidence Act. A fact is said to be proved when, after considering the matter before it, the Court either believes it to exist or considers 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 section 4 which provides that whenever it is directed that the (1) (2) at p. 11. 603 court shall presume a fact it shall record such fact as proved unless and until it is disproved. The argument is that there is not much room for relaxing the onus of proof where the accused is called upon to prove the contrary under section 4(1). We do not think it necessary to decide this point in the present appeal. We are prepared 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 now be considered. 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 conclusion 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 no immediate 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 daughter 's marriage which he was intending to perform in the near future. The High Court was not impressed by this story; and so it thought that the purpose for which the amount was alleged to have been borrowed could not be a true purpose. Besides the High Court has also considered whether it would have been probable that Shukla 604 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 consideration of these facts that the High Court came to the conclusion that the explanation given by the accused was improbable and palpably unreasonable. It is true that in considering 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 commenced is inadmissible. We are prepared to assume that this criticism is wellfounded and that the appellant 's statement in question should not have been taken into account in considering the probability of his explanation; but, in our opinion, the judgment of the High Court shows that not much importance was attached to this statement, and that the final conclusion of the High Court was substantially based on its appreciation of the oral evidence led by the defence and on considerations 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 not necessary in the present appeal to decide the question about the nature of the onus of proof cast upon the accused by section 4(1) after the statutory presumption is raised against him. In the result the appeal fails, the order of conviction and sentence passed against the appellant is confirmed and his bail bond cancelled. Appeal dismissed.

The appellant, who was working as a Loco Foreman, was found to have accepted a sum of Rs. 375 from a Railway Contractor. The appellant 's explanation was that he had borrowed the amount as he was in need of money for meeting the expenses of the clothing of his children who were studying in school, The Special judge accepted the evidence of the contractor and held that the money had been taken as a bribe, that the defence story was improbable and untrue, that the presumption under section 4 Of the Prevention of Corruption Act had to be raised and that the presumption had not been rebutted by the appellant and accordingly convicted him under section 161 Indian Penal Code and section 5 Of the Prevention of Corruption Act, 1947. On appeal the High Court held that on the facts of the case the statutory presumption under section 4 had to be raised, that the explanation offered by the appellant was improbable and palpably unreasonable and that the presumption had not been rebutted, and upheld the conviction. The appellant contended (i) that section 4 was ultra vires as it contravened article 14 of the Constitution, (ii) that the presumption under section 4 could not be raised merely on proof of acceptance of money but it had further to be proved that the money was accepted as a bribe, (iii) and that even if the presumption arose it was rebutted when the appellant offered a reasonably probable explanation. Held, that section 4 of the Prevention of Corruption Act did not violate article 14 Of the Constitution. The classification of public servants who were brought within the mischief of section 4 was based on intelligible differentia which had a rational relation to the object of the Act, viz,, eradicating bribery and corruption amongst public servants. Ram Krishna Dalmia vs Shri justice section R. Tendolkar; , , followed. A. section Krishna vs The State of Madras, ; , referred to. The presumption under section 4 arose when it was shown that the accused had received the stated amount and that the said amount was not legal remuneration. The word " gratification ' 593 in section 4(1) was to be given its literal dictionary meaning of satisfaction of appetite or desire ; it could not be construed to mean money paid by way of a bribe. The High Court was justified in raising the presumption against the appellant as it was admitted that he had received the money from the contractor and the amount received was other than legal remuneration. State vs Pundlik Bhikaji Ahire, and Promod Chander Shekhar vs Rex, I.L.R. 1950 All. 382, approved. The State vs Abhey singh, A.I.R. 1957 Raj. 138 and State vs Pandurang Laxman Parab, , disapproved. Even if it be assumed that the presumption arising under section 4(1) could be rebutted by the accused giving an explanation which was a reasonably probable one the High Court was right in holding that the explanation given by the appellant was wholly unsatisfactory and unreasonable. Otto George Gfeller vs The King, A.I.R. 1943 P.C. 211 and Rex vs Cary Briant, (1943) I K.B. 607, referred to.

The appellant 's election to the M.P. Legislative Assembly in February 1957 was challenged by an election petition mainly on the allegation ,that he was disqualified from being a candidate as he held certain offices of profit under the Government. The trial Judge allowed the election petition holding that the appellant held an office, of profit under the Government being on the panel of lawyers prepared by the Central 'and Western Railway Administration and having been at the material time a Professor of Law in a Government College on a regular salary of Rs. 250 per month; it was also held that on the material before the court it could not be said that the appellant held the post of the President Member of a Tribunal constituted under section 73 of the Madhya Pradesh Town Improvement Trust Act, 1960. On appeal to this Court, HELD: Dismissing the appeal: (i) "By office" is meant the right and duty to exercise an employment or a position to which certain duties are attached. The appellant held such an office by his enagagement on the, basis of a letter of appointment dated February 6, 1962 addressed to him by ' the Chief Commercial Superintendent of the Railway and his reply thereto whereby he accepted certain obligations and was required to discharge. certain duties. lie was not free to take a brief against the Railway Administration. Whether or not the Railway Administration thought it proper to entrust any particular case to him, it was his duty to watch 'all cases coming up fog hearing against the Railway Administration and to give timely intimation of the same to the office of the Chief Commercial Superintendent. Even if no instructions regarding any particular case were given to him, he was expected to appear in court and obtain adjournment. In effect this cast a continuing duty on him to protect the interests of the Railway as long as his engagement continued. The fact that the appellant would be paid only if he appeared in a case and the possibility of the Railway 's not engaging him was a matter of no moment. An office of profit realy means an office in respect of which a profit may accrue. It is not necessary that it should be possible to predicate of a holder of an office of profit that he was bound to get a certain amount of profit irrespective of the duties discharged by him. [426 F 427 C] Although it was open to the appellant to terminate the engagement at any time and he might even commit a breach of etiquette by 'accepting a brief against the Railway without formally putting. an end to the engagement that would ' not detract from the position that he was in duty bound to work for the Railway Administration and see that it causes did not suffer by default. So long as the engagement was not put an end to, he was holding an office of profit in the Railway Adminis 423 tration, and as such was disqualified for being elected to the Legislative Assembly of Madhya Pradesh. The Statesman (Private) Ltd. vs H.R. Deb and others ; ; Mcmillan vs Guest [1942] Appeal Cases 561; referred to. [427 E F] (ii) Although it was not necessary for the purpose of the present case to express any final opinion on the point, on the facts, there was great force in the appellant 's contention that he did not hold an office of profit by being a Professor of Law in a Government College on a salary of. Rs. 250 per month. The Management of the College in question had been handed ' over W the University The appellant was only a temporary Government servant. He had never become permanent nor had a ,lien on the post. He was sent on deputation to the University in 1959 and in the ordinary course of things such deputation would have come to an end in 1964 when he attained the age of superannuation. No order was passed in respect of him at any time either by the Government or by the University until after the firing of the election petition. [430 F 431 B] (iii) On the facts, it was difficult to hold that the appellant held the office: of profit as the President of a Tribunal constituted under section 73 of the Madhya Pradesh Town Improvement Trust Act, 1950. He had never been approached for the purpose nor had he ever signified his willingness to act under the terms of the notification. He had never taken charge of 'any office nor had he ever discharged any function with regard to the office. [431 G]

The appellant Board passed a special resolution on September 28, 1956, imposing water tax in Hapur and a notification by the Uttar Pradesh Government was published in the Uttar Pradesh Gazette under section 135(2) of the U.P. Municipalities Act (2 of 1916) notifying the resolution. Fifteen house owners of Hapur who received notices from the appellant Board for the payment of the tax petitioned to the High Court under article 226 ,of the Constitution and asked for a writ or order preventing the appellant Board from realising the tax. The main objections were (a) that the resolution of the appellant Board framing the proposal was not pub lished in a local paper of Hapur published in Hindi and (b) that the rules framed for the imposition of the tax did not accompany the resolution which was affixed on the notice board at the office of the appellant Board in purported compliance with the requirements for publication. The imposition was also challenged on the ground that articles 14 and 19 of the Constitution were violated. A single judge of the High Court held that the tax was illegal inasmuch as the mandatory requirements of the Municipalities Act were not complied with by the appellant Board while imposing the tax and that section 135(3) of the Act (which cures all defects in the imposition of the tax by making the notification of Government conclusive evidence of the legality of the imposition) was ultra vires article 14 of the Constitution because it created a bar against proof and left no remedy to the tax payers thereby making a discrimination between them and other litigants. He further held that the sub section by making Government the sole judge of compliance with the Act conferred judicial power on Government contrary to the intendment of the Constitution. The appellant Board appealed under the Letters Patent. The Divisional Bench upheld the order of the single judge. The case was however certified as fit for appeal under article 133 and the Board appealed to this Court. The contentions raised in appeal were: (i) s.135(3) shuts out all ,enquiry into the procedure by which a tax had been imposed and therefore suffered from excessive delegation of legislative function. (ii) The tax had not been validly imposed a there had been non observance of mandatory provisions; (iii) section 135(3) was discriminatory; and (iv) the sub section was also bad because it conferred judicial functions on the State Government. HELD : Per Gajendragadkar, C.J., Hidayatullah, Shah and Sikri. JJ. (i) The rule of conclusive evidence in s.135(3) does not shut out all enquiry by courts. There are certain matters which cannot be established by a notification under s.135(3). For example no notification can issue unless there is a special resolution under section 134. The special resolu 951 tion is a sine qua non for the notification. Again the notification cannot authorise the imposition of a tax not included in section 128 of the Municipalities Act. Neither the Municipal Board nor the State Government can exercise such power. What the section does is to put beyond question the procedure by which the tax is imposed, that is to say the various steps taken to impose it. A tax not authorised, can never be within the protection afforded to the procedure for imposing taxes. Such a tax may be challenged, not with reference to the manner of imposition but as an illegal impost. [958 A D] (ii) There can be no doubt that some of the provisions of sections 131 to 134 of the Act are mandatory. But all of them are not of the same character. In the present case, as in Raza Buland Sugar Co. Ltd. and in Berar Swadeshi Vanaspati, the provisions not observed were of a directory character and therefore the imposition had the protection of section 135(3). [958 H] Raza Buland Sugar Co. Ltd. vs Municipal Board, Rampur. ; and Berar Swadeshi Vanaspati vs Municipal Committe, Committee Sheogaon & Anr. , relied on. (iii) Mandatory provisions must be fully complied with, and directory provisions should be substantially complied with. In either case the agency for seeing to this compliance is the State Government. It is hardly to be expected that the State Government would not do its duty or that it would allow breaches of the provisions to go unrectified. In cases of minor departure from the letter of the law especially in matters not fundamental, it is for the Government to see whether there has been substantial or reasonable compliance. Once Government condones the departure, the decision of the Government is rightly made final by making the notification conclusive evidence of the compliance with the requirements of the Act. [959 H 960 D] (iv) The power to tax belongs to the State Legislature but is exercised by the local authority under the control of the State Government. It is impossible for the State Legislature to impose taxes in local areas because local conditions and needs must very. The power must be delegated. The taxes however are predetermined and a procedure for consulting the wishes of the people is devised. But the matter is not left entirely in the hands of the Municipal Boards. As the State Legislature cannot supervise the due observance of its laws by the municipal Boards power is given to the State Government to check their actions. The proceedings for the imposition of the tax must come to a conclusion at some stage after which it can be said that the tax has been imposed. That stage is reached, not when the special resolution of the Municipal Board is passed but when the notification by Government is issued. After the notification all enquiry must cease. This is not a case of excessive delegation unless one starts with the notion that the State Government may collude with the Municipal Board to disregard deliberately the provisions for The imposition of the tax. There is no warrant for such a supposition. The provision making the notification conclusive evidence of the proper imposition of the tax is conceived in the best interest of compliance of the provisions by the Board and not to facilitate their breach. [960 F 961 E] Excessive delegation is most often found when the legislature does not perform all the essential legislative functions and leaves them to some other agency. The Legislature here performs all essential functions in the imposition of the tax. The selection of the tax for imposition in a municipal area is by the legislative will expressed in section 128. Neither the Municipal Board, nor the Government can go outside the list of taxes therein included. The procedure for the imposition of the tax is also, laid down 952 by the Legislature for the Municipal Board to follow and the State Government is there to ensure due observance of that procedure. in view of all this there was no excessive delegation or conferral or legislative functions on the appellant Board or the State Government. [961 F 962 C] (v) There are numerous statutes including the Evidence Act, in which a fact is taken to be conclusively proved from the existence of some other fact. The law is full of fictions and irrebuttable presumptions which also involve proof of facts. The tax payers in the Municipality are allowed to object to the proposal for the tax and the rules and to, have their objections considered. They cannot be allowed to keep on agitating. Section 135(3) which only concludes objections against the procedure followed in the imposition of the tax cannot be said to be discriminatory and viola tive of article 14. [962 D H] (vi) The objection that the impugned sub section involves the exercise of judicial functions not open to the legislature is wholly erroneous. The subsection only shuts out further enquiry and makes the notification final. [962 H] Per Wanchoo, J. (dissenting) (i) Section 135(3) bars enquiry by courts into all procedural provisions relating to imposition of taxes and therefore it bars enquiry into any matter covered by section 131 to section 135(1) of the Act. It cannot be read down as barring enquiry only into some procedural provisions i.e. from section 131 to section 133 and not into the other procedural provisions i.e. section 134 and section 135(1). [968 D] Section 135(3) is not a rule of evidence; it is a substantive provision which lays down in effect that once a notification under section 135(2) is issued it will be conclusively presumed that the tax is in accordance with all the procedural provisions with respect to the imposition thereof. [969 E] Ishar Ahmad Khan vs Union of India, [1962] Supp. 3 S.C.R. 235, referred to. The effect of section 135(3) is that the procedural provisions are given the go by in the matter of imposition of tax and as soon as a notification under section 135(2) is shown to the court, the court is helpless, in the matter even though none of the provisions of section 131 to section 135(1) may have been complied with. [969 H] (ii) In the field of local taxation relating to municipal boards and district boards and similar other bodies there are reasons for delegating :fixation of rate to such bodies subject to proper safeguards. This is exactly what has been done under the Act subject to the safeguards contained in sections 131 to section 135(1). If those safeguards are followed the delegation would be proper delegation and could not be challenged as ultra vires on the ground of excessive delegation. But if the legislature after laying down with great care safeguards as to the imposition of tax including its rate makes a blanket provision like section 135(3), which at one stroke does away with all those safeguards and this is what section 135(3) has done in the present case the position that results is that there is delegation of even the essential function of fixing the rate to the subordinate authority without any safeguard. Such a delegation would be excessive delegation and would be ultra vires. [972 D F] (iii) Section 135(3) inasmuch as it makes the delegation contained in sections 128 to 135(2) excessive must be severed from the rest of the sections which are otherwise a proper delegation of legislative authority and should be struck down on the ground of excessive delegation. [973 B] 953

The appellant who was charged for the offences (a) under section 120B I.P.C. (b) under section 161 I.P.C. read with section 5(2) and 5(1) (d) of the Prevention of Corruption Act 1947 and (c) under section 5(2) read with section 5(1) (a) of the Prevention of Corruption Act 1947 was acquitted by the special judge holding that neither the charge of conspiracy nor any other charge against the accused was proved. But the special Judge held that the assets of the appellant from 1st of July '55 to 30th April 1961 had exceeded his income by Rs. 33,588.34 and they were disproportionate to the known sources of income of the petitioner. The trial Judge, however, found that as section 5(3) of the Act had been repealed on 18 12 1964 and as specific instances of payment of bribe to the petitioner could not be proved the accused could not be held guilty of the charges. Aggrieved by the decision, the State preferred an appeal to the Delhi High Court on 11th April, 1967. Pending the appeal before the High Court, Act No. 16 of 1967, came into force on 5th May 1967 re introducing section 5(1)(e) in the Act. In the High Court the appellant challenged the vires of Act No. 16 of 1967 on the ground that revival of section 5(3) of the Act and making it applicable retrospectively was void and unconstitutional as it was in violation of article 14 and 20(1) of the Constitution. A Division Bench of the High Court of Delhi by its judgment dated 27th November, 1973 allowed the appeal upholding the validity of Act No. 16 of 1967 and remanded the case to be tried from the stage at which it was pending on 18th December, 1964. In appeals by special leave it was contended that (a) Since section 5(3) of the P. O. F. A., 1947 was repealed on 18 12 64 the Court below cannot take into account the provisions of section 5(3) of the Act after the date of its repeal on 18 12 64 and (b) Act No. 16 of 1964 which gave retrospective operation to section 5(3) of the Act is violative of Articles 14 and 20(1) of the Constitution. ^ HELD: 1. Whether Act 16 of 1967 had been brought into force on 20th June 1967 or not the rule of evidence as incorporated in section 5(3) of the P.O.F.A., 1947 would be available regarding offences that were committed during the period before the repeal of section 5(3). [823 G] 2. Section 5(3) of the Prevention of Corruption Act, 1947 provided an additional mode of proving an offence punishable under sub sections 5(2) for which an accused person is being tried and, therefore, prescribes a rule of evidence. Section 5(3) does not create a new kind of offence of criminal misconduct by a public servant in the discharge of his official duty. [821 H, 822 A]. 817 G.D.S. Swamy vs State, ; , Surajpal Singh vs State of U.P., ; and Sajjan Singh vs State of Punjab ; ; applied. While repealing section 5(3) by Act 40 of 1964 the statute did not say that the section shall be deemed not to have been in force at all. Section 6 of the provides that the repeal shall not affect the previous operation of any enactment so repealed unless a different intention appears. The operation of all the provisions of the Prevention of Corruption Act would continue in so far as the offences that were committed when section 5(3) was in force. The offences that were committed after the date of the repeal will not come under the provisions of section 6(b) of the . Section 6(c) also preserves all legal proceedings and consequences of such proceedings as if the repealing Act had not been passed. [822 C, 823 E F]. Keshavan Madhava Menon vs State of Bombay, [1951] 2 SCR followed. Article 20(1) of the Constitution deals with ex post facto laws though that expression has not been used in the Article. Usually, a law prescribes a rule of conduct by which persons ought to be governed in respect of their civil rights. Certain penalties are also imposed under the criminal law for breach of any law. Though a sovereign legislature has power to legislate retrospectively creation of an offence for an act which at the time of its commission was not an offence or imposition of a penalty greater than that which was under the law provided violates article 20(1). All that article 20(1) prohibits is ex post facto laws and is designed to prevent a person being punished for an act or omission which was considered innocent when done. It only prohibits the conviction of a person or his being subjected to a penalty under expost facto laws. [824 B D]. In the instant case, the appellant cannot object to a procedure different from what obtained at the time of the commission of the offence. The offence that was committed was when section 5(3) was in force and by Act 16 of 1967 the procedure is revived. It is not as if the procedure is brought into force for the first time. [824 F G]. Rao Shiv Bahadur Singh & Anr. vs The State of Vindhya Pradesh, ; applied; Phillips vs Eyre, , at pp. 23 and 25 and Calder vs Bull, ; ; at 649; quoted with approval. There can be no objection in law to the revival of the procedure which was in force at the time when the offence was committed. The effect of the amendment is that sub section (3) of section 5 as it stood before the commencement of 1964 Act shall apply and shall be deemed to have always applied in relation to trial of offences. It may be, if by this deeming provision a new offence was created then the prohibition under Article 20(1) may come into operation. In this case what is done is no more than reiterating the effect of section 6(1) of the . [825 A B]. 818 6. In the present case the old procedure is revived and no new procedure is given retrospective effect. The procedure given effect to is not of such a natural as to result in creation of a new offence. [825 D].

The respondent was holding the post of an Assistant to the Additional Development Commissioner, Planning, Bangalore. A departmental enquiry was held against him and the Enquiry Officer recommended that the respondent be reduced in rank. After considering the report of Enquiry Officer, the Government issued a notice calling upon respondent to show cause why he should not be dismissed from service. The reply of the respondent was that the entire case had been foisted on him. After considering his representation, the Government passed an order dismissing him from service. The reason given for his dismissal was that the respondent had on two earlier occasions committed certain offences and he had been punished for the same. However, those facts were not given as reasons for the proposed punishment. of dismissal from service. 541 The respondent filed a petition in the High Court under article 226 of the Constitution for quashing the order of his dismissal. The High Court quashed the order of dismissal on the ground that the two circumstances on which the Government relied for the proposed infliction of punishment of dismissal were not put to the respondent for being explained by him in the show cause notice which was issued to him. The appellant came to this Court by special leave. The contentions of the appellant were that the Government was entitled to take into consideration the previous record of Government servant in awarding punishment to him and it was not incumbent on it to bring to the notice of the Government servant the said fact in the second notice. Moreover, as the Government servant in this case had knowledge of his two.earlier punishments he was not in any way prejudiced by their non disclosure in the second notice. Dismissing the appeal, Held, that it was incumbent upon the Government to give the Government servant at the second stage reasonable opportunity to show cause against the proposed punishment and if the proposed punishment was also based on his previous punishments or his previous bad record, that should be included in the second notice so that he may be able to give an explanation. The doctrine of "presumptive knowledge" or that of "purposeless enquiry" is subversive of the principle of "reasonable opportunity". Secretary of State for India, vs I. M. Lal, [1945] F.C.R. 103, Khern Chand vs Union of India, ; , Gopalrao vs State, I.L.R. , Shankar Shukla vs Senior Superintendent of Post Offices, Lucknow Division, A.I.R. 1959 All. 624 and State of Assam vs Bimal Kumar Pandit, [1964] 2 S.C.R. referred to.

The appellant company retired three of its workmen and the industrial dispute thus arising was referred to the Labour Court, Gorakhpur, for adjudication The reference was registered by the Labour Court as Adjudication Case No. 93 of 1960. The parties filed their written statement and proceedings went on resulting in the Labour Court passing an order dated February 26, 1961 holding that the retirement of the three workmen was neither legal nor justified. There were similar disputes regarding the retirement of several other workmen and the dispute relating to them was referred to the same Labour Court and this reference was registered as Adjudication Case No. 98 of 1960. The three workmen whose cases were the subject matter of the first reference were also included in the second reference. They applied to the Labour Court to have their names deleted from the second reference, and they were accordingly deleted. The Labour Court gave its award in the second reference on February 27, 1961. In this award the Labour Court specifically stated that it was not recording any finding with regard to the three workmen covered by the first reference. On a representation made by the appellant the State Government issued a notification on February 28. 1961 withdrawing the first reference relating to the three aforesaid workmen. This was purported to be done under sub section (1) of section 6 G of the U.P. Even so the State Government published the award in the first reference on May 6, 1961. The appellant filed a writ petition in the High Court under article 226 of the Constitution for the issue of a writ of certiorari quashing the award dated February 26, 1961 and also for a mandamus directing the State Government to withdraw its Notification dated May 6. 1961. The single Judge as well as the Division Bench decided against the appellant. In appeal before this Court, HELD : (i) The wording of sub section (1) of section 6 G is capable of being construed as conferring on the State Government a power to withdraw any proceedings or to transfer a proceeding from one Labour Court or Tribunal to another. But having regard to the scheme of section 6 G read in the light of the other provisions of the Act the section will have to be interpreted as giving to the State Government only a power to transfer a proceeding from one Labour Court to another. When section 6 makes it obligatory that an award has to be made by the tribunal concerned and that It has to be published by the State Government within 30 days of its receipt and declares that the award on is idle to expect that the legislature intended to by conferring an absolute power of withdrawal on Government State section 6 G. The proper way of reading section 6 G is to limit the power of withdrawal referred to therein only for the purpose of transferring proceedings from one Labour Court or Tribunal to another. [75D] The provisions of section 33B and section 6 D of the Act did not support a contrary conclusion. Sirsilk Ltd. and Others vs Government of Andhra Pradesh & Another ; , distinguished. (ii) The expression 'or ' in section 6 G (1) interposed between 'withdraw any proceedings ' or 'transfer a proceeding ' will have to be understood as 'and '. [75H] Mazagaon Dock Ltd. vs The Commissioner of income tax and Excess Profits Tax; , relied on.

The appellant who was an employee of the State Government in the Horticulture department, was on deputation with the Central Government. In May, 1952 he was selected by the State Public Service Commission as Landscape Architect on a temporary basis. From time to time he sought extension of time for joining the post and it was granted. Eventually when he reported for duty in June, 1953 he was informed that the offer made to him stood cancelled as he did not join in time and that the post had been filled by appointing someone else. He therefore rejoined the Government of India. In 1954 the State Service Commission again advertised the post stating that it was a temporary post but was likely to continue. The appellant was selected for the post and joined it on November 6, 1954. His period of probation was extended but he was not confirmed in the post. Eventually the State Government decided to abolish the post of Landscape Architect with immediate effect and the appellant reverted to his substantive post in the State service on November 4, 1958. The High Court dismissed the appellant 's writ petition. In appeal to this Court it was contended on his behalf that (i) the order of premature abolition of the post was male fide in that it was the result of inordinate hostility of higher officers towards him; (ii) the discontinuance of the post was due to personal reasons because the higher officers were displeased with him for pointing out irregularities in incurring expenditure and (iii) the order abolishing the post was illegal because it denied the benefit of three months notice for termination of his appointment. Dismissing the appeal, ^ HELD: (1) (a) Although the appellant has based his case almost entirely on mala fides, he has not succeeded in proving the allegation. [1102G] (b) He did not furnish the necessary particulars for the allegation. What he had to prove was not malice in its legal sense but males animus indicating that the State Government was actuated either by spite or ill will against him, 1090 or by indirect or improper motives. It was also not shown that his reversion was ordered for a collateral purpose and not for the ostensible purpose of abolishing an unnecessary post, or by proving that the ostensible purpose of abolishing the post was so unconvincing and absurd as to lack bona fides. Both direct and circumstantial evidence were admissible to establish lack of bona fides or bad faith, but the appellant has not succeeded in proving the allegation. [1102 H 1103 B] (c) It is for the person seeking to invalidate an order to establish the charge of bad faith. Such a charge may be made easily or without any sense of responsibility. That is why courts examine it with care and attention. [1103 C] section Pratap Singh vs The State of Punjab, ; at 741; referred to. (2) It cannot be said that the post was abolished without reason or justification, but with the intention of getting rid of the appellant somehow. The post was a temporary one all through. The question of continuation of the post was referred to a special committee presided over by the Minister and that committee came to the conclusion that the post was no longer necessary and should therefore be abolished. The Cadre Committee to which also a reference was made, made a similar recommendation. The reason for abolishing the post was that almost all the plans which were needed for the project had been prepared and the Chief Engineer 's Organization would have no difficulty in carrying on the outstanding work. [1097 H, 1097 E G] State of Haryana vs Des Raj Sengar, ; ; held not applicable. (3) There is nothing on record to show that the appellant 's alleged exposure of irregularities in the expenditure led to an adverse decision against him. While the controversy regarding the alleged unauthorised expenditure was raised in December, 1954, the decision to revert him was taken four years later. [1098 F] (4) There was no term in the order of appointment given to the appellant that he would be entitled to a three months ' notice for termination of his appointment. The State Public Service Commission specified in the impugned notification that the post was temporary upto February, 1955 but was likely to continue thereafter. If the appellant knew that the term of the post was to expire in November, 1958, he could not possibly claim that he should have been given three months ' notice. He was fully aware of his precarious tenure from month to month. [1099 F H] (5) The earlier order of the Chief Minister dated February 13, 1958 in the appellant 's favour could not give rise to any right as it was not expressed in the name of the Governor as required by article 166 of the Constitution and was not communicated to the appellant. It was only a provisional order which was open to reconsideration by the Chief Minister and did not bind anyone. Nothing could, therefore, turn on the Chief Minister 's order dated February 13, 1958, when it was specifically rescinded by his subsequent order dated October 29, 1958. There could be no question of appellant 's confirmation as Landscape Architect as it was a temporary post all through until it was allowed to lapse on November 4, 1958. [1101 G 1102 B] 1091 Bachittar Singh vs State of Punjab, [1962] Suppl. 3 SCR 713; referred to. (6) This was not really a case of abolition of the post of Landscape Architect, for the post was sanctioned upto November 4, 1958 and was allowed to lapse thereafter.

The respondent was appointed as a Sub Inspector of police in a temporary post in 1955. He was discharged from service on July 13, 1957. A Writ Petition filed by him in the Allahabad High Court was allowed on August 4, 1959 and consequently he was re instated in service on December 15, 1959. Thereafter, on January 21, 1960 his services were terminated on the ground that they were no longer required by the State. A suit for declaration that the said order of termination was null and void was decreed in his favour by the trial court which was affirmed in appeal and also by the High Court in second appeal. Allowing the State appeal by special leave the Court, ^ HELD: 1. The considerations which prevailed with the High Court in reaching its findings on the application of Article 311(2) of the Constitution and the bona fides of the superior authority in making the impugned order of termination simpliciter are not warranted in law. [1130D] 2. The order terminating the services was order of termination simpliciter passed in accordance with the rules applicable to temporary Government servants. After the original order of discharge was quashed by the High Court, the respondent was reinstated, allowed increment in pay and one month 's salary in lieu of notice under the 'general rules for termination of services of temporary government servants was also given. [1128F G] 3. It was open to the superior authority to terminate the respondent 's services on the ground on which it did so. And the evidence disclosed no personal motive had influenced the order or that it was passed by way of punishment. A departmental enquiry is not required under the law. Instead of instituting disciplinary proceedings against the government servant, the suitability for retention in service could be decided. [1128H, 1129A, E] State of U.P.v. Ram Chandra Trivedi; , ; Champaklal Chimanlal Shah vs The Union of India, , Jagdish Mitter vs Union of India, A.I.R. 1964 S.C. 449 and State of Punjab & Anr. vs Shri Sukh Raj Bahadur, ; ; referred to. Union of India & Ors. vs R. section Dhaba, , State of Bihar & Ors. vs Shiva Bhikshuk Mishra and R. section Sial vs The State of U.P. and Ors., ; applied. The State of Bihar vs Gopi Kishore Prasad, A.I.R. 1960 SC 689 and Madan Gopal vs The State of Punjab, [1963] 3 SCR 716; distinguished. 1127

minal Appeal No. 124 of 1959. Appeal by special leave from the judgment and order dated June 19 and 20, 1959, of the former Bombay High Court in Criminal Appeal No. 411 of 1959 arising out of the judgment and order dated March 17, 1959, of the Presidency Magistrate XX Court, Mazagaon, Bombay in Case Nos. 1952 54/P of 1958. B. M. Mistri, Ravinder Narain, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra for the Appellants. Nur ud din Ahmed and R. H. Dhebar, for the Respondent. 1960. November 18. The Judgment of the Court was delivered by IMAM, J. The appellants were convicted under sections 65(b), 65(f) and 66(b) of the Bombay Prohibition Act of 1949, hereinafter referred to as the Act, by the Presidency Magistrate XX Court, Mazagaon, Bombay. The appellant No. 1 was sentenced to 9 months ' rigorous imprisonment and a fine of Rs. 1,000 under section 65(b). No separate sentence was imposed under the other sections. Appellant No. 2 was sentenced to 6 months ' rigorous imprisonment and fine of Rs. 500 under section 65(b). No separate sentence was imposed under the other sections. They appealed to the Bombay High Court against their convictions and sentence. The High Court set aside their convictions under sections 65(b) and 66(b) of the Act but maintained their conviction under section 65(f ) read with section 81 relying on the presumption against the appellants arising out of section 103 of the Act. The High Court accordingly directed that the sentence of imprisonment and fine imposed upon the appellants by the Presidency Magistrate under section 65(b) be regarded as the sentence of imprisonment and fine imposed on the appellants under section 65(f) read with section 81. 66 518 According to the case of the prosecution, there was a search on August 2,1958, of certain premises in the occupation of appellant No. 1 on the third floor of Dhun Mansion, Khetwadi 12th Lane. A complete working still was found there and both the appellants were working it. Appellant No. 2 was pumping air into the cylinder with a motor pump while appellant No. 1 was holding a rubber tube attached to the tank. An iron stand with a boiler on it was also found there. Below the boiler there was a stove which was burning. There was also a big jar near the still. According to the prosecution, this big jar contained illicit liquor. Another glass jar was used as a receiver which, according to the prosecution, also contained 20 drams of illicit liquor. The, boiler contained four gallons of wash. There were also 11 wooden barrels containing wash. In the drawing room of the premises a small glass jar containing 20 drams of illicit liquor, a bottle of 1 1/2 drams of illicit liquor and a pint bottle containing 3 drams of illicit liquor were also found. A _panchnama was drawn up concerning the recovery of these articles. It was the case of the prosecution that the appellants were manufacturing illicit liquor and were in possession of a still and other materials for the purpose of manufacturing intoxicant and were also in possession of illicit liquor. The Presidency Magistrate was satisfied that a working still and illicit liquor in the glass jars and the two bottles were found in the premises in question. The High Court also was of the opinion that a working still was found there but it thought that it would not be safe to rely upon the conflicting and unsatisfactory evidence in the case to hold that illicit liquor had been found in the premises in question, as it had not been satisfactorily proved that the bottles and the glass jars had been sealed in the presence of the panchas. The High Court was further of the opinion that there was no evidence on the record to show that the very bottles which were attached and the sample bottles in which was contained the wash were the bottles which were examined by the Chemical Examiner in respect 519 of which he made a report to the Magistrate. Accordingly, it was of the opinion that the convictions under sections 65(b) and 66(b) could not stand. On behalf of the appellants it was urged that no presumption under section 103 of the Act could arise as it had not been established, on the findings of the High Court, that the still was an apparatus for the manufacture of any intoxicant as is ordinarily used in the manufacture of any intoxicant. It was further argued that no questions were put to the accused, when they were examined under section 342 of the Code of Criminal Procedure, in this connection and therefore they had been denied the opportunity to rebut the presumption. The Presidency Magistrate had not used the provision,,; of section 103 against the appellants because he had found that in fact illicit liquor had been recovered from the premises and that the still was for manufacturing such intoxicant. If the Presidency Magistrate had at all intended to use the presumption under section 103 against the appellants, he was bound to have given them an opportunity to rebut it. If at the appellate stage the High Court was of the opinion that it had not been established that any illicit liquor had been recovered as a result of the search, then it ought not to have convicted the appellants on the presumption arising under section 103 without giving the appellants an opportunity to rebut the same. In this case the offence under section 65(f) would be the using, keeping or having in possession a still or apparatus for the purpose of manufacturing any intoxicant other than toddy. It was not established by the evidence that the still or apparatus recovered from the premises occupied by appellant No. 1 was one which is not ordinarily used for the manufacture of toddy. It was further urged on behalf of appellant No. 2 that he could not be convicted either for being in possession of the still or under section 65(f) read with section 81, that is to say, abetment of an offence under section 65(f) of the Act. This appellant was merely a servant of appellant No. 1. If any one was in possession of the still it was appellant No. 1. There was also no evidence to show that appellant No. 2 had abetted 520 appellant No. 1 in coming into possession of the still. Appellant No. 2 was merely using the pump, presumably under the orders of his master, and as he could not be said to be in possession of the still, no presumption against this appellant could arise under section 103 of the Act. We would deal with the case of appellant No. 2 first. There is no evidence that he in any way aided his master to come into possession of the still. It would be reasonable to suppose that when he was using the pump he was doing so on the orders of his master and he may not have been aware of what was being manufactured, whatever suspicion may arise from his conduct. It cannot also be said that he was in possession of the still. The still was in the possession of his master. He was merely an employee in the premises and cannot be said to be in physical possession of things belonging to his master unless they were left in his custody. It seems to us that whatever suspicion there may be against the appellant No. 2 it cannot be said that it has been established beyond reasonable doubt that he was in such possession of the still as would amount to an offence under section 65(f) of the Act. In the circumstances, no presumption could arise under section 103 against him that he was in posses sion of the still for which he could not account satis factorily. We would accordingly allow the appeal of appellant No. 2 and set aside his conviction and sentence. So far as the appellant No. 1 is concerned, there can be no question that he was found in possession of a still which, having regard to the nature of the still as disclosed by the evidence, is ordinarily used for the manufacture of an intoxicant such as liquor. Having regard to the description of the still, as found on the record, we are satisfied that the still in question is not ordinarily used for the manufacture of toddy. Indeed, it is doubtful that any still is required for the manufacture of toddy because toddy is either fermented or not. If the toddy is unfermented the need for a still is unnecessary. On the other hand, if the toddy is fermented, the process of fermentation is a natural 521 one and does not require the aid of any apparatus to ferment it. It was said, however, that by heating the toddy, a higher degree of fermentation takes place and it becomes more potent. We have, however, no evidence on the record as to this. Even if we assume that toddy, when heated, becomes highly fermented and therefore more potent, there is nothing to show that the heating process to achieve this required an elaborate still of the kind found in the premises of appellant No. 1. It was, however, pointed out that no questions were put to the appellant in order to give him an opportunity to rebut the presumption arising out of section 103 of the Act. It is, however, to be remembered that when the appellant was examined under section 342 of the Code of Criminal Procedure he had volunteered the statement that he did not know about the various contraband seized by the police. Since this was his attitude in the matter, it is difficult 'to understand what further questions could have been put to him to explain the possession of the still and the various other articles found in the premises occupied by him. It is not possible to say in this particular case that this appellant had been prejudiced by the failure of the Magistrate to put to him any specific questions about the still and the other articles found in the premises occupied by him. The presumption which arises under section 103 of the Act is that an offence under the Act is committed where a person is found in mere possession, without further evidence, of any still, utensil, implement or apparatus whatsoever for the manufacture of any intoxicant as are ordinarily used in the manufacture of such intoxicant until the contrary is proved. it is difficult to conceive that the appellant could have given any satisfactory evidence to establish that the still and other articles found in the premises occupied by him could ordinarily be used for the manufacture of toddy. We are accordingly satisfied that there was no prejudice caused to the appellant, in the circumstances of the present case, when the High Court relied upon the presumption arising under section 103 522 to uphold his conviction under section 65(f) of the Act. It was finally urged that the sentence should be reduced. In our opinion, the sentence imposed cannot be said to be unduly severe having regard to the provisions of the Act. Accordingly, the appeal of appellant No. 2 is allowed and his conviction and sentence are set aside but the appeal of appellant No. 1 is dismissed. Appeal disposed of accordingly.

During the search of the premises of the appellant No. 1 a complete working still was found which was being worked by the appellant No. 1 and his servant, appellant No. 2. The presidency Magistrate was satisfied that a working still and 516 illicit liquor were found. The appellant No. 1 was examined under section 342 of the Code of Criminal Procedure, he volunteered the statement that he did not know anything of the contraband seized by the police ; so no specific question about the still and other articles recovered from his premises were put by the Presidency Magistrate who convicted the appellants under sections 65(b), 65(f) & 66(b) of the Bombay Prohibition Act, relying on the facts of the recovery of still and illicit liquor and did not use the provision of section 103 for presumption against the appellants. The appellants on appeal by special leave contended, (1) that no presumption under section 103 of the Act could arise ; and that he had been denied the opportunity to rebut the presumption under section 103 of the Act, as no questions were put to them when they were examined under section 342 of the Code of Criminal Procedure (3) that as the Magistrate had not used the provision of section 103 for presumption against the appellants, the High Court ought not to have convicted the appellants on the presumption arising under section 103 of the Act without giving them an opportunity to rebut the same. On behalf of appellant No. 2 it was further urged that he was merely a servant of appellant No. 1; if any one was in possession of the still it was appellant No. 1 and no presumption against him could arise under section 103 of the Act. Held, that when an accused is examined under section 342 of the Code of Criminal Procedure and volunteers statement denying all knowledge of articles recovered from his possession, no prejudice is caused to him if no further questions are put to explain the possession of articles found in the premises occupied by him. The presumption which arises under section 103 of the Bombay Prohibition Act is that an offence under the Act is committed when a person is found in mere possession, without further evidence, of any still, utensil, implement or apparatus whatsoever for the manufacture of such intoxicant until contrary is proved. Thus no prejudice was caused to the appellant No. 1 when the High Court relied upon the presumption arising under section 103 of the Act to uphold his conviction under section 65(f) of the Act. Held, further, that it cannot be said of merely an employee in the premises that he was in physical possession of the things belonging to his master unless they were left in his custody, Where an offence under section 65(f) of the Bombay Prohibition Act has not been established beyond reasonable doubt and the possession of still does not amount to an offence under the section no presumption could arise under section 103 of the Act against a person that he was in possession of the still for which he could not account satisfactorily. In the instant case the still being in the possession of the master and there being no evidence that the employee in any 517 way aided his master to come into possession of the still, it could not be said that the appellant No. 2 was in such possession of the still as would amount to an offence under section 65(f) of the Act.

The appellant was running a Octroi Clearing Agency at 'Mulund Check Post ' in the State of Maharashtra. He used to attend to certain transactions of Montgomery Transport Co. also. On December 16, 1968, a truck of the said transport company arrived at the Check Post with a machine to be delivered to M/s. Imperial Tobacco Co. The appellant informed the Manager of the Transport Company to arrange for the payment of Octroi which amounted to more than Rs. 8,000/ . Accordingly, a sum of Rs. 8,196/ was handed over to the appellant in the presence of the Driver of the truck. It was found out after investigation that the receipt for the payment of Octroi held by the Imperial Tobacco Co. was not genuine and on a complaint lodged by the Company, the appellant was arrested and committed for trial to the Court of Sessions, under section 467, 471 read with section 467 and section 420 of I.P.C. The Trial Court convicted the appellant for an offence under section 471 read with section 467 1. P. C. and for an offence under section 420 1. The appeal to the High Court was dismissed in limine with the word "dismissed". The point raised before this Court was whether the High Court was justified in dismissing the appeal in limine with one word "dismissed", without making a speaking order indicating the reasons for dismissal. Remanding the case to the High Court for rehearing. HELD : (i) The importance of the opinion of the High Court on arguable points requiring consideration in appeal in that Court when questions of fact or law are open to challenge by the appellant was emphasised more than 20 years ago by this Court in Mustaq Hussain vs The State of Bombay, ; Since then, in a series of decisions, this Court has consistently drawn the attention of the High Courts to the desirability of giving an indication of their views on the points raised in arguable cases in accordance with the legal position enunciated by this Court. [552 AB.] (ii) In K. K. Jain vs State of Maharashtra, A.I.R. 1973 S.C. 243 it was reiterated that reasons before the High Court for dismissing the appeal, if recorded, would be a valuable assistance to this Court in finally dismissing of the appeal on merits. Another advantage of recording such reasons is, that the accused appellant, who may not always be present in the court, would have the satisfaction of knowing from the judgment that the points appropriately arising for consideration in his case, were actually argued and duly considered by this High Court while dismissing his appeal. In the prevent case, since the High Court did not record its reasons for dismissing the appeal, this court has no option but to remand the case to the High Court for rehearing and deciding the appeal after considering the points raised and recording its reasons in accordance with law. [552 FG & 553A] 549 Mustaq Hussain vs State of Bombay, ; , and K. K. Jain vs State of Maharashtra, A.I.R. 1973 S.C. 243, referred to.

% The question which arose for determination in this case was whether a Letters Patent Appeal would lie to a Division Bench of the High Court of Gujarat from an interlocutory order of a Single Judge of that High Court in the course of the trial of an election petition filed under the Representation of the People Act, 1951. The appellant and respondents Nos. 1 to 6 were candidates at an election held to fill a seat in the Legislative Assembly of the Gujarat State. The appellant was declared elected. Thereupon, the 1st respondent filed an election petition in the High Court, challenging the validity of the election of the appellant on a number of allegations, and in order to establish his case, he filed an application before the Single Judge who was trying the election petition, to direct the Returning Officer to produce all the records of the election, mentioned in the application, and prayed for permission to inspect the same. The appellant opposed the prayers made by the 1st respondent. The Single Judge declined to grant the application made by the Ist respondent. Against the order of the Single Judge, the Ist respondent preferred an appeal under clause 15 of the Letters Patent of the Gujarat High Court. The Division Bench of the High Court allowed the appeal to the extent indicated in its judgment, overruling the contention of the appellant that the appeal was not maintainable as there was no provision in the Act, permitting an appeal to the Division Bench of the High Court against an interlocutory order of a Single Judge hearing an election petition filed under the Act. Aggrieved by the decision of the Division Bench, the appellant moved this Court for relief by special leave. Allowing the appeal, setting aside the judgment of the Division 1044 Bench of the High Court and dismissing the Letters Patent Appeal while expressing no opinion on the merits of the case, the Court, ^ HELD: The only point urged in this appeal by the appellant was that the appeal filed under clause 15 of the Letters Patent of the High Court against the interlocutory order passed by the Single Judge was not maintainable and, therefore, the judgment of the Division Bench was liable to be set aside. [1048C D] Under the provisions of the Act as amended and the provisions of the Constitution of India, no Court exercising power under any ordinary law other than the Judge of a High Court who had been assigned the work of trying an election petition under sub section (2) of section 80 A of the Act and the Supreme Court which was empowered to hear an appeal against any order passed by the judge of the High Court under section 98 or section 99 of the Act, could decide any question arising out of an election petition. The power of the Supreme Court under the provisions of the Constitution was, however, unaffected by any of the provisions of the Act. It meant that when an election petition was pending in the High Court, only the judge who was asked to try the election petition could deal with the questions arising in it and no other judge or judges of the High Court could deal with them. When an order was passed under section 98 or section 99 of the Act by a judge of the High Court in an election petition, it was subject to the appellate jurisdiction of the Supreme Court under section 116 A of the Act, Article 136 of the Constitution being excluded in view of the express provisions of section 116 A of the Act, and being resorted to by any party aggrieved by any order passed by the judge trying an election petition not falling under section 98 or section 99 of the Act. It followed that the Division Bench of the High Court, which was entitled to hear an appeal against any order of a Single Judge under clause 15 of the Letters Patent of the High Court, which was an ordinary law, could not hear an appeal against any interlocutory order passed in the course of the trial of an election petition by the Judge trying the election petition, since the Division Bench was not specified in the Act as an appellate authority which could deal with questions arising out of an election petition filed under the Act. [1053G H; 1054A D] Under clause 15 of the Letters Patent, an appeal no doubt lay from an order of a Single Judge of the High Court exercising Original Jurisdiction to the High Court itself irrespective of the fact that the judgment was preliminary or final or that it was one passed at an interlocutory stage, provided it satisfied certain conditions, but the said 1045 provision could not be extended to an election petition filed under the Act. Conferment of the power to try an election petition under the Act did not amount to enlargement of the existing jurisdiction of the High Court. The jurisdiction exercisable by the Single Judge under the Act was a special jurisdiction conferred on the High Court by virtue of Article 329(b) of the Constitution. In view of the limited nature of the appeal expressly provided in section 116 A of the Act, it should be held that any other right of appeal (excluding that under the Constitution) was taken away by necessary implication. Therefore, it was difficult to subscribe to the view that when once the jurisdiction to try an election petition was conferred on the High Court, all other powers incidental to the ordinary original jurisdiction exercised by a single Judge of a High Court would become applicable to an election petition under the Act. If the Parliament had intended that the Division Bench of the High Court should exercise its appellate jurisdiction under clause 15 of the Letters Patent of the High Court, probably, it would not have enacted sub section (7) of section 86 of the Act, having regard to the well known tendency of one or the other party to an election petition preferring appeals against the interlocutory orders to the Division Bench. If such appeals against the interlocutory orders to the High Court, were permitted, perhaps, no election dispute would be finally settled till the next election became due. As regards the jurisdiction to try an election petition and the right of appeal of the parties to an election petition, the provisions of the Act (apart from the provisions in the Constitution) constituted a complete code and no Judge or Judges other than the Single Judge of the High Court, who was asked to try an election petition, and the Supreme Court, exercising the appellate powers under section 116 A of the Act in respect of orders passed under section 98 or section 99 of the Act or under Article 136 of the Constitution in respect of other orders, could have any jurisdiction to deal with any matter arising out of an election petition filed under the Act. The Court disagreed with the view expressed on this question by the Gujarat High Court in Dr. Chotalal Jivabhai Patel vs Vadilal Lallubhai Mehta & Ors., (12 Gujarat Law Reporter 850), and overruled that decision of the High Court. The Court also overruled the decision of the Madras High Court in Kadiravan alias Shamsudeen vs B. Thirumalaikumar, ILR (1970) 2 Mad. 183 and the decision of the Madhya Pradesh High Court in Laxmi Narayan Nayak vs Ramratan Chaturvedi & Ors, AIR 1986 Madhya Pradesh 165 which had taken the same view as in Dr. Chotalal Jivabhai Patel 's Case (supra). The Court agreed with the view expressed by the Allahabad High Court in Siaram vs Nathuram & Ors., [1968] ALL. L.J. 576 and by the Rajasthan High Court in Ramdhar vs Shanwar Lal, AIR which held that by necessary 1046 implication an appeal to the High Court from an interlocutory order of the Single Judge of the High Court in the course of trial of an election petition filed under the Act, was excluded. [1054G H; 1055A H; 1056A H] The Division Bench of the High Court of Gujarat had no jurisdiction to hear the appeal filed by the Ist respondent against the interlocutory order passed by the Single Judge who was trying the election petition. Judgment of the Division Bench of the High Court set aside, Letters Patent Appeal dismissed. [1057B] Dr. Chotalal Jivabhai Patel vs Vadilal Lallubhai Mehta Shamsudeen vs B. Thirumalai Kumar, ILR ; and Laxmi Narayan Nayak vs Ramratan Chaturvedi and Ors., A.I.R. 1986 Madhya Pradesh 165, overruled. Siaram vs Nathuram and Ors., [1968] All. L.J. 576 and Ramdhan vs Bhanwarlal, A.I.R. approved. N.P. Ponnuswami vs Returning Officer, Namekkal Constitutency and others; , ; Shah Babulal Khimji vs Jayaban D. Kania & Anr., ; and National Telephone Company Ltd. vs Post Master General, [1913] A.C.546, referred to.

The appellant Co operative Housing Society Ltd. made some unauthorised constructions in a 36 storeyed building. The Bombay Municipal Corporation issued a show cause notice calling upon the society to show cause as to why the upper eight floors of the building should not be demolished so as to limit the development to the permissible Floor Space Index (F.S.I.) since the additional Floor Space Index to the extent of 2773 sq. was gained by the appellant. The appellants submitted a reply to the show cause notice. The Administrator of the Municipal Corporation made an order on 21st Septmber, 1984 requiring the appellant to demolish 24,000 sq. on the eight upper floors of the building on the basis of 3000 sq. on each floor. The Administrator as well as the State Government dismissed the representation and appeal by the appellant. So the appellant filed a writ petition in the High Court which also dismissed with the observation that the appellant be given a choice to reduce the construction upto permissible limit by any alternative proposal within the four corners of the rules and regulations within one month from 28th October 1985 the Municipality may consider. The appellant made application to the Municipal Corporation giving several alternative proposals on 21st November 1985. But it also preferred a special leave petition before this court against the High Court Judgment. The special leave petition leave petition was dismissed on January 17, 1986. The appellants alleged that they submitted another proposal to the Municipal Corporation on 17th February, 1986 and a meeting for hearing alternative proposals was fixed up by the Municipal commissioner and put forward its case in support of the new proposals and the Municipal Commissioner said he would consider the proposals and take decision. On 27th December 1988 the appellant wrote a letter to the Municipal Commissioner to consider the alternative proposal i.e. of 746 vertical demolition of the building instead of demolishing the eight upper floors. In January, 1989 the officers of the corporation agreed that demolition can be made vertically so as to bring the entire construction within the permissible Floor Space Index where as the work of demolition of upper eight floors of the building were entrusted to a company by the Municipal Commissioner. So the appellant again filed a writ in the High Court. It was dismissed by the Single Judge as well as by the Division Bench dated 5th March, 1990. The appellants came by Special Leave Petition in this Court; The main grievance of the appellant being that vertical demolition proposal was not considered. Inspite of orders of this Court in this regard to the Municipal Corporation no agreeable solution could fructify. The proposal was examined by the Municipal Commissioner but rejected on 13th November, 1990 and submitted the detailed report to this Court. Dismissing the petition the Court HELD: The appellant had made illegal constructions in violation of Floor Space Index to the extent of more than 24000 sq. The decision taken by the Municipal Commissioner does not suffer from any want of jurisdiction nor is violative of any law or rules. It is well settled that the High Court under Article 226 of the Constitution is not an appellate Court on the administrative decision taken by the authorities. Since the tendency of raising unlawful constructions and unauthorised encroachments is increasing in the entire country and such activities are required to be dealt with by firm hands. Such unlawful constructions are against public interest and hazardous to the safety of occupiers and residents of the multistoreyed buildings. [749F, 750B, E F] This case should be a pointer to all the builders that making of unauthorised construction never pays and is against the interest of the society at large. The rules, regulations and by laws are made by the corporations or development authorities taking in view the larger public interest of the society and it is the bounden duty of the citizens of obey and follow such rules which are made for their own benefits. [750H 715B]

The appellant instituted a suit for the recovery of money against the respondents in a Court in Gwalior State in May 1947. The respondents who were residents in U. P. did not appear before the court and in November 1948 the Gwalior Court passed an ex partc decree. On September 14, 1951, the Gwalior Court transferred the decree for execution to Allahabad, and on October 16, 1951, the appellant filed an application for execution of the decree before the Allahabad Court. The respondents contended that the decree being a decree of a Foreign Court to whose jurisdiction they had not submitted was a nullity and the execution application in respect thereof was not maintainable. Held, that the decree was not executable at Allahabad. Per Kapur, Ayyangar and Mudholkar, JJ.The decree of the Court in Gwalior State sought to be executed was a foreign decree which not change its nationality inspite of subsequent constitutional changes or amendments in the Code of Civil Procedure. On the day on which it passed the decree the Gwalior Court was a foreign Court within the meaning of section 2 (5) of the Code. None of the conditions necessary to give its judgment extra territorial validity existed (i) the respondents were not the subjects of Gwalior; (ii) they were not residents in Gwalior at the time the suit was filed, (iii) they were not temporarily present in gwalior when the process was served upon them, (iv) they did not select the forum which passed the decree against them, (v) they did not voluntarily appear before the court, and (vi) they had not contracted to submit to the jurisdiction of the 579 by the Indian Code, was a different court from that which passed the decree under the Local Code, and was not the court. which passed the decree within the meaning of section 39. Sections 37 to 42 of the Code deal with execution of decree., passed by the courts governed by the Indian Code. The decree could not be executed under the provisions of section 43 of the Code at any time. After its adaptation in June 1950, section 43 applied to "a decree passed by a Civil Court in a Part B State". There were no Part B States at the time when the decree was passed and these words could not be read as "a decree passed by a civil court in what became a Part B State". Nor could the decree be executed under section 44 as that section was also inapplicable to this decree. Article 261 (3) which provides that the final judgments or orders of Civil Courts in any part of the territory of India shall be capable of execution anywhere within that territory is inapplicable to the decree of the Gwalior court as the, provision is prospective and not retrospective. Per Sarkar and Das Gupta, JJ. Even in the decree passed by Gwalior Court was not a foreign decree the Allahabad Court had no power to execute it either under section 38 or under sections 43 or 44 of the Code of Civil Procedure. Section 38 provides that a decree may be executed either by the court which passed it or by the court to which it is sent for execution. The Allahabad Court was not the court which passed the decree. Section 39 empowers the court which passed the decree to transfer it for execution to another court. The word "court" in the phrase "court which passed the decree" in section 39 contemplates only courts governed by the Indian Code of Civil Procedure. The Gwalior ,.Court which was governed by the Gwalior Code when it passed the decree had a distinct identity from the court at Gwalior after it came to be governed by the Indian Code. The Court which transferred the decree was accordingly not the court which passed the decree and the order of transfer was not a valid order. Section 43 of the Code provided for the execution of decrees passed by the Civil Courts in places where the Indian Code did not extend. The decree of the Gwalior Court did not fall within this section as it stood before the Constitution. A, After the adaptation in 1950 the section applied to a decree passed "by a Civil Court in a Part B State". These words could not be read as "by a civil court in an Indian State which has later been included in a Part B State". The Gwalior Court which passed the decree was not a Civil Court in a Part B State. 'Section 44 was equally inapplicable to the decree,. The section after adaptation in 1950 580 applied only to decrees of revenue courts. Before the adap tation it could apply only if there was a notification issued by the U. P. Government but no such notification was issued.

Civil Appeal Nos. 931 of 1977 and 200 of 1978 relate to the same dispute though arose from, two suits and separate judgements. Civil Appeal No. 931 of 1977 arose out of the suit for possession by the Gram Panchayat against the descendants of the grantee of inam. The suit was dismissed by the Trial Court and was confirmed by the High Court and the High Court granted leave under Art.133. Civil Appeal No. 200 of 1978 arose out of the suit for possession and mesne profits which was laid by the descendants of the grantee of inam. The pleadings are the same in both cases. A Zamindar granted 100 acres of land inam to dig, preserve 532 and maintain a tank in favour of the predecessors of the respondents of C.A. No. 931/77. In 1700 A.D.i.e. , 1190 Fasli, the tank was dug by the villagers and ever since, the villagers were using the tank for their drinking purpose and perfected their right by prescription. In course of time the tank was silted up and fresh water existed only in and around 30 acres. The grantee 's descendants respondents did not make any repairs, Grass and trees had been grown in the rest of the area and was being enjoyed. Under section 3 of the A.P.Inams ( Abolition and Conversion into Ryotwari) Act, ( Act XXXVII of 1956) Ryotwari Patta was granted to the respondents in individuals capacity and on appeal the Revenue Divisional Officer confirmed the same and it became final, as it was not challenged any further. On 7.7.1965, the Gram panchayat the appellant in C.A. No. 931/77 took unilateral possession of the tank and ever since , it was exercising possession, supervision and control over it. After the expiry of three year from the date of dispossession, the respoondents filed a suit for possession based on title. Earlier thereto the appellant Gram Panchayat had filed a suit for possession. The Trial Court found that the tank was a 'public trust ', the appellants would be hereditary trustees and could be removed only by taking action under section 77 of the A.P. Hindu Charitable and Religious Institutions and Endowments Act, 1966 and that the respondents had acquired title by adverse possession. Accordingly the suit for possession was decreed relegating the filing of separate application for mesne profit. On appeal, the High Court reversed the decree and held that the tank was a public tank, and the tank and the lands stood vested in the Gram Panchyat under A.P. Gram Panchayat Act,1964. Since, the Gram Panchayat was in possession from July 7, 1966, though dispossessed the respondents forcibly and as the suit was not under section 6 of the , but one based on title, it called for interference and dismissed the suit. This court granted leave to appeal under article 136. 533 The respondents in C.A. No. 931/77 (the appellants in C.A. No. 200/78) contended that in view of the entries of the Inam Fair Register, the tank was a public trust and not a public tank; they could not be dispossessed until recourse made under section 77 of the A.P. Charitable and Religious Institutions and Endowments Act; that under the Gram Panchayat Act, the lands did not vest in the gram Panchayat; and that since the grant of ryotwari patta under the Inams Act had become final, section 14, thereof barred the jurisdiction of the Civil Court to entertain the suit. The appellant Gram Panchayat in C.A. No. 931/77 (the respondents in C.A. No. 200/78) contended that the tank and the appurtenant land was correctly held as public tank by the High Court that by operation of sections 85 and 64 of the Gram Panchayat Act, the land and the tank stood vested in the Panchayat, that the entries in the Inam Fair Register established that the grant of land was for preservation, maintenance and repairs of the tank and therefore, the grant should be in favour of the institution, i. e., the tank and the respondents thereby did not acquire any title, that ryotwari patta was only for the purpose of land revenue; that the Gram Panchayat acquired absolute right, title and interest in the land; and the suit was not a bar in the facts of the case. Dismissing both appeals, this Court HELD: 1.01. Any property or income, which belongs to or has been administered for the benefit of the villagers in common or the holders in any of the village land generally or of land of a particular description or of lands under particular source of irrigation shall vest in Gram Panchayat and be administered by it for the benefit of the villagers or holders. The lands or income used for communal purpose shall either belong to the Gram Panchayat or has been administered by the Gram Panchayat. It is not the case of the Gram Panchayat nor any finding recorded by the courts below to that effect. section 64 is not attracted though the villagers acquired prescriptive right to use the water from the tank for their use and of their cattle. [554D F] 1.02. All public water courses, springs, reservoirs, tanks, cisterns, etc. and other water works either existing on the date of the Act or made thereafter by the Gram Panchayat, or otherwise including those used by the public ripened into prescriptive right for the use and benefit of the public and also adjacent or any appurtenant land not being private property shall vest in the Gram Panchayat under section 85(1) and be subject to its control. [554F G] 534 2.01. The word`vesting ' in section 85 would signify that the water courses and tanks, lands etc. used by the public to such an extent as to give a prescripvtive right to their use, are vested in the Gram Panchayat, and placed them under the control and supervision of the Gram Panchayat. It confers no absolute or full title. It was open to the Government, even after vesting, to place restriction upon the Gram Panchayat in the matter of enjoyment and use of such tanks, and appurtenant lands etc. The assumption of management by the Government would be subject to the prescriptive right of the villagers, if any. The vesting of the tanks etc. in the Gram Panchayat was with absolute rights and the village community rights would over ride against rights of the Government. [546C F] 2.02. The tank is a public tank and not a public trust and that under section 85(1) and section 64, the vesting of the tanks, the appurtenant land and the common land is only for the purpose of possession, supervision, control and use thereof for the villagers for common use subject to the over riding title by the Government and its assumption of management should be in terms of sub section (3) of section 85 of the Act and subject to the prescriptive right in the water, water spread tank for common use. [547A B] Gram Panchayat, Mandapaka & Ors. V. Distt. Collecctor, Eluru & Ors. , approved. Anna Narasimha Rao & Ors. vs Kurra Venkata Narasayya & Ors., , OVER RULED. 3.01. Under A.P. Land Encroachment Act, 1905; Talengana Area Land Revenue Act, relevant Abolition Acts like A.P. Estates (Abolition and Conversion into Ryotwari) Act, 1948, Inams Abolition Act etc. give absolute rights or vesting in the State over the forest land, tanks, rivers, mines, poramboke, land, etc. free from all encumbrances and the preexisting rights in the other land stood abolished and will be subject to the grant of Ryotwari Patta etc. [546F H] 3.02 Grant of Ryotwari patta is not a title but a right coupled with possession to remain in occupation and enjoyment, subject to payment of the land revenue to the State. [546H] 3.03. The entries in the Inam Fair Register are great acts of the State and coupled with the entries in the survey and settlement record 535 furnishes unimpeachable evidence. On construction of these documents, it would clearly emerge that the original grant was made for the preservation and maintenance of the tank and tax free Inam land was granted for that purpose, though it was in the name of the individual grantee. The grant was for the preservation and maintenance of the tank. [548C D] 3.04. The grant was for the institution. Under section 3 of the Inams Act, the enquiry should be, whether (1) a particular land is Inam land; (2) Inam land in a Ryotwari, Zamindar or Inam Village; and (3) is held by any institution. In view of the finding that the grant was for the preservation and maintenance of tank, the Inam land in an inam village was held by the institution, namely, the tank. Ryotwari patta shall, therefore, be in favour of the institution. Undoubtedly the ryotwari patta was granted in favour of the descendants. [548D F] 3.05. The pattas were obtained in the individuals name, the trustees of an institution cannot derive personal advantage from the administration of the trust property. The grant of patta was for the maintenance of the trust. [548G] 3.06. The descendants, though enjoyed the income from the properties, did not effect the repairs and neglected the maintenance and upkeep of the tank. They rendered the tank disused and abandoned. By operation of section 85 of the Act the lands and tank stood vested in the Gram Panchayat for control, management and supervision. [550E F] 3.07. A hereditary trustee is entitled to be the Chairman of a Board of Trustees, if any, constituted under the Endowment Act or else be in exclusive possession and management of the public trust registered thereunder until he is removed as per the procedure provided therein. Since the tank always remained a public tank and not being a public trust, the Endowment Act does not apply. Therefore, the question of initiating action under section 77 of the Endowment Act for removal of the descendants as trustees does not arise. [550F G] Arunachalam Chetty vs Venkatachalpathi Garu Swamigal, AIR 1919 P.C. 62 at P. 65; Syed Md. Mazaffaral Musavi vs Bibi Jabeda & Ors., AIR 1930 Pc 1031; Bhojraj vs Sita Ram & Ors, AIR 1936 P.C. 60; M. Srinivasacharyulu & Ors. V. Dinawahi Pratyanga Rao & Ors., ; Ravipati Kotayya & Anr. vs Ramaswamy Subbaraydu & Ors., , referred to. 536 K.V. Krishna Rao vs Sub Colletor, Ongole, ; , followed. Nori Venkatarama Dikshitulu & Ors. vs Ravi Venkatappayya & Ors., , approved. Krishan Nair Boppudu Punniah & Ors. vs Sri Lakshmi Narasimhaswamy Varu, ; Bhupathiraju Venkatapathiraju & Ors. V. The President Taluq Board, Narsapur & Ors.; [1913] 19 1.C. 727 (Mad.) (D.B.), distinguished. Tagore Law Lecture, ``Hindu Religious Endowments and Institutions at p. 6, distinguished. In the laws made to restructure the social order creating rights in favour of the citizens and conferring power and jurisdiction on the hierarchy of Tribunals or the authorities constituted thereunder and giving finality to their orders or decisions and divested the jurisdiction of the established civil courts expressly or by necessary implication Departure in the allocation of the judicial functions would not be viewed with disfavor for creating the new forums and entrusting the duties under the statutes to implement socio economic and fiscal laws. Courts have to consider, when questioned, why the legislature made the departure. The reason is obvious. The tradition bound civil courts gripped with rules of pleading and strict rules of evidence and tardy trial, four tier appeals, endless revisions and reviews under C.P.C. are not suited to the needed expeditious dispensation. The adjudicatory system provided in the new forums is cheap and rapid,. The procedure before the Tribunal is simple and not hide bound by the intricate procedure of pleadings, trial, admissibility of the evidence and proof of facts according to law. Therefore, there is abundant flexibility in the discharge of the functions with greater expedition and inexpensiveness. {552D H] 4.02. In order to find out the purpose in creating the Tribunals under the statues and the meaning of particular provisions in social legislation, the Court would adopt the purposive approach to ascertain the socials ends envisaged in the Act, to consider scheme of the Act as an integrated whole and practical means by which it was sought to be effectuated to achieve them. Meticulous lexographic analysis of words and phrases and sentences should be subordinate to this purposive approach. The dynamics of the interpretative functioning of the Court is to reflect the contemporary needs and the prevailing values consistent with the constitutional and legislative declaration of the policy envisa 537 ged in the statute under consideration. [552H 553B] 4.03. The law should, therefore, respond to the clarion call of social imperatives evolve in that process functional approach as means to subserve ``social promises ' ' set out in the Preamble, Directive Principles and the Fundamental Rights of the Constitution. [553d] 4.04. Section 9 of the Civil Procedure Code, 1908 provides that whenever a question arises before the Civil Court whether its jurisdiction is excluded expressly or by necessary implication, the court naturally feels inclined to consider whether remedy afforded by an alternative provision prescribed by special statute is sufficient or adequate. In cases where exclusion of the civil court 's jurisdiction is expressly provided for, the consideration as to the scheme of the statue in question and the adequacy of sufficiency of the remedy provided for by it may be relevant, but cannot be decisive. Where exclusion is pleaded as a matter of necessary implication such consideration would be very important and inconceivable circumstances might become even decisive. [553G 554B] 4.05. The jurisdiction of a Tribunal created under statute may depend upon the fulfilment of some condition precedent or upon existence of some particular fact. Such a fact is collateral to the actual matter which the Tribunal has to try and the determination whether it existed or not is logically temporary prior to the determination of the actual question which the Tribunal has to consider. At the inception of an enquiry by a Tribunal of limited jurisdiction, when a challenge is made to its jurisdiction, the Tribunal has to consider as the collateral fact whether it would act or not and for that purpose to arrive at some decision as to whether it has jurisdiction or not. There may be Tribunal which by virtue of the law constituting it has the power to determine finally, even the preliminary facts on which the further exercise of its jurisdiction depends; but subject to that, the Tribunal cannot by a wrong decision with regard to collateral fact, give itself a jurisdiction which it would not otherwise have except such tribunals of limited jurisdiction when the statue not only empowers to enquire into jurisdictional facts but also the rights and controversy finally it is entitled to enter on the enquiry and reach a decision rightly or wrongly. If it has jurisdiction to do right, it has jurisdiction to do wrong. It may be irregular or illegal which could be corrected in appeal or revision subject to that the order would become final. [554B F] 4.06. The Inams Act did not intend to leave the decisions of the revenue courts under section 3 read with section 7 to retry the issue once over in the civil court. [561D E] 538 4.07. The glimpse of the object of the Inams Act, scheme, scope and operation thereof clearly manifest that Inams Act is a self contained code, expressly provided rights and liabilities; prescribed procedure; remedies; of appeal and revision, excluded the jurisdiction of the civil court, notwithstanding anything contained in any law, given primacy of Inams Act though inconsistent with any law or instrument having force of law. The jurisdictional findings are an integral scheme to grant or refuse ryotwari pattta under section 3, read with section 7 and not collateral findings. It was subject to appeal and revision and certiorari under Art 226. The decision of the Revenue Tribunal, are final and conclusive between the parties or persons claiming right, title or interest through them. The trick of pleadings and the camouflage of the reliefs are not decisive but the substance or the effect on the order of the tribunal under the Inams Act are decisive. The civil suit except on grounds of fraud, misrepresentation or collusion of the parties is not maintainable. The necessary conclusion would be that the civil suit is not maintainable when the decree directly nullifies the ryotwari patta granted under section 3 of the Inams Act. [561E 562A] Deena vs Union of India, [1984] ISCR, referred to. Kamala Mills Ltd. vs State of Bombay, ; ; Secretary of State vs Mask & Co., [1940] L.R. 67 I.A. 222; Raleigh Investment Co. Ltd. V. Governor General in Council, L.R. 74 I.A. 50; Firm and Illuri Subbayya Chetty & Sons vs State of Andhra Pradesh; , ; Deesika Charyulu vs State of A.p., AIR 1964 SC 807; Dhulabhai & Ors vs State of M.P. & Anr., ; ; Hati vs Sunder Singh, ; ; Muddada Chayana vs Karam Narayana and Anr. ; , ; T. Munuswami Naidu vs R. Venkata Reddy, AIR 1978 A.P. 200; O. Chenchulakshmamma & Anr. vs D. Subramanya Reddy; , ; A. Bodayya & Anr. V. L. Ramaswamy(dead) by Lrs., ; Doe vs Bridges, at p. 359; Premier Automobiles Ltd. vs Kamlakar Shantaram Wadke and Ors., ; ; State of Tamil Nadu vs Ramalinga Samigal Madam, ; ; Syamala Rao vs Sri Radhakanthaswami Varu, ; Jyotish Tahakur & Ors. vs Tarakant Jha & Ors., [1963] Suppl. 1 SCR 13; Sri Athmanathaswami Devasthanam vs K. Gopalaswami Aiyangar, {1964] 3 SCR 763; Sri VEdagiri Lakshmi Narasimha Swami Temple vs Induru Pattabhirami Reddy, ; ; Shree Raja Kandragula Srinivasa Jagannadha Rao Panthulu Bahadur Garu vs State of Andhra Pradesh, ; ; Dr. Rajendra Prakash Sharma vs Gyan Chandra & Ors., ; ; Anne Basant National Girls High School vs Dy. 539 Director of Public Instruction & Ors., ; Raja Ram Kumar Bhargava (dead) by Lrs. vs Union of India, [1988] 2 SCR 352; Pabbojan Tea Co., Ltd., etc. vs the Dy. Commissioner, Lakhimpur, etc. ; , and K. Chintamani Dora & Ors. vs G. Annamnaidu & Ors., ; , distinguished. D.V. Raju vs B.G. Rao & Anr., , approved. P.pedagovindayy vs Subba Rao, , over ruled. The word `vest ' clothes varied colours from the context and situation in which the word came to be used in a statue of rule. [545B C] 5.02. The word [vest '], means, to give an immediate, fixed right of present or future enjoyment, to accrue to, to be fixed, to take effect, to clothe with possession, to deliver full possession of land or of an estate, to give seisin to enfeoff. [545C D] 5.03. The word, `vest ', in the absence of a context, is usually taken to mean, `vest ' in interest rather than vest in possesion '.[545E F] 5.04. `Vest '. ``generally means to give the property in ' '. [545E F] 5.05. The word, `vested ' was defined, `as to the interest acquired by public bodies, created for a particular purpose, in works, such as embankments, whcih are `vested ' in them by statute. ' {545D E] 5.06. ``Vesting ' ' in the legal sense means, to settle, secure, or put in fixed right of possession; to endow, to descend, devolve or to take effect, as a right '. [545C] Chamber 's Mid Century Dictionary at P. 1230; Blacks Law Dictionary, 5th Edition at P. 1401; Stroud 's Judicial Dictionary, 4th Edition Vol, 5 at P. 2938, Item 12, at P 2940, Item 4 at P. 2939; Port of London Authority vs Canvey Island Commissioners, {1932] 1 Ch. 446; Fruit and Vegetable Merchants Union vs Delhi Improvement Trust, ; , referred to. Under the Gram Panchayat Act the statutory interposition of vesting the tank and the appurtenant land in the Gram Panchayat made it to retain possession, control and supervision over it, though the Gram Panchayat unlawfully took possession. The need to grant decree for possession in favour of the Gram Panchayat is thus redundant. The suit 540 of the descendants normally to be decreed on the finding that ryotwari patta under section 3 of the Inams Act was granted in their favour and that they were unlawfully dispossessed. Since the grant of ryotwari patta, though in the name of individuals, was to maintain the public tank whcih stood vested under section 85 of the Act in the Gram panchayat, the descendants are divested of the right and interest acquired therein. Thus the suit of the descendants also is liable to be dismissed. [562A C]

The appellant, a public limited company, was a lessee of four cinema houses situated within the municipal limits of Poona City where it used to exhibit cinematograph films. The respondent, the Municipal Corporation of Poona, in exercise of its power under section 59(1) (XI) of the Bombay District Municipal Act, 1901, levied with effect from October 1, 1920 a tax of Rs. 2 per day as license fee on the owners and lessees of cinema houses. That Act governed the Municipality till 1926 and thereafter it was governed by the Bombay Municipal Boroughs Act, 1925. The tax was enhanced to Re. 1 per show on June 3, 1941, and to Rs. 5 per show on June 9, 1948. By the suit, out of which the present appeal arose, the appellant sought for a declaration that the levy of the said tax, the rules framed in connection therewith and the enhancement of the tax as aforesaid were illegal and ultra vires. The trial court decreed the suit in part but the High Court in appeal reversed the decision of the trial court 72 and dismissed the suit. It was contended on behalf of the appellant that (1) the tax was not one covered by Entry 50 in List 11 of Seventh Schedule to the Government of India Act, 1935, but was one on trade or calling covered by Entry 46 thereof, and, was as such governed by section 142A of the said Act and that (2) section 59(1)(XI) Of the Bombay District Municipal Act, 1901, was unconstitutional in that the legislature had thereby delegated essential legislative power to the Municipality to determine the nature of the tax to be imposed on the rate payers and completely abdicated its function, leaving such power wholly unguided. Held, that both the contentions must fail. The first point was covered by the decision given in the appellant 's other appeal, Civil Appeal No. 145 Of 1955 which must also govern this case. It was not correct to contend that the power delegated to the Municipality under section 59(1)(XI) Of the Bombay District Municipal Act, 1901, was unguided. That section authorised the imposition of such taxes alone as were necessary for the purposes of the Act. The obligations and functions cast upon the Municipalities by ch. VII of the Act showed that taxes could be levied only for implementing those purposes and none others. Nor could it be said that the Provincial Legislature had abdicated its function in favour of the Municipality. The taxing power of the Municipality was made subject to the approval of the Governor in Council by the section itself. The marginal note to a section could not affect the construction of the section if its language was otherwise clear and unambiguous and the word 'modify ' connoted not merely reduction but also other kinds of alteration including enlargement. The substitution of the word I reduce ' by the word I modify ' in the body of section 6o of the Bombay Municipal Boroughs Act, 1925, notwithstanding the omission to do so in the marginal note, therefore, clearly indicated the intention of the Legislature to widen the scope of that section and, consequently, it could not be said that the enhancement of the tax was not sustainable thereunder. Commissioner of Income Tax, Bombay vs Ahmedbhai Umarbhai & Co., Bombay, ; and Stevens vs The General Steam Navigation Company, Ltd., , referred to.

In 1931 the respondent, a registered firm, was appointed the sole selling agents and distributors for the Hyderabad State of 376 cigarettes manufactured by V (a limited company)/ under the terms of a resolution of the Board of Directors, the agency commission being a discount of 2% on the gross selling price. In 1939 another arrangement was made whereby the respondent 's agency was extended to the rest of India. By a resolution dated June 16, 1950, the agency of 1939 was terminated on payment of Rs. 2,26,263 to the respondent by way of compensation, but the respondent continued to be distributors for the Hyderabad State. For the assessment year 1951 52 the Income tax Officer included the aforesaid sum in the respondent 's total income and taxed it as a revenue receipt under the head of " business ". The respondent claimed that it did not carry on business of acquiring and working agencies, that the agency acquired in 1931 was a capital asset of its business of distributing cigarettes in the Hyderabad State, that the expansion of territory outside the Hyderabad State in 1939 was an accretion to the capital asset already acquired by it, that the resolution Of 1950 was in substance a termination of the agency qua territory outside the Hyderabad State which resulted in the sterilisation of the capital asset qua that territory, that the sum of Rs. 2,19,343 received by it in the year of account was by way of compensation for the termination of the agency outside Hyderabad State and being therefore compensation for the sterilisation Pro tanto of a capital asset of its business was a capital receipt and therefore was not liable to tax. It was contended on behalf of the Incometax Authorities that the sole selling agency which was granted by the company to the assessee in the year 1931 was merely expanded as regards territory in 1939 and what was done in 1950 was to revert to the old arrangement, that the structure or the profit making apparatus of assessee 's business was not affected thereby, that the expansion as well as the restriction of the assessee 's territory were in the ordinary course of the assessee 's business and were mere accidents of the business which the assessee carried on and that the sum of Rs. 2,19,343 received by the assessee as and by way of compensation for the restriction of the territory was a trading or an income receipt and was therefore liable to tax. It was also urged that the agency agreement between the respondent and the company was terminable at the will of the latter and so it could not be considered as an enduring asset. Held (per Bhagwati and Sinha, JJ., Kapur, J., dissenting) that the agency agreements in question did not constitute the business of the respondent, but formed a capital asset, being the profit making apparatus of its business of distribution of the cigarettes manufactured by the company within the respective territories, and, consequently, any payment made by the company as compensation for terminating the agency would only be a capital receipt in the hands of the respondent. Commissioner of Income tax vs Shaw Wallace & Co., (1932) L.R. 59 I. A. 206, relied on. 377 Commissioner of Income Tax and Excess Profits Tax, Madras vs The South India Pictures Ltd., Karaikudi; , and Commissioner of Income tax, Nagpur vs Rai Bahadur jairam Valji, [1959] Supp. 1 S.C.R. 110, distinguished. Case law reviewed. Held, further, that the fact that the agency agreements were terminable at will, or that only one of them was terminated, would not make any difference because in either case, when the agency was terminated and the amount was paid as compensation for such termination it resulted in the sterilisation of the capital asset Pro tanto and it was received as a capital receipt in the hands of the respondent. Glenboig Union Fire Clay Co., Ltd. vs The Commissioners of Inland Revenne, , relied on. Per Kapur, J. The true effect of the facts of the present case was that in 1939 the respondent 's area of distribution was increased from the State of Hyderabad to the whole of India and in 1950 it was again reduced to the original area of 1931, so that the respondent did not lose its agency. Consequently, the termination of the agency in 1950 did not affect the trading activities of the respondent and, therefore, viewed against the background of the respondent 's business Organisation and profitmaking structure the compensation for the termination of the agency was no more than that for the loss of future profit and commission. The compensation therefore was in the nature of surrogatum and in this view of the matter it was revenue and not capital. The answer to the question, as applied to agencies, whether the compensation is capital or revenue, is that it will be a capital receipt if it is received as the value of the agency, i. e., it is a price of the business as if it is brought to sale. On the other hand it is revenue receipt if it is paid in lieu of profits or commission. In view of the decision The Commissioner of Income tax vs The South India Pictures Ltd., Karaikudi; , , and the observations of Bose, J., in the case of Raghuvanshi Mills Ltd. vs Commissioner of Income tax, ; , the authority of Commissioner of Income tax vs Shaw Wallace considerably shaken.

Appeal No. 198 of 1954. Appeal from the judgment and order dated October 16, 1952, of the former Nagpur High Court in Misc. ; No. 1231 of 1951. M. section K. Sastri, for the appellant. H. L. Khaskalam, B. K. B. Naidu and I. N. Shroff, for the respondent. 64 502 1960. November 18. The Judgment of the Court was delivered by IMAM, J. This is an appeal from the judgment of the Nagpur High Court dismissing the appellants petition under articles 226 and 227 of the Constitution of India. The High Court certified under article 132(1) of the Constitution that the case involved a substantial question of law as to the interpretation of the Constitution. Hence the present appeal. The appellant was the Ruler of the State of Baster. After the passing of the Indian Independence Act, 1947, the appellant executed an Instrument of Accession to the Dominion of India on August 14, 1947. Thereafter, he entered into an agreement with the Dominion of India popularly known as "The Stand Still Agreement". On December 15, 1947, he entered into an agreement with the Government of India whereby he ceded the State of Baster to the Government of India to be integrated with the Central Provinces and Berar (now the State of Madhya Pradesh) in such manner as the Government of India thought fit. Con sequently the Governments in India came to have exclusive and plenary authority, jurisdiction and powers over the Baster State with effect from January 1, 1948. The Legislature of the State of Madhya Pradesh passed the Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act, 1950 (Madhya Pradesh Act 1 of 1951), hereinafter referred to as the Act, which received the assent of the President of India on January 22, 1951. The preamble of the Act stated that it was one to provide for the acquisition of the rights of proprietors in estates, mahals, alienated villages and alienated lands in Madhya Pradesh and to make provisions for other matters connected therewith. Under section 3 of the Act, vesting of proprietary rights in the State Government takes place on certain conditions,, mentioned in that section, being complied with. The definition of 'proprietor ' is stated in section 2 cl. (m) and it is "in relation to 503 (i) the Central Provinces, includes an inferior proprietor, a protected thekadar or other thekadar, or protected headman; (ii) the merged territories, means a maufidar including an ex Ruler of an Indian State merged with Madhya Pradesh, a Zamindar, Ilaquedar, Khorposhdar or Jagirdar within the meaning of wajib ul arz, or any sanad, deed or other instrument, and a gaontia or a thekadar of a village in respect of which by or under the provisions contained in the wajib ul arz applicable to such village the maufidar, the gaontia, or the thekadar, as the case may be, has a right to recover rent or revenue from persons holding land in such village;". The definition of 'mahal ' is stated in section 2(j) and it is "mahal", in relation to merged territories, means any area other than land in possession of a raiyat which has been separately assessed to land revenue, whether such land revenue be payable or has been released, compounded for or redeemed in whole or in part;". Before the High Court the appellant contended that he was still a Sovereign Ruler and absolute owner of the villages specified in Schedules A and B of his petition under articles 226 and 227 of the Constitution. He urged that his rights had been recognized and guaranteed under the agreements entered into by him with the Government of India. The provisions of the Act, therefore, did not apply to him. It was further contended that the provisions of the Act did not apply to a Ruler or to the private property of a Ruler which was not assessed to land revenue. He relied on article 6 of the Instrument of Accession and the first paragraph of article 3 of the Merger Agreement. The High Court held that if the petitioner 's rights under article 6 of the Instrument of Accession and article 3 of the Merger Agreement had been infringed it was clear from the provisions of article 363 of the Constitution that interference by the courts was barred in disputes arising out of these two instruments. The High Court was also of the opinion that article 362 of the Constitu tion was of no assistance to the appellant. 504 After referring to the definition of the word 'proprietor ' in the Act, the High Court was of the opinion that the word 'maufidar ' in section 2(m) of the Act had not been used in any narrow or technical sense. A 'maufidar ' was not only a person to whom a grant of maufi lands had been made but was also one who held land which was exempt from the payment of "rent or tax". It accordingly rejected the contention on behalf of the appellant that the word 'maufidar ' is necessarily confined to a grantee from the State or Ruler and therefore a Ruler could not conceivably be a maufidar. The High Court also rejected the contention on behalf of the appellant that as he was a "Ruler" within the meaning of that expression in article 366(22) of the Constitution he did not come within the expression 'ex Ruler ' as contained in the definition of the word 'proprietor ' in the Act. The expression 'Ruler ' as defined in article 366(22) of the Constitution applied only for interpreting the provisions of the Constitution. The expression 'ex Ruler ' given in the Act must therefore be given the ordinary dictionary meaning. According to Shorter Oxford English Dictionary, 'Ruler ' means "one who, or that which, exercises rule, especially of a supreme or sovereign kind. One who has control, management, or head ship within some limited sphere". The High Court accordingly took the view that although the appellant did exercise such a rule in the past he ceased to exercise it in his former Domain after the agreements of accession and merger had come into operation. Accordingly the appellant must be regarded as an ex Ruler and as he was also a maufidar he fell within the definition of the word 'proprietor ' in the Act. The question whether the villages mentioned in Schedules A and B of the petition under articles 226 and 227 of the Constitution fell in any of the categories, "Estates, Mahals, Alienated lands", was also considered by the High Court. In its opinion they did not fall within the category of Estates or Alienated lands but they did fall within the category of Mahals. According to the definition of 'Mahal ' in section 2(j) of the Act the same must be separately assessed to land 505 revenue. According to the appellant they had not been assessed to land revenue but this was denied on behalf of the State of Madhya Pradesh. The High Court was of the opinion that in these circumstances it was for the appellant to establish that the villages in question had never been assessed to land revenue but no evidence had been led to this effect. On the contrary, according to the High Court, it would appear from the documents on the record that the villages known as 'Bhandar villages ' had been assessed to land revenue. As the rest of the villages in Schedule A and the villages in Schedule B, upto the date of the High Court judgment, had not been recognized as the private property of the appellant by the Government of India as required by the second and third paragraphs of the Merger Agreement, the appellant could not assert his ownership over them. The High Court, accordingly, dismissed his petition under articles 226 and 227 of the Constitution. Two questions in the main were urged before us (1) whether the appellant is a proprietor within the meaning of that expression in the Act and (2) whether the villages in question came within the definition of the word 'mahal ' contained in the Act. On behalf of the appellant it had also been urged that the Act could not defeat the rights of the appellant guaranteed under article 3 of the Merger Agreement. It seems clear to us, however, that in view of the provisions of article 363(1) of the Constitution any dispute arising out of the Merger Agreement or the Instrument of Accession is beyond the competence of the courts to enquire into. The High Court rightly decided this point against the appellant. With reference to the first point we would first consider whether the appellant is an ex Ruler for the purposes of the Act. That he is so factually cannot be denied, since he ceded his State to the Government of India to be integrated with the Central Provinces and Berar (now the State of Madhya Pradesh) in such manner as the Government of India thought fit. He further ceded to the Government ' of India full and exclusive authority, jurisdiction and powers in relation 506 to the governance of his State when he agreed that the administration of that State would be transferred to the Government of India as from January 1, 1948. The question is whether his recognition for the purposes of the Constitution as Ruler by virtue of the provisions of article 366(22) of the Constitution of India continues his status as a Ruler for purposes other than the Constitution. article 366(22) states: " "Ruler" in relation to an Indian State means the Prince, Chief or other person by whom any such covenant or agreement as is referred to in clause (1) of article 291 was entered into and who for the time being is recognised by the President as the Ruler of the State, and includes any person who for the time being is recognised by the President as the successor of such Ruler". Article 291 refers to the privy purse payable to Rulers. It states: "Where under any covenant or agreement entered into by the Ruler of any Indian State before the commencement of this Constitution, the payment of any sums, free of tax, has been guaranteed or assured by the Government of the Dominion of India to any Ruler of such State as privy purse (a) such sums shall be charged on, and paid out of, the Consolidated Fund of India; and (b) the sums so paid to any Ruler shall be exempt from all taxes on income. " Article 291 refers to any covenant or agreement entered into by the Ruler of any Indian State before the commencement of the Constitution. The covenant or agreement referred to in this Article certainly includes the Instrument of Accession and the Merger Agreement. The effect of the Merger Agreement is clearly one by which factually a Ruler of an Indian State ceases to be a Ruler but for the purposes of the Constitution and for the purposes of the privy purse guaranteed, he is a Ruler as defined in article 366(22) of the Constitution. There is nothing in the provisions of article 366(22) which requires a court to recognise such a person as a Ruler for purposes outside the Constitution. In our opinion, the High Court rightly held that 507 the appellant was an ex Ruler and that article 366(22) of the Constitution did not make him a Ruler for the purposes of the Act. As the appellant was an 'ex Ruler ', he was within the class of persons who were by name specifically included in the definition of 'proprietor ' and therefore clearly within the scope of the Act. That the appellant was not only an ex Ruler but a maufidar appears to us to be clear. The ordinary dictionary meaning of maufi is "Released, exempted, exempt from the payment of rent or tax, rent free" and maufidar is "A holder of rent free land, a grantee". It was common ground in the High Court that the villages in question were exempt from the payment of rent or tax. In our opinion, the High Court rightly took the view that the expression 'maufidar ' was not necessarily confined to a grantee from a State or a Ruler of a State. A maufidar could be a person who was the holder of land which was exempted from the payment of rent or tax. In our opinion, the appellant certainly came within the expression 'maufidar ' besides being an ex Ruler ' of an Indian State merged with Madhya Pradesh. It is, however, contended on behalf of the appellant that the most important part of the definition was the concluding portion where it was stated that in the case of a maufidar he must be a person who by or under the provisions contained in the wajib ul arz applicable to his village, had the right to recover rent or revenue from persons holding land in such village. It was contended that even if the appellant was a maufidar, there was nothing to show that with reference to any village held by him it was entered in the wajib ul arz, that he had a right to recover rent or revenue from persons holding land in such village. In the petition under articles 226 and 227 of the Constitution, filed by the appellant in the High Court, it was nowhere asserted that even if he was regarded as a maufidar it was not entered in the wajib ul arz with respect to any of his maufi villages that he had a right to recover rent or revenue from persons holding land in such villages. From the judgment of the High 508 Court it would appear that no such argument was advanced before it. In the application for a certificate under article 132(1) of the Constitution we can find no mention of this. In the statement of the case filed in this Court also there is no mention of this fact. There is thus no material on the record to establish that the appellant as a maufidar had no right to recover rent or revenue from persons holding land in his villages. The burden was on the appellant to prove this fact which he never attempted to discharge. It is impossible therefore to accept this contention on behalf of the appellant raised for the first time before us in the course of the submissions made on behalf of the appellant. Regarding the second point arising out of the definition of 'Mahal ', the High Court definitely found that the petitioner had given no evidence to establish that the villages in question were not assessed to land revenue. On the contrary, at least with reference to the Bhandar villages documents on the record showed that these villages had been assessed to land revenue. Since it was a question of fact whether the villages had been assessed to land revenue, which was denied on behalf of the State of Madhya Pradesh, the High Court rightly held that the contention of the appellant in this respect could not be accepted. As for the other villages, in Schedules A and B of the petition of the appellant under articles 226 and 227 of the Constitution the High Court, in our opinion, rightly held that the petition was not maintainable as these villages had not yet been recognised by the Government of India as the private property of the appellant. In our opinion, the appeal accordingly fails and is dismissed with costs. Appeal dismissed.

The appellant was the Ruler of the State of Baster which was later integrated with the State of Madhya Pradesh. He was recognised by the President as a Ruler under article 366(22) of the Constitution. The respondent resumed certain lands belonging to the appellant under the Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act, 1950. The appellant contended that he was still a Ruler and not an ex Ruler and as such did not come within the definition of "proprietor" given in the Act. Held, that the appellant was an ex Ruler for the purposes of the Act and was within the class of persons who were by name included in the definition of 'proprietor ' and was within the scope of the Act. Factually the appellant was an ex Ruler. He was a Ruler for the purposes of the privy purse guaranteed to him. There was nothing in article 366(22) which required a court to treat such a person as a Ruler for purposes outside the Constitution. Further, the appellant was also a maufidar in respect of the lands acquired which were exempt from the payment of rent or tax. The expression "maufidar" was not necessarily confined to a grantee from a State or a Ruler of a State; he could be the holder of land which was exempted from payment of rent or tax.

The appellant, a Cotton Mill in Indore in Holkar State was taxed in respect of profits, gains and income under the Indore Industrial Tax Rules, 1927 by the then Ruler of Indore. The Holkar State merged into the State of Madhya Bharat which acceded to India. The Rajpramukh of the new State promulgated an Ordinance No. 1 of 1948 to provide for peace and good Government of the State. This Ordinance was superseded by Act 1 of 1948. Thereafter on December 28, 1949, me Government issued a Notification under r. 18 of the Tax Rules purporting to make rules under r. 17 thereof. These rules made certain amendments in the Tax Rules. The State of Madhya Bharat became one of the Part B States on January 26, 1950. From April 1, 1950, Finance Act No. 25 of 1950 came into force and applied to Madhya Bharat also. According to its provision, the Tax Rules came to be repealed from after the accounting year ending on March 31, 1949 and assessments could only be made under the Tax Rules upto the end of the accounting period ending on or before March 31, 1949. It further provided that even the assessments for the years previous to the accounting year ending on March 31, 1949 could only be made by the corresponding authorities under the Income tax Act, and that appeals would lie to the corresponding authorities under the Income tax Act; no levy and assessment could be made by the authorities under the repealed law and no appeal would lie to the authorities or Court under that law. This provision as to the authorities competent to make assessments was lost sight of with the result that assessments were made for the years in dispute which were all before the accounting year ending on March 31, 1949 by the authorities under the Tax Rules, as they were before their repeal. When this mistake was discovered, Parliament passed the Madhya Bharat Taxes on Income (Validation) Act, No. 38 of 1954. The appellant then challenged the validity of the assessments under the Tax Rules, on the grounds: (1) that the amendments of the Tax Rules on December 28, 1949 were invalid as such amendments could not be made under r. 17 of the Tax Rules, as was purported to be done; (2) even if the amendments were good, they could not have retroactive effect and could not take away the vested right of appeal; (3) as after the Finance Act, 1950, assessments were made by the old officers appointed tinder the Tax Rules and not by the corresponding officers under the Income tax Act, the assessments were invalid and the Validating Act could not validate them because, (i) the Validating Act itself was discriminatory and was hit by article 14, and (ii) because in any case it did not apply to the present assessments. The High Court repelled all these contentions and dismissed the writ petition. On appeal by certificate this Court, Held: (i) The amendments which were made in the Tax Rules on December 28, 1948, could be justified on the basis of Act 1 of 1948. All that section 5 of Act 1 of 1948 requires is the publication of the 859 regulation made thereunder and their being made by Government, and that has been complied with in this case. There is no other formality required for making regulations and therefore, even though there was a mistake in the opening part of the Notification of December 28, 1949, the amendments made in the Tax Rules can be upheld under section 5 of Act 1 of 1948 as regulations. (ii) Even a vested right of appeal can be taken away by express legislation or by legislation which, though it may not expressly repeal the vested right of appeal, has the effect of such repeal by necessary implication. Though the right of second appeal on facts is taken away by the new rule 13 inserted in the Tax Rules, such right is taken away by legislation by necessary intendment. Therefore, the right of second appeal after the amendment must be confined in all cases by necessary intendment to questions of law only. (iii) The Validating Act is not hit by article 14. The present cases are with reference to years 1940 48, that is before the accounting year ending on March 31, 1949. The assessments in these cases were carried on by the old officers under the old law and the Validating Act specifically validates such assessments. In these circumstances it cannot be said that these assessments have not been validated by the Validating Act.

The petitioners challenged the constitutional validity of the U.P. Sugarcane (Regulation of Supply and Purchase) Act of 1953, and two notifications issued by the State Government on September 27, 1954 and November 9, 1955, the former under sub sec. 1(a) read with sub sec. 2(b) of section 16 of the impugned Act providing that where not less than three fourths of the canegrowers within the area of operation of a Canegrowers ' Co operative Society were members thereof, the occupier of the factory to which that area is assigned should not purchase or enter into an agreement to purchase cane except through that society and the latter under section 15 of the Act assigning to different sugarcane factories specified cane purchasing centers for supply to them of sugarcane for the crushing season of 1955 56. They contended that the impugned Act was ultra vires the 394 State Legislature, the subject matter of legislation being within the exclusive jurisdiction of Parliament, and repugnant to Act LXV of 1951 and Act X of 1955 passed by Parliament and that sections 15 and 16(1)(a) and (2)(b) and the two notifications infringed their fundamental rights under articles 14, 19(1)(c), (f) and (g) and 31 and violated the provisions of article 301 of the Constitution. Held, (1) that the impugned Act and the notifications issued thereunder were intra vires the State Legislature, did not infringe any fundamental rights of the petitioners nor violated the provisions of article 301 of the Constitution and the petitions must be dismissed; (2)that the Central Acts in respect of sugar and sugarcane and the notifications thereunder having been enacted and made by the Central Government in exercise of concurrent jurisdiction under Entry 33 of List III of the Seventh Schedule to the Constitution as amended by the Constitution (Third Amendment) Act of 1954, the State Legislature was not deprived of its jurisdiction thereunder and no question of legislative incompetence of the U.P. Legislature or its trespassing upon the exclusive jurisdiction of the centre in enacting the impugned Act could arise; (3) that the provisions of the impugned Act compared to those of the Central Acts clearly showed that the impugned Act was solely concerned with the regulation of the supply and purchase of sugarcane and in no way trenched upon the exclusive jurisdiction of the Centre with regard to sugar and the U.P. Legislature was, therefore, quite competent to enact it; (4) that no question of repugnancy under article 254 of the Constitution could arise where Parliamentary Legislation and State Legislation occupied different fields and dealt with separate and distinct matters even though of a cognate and allied character, and that where, as in the present case, there was no inconsistency in the actual terms of the acts enacted by Parliament and the State Legislature, the test of repugnancy would be whether Parliament and the State Legislature, in legislating under an entry in the Concurrent List, exercised their powers over the same subject matter or whether the laws enacted by Parliament were intended to be exhaustive so as to cover the entire field; (5) that the provisions of section 18 G of Act LXV of 1951 did not cover sugarcane nor indicate the intention of the Parliament to cover the entire field of such legislation; the expression "any article or class of articles relatable to any scheduled industry" used in sections 18 G, 15 and 16 of the Act did not refer to raw materials but only to finished products of the scheduled industries the supply and distribution of which section 18 G was intended to regulate, its whole object being the equitable distribution and availability of manufactured articles at fair prices and not to invest the Central Government with the power to legislate in regard to sugarcane; 395 (6) that even assuming that sugarcane was such an article and fell within the purview of section 18 G of the Act, no order having been issued by the Central Government thereunder, no question of repugnancy could arise, as repugnancy must exist as a fact and not as a mere possibility and the existence of such an order would be an essential pre requisite for it; (7) that as the provisions of Act X of 1955, and those ' of the impugned Act and the U.P. Sugarcane Regulation of Supply and Purchase Order, 1951, made thereunder, relating to sugarcane were mutually exclusive and did not impinge upon each other and the one legislature did not trench upon the field of the other, the Centre remaining silent where the State spoke and the State remaining silent where the Centre spoke, there could be no inconsistency between them and no provision of the impugned Act and the Rules made thereunder was invalidated by any of the provisions of Act LXV of 1951 as amended by Act XXVI of 1953 or Act X of 1955 and the Sugarcane Control Order, 1955, issued thereunder; Clyde Engineering Company, Limited vs Cowburn ([1926] , Ex Parte McLean ([1930] ; , Stock Motor Plough Ltd. vs Forsyth ([1932] ; , G. P. Stewart vs B.K. Boy Chaudhury (A.I.R. and Shyamakant Lal vs Rambhajan Singh ([1939] F.C.R. 188), referred to. (8) that the power of repeal conferred on Parliament by the proviso to article 254(2) of the Constitution was a limited power and could be exercised only by enacting a law relating to the matter dealt with by the state law and the state law must be one of the kind indicated in the body of article 254(2) itself, and as the impugned Act did not fall within that category the proviso did not apply and the impugned Act, the notifications made thereunder and the U. P. Sugarcane Regulation of Supply and Purchase Order, 1954, stood unrepealed by section 16(1)(b) of Act X of 1955 and cl. 7(1) of the Sugarcane Control Order, 1955 made thereunder; Zaverbhai Amaidas vs The State of Bombay ([1955] 1 S.C.R. 799), referred to. (9) that the power of repeal conferred by the proviso to article 254(2) could be exercised by Parliament alone and could not be delegated to an executive authority and, consequently, the Central Government acquired no power of repeal under cl. 7 of the Sugarcane Control Order, 1955; (10) that the contention that the impugned Act infringed the fundamental right guaranteed by article 14 inasmuch as very wide powers were given to the Cane Commissioner which could be used in a discriminatory manner was without any foundation since his powers under section 15 of the impugned Act were well defined and the Act and Rules framed thereunder gave the canegrowers or a Canegrowers ' Co operative Society or the occupier of a factory the right to appeal to the State Government against any order passed by him 396 and thus provided a sufficient safeguard against any arbitrary exercise of those powers; (11) that equally unfounded was the contention that the im pugned Act and the notification dated September 27, 1954, violated the fundamental right guaranteed by article 19(1)(c) of the Constitution. Although the right to form an association was a fundamental right, it did not necessarily follow that its negative, i.e. the right not to form an association must also be so, as all rights which an Indian citizen had were not fundamental rights. No canegrower was compelled to become a member of the Canegrowers ' Co operative Society or prevented from resigning therefrom or selling his crops elsewhere and, consequently, the impugned Act and the notification did not violate his fundamental right; (12) that the powers given to the Cane Commissioner by section 15 of the impugned Act to declare reserved or assigned areas were well defined and controlled by higher authorities and by no means absolute and unguided and were not, therefore, bit by article 19(1)(f) and (g) and the notification dated November 9, 1955, could not, therefore, be impugned on that ground; (13) that the restriction imposed by the notification dated September 27, 1954, on canegrowers in regard to sale of sugarcane to occupiers of factories in areas where the membership of the Canegrowers ' Co operative Society was not less than 75 per cent. of the total number of canegrowers was a reasonable restriction in the public interest, designed for the benefit of a large majority of canegrowers, and as such came within the protection of article 19(6) and did not violate article 19(1)(f) and (g) of the Constitution; (14) that the impugned notifications, being intra vires the State Legislature, could not also be challenged under article 31 as none of the petitioners was deprived of his property, if any, save by authority of law. Messrs Dwarka Prasad Laxmi Narain vs The State of Uttar Pradesh and two others ([1954] S.C.R. 803), referred to. (15) Nor could it be contended that the impugned Act and the notifications contravened the provisions of article 301 of the Constitution in view of the provision of article 304(b) which made it permissible for the State Legislature to impose reasonable restrictions in the public interest. Commonwealth of Australia vs Bank of New South Wales ([1950] A.C. 235) and Hughes and Vale Proprietary Ltd. vs State of New South Wales and others ([1955] A.C. 241), referred to.

The appellants, a Hindu undivided family, carrying on business in the former State of Mysore, were assessed under the Mysore Income tax Act for the year of assessment 1949 50 corresponding to the year of account July 1, 1948, to June 30, 1949. The Indian Income tax Act came into force in that area in April 1, 1950, and on December 26, 1950, notice under section 22(2) of that Act was served upon the appellants to submit their return for the assessment year 1950 51. On September 8, 1952, the appellants submitted their return stating that they had no assessable income for that year. The Income Tax Officer passed on that return an order, "no proceeding", and closed the assessment. When the appellants submitted their return for the next assessment year, their books of account disclosed an opening cash credit balance of Rs. 1,87,000 and odd on July 1. 1949. They failed to produce the books of account of the previous years, and the Income tax Officer held that Rs. 1,37,000 out of the said opening balance represented income from an undisclosed source. The appellants submitted a fresh return for the assessment year 1950 51 purporting to do so under section 22(3) of the Indian Incometax Act. Pursuant to the direction of the Appellate Assistant Commissioner, the Income Tax Officer on October 15, 1957, served on the appellants a notice under section 34 of the Act and thereupon the appellants moved the High Court under article 226 for an order quashing the said notice and the proceeding as without jurisdiction. The High Court dismissed the petition. Held, that it was not correct to say that the issue of the notice for reassessment was without jurisdiction as the assessment was yet pending. Under section 23(1) of the Indian Income tax Act, it is open to the Income tax Officer, if he is satisfied as to correctness of the return filed by the assessee, to assess the income and determine the sum payable on the basis of the return without requiring the assessee either to be present or to Produce evidence. The order 'no proceeding recorded on the. return must, therefore, mean that the Income Tax Officer bad accepted the previous return and assessed the income as nil. A revised return under section 22(3) filed by the assessee may be 912 entertained only before the order of assessment and not thereafter. Lodging of such a return after the assessment is no bar to reassessment under section 34(1) of the Act. It could not be said, having regard to the provisions of section 13(1) of the Finance Act (XXV of 1950) and cl. 5(1) of Part. B States (Taxation Concessions) Order 1950, issued by the Central Government under section 60A of the Indian Income tax Act, that for the assessment year 1950 51 the appellants were assessable under the Mysore Income tax Act and not under the Indian Income tax Act.

The petitioners challenged the constitutional validity of the Bombay Tenancy and Agricultural Lands (Vidarbha Region and Kutch Area) Act, 1958, which extended the provisions of the Bombay Tenancy and Agricultural Lands (Amendment) Act, 1956, to Vidarbha and Kutch. That Act was declared valid by this Court in Sri Ram Narain Medhi vs The State of Bombay, [1950] Supp. 1 S.C.R. 489, and one of the reason , for doing so was that the lands covered by that Act fell within the definition of the word 'estate ' contained in the Bombay Land Revenue Code, 1879. The lands in question in the present petitions were situated in Amraoti and Yeotmal and the existing law relating to land tenures in force in that area was the Madha Pradesh Land Revenue Code, 1954. This Code did not employ the word ,estate ' and it was contended by the petitioners that the impugned Act was not within the protection of article 31A of the Constitution. Held, that the contention must fail. Although the Madhya Pradesh Land Revenue Code, 1954, did not employ the word 'estate ', the relevant definition contained in sections 2(17) and 2(18) of impugned Act and sections 2(7), 2(20) of the Code read with sections 145 and I46 thereof leaves no manner of doubt that the lands in the possession of the petitioners were tenures and in substance ,in estate. Since the petitioners held the lards tinder the State and paid land revenue for them, the lands fell within the class of local equivalents of the word 'estate. ' as contemplated by article 31A(2)(a) of the Constitution.

% The lands of the appellant were situated on the banks of the river Tapti known for its frequent floods. They were sought to be acquired under the Land Acquisition Act, 1894. The preliminary notification declaring the intention to acquire the said land was issued under section 4 of the act and published in the Government Gazette on April 30, 1970. It was notified that the proposed acquisition was for the public purpose for extension of the village site for the purpose of housing 12 families who had been rendered homeless because of floods in the Tapti river. An individual notice under section 4 of the Act was served on the Appellant on May 2, 1970. He filed his objections against the proposed acquisition on May 12, 1970 and filed additional objections on June 20, 1970 and July 6, 1970 respectively. After the consideration and rejection of the said objections, the notification of the lands under section 6 was issued on December 8, 1970. Notices under section 9 were issued on January 8, 1971. The appellant challenged the aforesaid acquisition in a writ petition in the High Court on various grounds, the main ground being that the provisions of sections 4 and 6 of the Act were ultra vires the Constitution. The High Court dismissed the petition, but granted a certificate of fitness under Article 133(t)(c) of the Constitution. 777 In the appeal to this Court on behalf of the appellant it was conceded: (1) that the vires of sections 4 and 6 could no longer be called in question, but it was submitted that (t) under the provisions of the Bombay Land Revenue Code, 1879 it must be established that the lands in the existing village site are insufficient for the extension of the village site before any acquisition can be resorted to, (2) the land acquisition authorities had failed to consider what were the other lands available which could have been more conveniently acquired, and (3) since several years have passed from the date of the Notification under section 4, the victims of the floods must have been housed and rehabilitated elsewhere and hence the public purpose for which the lands were sought to be acquired does not survive. Dismissing the Appeal the Court, ^ HELD: t. The challenge to the vires of sections 4 and 6 of the Land Acquisition Act, 1894 no longer survive in view of the validity of the sections having been upheld by this Court in Manubhai Jehtalal Patel and Anr. vs State of Gujarat and others, ]983 4 SCC 553. [778F] 2. Section 126 of the Bombay Land Revenue Code merely deals with the limits of the site of any village, town or city and prescribes the procedure for fixing the limits of such sites. There is nothing in the Bombay Land Revenue Code or the Land Acquisition Act which would suggest that before acquisition can be resorted to for enlarging a village site, the Collector or a Survey officer or Revenue Authority must decide upon such enlargement. [781E F] Chandrabhagabai Udhaorao and others vs Commissioner, Nagpur Division, Nagpur Ors., [1962] Nagpur Law Journal, Vol. XLV at p. 466 and Sitaram Maroti vs State of Maharashtra, [1963] 65 Bombay Law Reporter, 241 distinguished. The assessment of suitability of the land proposed to be acquired for the concerned public purpose is primarily for the Land Acquisition officer to consider, and no good reason has been shown on behalf of the appellant which could warrant interference with his decision. Moreover, the appellant had not even given proper particulars of the other lands which, according to him, were available and were more suitable for acquisition and hence he can make no grievance on the score of proper consideration not having been given to the question of acquiring such lands. [782BC D] 778 4. The delay in the acquisition has taken place on account of the legal proceedings adopted by the Appellant himself and by reason of the interim orders obtained by him. He cannot take advantage of this delay and claim that the public purpose no longer survives. Moreover, the public purpose stated in the Notification is the extension of a village site or goathan of the village Bhairav and there is nothing to show that the public purpose has exhausted itself. In fact, on account of increasing population, it would be more necessary today that the village site should be extended even then it was at the time when the notification was issued.[782E F]

After the estates and tenures of proprietors or tenure holders had passed to and became vested in the State by virtue of the Bihar Land Reforms Act, 1950, the Revenue Authorities interfered with the rights of those ex proprietors and ex tenureholders to hold Melas on lands which were occupied by them thereafter as occupancy raiyats and collected tolls from such Melas on behalf of the Government whereupon those intermediaries made applications to the High Court for writs restraining the Government from such interference which were allowed by the High Court. During the pendency in this Court of these appeals preferred by the Officers of the State of Bihar against the order of the High Court the Bihar Land Reforms Amendment Act, 1959, was passed amending the Bihar Land Reforms Act of 1950 with retrospective effect by which the word Mela was added after the words jalkars, hats and bazars in section 4, cl. (b) of the amended Act. Further amendments provided inter alia that the State Government and not the intermediaries except with the consent of the State Government shall have the right to hold such Melas. The main question arising for decision in these appeals and certain other applications made to this Court under article 32 of the Constitution of India was whether the amending legislation violated articles 14, 19 and 31 of the Constitution. Held, that the Bihar Land Reforms Amendment Act, 1959, is a law providing for the acquisition by the State of rights in an "estate" within the meaning of article 31A of the Constitution and even if it is assumed that it abridges the rights conferred by articles 14, 19 and 31 of the Constitution its provisions are not void on that ground. The amending legislation was within the legislative com petence of the Legislature under article 246 of the Constitution and after its amendment the legislative list permitted the State 383 Legislature to enact a law of acquisition even without a public purpose. The State of Bihar vs Sir Kameshwar Singh, [1952] S.C.R. 889, considered.

The appellants and others were the Zamindars of a village in which certain lands were given on Theka to the Respondent and others on 6th March, 1948, the Zamindari having vested on 30th June, 1952. Disputes arose between the appellants and the respondents during the pendency of proceedings under the U.P. Consolidation of Holdings Act. The appellants and others claimed the plots in dispute being in their exclusive Sir and Khudkast would be deemed to have been settled with them by the State on the Abolition of Zamindari and their name should be recorded as Bhoomidars thereof. Respondent and others on the other hand claimed they had become the Sirdars of the plots in dispute and resisted the claims of the Zamindars. The dispute gave rise to the question of title. The Civil Judge sent the matter for decision to an Arbitrator appointed under the Act. The Arbitrator held the respondents to be the Sirdars of the plots in question. The appellants filed objections against the award before the Civil Judge who allowed the objections, set aside the award and remitted back the award for reconsideration. Appeals were taken to the Additional District Judge who disagreed with the Civil Judge but affirmed the order of remand. Both sides filed separate revisions before the High Court, the revision of Respondents was allowed and dismissed those of the appellants. The only point argued was whether Respondent and others have been rightly held to be the Sirdars of the plots in question or whether the ex landlords had become the Bhoomidars. Dismissing the appeal. ^ HELD: That a Thekedar of an Estate ceases to have any right to hold or possess any land in such Estate with effect from the date of its vesting. This is what has been provided in sub section (1) of section 13. But it is subject to the exceptions viz. , one the provisions contained in section 12 and the other engrafted in sub section (2) of section 13. There is no dispute between the parties that the land in possession of the Thekedars on the date of vesting was either covered by section 12(1) or section 13(2)(a). The land admittedly was the Sir or Khudkasht of the lessor namely the Zamindars. If such a land was in the personal cultivation of a person on the Ist May, 1950 as a Thekedar thereof and if the Theka was made with a view to the cultivation of the land by such Thekedars personally then because of the non obstante clause occurring in sub section (1) of section 12 of the Act the Thekedar would be deemed to be a hereditary tenants of the land entitled to hold as such and liable to pay rent at hereditary rates. If, however, the land was in personal cultivation of the Thekedar merely as a Thekedar appointed to collect rent from other tenants and incidentally allowed to cultivate the Sir or Khudkasht land of the lessor then he will be a mere asami in accordance with section 13(2)(a) of the Act. The Arbitrator on a consideration of the theka document found that the theka 978 was made with a view to cultivation of the land by the Thekedar personally. The interpretation of the Arbitrator was not such that it could enable the Civil Judge to take the view that there was an error of law apparent on the face by the record. On the other hand it appears to us that the interpretation put by the Arbitrator was correct. There is a subtle but clear dividing line between the two types of cases one falling under section 12(1) of the Act and the other coming within the ambit of section 13(2) (a). The High Court was right in its that the Award of the Arbitrator was not fit to be interfered with. [980 G H. 981 A D]

Appeal No. 285 of 1959. Appeal by Special Leave from the Judgment and Decree dated the 13th July, 1956, of the Patna High Court in M. J. C. No. 404 of 1954. M. C. Setalvad, Attorney General for India and section P. Varma, for the Appellants. A. V. Viswanatha Sastri, Suresh Aggarwala and D. P. Singh, for the Respondent. 1960. November 21. The Judgment of the Court was delivered by 524 SINHA, C.J. This appeal, by special leave, is directed against the judgment and order of the High Court of Patna dated July 13, 1956 disposing of a reference under section 25(1) of the Bihar Sales Tax Act, 1947, which hereinafter will be referred to as the Act, made by the Board of Revenue, Bihar. The facts of this case have never been in dispute and may shortly be stated as follows. The appellant is a Corporation incorporated under the Damodar Valley Corporation Act (XIV of 1948) and will hereinafter be referred to as the Corporation. It is a multipurpose Corporation, one of its objects being the construction of a number of dams in Bihar and Bengal with a view to controlling floods and utilising the stored water for purposes of generation of electricity. One of such dams is the Konar Dam in the district of Hazaribagh in Bihar. For the construction of the aforesaid Dam the Corporation entered into an agreement with Messrs Hind Construction Ltd. and Messrs Patel Engineering Co. Ltd. on May 24, 1950, and appointed them contractors for the aforesaid purpose. They will hereinafter be referred to as the Contractors. As a result of a change in the design of the Dam, it became necessary to enter into a supplementary agreement and on March 10, 1951, cl. 8 of Part II of the original agreement was amended and a fresh cl. 8 was substituted. Under the new cl. 8 of the agreement, as amended, the Corporation agreed to make available to the contractors such equipment as was necessary and suitable for the construction aforesaid. The Contractors are charged the actual price paid by the Corporation for the equipment and machinery thus made available, inclusive of freight and customs duty, if any, as also the cost of transport, but excluding sales tax. The equipment thus supplied by the Corporation to the Contractors was classified into two groups, Group A and Group B, as detailed in Schedule No. 2. The machinery in Group A was to be taken over from the Contractors by the Corporation, after the completion of the work at their "residual value" which was to be calculated in the manner set out in the agreement. The machinery in Group B was to become the 525 property of the Contractors after its full price had been paid by them. No more need be said about the machinery in Group B, because there is no dispute about that group, the Contractors having accepted the position that Group B machinery had been sold to them. The controversy now remaining between the parties relates to the machinery in Group A. On August 12, 1952, the Superintendent of Sales Tax, Hazaribagh, assessed the Corporation under section 13(5) of the Act for the period April, 1950 to March, 1952. It is not necessary to set out the details of the tax demand, because the amount is not in controversy. What was contended before the authorities below and in this Court was that the transaction in question did not amount to a "sale" within the meaning of the Act. The Superintendent rejected the contention raised on behalf of the Corporation that it was not liable to pay the tax in respect of the machinery sup plied to the Contractors. The Corporation went up in appeal to the Deputy Commissioner of Sales Tax against the said order of assessment. By his order dated May 5, 1953, the Deputy Commissioner rejected the contention of the appellant as to its liability under the Act, but made certain amendments in the assessment which are not material to the points in controversy before us. The Deputy Commissioner repelling the Corporation 's contentions based on the Act, held inter alia that the supply of equipment in Group A of the agreement aforesaid amounted to a sale and was not a hire ; that the condition in the agreement for the "taking over" of the equipment on conditions laid down in the agreement was in its essence a condition of repurchase and that the Corporation was a "dealer" within the meaning of the Act. The Corporation moved the Board of Revenue, Bihar, in its revisional jurisdiction under section 24 of the Act. The Board of Revenue by its resolution dated October 1, 1953, rejected the revisional application and upheld the order of the authorities below. Thereafter, the Corporation made an application to the Board of Revenue under section 25 of the Act for a reference to refer the following 67 526 questions to the High Court at Patna, namely, (a) whether the assessment under section 13(5) of the Act is maintainable, (b) whether, in the facts and circumstances of the case, it can be held that the property in the goods included in Schedule A did pass to the Contractors and the transaction amounted to a sale, and (c) whether the terms of the agreement amount to sale transactions with the Contractors and taking over by the Corporation amounts to repurchase. This application was made on December 22, 1953, but when the application for making a reference to the High Court came up for hearing before the Board of Revenue on May 20, 1954, and after the parties had been heard, counsel for the Corporation sought leave of the Board to withdraw questions (a) and (c) from the proposed reference and the Board passed the following order: "Leave is sought by the learned advocate for the petitioner to drop questions (a) and (c) from the reference. The leave is granted. There remains only question (b) for reference to the High Court. . " Thus only question (b) set out above was referred to the High Court for its decision. After hearing the parties, a Division Bench of the High Court, Ramaswami, C. J. and Raj Kishore Prasad, J., heard the reference and come to the conclusion by its judgment dated July 13, 1956, that the reference should be answered in the affirmative, namely, that the transaction in question amounted to a sale within the meaning of section 2(g) of the Act. Thereupon the Corporation made an application headed as under article 132(1) of the Constitution and prayed that the High Court "be pleased to grant leave to appeal to the Supreme Court of India and grant the necessary certificate that this case is otherwise a fit case for appeal to the Supreme Court. . " Apart from raising the ground of attack dealt with by the High Court on the reference as aforesaid, the Corporation at the time of the hearing of the applica tion appears to have raised other questions as would appear from the following extract from the judgment and order of the High Court dated January 31, 1957 : 527 "It was conceded by learned counsel for the petitioner that the case does not fulfill the requirements of Article 133(1) of the Constitution; but the argument is that leave may be granted under Article 132 of the Constitution as there is a substantial question of law with regard to the interpretation of the Constitution involved in this case. We are unable to accept this argument as correct. It is not possible for us to hold that there is any substantial question of law as to the interpretation of the Constitution involved in this case. The question at issue was purely a matter of construction of section 2(g) of the Bihar Sales Tax Act and that question was decided by this Court in favour of the State of Bihar and against the petitioner. It is argued now on behalf of the petitioner that the provisions of section 2(g) of the Bihar Sales Tax Act are ultra vires of the Constitution, but no such question was dealt with or decided by the High Court in the reference. We do not, therefore, consider that this case satisfies the requirements of article 132(1) of the Constitution and the petitioner is not entitled to grant of a certificate for leave to appeal to the Supreme Court under this Article. The application is accordingly dismissed. " Having failed to obtain the necessary certificate from the High Court, the Corporation moved this Court and obtained special leave to appeal under article 136 of the Constitution. The leave was granted on March 31, 1958. Though the scope of the decision of the High Court under section 25 of the Act on a reference made to it is limited, the Corporation has raised certain additional points of controversy, which did not form part of the decision of the High Court. Apart from the question whether the transaction in question amounted to a sale within the meaning of the Act, the statement of the case on behalf of the appellant raises the following additional grounds of attack, namely, (1) that the Corporation is not a dealer within the meaning of the Act, (2) that the proviso to section 2(g) of the Act is ultra vires the Bihar Legislature and (3) that the Act itself is ultra vires the Bihar Legislature by reason of the 528 legislation being beyond the scope of entry 48 in List II of Schedule 7 of the Government of India Act, 1935. Hence, a preliminary objection was raised on behalf of the respondent that the additional grounds of attack were not open to the Corporation in this Court. It is, therefore, necessary first to determine whether the additional grounds of attack set out above are open to the Corporation. In our opinion, those additional grounds are not open. They were never raised at any stage of the proceedings before the authorities below, or in the High Court. This Court is sitting in appeal over the decision of the High Court under section 25 of the Act. The High Court in coming to its conclusion was acting only in an advisory capacity. It is well settled that the High Court acting in its advisory capacity under the taxing statute cannot go beyond the questions referred to it, or on a reference called by it. The scope of the appeal to this Court, even by special leave, cannot be extended beyond the scope of the controversy that could have been legally raised before the High Court. It is manifest that the High Court could not have expressed its opinion on any matter other than the question actually before it as a result of the reference made by the Board of Revenue. The preliminary objection must, therefore, be allowed and the appeal limited to the question whether the transaction in question in this case amounted to a sale within the meaning of the Act. It is manifest that this controversy between the parties has to be resolved with reference to the terms of the contract itself. Clause 8 of the agreement as amended is a very complex one as will presently appear from the following extracts, being the relevant portions of that clause : "The Corporation may hire or make available such of its equipment as is suitable for construction for the use of the Contractor. The actual prices paid by the Corporation for the equipment thus made available, inclusive of freight, insurance and custom duties, if any, and the cost of its transport to site but excluding such tax as sales tax whether local, municipal, State or Central, shall be charged to the 529 Contractor and the equipment shall remain the property of the Corporation until the full prices thereof have been realised from the Contractor. Equipment lent for the Contractor 's use, if any, shall be charged to him on terms of hiring to be mutually agreed upon; such terms will cover interest on capital cost and the depreciation of the equipment. The Corporation will supply to the Contractor the machinery mentioned in Schedule No. 2, Group A and Group B below." Then follows a description seriatim of the many items of machinery in Group A with the number of such machinery and the approximate cost thereof. In this Group A, there are fourteen items of which it is only necessary to mention the first one, that is to say, four excavators with accessories approximately valued at Rs. 12,46,390; and No. 14, two excavators of another model, approximately costing Rs. 3,35,000. The total approximate cost of the machinery in Group A is estimated to be Rs. 42,63,305. Then follow the descriptions of machinery in Group B, the approximate cost of which is Rs. 21,84,148. Then follow certain conditions in respect of equipments included in Group A, in these words: "The Corporation will take over from the Contractor item 1 and 14 on the completion of the work at a residual value calculated on the basis of the actual number of hours worked assuming the total life to be 30,000 hours and assuming that the machinery will be properly looked after during the period of its operation. The remaining items of this group will be taken over by the Corporation at their residual value taking into account the actual number of hours worked and the standard life of such machinery for which Schedule F. as last relished, ? of the U. section Bureau of Industrial Revenue, on the probable useful life and depreciation rates allowable for Income Tax purpose (vide Engineering News Record dated March 17, 1949) will serve as a basis, provided that the machinery shall be properly looked after by the Contractor during the period of its operation. Provided further that such residual value of the machinery shall be assessed 530 jointly by representatives of the Corporation and of the Contractor and that in case of difference of opinion between the two parties the matter shall be settled through arbitration by a third party to be agreed to both by the Corporation and the Contractor. The items included in this group will be taken over by the Corporation from the Contractor either on the completion of the work or at an earlier date if the Contractor so wishes, provided that in the latter case the equipments will be taken over by the Corporation only when they are declared surplus at Konar and such declaration is duly certified by the Consulting Engineer, within a period of 15 days of such declaration being received by the Corporation. In respect of the machinery which shall have been delivered to the Contractor on or before the 31st of December 1950, their cost shall be recovered from the Contractor in eighteen equal instalments beginning with January 1951 and in respect of the remaining items included in this group of machinery, their cost will be recovered from the Contractor in eighteen equal instalments beginning with July 1951, provided that these remaining items shall have been delivered to the Contractor prior to the last specified date. Provided (a) that the total actual price for these equipments which has been provisionally estimated at Rs. 42,63,305 will be chargeable to the Contractor as per first para of clause 1 above. (b) that after approximately two thirds of total cost or an amount of Rs. 28,43,000 (Rupees twenty eight lakhs forty three thousand) approximately has been recovered from the Contractor on account of these equipments the Corporation will consider the date or dates when it could take over the equipments still under use by the Contractor, assess the, extent to which they have already been depreciated and thereby arrive at, their residual value; and (c) that the recovery or refund of the amount payable by or to the Contractor on account of these equipments will be decided only if the Corporation is fully satisfied that their residual life at the time of 531 their being finally handed over to the Corporation shall under no circumstances fall below one third of their respective standard life as agreed upon by the Corporation and the Contractor." Then follow terms and conditions in respect of Group 'B ' which are not relevant to our purpose. Thereafter, the following conditions appear: "In respect of equipments whether in Group A or B made available by the Corporation to the Contractor. The following conditions shall apply to all equipments, i.e., those included in Group A and B above and others, if any (a) The Contractor shall continuously maintain proper machine cards separately in respect of each item of equipment, clearly showing therein, day by day, the number of actual hours the machine has worked together with the dates and other relevant particulars. (b) The Contractor shall maintain all such equipments in good running condition and shall regularly and efficiently give service to all plant and machinery, as may be required by the Corporation 's Chief Engineer who shall have the right to inspect, either personally or through his authorised representatives all such plant and equipment and the machine cards maintained in respect thereof at mutually convenient hours. (c) No item of equipment made available by the Corporation on loan or hire shall at any time be removed from the work site under any circumstances until the full cost thereof has been recovered from the Contractor by the Corporation and thereafter only if in the opinion of the Consulting Engineer the removal of such item or items is not likely to impede the satisfactory prosecution of the work. Similarly no item of equipment or material belonging to the Contractor but towards the cost of which money has been advanced by the Corporation shall at any time be removed from the work site under any circumstances until the amount of money so advanced has been recovered from the Contractor by 532 the Corporation and thereafter if in the opinion of the Consulting Engineer the removal of such item or items is not likely to impede the satisfactory prosecution of the work. (d) The Corporation shall supply to the Contractor whatever spares have been procured or ordered for the equipment already supplied or to be supplied by the Corporation to the Contractor under the terms of this Agreement and that thereafter the replenishment of the stock of spares shall be entirely the responsibility of the Contractor who shall therefore take active steps in time to procure fresh spares so as to maintain a sufficient reserve. The spares to be supplied by the Corporation will be issued to the Contractor by the Executive Engineer, Konar as and when required by the Contractor against indent accompanied by a certificate that the spares previously issued to him have been actually used up on the machines for which they were intended. (e) Whenever spares are issued to the Contractor in accordance with this provision, their actual prices inclusive of freight, insurance and customs but excluding storage and handling charges shall be debited against him and recovered from his next fortnightly bill. (f) In order to enable the Contractor to take active steps for planning the procurement of additional spares in advance, the Corporation shall forthwith furnish to him a complete list of all the spares which it has procured or ordered for the equipment to be supplied to the Contractor. " The portions quoted above contain the relevant terms and conditions in respect of the transaction in question, so far as it is necessary to know them for the purpose of this case. It will be noticed that the Corporation made available to the Contractors different kinds of machinery and equipment detailed in Group A of the approximate value of Rs. 42,63,000 odd, for which the price paid by the Corporation inclusive of freight, insurance, customs duty etc. has to be charged to them. But the machinery and the equipment so 533 made available to the Contractors were to remain the property of the Corporation until the, full price thereof had been realised from the Contractors. It is also noteworthy that the agreement makes a distinction between the aforesaid part of the agreement and the equipment lent to the contractors in respect of which the contractors had to be charged in terms of hiring, including interest on capital cost and the depreciation of equipment. Thus clearly the agreement between the parties contemplated two kinds of dealings between them, namely (1) the supply of machinery and equipments by the Corporation to the Contractors and (2) loan on hire of other equipment on terms to be mutually agreed between them in respect of the machinery and equipment supplied by the Corporation to the Contractors. There is a further condition that the Corporation will take over from the contractors items 1 and 14, specifically referred to above, and the other items in Group A at their "residual value" calculated on the basis indicated in the paragraph following the description of the machinery and the equipments. But there is a condition added that the "taking over" is dependent upon the condition that the machinery will be properly looked after during the period of its operation. There is an additional condition to the taking over by the Corporation, namely, the work for which they were meant had been completed, or earlier, at the choice of the Contractors, provided that they are declared surplus for the purposes of the construction of the Konar Dam and so certified by the Consulting Engineer. Hence, it is not an unconditional agreement to take over the machinery and equipment as in Group B. The total approximate price of Rs. 42,63,305 is payable by the Contractors in 18 equal instalments. Out of the total cost thus made realisable from the Contractors two thirds, namely, Rs. 28,42,000 approximately, has to be realised in any case. After the two thirds amount aforesaid has been realised from the contractors on account of supply of the equipments by the Corporation, the Corporation had to consider the date or dates of the "taking over" of the equipment after assessing the extent to which it 534 had depreciated as a result of the working on the project in order to arrive at the "residual value" of the same. The refund of the one third of the price or such other sum as may be determined as the "residual value" would depend upon the further condition that the Corporation was fully satisfied that their "residual life" shall, under no circumstances, fall below one third of their respective standard life as agreed upon by the parties. It would, thus, appear that the "taking over" of such of the equipments as were available to be returned was not an unconditional term. The Corporation was bound to take them over only if it was satisfied that their "residual life" was not less than one third of the standard life fixed by the parties. It is clear from the terms and conditions quoted above that there was no right in the contractors to return any of the machinery and equipments at any time they liked, or found it convenient to do so. The conditions which apply to all equipments, whether in Group A or in Group B, are also relevant to determine the nature of the transaction. The contractors are required to "continuously maintain proper machine cards showing certain relevant particulars". It is their duty to maintain the equipments in good running condition and to regularly and effectively service them. No item of machinery and equipment could be removed by the contractors under any circumstances until the full cost thereof had been recovered from them and even then only if the removal of those items of machinery or equipment was not likely to impede the satisfactory progress of the work. Then follows the most important condition that the Contractors themselves shall have to replenish their stock of spare parts of the machinery made available to them by the Corporation. When spare parts are supplied to the Contractors by the Corporation, they shall be liable for the actual price of those parts inclusive of freight, insurance and customs duty. Those substantially are the terms of the contract between the parties and the sole question for determination in this appeal is whether, in respect of the machinery and equipments admittedly supplied by the Corporation to the Contractors, it was a mere 535 contract of hiring, as contended on behalf of the appellant Corporation, or a sale or a hire purchase, as contended on behalf of the respondent State. The law on the subject is not in doubt, but the difficulty arises in applying that law to the facts and circumstances of a particular case on a proper construction of the document evidencing the transaction between the parties. It is well settled that a mere contract of hiring, without more, is a species of the contract of bailment, which does not create a title in the bailee, but the law of hire purchase has undergone consider able development during the last half a century or more and has introduced a number of variations, thus leading to categories, and it becomes a question of some nicety as to which category a particular contract between the parties comes under. Ordinarily, a contract of hire purchase confers no title on the hirer, but a mere option to purchase on fulfillment of certain conditions. But a contract of hire purchase may also provide for the agreement to purchase the thing hired by deferred payments subject to the condition that title to the thing shall not pass until all the instalments have been paid. There may be other variations of a contract of hire purchase depending upon the terms agreed between the parties. When rights in third parties have been created by acts of parties or by operation of law, the question, which does not arise here, may arise as to what exactly were the rights and obligations of the parties to the original contract. It is equally well settled that for the purpose of determining as to which category a particular contract comes under, the court will look at the substance of the agreement and not at the mere words describing the category. One of the tests to determine the question whether a particular agreement is a contract of mere hiring or whether it is a contract of purchase on a system of deferred payments 'of the purchase price is whether there is any binding obligation on the hirer to purchase the goods. Another useful test to determine such a controversy is whether there is a right reserved to the hirer to return the goods at any time during the subsistence of the contract. If there is such a right reserved, then 536 clearly there is no contract of sale, vide Helby vs Matthews and others (1). Applying these two tests to the transaction in the present case, it becomes clear that it was a case of sale of goods with a condition of repurchase on certain conditions depending upon the satisfaction of the Corporation as to whether the "residual life" of the machinery or the equipment was not less than one third of the standard life in accordance with the terms agreed between the parties. It is clear on those terms that there is no right reserved to the contractors to return the goods at any time that they found it convenient or necessary. On the other hand, they were bound to pay two thirds of the total approximate price fixed by the parties in equal instalments. The Contractors were not bound under the terms to return any of the machinery or the equipments, nor was the Corporation bound to take them back unconditionally. The term in the agreement regarding the "taking over" of the machinery or equipments by the Corporation on payment of the "residual value" is wholly inconsistent with a contract of mere hiring and is more consistent with the property in the goods having passed to the Contractors, subject to the payment of all the instalments of the purchase pride. Furthermore, the stipulation that the Contractors themselves will have to supply the spare parts, as and when needed, for replacements of the worn out parts is also consistent with the case of the respondent that title had passed to the contractors and that they were responsible for the upkeep of the machinery and equipments and for depreciation. If it were a mere contract of hiring, the owner of the goods would have continued to be liable for replacements of worn out parts and for depreciation. Applying those tests to the terms of the agreement between the parties, it is clear that the transaction was a sale on deferred payments with an option to repurchase and not a mere contract of hiring, as contended on behalf of the appellant. It must, therefore, be held that the judgment of the High Court is entirely correct and the appeal must be dismissed with costs. Appeal dismissed.

The appellant Corporation was assessed to sales tax under section 13(5) of the Bihar Sales Tax Act, 1947, on the price of machinery and equipment, amounting approximately to Rs. 42,63,305, supplied to two contractor firms on the basis of an agreement which it entered into with them for the construction of a dam. The agreement provided, inter alia, that the price of the machinery and equipment supplied was to be paid by the contractors and until that was done they were to remain the property of the Corporation. It was further agreed that the Corporation would take them over after the completion of the work at their residual value, to be calculated in the manner set out in the agreement, provided that they were properly looked after during the period of operation; and if the contractors so chose earlier, if they were declared surplus and certified as such by the consulting Engineer. The price was to be paid in 18 equal instalments, two thirds of which was realisable in any case, and thereafter the Corporation was to consider the date or dates of taking them over after assessment of the depreciation in order to arrive at the residual value. The Corporation was not bound to take over if the residual life of the equipment fell below one third of the standard life as fixed by the parties. 523 The contractors were to replenish the stock of spare parts supplied to them at their own cost. The appellant 's case was that the transaction represented by the agreement was not a sale within the meaning of the Act. The Sales Tax authorities held against it and the only question that was ultimately referred to the High Court by the Board of Revenue under section 25 of the Act was whether the property in the equipment and machinery passed to the contractors and the transaction amounted to a sale. The High Court answered the question in the affirmative, holding that the transaction was a sale within the meaning of section 2(g) of the Act. The High Court having refused the necessary certificate, the appellant appealed by special leave granted by this court. Held, that the appeal must be confined to the question debated in the High Court. It is well settled that, while functioning in its advisory capacity under a taxing statute, the High Court cannot go beyond the question referred to it or on a reference called by it. That the appeal was by special leave could make no difference and the scope of the controversy could not be extended beyond what could be legally raised before the High Court. The two fold test to determine whether a particular agree ment is a contract of mere hiring or of purchase on deferred payments is (1) whether the hirer is under an obligation to purchase the goods and (2) whether he has the right to return the goods at any time during the subsistence of the contract. What has to be considered in each case is the substance of the agreement and not the words describing its category. Helby vs Matthews and others, , referred to. So judged, there could be no doubt that on the terms of the agreement between the parties the transaction in the instant case was clearly a sale on deferred payments with an option to repurchase and not a mere contract of hiring.

The Project and Equipment Corporation of India Ltd. was formed in 1971 as a wholly owned subsidiary company of State Trading Corporation, a Government of India Undertaking. In 1976 it was separated and since then it functions as a separate Government of India Undertaking. The appellant who joined the service under the State Trading Corporation originally and later exercised his option to serve the Project and Equipment Corporation with effect from November 9, 1976. The appellant while working as Deputy Finance Manager Grade II applied for and obtained (a) an advance in the amount of Rs. 16,050 for purchasing a plot of land on April 4, 1979 for which he executed the requisite agreement as required by 'the Project & Equipment Corporation of India Ltd., House Building Advance (Grant and Recovery) Rules, and (b) an advance in the amount of Rs. 11,000 for purchase of a new motor cycle on July 7, 1979 as admissible under "the Project and Equipment Corporation conveyance Advance (Grant and Recovery) Rules. Under these rules non utilisation of the amounts within the time limit will impose a liability of the refund of the entire amount forth with together with penal interest thereon. The appellant failed to utilise the amounts and also to refund the same. Therefore, coercive steps were taken to recover the entire amount of the House Building advance from his pay by stopping the payment of his salary from 16th November, 1979. As regards the conveyance advance, the receipts etc. for purchase made in 1980 were accepted. On July 22, 1980 a memorandum was served upon the appellant stating therein that the competent authority proposes to hold an enquiry against him under Rules 27 of the Project and Equipment Corporation of India Employees (Conduct, Discipline & Appeals Rules, 1975 in respect of the aforesaid mis utilization of the advances. The committee of Management in exercise of the powers conferred by sub rule (4) of Rule 27 of the 1975 rules appointed one Sri A.S. Nangia, its Chief Marketing Manager as the Enquiry Officer to enquire into the two charges against the appellant. The appellant submitted on June 13, 1980 a detailed statement pointing out that for various reasons therein mentioned so as to explain why there was delay in refunding the advance and specifically pleaded that in view of the fact that the first advance was sought to be recovered by withholding his salary and adjusting the pay towards the advance and charging penal interest and in the second case by accepting the document evidencing purchase of scooter no misconduct could be said to have been committed 648 by the appellant and the disciplinary enquiry was uncalled for. The enquiry officer in his report after recapitulating allegations and explanation simply concluded that the appellant has contravened Rule 10 (1) (c) (i) of the House Building Advance Rules, and also rules 8 and 10 (1) of the Conveyance Advance Rules and therefore committed misconduct punishable under Rule 4 (1) (iii) of the 1975 Rules. Pursuant to the report of the Enquiry Officer, the Executive Director for and on behalf of the Committee of Management of the corporation made an order PEC : P 5 (8) 77 dated February 4, 1981 stating that the Committee of management agrees with the findings of the inquiry officer and imposes the punishment of removal from service with effect from the date of the order. The appeal preferred to the Appellate Authority was rejected as per the Memorandum dated May 21,1981 signed by one Anand Krishna claiming to act for and on behalf of the Board of Directors. The appellant, therefore approached the High Court of Delhi under article 226 of the Constitution questioning the correctness and validity of the findings of the inquiry officer and the decision of the Disciplinary Authority as well as the appellate authority inter alia on the ground that the inquiry was held in violation of the principles of natural justice and the quasi judicial authority failed to give reasons in support of its order and the action taken against the appellant was per se arbitrary and violative of articles 14 and 16 of the Constitution inasmuch as the allegation contained in the heads of charges, even if unrebutted, do not constitute a misconduct within the meaning of the expression in 1975 Rules. In order to sustain the maintainability of the writ petition, the appellant also contended that the respondent is an instrumentality of the State and is comprehended in the expression 'other authority ' in article 21 of the Constitution. The writ petition came up for admission before a Division Bench of the Delhi High Court. It was dismissed in limine observing that the writ petition is not maintainable on the facts presently set out in the petition. Hence this appeal by special leave Allowing the appeal, the Court ^ HELD: 1: 1. Public sector undertakings and other instrumentalities of the State are comprehended in the expression other authority" in Article 12 of the Constitution. [660A] 1: 2. Once it is conceded that the respondent corporation is an instrumentality of the State and is therefore, comprehended in the expression 'other authority ' in article 12 of the Constitution, it is indisputable that it is amenable to the writ jurisdiction under articles 32 and 226 of the Constitution. Apart from the concession, the tests collated in the decision of the Constitution Bench of this Court in Ajay Hasia etc vs Khalid Mujib Sheravardi and Others etc ; for determining whether a particular body is an instrumentality of the State are fully satisfied and therefore on precedent and concession it is satisfactorily established that the respondent Corporation is an instrumentality of the State within the 649 meaning of the expression 'other authority ' under article 12 of the Constitution and is amenable to the writ jurisdiction. The writ petition filed by the appellant in the High Court was thus maintainable. [660D E] 2. When once it is conceded that the respondent was amenable to the writ jurisdiction, the question that will arise is whether the matter should be remitted to the High Court as the High Court has rejected the writ petition in limine on the ground that the respondent was not amenable to the writ jurisdiction of the High Court. In order not to protract the litigation involving livelihood of the party approaching the Supreme Court for justice, the Court can set down the appeal for final hearing on merits, which they did in the instant case. [660F H] 3:1 It cannot be said that executive action which results in denial of equal protection of law or equality before law cannot be judicially reviewed nor can be struck down on the ground of arbitrariness as being violative of article 14. [661E F] 3:2 The scope and ambit of Article 14 have been the subject matter of a catena of decisions. It is well settled that Article 14 strikes at arbitrariness in executive/administrative action because any action that is arbitrary must necessarily involve the negation of equality. One need not confine the denial of equality to a comparative evaluation between two persons to arrive at a conclusion of discriminatory treatment. An action per se arbitrary itself denies equal protection of law. It is thus too late in the day to contend that an executive action shown to be arbitrary is not either judicially reviewable or within the reach of Article 14. [662A, F G, 663A B] Ajay Hasaia etc. Khalid Majid Shehravardi and Ors[1981] 2 S.C.R 79; E.P.Royappa vs State of Tamil Nadu and anr. ; ; D. section Nakara vs Union of India [1983] I S C. C. 305 and Maneka Gandhi vs Union of India [1978] 2 section C. R. 621 followed. Wisdom of the legislative policy may not be open to judicial review but when the wisdom takes the concrete form of law, the same must stand the test of being in tune with the fundamental rights and if it trenches upon any of the fundamental rights, it is void as ordained by article 13, Conceding for the present purpose that legislative action follows a legislative policy and the legislative policy is not judicially reviewable, but while giving concrete shape to the legislative policy in the form of a statute, if the law violates any of the fundamental rights including article 14, the same is void to the extent as provided in article 13. If the law is void being in violation of any of the fundamental rights set out in Part II of the Constitution, it cannot be shielded on the ground that it enacts a legislative policy. [661F H] 5. Even if the respondent Corporation is an instrumentality of the State as comprehended in article 12, yet the employees of the Corporation are not governed by Part XIV of the Constitution. However it could not be 650 said that the protection conferred by Part III on the public servant is comparatively Less effective than the one conferred by Part XIV. Therefore the distinction sought to be drawn between protection of part XIV of the Constitution and part III has no significance. [663B C, 665A] Managing Director. Uttar Pradesh Warehousing Corporation & Anr. vs Vinay Narayan Vajpayee; ; at p. 784, relied upon. Even if the facts alleged in two heads of charges are accepted as wholly proved, yet that would not constitute misconduct as prescribed in Rule 5 and no penalty can be imposed for such conduct, for the reason that while Rule 25 which prescribes penalties specifically provides that any of the penalties therein mentioned can be imposed on an employee for misconduct committed by him. Rule 4 does not specify a misconduct. Rule 4 styled as 'General ' specifies a norm of behaviour but does not specify that its violation will constitute misconduct. In Rule 5, it is nowhere stated that anything violative of Rule 4 would be per se a misconduct in any of the sub clauses of Rule 5 which specifies misconduct. [666B D] 6:2. A general expectation of a certain decent behaviour in respect of employees keeping in view corporate culture may be a moral or ethical expectation. Failure to keep to such high standard of moral; ethical or decorous behaviour befitting an officer of the company by itself cannot constitute misconduct unless the specific conduct falls in any of the enumerated misconduct in Rule 5. Any attempt to telescope Rule 4 into Rule 5 must be looked upon with apprehension because Rule 4 is vague and of a general nature and what is unbecoming of a public servant may vary with individuals and expose employees to vagaries of subjective evaluation. What in a given context would constitute conduct unbecoming of a public servant to be treated as misconduct would expose a grey area not amenable to objective evaluation. Where misconduct when proved entails penal consequences, it is obligatory on the employer to specify and if necessary define it with precision and accuracy so that any ex post facto interpretation of some incident may not be camouflages as misconduct. [665 D G] M/s Glaxo Laboratories (I) Ltd vs Presiding Officer, Labour Court, Meerut & Others; , followed. Seeking advance and granting the same under relevant rules is at best a loan transaction. The transaction may itself provide for payments and the consequences of failure to repay or to abide by the rules. If the rules for granting the advance themselves provided the consequence of the breach of conditions, it would be idle to go in search of any other consequence by initiating any disciplinary action in that behalf unless the 1975 Rules specifically incorporate a rule that the breach of House Building Advance Rules and the conveyance advance rules, would by themselves constitute a "misconduct". Therefore Rule 4 (1) is not only, not attracted but in this case no attempt was made to establish the correction. And 651 as far as Rule 4 (1) (iii) is concerned, an advance not refunded in time where it was recovered by withholding the salary of a highly placed officer may not disclose a conduct unbecoming of a public servant. Therefore, the first head of charge is an eye wash, It does not constitute a misconduct if it can be said to be one even if it remains unrebutted. The inquiry officer has not said one word how the uncontroverted facts constitute a conduct unbecoming of a public servant, or he failed to maintain absolute integrity. Regarding the conveyance advance the position is the same. The appellant for no fault has been punished sub silencio. [667F H, 668A, D E, 669H] 7:2. Now if what is alleged as misconduct does not constitute misconduct not by analysis or appraisal of evidence, but per se under 1975 Rules the respondent had neither the authority nor the jurisdiction nor the power to impose any penalty for the alleged misconduct. An administrative authority who purports to act by its regulation must be held bound by the regulation. [670H, 671A] 8. In the matter of public employment if the termination is held to be dba, a declaration can be granted that the man continues to be in service. [671G, 672A] Sukhdev Singh & Ors. vs Bhagatram Sardar Singh. Raghuvanshi & Anr. ; @ 655. Western India Automobile Association vs Industrial Tribunal, Bombay and Ors.[1949] F.C.R. 321 at 340. The duty to give reasons would permit the court hearing a petition for a writ of certiorari to ex facie ascertain whether there is any error apparent on the record. A speaking order will at its best be reasonable and at its worst be at least a plausible one. If reasons for an order are given there will be less scopes for arbitrary or partial exercise of power and the order ex facie will indicate whether extraneous matters were taken into consideration by authority passing the order. [672D E] M.P. Industries Ltd. vs Union of India and Others ; at 472; Vadacha Mudaliar vs State of Madras, A.I.R. 1952 Madras 276; Bhagat Raja v Union of India and Others, ; @ 320; referred to. Here, the findings of the inquiry officer are merely his ipse dixit. No reasons are assigned for reaching the finding and while recapitulating evidence self contradictory positions were adopted that either there was no misconduct or there was some misconduct or double punishment was already imposed. Rule 27 (19) casts an obligation upon the inquiry officer at the conclusion of the inquiry to prepare a report which must inter alia include the findings on each article of charge and the reasons therefore. The report is prepared in contravention of the aforementioned rule. The situation is further compounded by the fact that the disciplinary authority which is none other than Committee of Management of the Corporation while accepting the report of the inquiry officer which itself was defective did not assign any 652 reasons for accepting the report of the inquiry officer. Further sub rule (ii) of Rule 35 provides amongst others that the Appellate Authority shall consider whether the findings are justified or whether the penalty is excessive or inadequate and pass appropriate orders within three months of the date of appeal. In order to ascertain whether the rule is complied with, the order of the appellate authority must show that it took into consideration the findings the quantum of penalty and other relevant considerations. There is no material for showing that the appellate authority acted in consonance with its obligation under Rule 35. [672E H, 673A D E] 9:3. Therefore, the order of removal passed by the Disciplinary Authority is illegal and invalid for the reasons (i) that the action is thoroughly arbitrary and is violative or article 14; (ii) that the alleged misconduct does not constitute misconduct within the 1975 Rules; (iii) that the inquiry officer himself found that punishment was already imposed for the alleged misconduct by withholding the salary and the appellant could not be exposed to double jeopardy; and (iv) that the findings of the inquiry officer are unsupported by reasons and the order of the Disciplinary Authority as well as the Appellate Authority suffer from the same vice. [673H. 674A B] 10:1. Once the order of removal from service is held to be illegal and invalid and the appellant being in public employment, the necessary declaration must follow that he continues to be in service uninterruptedly. Ordinarily, it is well settled that if termination of service is held to be bad, no other punishment in the guise of denial of back wages can be imposed and therefore, it must as a necessary corollary follow that he will be entitled to all the back wages on the footing that he has continued to be in service uninterruptedly. If the appellant had procured an alternative employment he would not be entitled to wages and salary from the respondent But it is equally true that an employee depending on salary for his survival when he is exposed to the vagaries of the court litigation cannot hold on to a slender distant hope of judicial process coming to his rescue and not try to survive by accepting an alternative employment, a hope which may turn out to be a mirage. Therefore, the appellant was perfectly justified in procuring an alternative employment in order to keep his body and soul together as also to bear the expenses of litigation to vindicate his honour, integrity and character. [674B G] 10:2. However, in the instant case, the appellant should be paid 50% of the back wages for the rest of the period during which he remained unemployed. This is so because the conduct of the appellant cannot be said to be entirely in consonance with corporate culture. As a highly placed officer he was bound to strengthen the corporate culture and he should have acted within the spirit of the regulations both for house building advance and conveyance advance, which are devised to help the employees. There has been lapse in totally complying with these regulations by the appellant though it neither constitutes misconduct to attract a penalty nor substantially good enough for initiation of disciplinary inquiry. [675A C] 653

The appellant company was manufacturing and selling black and galvanised steel tubes and pipes. In the assess ment proceedings for the years 1982 83 and 1983 84 under the Kerala General Sales Tax Act, 1963 the appellant contended that since the galvanised pipes manufactured by it were "declared goods" they were not liable to additional sales tax as well as surcharge. Rejecting the contention, the assessing authority taxed the turnover of galvanized iron pipes at four per cent and also assessed an additional tax and surcharge treating the galvanized iron pipes as 'goods ' falling under Entry 46 of the First Schedule to the Kerala Sales Tax Act. Demands were raised from the Appellant compa ny accordingly. The Company filed a writ petition in the High Court. The High Court, held that as a result of the process of galvani sation the galvanised iron pipes had acquired different commercial identity and therefore, could not be identified with steel tubes mentioned in Section 14(iv)(xi) of the . In these appeals on the question: whether galvanised iron pipes and tubes are a commercially different commodity from steel tubes mentioned in Section 14(iv)(xi) of the . Allowing the appeals and setting aside the judgment and order of the High Court, this Court, 211 HELD: 1. Galvanised pipes are steel tubes within the meaning of Section 14(iv)(xi) of the . The view taken by the High Court to the contrary was errone ous. [213E] 2. Galvanisation is done on steel tubes or pipes as a protective measure only, i.e., to make it weather proof. Merely because the steel tube has been galvanised does not mean that it ceases to be a steel tube. It still remains a steel tube and neither its structure nor function is al tered. Galvanisation does not bring a new commodity into existence and as a commercial item it is not different from a steel tube. [212H, 213A C] Commissioner of Sales Tax vs Mitra Industries, [1988] 69 S.T.C. (Note No. 55 at p. 16) applied. Associated Mechanical Industries vs Commissioner of Commercial Taxes, Bangalore, [1986] 61 S.T.C. 225; Commis sioner of Sales Tax vs Om Engineering Works, [1986] U.P.T.C. 55; State of Gujarat vs Shah Veljibhai Motichand Lunawada, [1969] 23 S.T.C. 288 and Sales Tax Commissioner and Ors. vs Jammu Iron and Steel Syndicate, [1980] 45 S.T.C. 99, ap proved. Apollo Tubes Limited vs State of Kerala, [1986] 61 S.T.C. 275. overruled. Deputy Commissioner of Commercial Taxes, Tiruchirapalli vs P.C. Mohammed Ibrahim Marakayar Sons, [1980] 46 S.T.C. 22. Not approved. Deputy Commissioner of Sales Tax (Law) Board of Revenue vs G.S. Pai & Co., ; , Distinguished.

The appellants belonging to the Revenue Department of Gujarat State were allocated to the Panchayat Service when the Gujarat Panchayats Act, 1961 came into force and their allocation became final under section 206A(2) of the Act. Thereafter they went on deputation as Circle Inspectors in the State service but were later reverted back to their parent cadre in the Panchayat Service. The appellants challenged their reversion before the High Court which dismissed the petition. Hence this appeal. Dismissing the appeal, this Court, HELD: 1. It is clear from section 206A(2) of the Gujarat Panchayats Act, 1961 that a Panchayat servant who is not reallocated within a period of four years from the coming into force of the Act would be deemed to be finally allocat ed to the Panchayat Service. The High Court has held that the appellants have not been able to show that they made any such options before the specified date. Even if the appel lant gave some sort of option the same having not been accepted before the expiry of specified date, the appellants stood finally allocated to the Panchayat Service. [416B C] 2. The appellants being on deputation they could be reverted to their parent cadre at any time and they do not get any right to be absorbed on the deputation post. There is no infirmity In the judgment of the High Court. [416D]

In Civil Appeal No. 855(N) of 1979 and Civil Appeal No. 2665 of 1991 the issue raised was common and relating to the date of merger of the two departments of the Government of India, in the field of mines and minerals, namely (i) Exploration Wing of the Indian Bureau of Mines (IBM) and (ii) Geological Survey of India (GSI). Between 1.1.1966 to 4.2.1969 thirty nine Lower Division Clerks belonging to GSI were promoted as Upper Division Clerks against the vacancies that arose in the GSI. They were juniors to their counterparts in the IBM. Being aggrieved by the said promotions, the respondents who originally belonged to the IBM, preferred Special Civil Application in the Bombay High Court for setting aside the seniority list and for a direction to consider their cases of promotion with effect from 1 January, 1966 and not from 4 February 1969 and therefore, there cannot be two separate channels of promotions from 1 January 1966 one from the employees of the Exploration Wing of IBM and another for the employees of GSI. The appellants contended that the Officers of GSI were promoted on the ground that the actual merger took place not on 1 January 1966 but on 4 February 1969. The High Court allowed the petition against which Civil Appeal No. 855(N) of 1979 has been preferred. A Senior Technological Assistant (Geology) of the erstwhile IBM moved the Karnataka High Court for similar relief contending inter 894 alia that this case ought to have been considered for promotion in the merger cadre with effect from 1 January 1966. The Karnataka High Court also allowed his claim with a direction to consider him for promotion with effect from 1 January 1966 in the merged cadre. That decision was not implemented by the GSI. In the contempt proceedings taken for disobedience of the judgment, the High Court allowed six weeks time for compliance, against which, SLP(C) No. 4906 of 1991 has been preferred. Respondents relying on the letters dated 10 December 1965 and 29 November 1966 contended in support of the decision of the High Courts that the merger took place on 1 January 1966, whereas the appellants took assistance from terms of the letter dated 4/6 February 1969 in support of the counter plea. Allowing the appeals, this Court, HELD: 1. The statements in the letter make it abundantly clear that it was only administrative control of the relevant wings of IBM that were transfered to GSI with effect from 1 January 1966. The letter does not refer to the decision of merger of the two departments. [902E] 2. The decision taken on the merger of the posts was communicated by subsequent letters dated 28 June 1967 and 4/6 February 1969. By letter dated 28th June 1967 the Government communicated the sanction of merger of class I IBM and GSI (Proper) with immediate effect. The letter also contains certain instructions to department about service conditions and seniority of persons in the amalgamated cadres of class I & II posts. The decision with regard to merger in respect of other categories of posts which include are concerned in these cases is contained in the letter dated 4/6 February 1969. [902F G] 3. The letter dated 4/6 February 1969 further provides the inter se seniority of the incumbent in the merged cadres will be governed in accordance with the principles laid down in the earlier letter dated 28th June 1967. The merger/revision of the scales of pay does not involve any change in the nature of duties of the respective posts. The Officers concerned in the merged cadre will be given options in writing for opting the new scales of pay in the merged. In case an individual concerned fails to exercise the option within the time limit, he will be treated to have accepted the new scale of pay. It will be apparent from the terms of the letter dated 4/6 February 1969 that the posts 895 referred to in the letter were merged with GSI with effect from 4 February 1969 would be unnecessary and uncalled for. [903A C] 4. Provisional seniority list and the statement of introduction to the compilation are no evidence of the date of merger do not reflect the decision of the Govt. of India.

The respondents brought a suit for a mandatory injunction directing the removal of certain masonry structure on suit site and for a permanent injunction restraining the appellants from encroaching upon the suit property and from causing obstruction to the right of way of the residents of the village. They claimed that the suit property formed part of a public street and the appellants had no right to encroach upon it. The appellants claimed the suit property as absolute owners and as such, they were entitled to use it in any manner they pleased. The trial. Court decreed the suit. On appeal, the learned Subordinate Judge set aside the decree. On challenge of this decree by the respondents in second appeal before the High Court, the learned single Judge passed a decree in their favour. All that the learned Judge stated in his judgment was that "after a careful consideration of all the issues that arise for decision in this second appeal, I am of the opinion that the best form in which a decree could be given to the plaintiffs is in the following terms" and then he proceeded to set out the terms of his decree. On appeal by Special Leave the appellants contended that the method adopted by the learned Judge in disposing of the second appeal before him clearly shows that the judgment delivered by him cannot be sustained. The respondents, raised a preliminary objection that since the appellants did not avail themselves of the remedy available to them under the Letters Patent of the High Court either the special Leave granted by this Court should be revoked, or the appeal should be dismissed. Held: It would not be possible to lay down an unqualified rule that special leave should not be granted if the party has not moved for leave under the Letters Patent and it cannot be so granted, nor is it possible to lay down an inflexible rule that if in such a case special leave has been granted, it must always and necessarily be revoked. Having regard to the wide scope of the powers conferred on this Court under article 136, it is not possible and, indeed, it would not be expedient, to lay down any general rule which would govern all cases. The question as to whether the jurisdiction of this Court under article 136 should be exercised or not, and if yes, on what terms and conditions, is a matter which this Court has to decide on the facts of each case. 50 Raruha Singh vs Achal, A.I.R. 1961, S.C. 1097, referred to. In the present case, the learned Judge passed an order which reads more like an award made by an arbitrator who, by terms of his reference, is not under an obligation to give reasons for his conclusions embodied in the award. When such a course is adopted by the High Court in dealing with second appeals, it must obviously be corrected and the High Court must be asked to deal with the matter in a normal way in accordance with law. Therefore, the decree passed in second appeal, must be set aside on the ground that the judgment delivered by the learned Judge did not satisfy the basic and legitimate requirements of a judgment under the Code of Civil Procedure.

Respondent No. 1 a Private Limited Company, was sanctioned a loan of Rs.30 lakh by the Appellant Corporation for the setting up of a factory. To secure this loan a mortgage deed of certain properties was executed by the Company and Respondents 2 to 4 as its directors had executed a personal Surety Bond without any security for its repayment. After obtaining a part of the sanctioned loan, which was to be given in phases, the Company became disinterested in availing of the balance amount. Consequently the Corporation demanded back the amount ahead taken together with interest and on the company 's failure to do so, it took over the Industrial Concern under section 29 of the Act and initiated steps to realise its dues by putting the property to sale. Having failed to recover the amount as no adequate offer was forthcoming despite repeated advertisements, it filed a petition before the Bombay High Court under sections 31 and 32 of the Act both against the Company as well as its directors sureties praying for a decree in the sum of Rs. 15,87,391.20 to be passed against them jointly and severally. The respondents contested the petition contending (a) that a petition under sections 31 and 32 of the Act could be filed only before the City Civil Court and the High Court had no jurisdiction to entertain it, (b) that no money decree can be passed under sections 31 and 32 of the Act, and (c) that the provision in the Act relating to enforcement of the 481 liablity of surety were ultra vires of Article 149 of the Constitution. The learned single judge relying on an earlier decision of the Bombay High Court reported in 1987 Mah. L.J 243 held that the High Court had to entertain the petition but on merits took the view that no money decree could be passed under sections 31 and 32 even against the sureties and since in the instant case the sureties had not given any security except their personal guarantee, the same could be enforced only in the ordinary course and not under the special machinery provided under the Act. In view of his findings on the first two pleas no arguments were entertained on the last plea and accordingly the petition was dismissed. The Division Bench while dismissing the appeal not only upheld the finding of the single Judge on merits but also overruled the decision reported in and held that the High Court had no jurisdiction to entertain a petition under sections 31 and 32 of the Act. The Corporation came up in appeal before this court by special leave against this decision of the High Court of Bombay. The impugned judgement was assailed by the Appellant Corporation both on merites and on the plea of juridiction. The respondents in reply asserted that the findings of the High Court on both pleas were unassailable. Allowing the appeal, by a majority decision, HELD: A. By the Full Court (i)The extent of the liability stated in the application as contemplated by sub section (2) of section 31 of the Act would represent the value of the claim of the Corporation and if since value is upto Rupees Fifty Thousand, the application would lie in the City City Court and if it is more than that amount it would lie in the High Court. This interpretation would give meaning and relevance to the words "having jurisdiction" used in sub section (11) of section 32. A different interpretation would render superfluous or otiose not only the words "having jurisdiction" but also the words and in the absence such court, by the High Court, occurring in the said sub section (11) inasmuch as in a Presidency town, in terms of territorial jurisdiction, the jurisdiction of the City Civil Court and of the High Court is co terminus [495D F] (ii) In the instant case the extent of liability of the surety being more than Rupees fifty thousand, the application could only have been filed and was rightly filed in the High Court and the finding in the 482 judgment under appeal to the contrary for holding that the High Court had no jurisdiction to entertain the application cannot be sustained. [497A] B. Per N. D. Ojha, J. for himself and Ranganathan, J. (iii) There can be no doubt that the term, "any surety" used in clause (aa) in sub section (1) of section 31 of the Act, will include not only a surety who has given some security but also one who has given only a personal guarantee. In our opinion, in a case where the relief claimed in the application under section 31(1) of the Act is for enforcing the liability of a surety who has given only a personal guarantee, sub section 4(A) of section 32 where no cause is shown and clause (da) of sub section (7) where cause is shown, contemplate cutting across and dispensing with the provisions of the Code of Civil Procedure from the stage of filing a suit to the stage of obtaining a decree against the surety, the passing of an order which can straightaway be executed as if it were a decree against the surety which may be passed in the event of suit being filed. [498F, 499E] (iv) In the absence of any provision such as sub section (8) of section 32 of the Act applying the manner provided in the Code for the execution of a decree against a surety only "as far as practicable" the entire provision contained in this behalf in the Code shall be applicable. This would be so in view of the use of the expression "any other law for the time being applicable to an industrial concern" used in section 46B of the Act. That the Code is applicable to an industrial concern also is not in dispute and cannot be doubted. [50OH 501A] (v) Even in the absence of section 46B of the Act the provisions of the Code would have been attracted in the matter of enforcing the liability of a surety in view of the decision of this Court in National Sewing Thread Co. Ltd. vs James Chadwick & Bros. Ltd., ; inasmuch as the District Judge while exercising jurisdiction under sections 31 and 32 of the Act is not a persona designate but a court of ordinary civil jurisdiction. [501B D] (Per section C. Agrawal, J. Dissenting.) It cannot be comprehended that while making provision which would enable passing of an order in the nature of a money decree against a surety on an application under section 31 of the Act, Parliament would have refrained from making a corresponding provision prescribing the procedure for carrying into effect such an order. It 483 appears to be more in consonance with the scheme of the Act and the object underlying sections 31 and 32 that by introducing the amendments in sections 31 and 32 of the Act the Parliament intended to place the surety on the same footing as the principal debtor so as to enable the Financial Corporation to obtain relief against the properties of the principal debtor as well as the surety [515E G] If considered in this perspective, the expression "enforcing the liability of any surety" in clause (aa) of section 31(1) would mean enforcing the liability of a surety in the same manner as the liability of principal debtor is enforced, by attachment and sale of property keeping in view that the proceedings under sections 31 and 32 of the Act are akin to an application for attachment of property in execution of a decree at a stage posterior to the passing of the decree. The relief of a money decree sought against the sureties respondents 2 to 4 was not maintainable and the said relief could not be granted to the appellant in proceedings under section 31 of the Act. As a result, the petition filed by the appellant must be dismissed and for the same reason this appeal must fail. [515G 516A, 516D E] Munnalal Gupta vs Uttar Pradesh Financial Corporation & Anr. ,A.I.R. 1975 Allahabad 416; Thressiamma Varghese vs K. section F. Corporation, A.I.R. 1986 Kerala 222; Maharashtra State Financial Corporation vs Hindtex Engineers Pvt. Ltd., ; Kayastha Training & Banking Corporation Ltd vs Sat Narain Singh, All. 433; M. K. Ranganathan & Anr. vs Government of Madras & Ors. ,[1955] 2 S.C.R. 374; The Central Talkies Ltd., Kanpur vs Dwarka Prasad, ; , referred to. Maganlal V. MIS. Jaiswal Industries, Neemach & Ors., ; ; M/s. Everest Industrial Corporation & Ors. vs Gujarat State Financial Corporation, [1987] 3S.C.C. 597; Parkash Playing Cards Manufacturing Co. vs Delhi Financial Corporation, ; Gujarat State Financial Corporation V. Natson Manufacturing Co. Pvt. Ltd. & Ors., , distinguished. West Bengal Financial Corporation vs Gluco Series Pvt. Ltd. ,A.I.R. , approved.

The appellant was a member of a joint Hindu family which carried on the business of Government stockists of grain under a contract with the Government of Bihar. His nomination for election to the Bihar Legislative Assembly was rejected on the ground that he was disqualified under section 7(d) of the Representation of the People Act, 195T, as he had an interest in a contract for the performance of services undertaken by the Bihar Government. The appellant contended that the service undertaken by the Government was the sale of foodgrains under the Grain Supply Scheme and the contract was not for the sale of such foodgrains and did not attract the provisions of section 7(d). Held, that the contract was not one for the performance of any service undertaken by the Government and the appellant was not disqualified under section 7(d). A contract of bailment which imposed on the bailee the obligation to stock and store the foodgrains in his godowns was not a contract for the purpose of the service of sale of grain which the Government had undertaken. The Government had undertaken the work of supplying grain but the contract was not one for the supply of grain. N. Satyanathan vs K. Subramanyam, ; and V. V. Ramaswamy vs Election Tribunal, Tirunelveli, , distinguished.

Appeal No. 353 of 1959. Appeal from the judgment and order dated April 22, 1958, of the Punjab High Court (Circuit Bench) at Delhi in Civil Writ No. 257 D of 1957. M. C. Setalvad, Attorney General of India, section N. Andley, J. B. Dadachanji Rameshwar Nath and P. L. Vohra, for the Appellant. G. section Pathak, R. L. Anand and Janardan Sharma, for the respondent No. 2. 591 1960. November 22. The Judgment of the Court was delivered by WANCHOO, J. This is an appeal on a certificate granted by the Punjab High Court. Sharda Singh (hereinafter called the respondent) was in the service of the appellant mills. On August 28, 1956, the respondent was transferred from the night shift to the day shift in accordance with para 9 of the Standing Orders governing the workmen in the appellant mills. At that time an industrial dispute was pending bet ween the appellant mills and their workmen. The transfer was to take effect from August 30, 1956; but the respondent failed to report for work in the day shift and was marked absent. On September 1, 1956, he submitted an application to the General Manager to the effect that he had reported for duty on August 30, at 10 30 p.m. and had worked during the whole night, but had not been marked present. He had again gone to the mills on the night of August 31, but was not allowed to work on the ground that he had been transferred to the day shift. He complained that he had been dealt with arbitrarily in order to harass him. Though he said that he had no objection to carrying out the orders, he requested the manager to intervene and save him from the high handed action taken against him, adding that the mills would be responsible for his wages for the days he was not allowed to work. On September 4, 1956, he made an application to the industrial tribunal, where the previous dispute was pending, under section 33 A of the , No. XIV of 1947, (hereinafter called the Act) and complained that he had been transferred without any rhyme or reason from one shift to another and that this amounted to alteration in the conditions of his service, which was prejudicial and detrimental to his interest. As this alteration was made against the provisions of section 33 of the Act, he prayed for necessary relief from the tribunal under section 33 A. On September 5, 1956, the General Manager replied to the letter of September 1, and told the respondent that his transfer from. one shift to the other had been ordered on 592 August 28, and he had been told to report for work in the day shift from August 30; but instead of obeying the order which was made in the normal course and report for work as directed he had deliberately disobeyed the order and reported for work on August 30 in the night shift. He was then ordered to leave and report for work in the day shift. He however did not even then report for work in the day shift and absented himself intentionally and thus disobeyed the order of transfer. The General Manager therefore called upon the respondent to show cause why disciplinary action should not be taken against him for wailfully refusing to obey the lawful orders of the departmental officers and he was asked to submit his explanation within 48 hours. The respondent submitted his explanation on September 7, 1956. Soon after it appears the appellant mills received notice of the application under section 33 A and they submitted a reply of it on October 5, 1956. Their case was that transfer from one shift to another was within the power of the management and could not be said to be an alteration in the terms and conditions of service to the prejudice of the workman and therefore the complaint under section 33 A was not maintainable. The appellant mills also pointed out that a domestic inquiry was being held into the subsequent conduct of the respondent and prayed that proceedings in the application under section 33 A should be stayed till the domestic inquiry was concluded. No action seems to have been taken on this complaint under section 33 A, for which the appellant mills might as they had prayed for stay However, the domestic inquiry continued and on February 25, be partly responsible of those proceedings. against the respondent 1957, the inquiry officer reported that t e charge of misconduct was proved. Thereupon the General Manager passed an order on March 5, 1957, that in view of the serious misconduct of the respondent and looking into his past records, he should be dismissed; but as an industrial dispute was pending then, the General Manager ordered that the permission of the industrial tribunal should be taken before the order of dismissal was 593 passed and an application should be made for seeking such permission under section 33 of the Act. In the meantime, a notification was issued on March 1, 1957, by which 10th March, 1957, was fixed for the coming into force of certain provisions of the Central Act, No. XXXVI of 1956, by which sections 33 and 33 A were amended. The amendment made a substantial change in section 33 and this change came into effect from March 10, 1957. The change was that the total ban on the employer against altering any condition of ser vice to the prejudice of workmen and against any action for misconduct was modified. The amended section provided that where an employer intended to take action in regard to any matter connected with the dispute or in regard to any misconduct connected with the dispute, he could only do so with the express permission in writing of the authority before which the dispute was pending; but where the matter in regard to which the employer wanted to take action in accordance with the Standing Orders applicable to a workman was not connected with the dispute or the misconduct for which action was proposed to be taken was not connected with the dispute, the employer could take such action as he thought proper, subject only to this that in case of discharge or dismissal one month 's wages should be paid and an application should be made to the tribunal before which the dispute was pending for approval of the action taken against the employee by the employer. In view of this change in the law, the appellant mills thought that as the misconduct of the respondent in the present case was not connected with the dispute then pending adjudication, they were entitled to dismiss him after paying him one month 's wages and applying for approval of the action taken by them. Consequently, no application was made to the tribunal for permission in accordance with the order of the General Manager of March 5, 1957, already referred to. Later, on April 2, 19579 an order of dismissal was passed by the General Manager after tendering one month 's wages to the respondent and an application was made to the authority concerned for approval of the action taken against the respondent. 594 Thereupon the respondent filed another application under section 33 A of the Act on April 9, 1957, in which he complained that the appellant mills had terminated his services without the express permission of the tribunal and that this was a contravention of the provisions of section 33 of the Act; he therefore prayed for necessary relief. On April 18, 1957, an interim order was passed by the tribunal on this application by which as a measure of interim relief, the appellant mills were ordered to permit the respondent to work with effect from April 19 and the respondent was directed to report for duty. It was also ordered that if the management failed to take the respondent back, the respondent would be paid his full wages with effect from April 19 after he had reported for duty. On May 6, 1957, however, the application dated April 9, 1957, was dismissed as defective and therefore the interim order of April 18 also came to an end. On the same day (namely, May 6, 1957), the respondent made another application under section 33 A in which he removed the defects and again complained that his dismissal on April 2, 1957, without the express previous permission of the tribunal was against section 33 and prayed for proper relief. It is this application which is pending at present and has not been disposed of, though more than three years have gone by. It is also not clear what has happened to the first application of September 4,1956, in which the respondent complained that his conditions of service had been altered to his prejudice by his transfer from one shift to another. Applications under section 33 and section 33 A of the Act should be disposed of quickly and it is a matter of regret that this matter is pending for over three years, though the appellant mills must also share the blame for this state of affairs ' However, the appellant mills gave a reply on May 14,1957, to the last application under section 33 A and objected that there was no breach of section 33 of the Act, their case being that the amended section 33 applied to the order of dismissal passed on April 2, 1957. Further, on the merits, the appellant mills ' case was that the dismissal was in the circumstances justified. 595 The matter came up before the tribunal on May 16, 1957. On this date, the tribunal again passed an interim order, which was to the effect that as a measure of interim relief, the respondent should be permitted to work from May 17 and the respondent was directed to report for duty. It was further ordered that in case the management failed to take him back, they would pay him his full wages with effect from the date he reported for duty. Thereupon the appellant mills filed a writ petition before the High Court. Their main contention before the High Court was two fold. In the first place it was urged that the tribunal had no jurisdiction to entertain an application under section 33 A of the Act in the circumstances of this case after the amended sections 33 and 33 A came into force from March 10, 1957. In the alternative it was contended that the tribunal had no jurisdiction to pass an interim order of reinstatement or in lieu thereof payment of full wages to the respondent even before considering the questions raised in the application under section 33 A on the merits. The High Court held on the first point that in view of section 30 of the Industrial Disputes (Amendment and Miscellaneous Provisions) Act, No. XXXVI of 1956, the present case would be governed by section 33 as it was before the amendment and therefore the tribunal would have jurisdiction to entertain the complaint dated May 6, 1957, under section 33 A of the Act. On the second point, the High Court held that the order of the tribunal granting interim relief was within its jurisdiction and was justified. In consequence, the writ petition was dismissed. Thereupon the appellant mills applied and was granted a certificate by the High Court to appeal to this Court; and that is how the matter has come up before us. The same two points which were raised in the High Court have been urged before us. We are of opinion that it is not necessary in the present case to decide the first point because we have come to the conclusion that the interim order of May 16, 1957, is manifestly erroneous in law and cannot be supported. Apart from the question whether the tribunal had jurisdiction 596 to pass an interim order like this without making an interim award, (a point which was considered and left open by this Court in The Management of Hotel Imperial vs Hotel Workers ' Union (1)), we are of opinion that where the tribunal is dealing with an application under section 33 A of the Act and the question before it is whether an order of dismissal is against the provisions of section 33 it would be wrong in law for the tribunal to grant reinstatement or full wages in case the employer did not take the workman back in its service as an interim measure. It is clear that in case of a complaint under section 33 A based on dismissal against the provisions of section 33, the final order which the tribunal can pass in case it is in favour of the workman, would be for reinstatement. That final order would be passed only if the employer fails to justify the dismissal before the tribunal, either by showing that proper domestic inquiry was held which established the misconduct or in case no domestic inquiry was held by producing evidence before the tribunal to justify the dismissal: See Punjab National Bank Ltd. vs All India Punjab National Bank Employees ' Federation (2), where it was held that in an inquiry under section 33 A, the employee would not succeed in obtaining an order of reinstatement merely by proving contravention of section 33 by the employer. After such contravention is proved it would still be open to the employer to justify the impugned dismissal on the merits. That is a part of the dispute which the tribunal has to consider because the complaint made by the employee is to be treated as an industrial dispute and all the relevant aspects of the said dispute fall to be considered under section 33 A. Therefore, when a tribunal is considering a complaint under section 33 A and it has finally to decide whether an employee should be reinstated or not, it is not open to the tribunal to order reinstatement as an interim relief, for that would be giving the workman the very relief which he could get only if on a trial of the complaint the employer failed to justify the order of dismissal. The interim relief ordered in this case was that the work (1) ; (2) ; 597 man should be permitted to work: in other words he was ordered to be reinstated; in the alternative it was ordered that if the management did not take him back they should pay him his full wages. We are of opinion that such an order cannot be passed in law as an interim relief, for that would amount to giving the, respondent at the outset the relief to which he would be entitled only if the employer failed in the proceedings under section 33 A. As was pointed out in Hotel Imperial 's case (1),ordinarily, interim relief should not be the whole relief that the workmen would get if they succeeded finally. The order therefore of the tribunal in this case allowing reinstatement as an interim relief or in lieu thereof payment of full wages is manifestly erroneous and must therefore be set aside. We therefore allow the appeal, set aside the order of the High Court as well as of the tribunal dated May 16, 1957, granting interim relief. Learned counsel for the respondent submitted to us that we should grant some interim relief in case we came to the conclusion that the order of the tribunal should be set aside. In the circumstances of this case we do not think that interim relief to the respondent is justified hereafter. As we have pointed above, applications under sections 33 and 33 A should be dealt with expeditiously. We trust that the applications dated September 4, 1956, which appears to have been overlooked and of May 6, 1957, will now be dealt with expeditiously and finally disposed of by the tribunal, as all applications under section 33 A should be. In the circumstances we pass no order as to costs. Appeal allowed.

One Sharda Singh, respondent, who was an employee of the appellant mills was dismissed for disobeying the orders of the managing authority. He filed an application before the Industrial tribunal under section 33 A of the , contesting his dismissal on various grounds, whereupon the tribunal passed an order to the effect that as an interim measure the respondent be permitted to work in the appellant mills and if the management failed to take him back his full wages be paid from the date he reported for duty. The appellant mills then filed a Writ Petition before the High Court contesting the interim order of the Tribunal and the High Court held that the interim relief granted to the respondent was justified. On appeal by a certificate of the High Court, Held, that the interim order passed by the tribunal reinsta ting the respondent was erroneous. Such an interim relief could not be given by the Tribunal as it would amount to prejudging the respondents ' case and granting him the whole relief at the outset without deciding the legality of his dismissal after hearing the appellant employer. The Management, Hotel Imperial and Ors. vs Hotel Workers ' Union, ; , and Punjab National Bank vs All India Punjab National Bank Employees ' Federation, A.I.R. , referred to.

One of the items in dispute referred to the Industrial Tribunal for adjudication, which was the subject matter of this appeal, related to the demand of the Workers ' Union that the appellant company must provide quarters to its employees in terms of the Bihar Government Scheme and undertake immediate construction for that purpose. The case of the Company was that the State and not the employer was primarily responsible for providing quarters to the employees and, in any event, it was not financially possible for the appellant to undertake the task. The Tribunal upheld the Union 's claim and directed the company to start construction of at least 15 quarters, as specified by the Government scheme, within a year. The Labour Appellate Tri bunal, on appeal, held that the Government scheme was binding on the company and upheld the award. The scheme, on which the award was based, was one prepared by the Industrial Housing sub Committee appointed by the Government of Bihar and sanctioned by the Government as recommended by the Bihar Central (Standing) Labour Advisory Board. It imposed on the employers the responsibility for housing industrial labour and provided for financial assistance to the employers by the State Government to the extent Of 50% of 'the capital required, by way of loan repayable in 25 annual instalments, recoverable, on default, from the properties mortgaged for the loan or the assets of the debtor. The scheme prescribed the terms on which the quarters were to be let out to the employees and specified their size. It was contended on behalf of the appellant that, the scheme was not obligatory and could not impose a term of employment for the workmen. For the Union it was argued that the scheme had materially altered the rule, followed by indus trial adjudication in such cases, so far as the State of Bihar was concerned and had imposed a moral obligation on the appellant. Neither the Industrial Tribunal nor the Labour Appellate Tribunal in appeal, took the financial position of the company into consideration where they held that the Scheme did impose a 96 762 moral obligation on the appellant to provide quarters for its employees, which was enforceable in industrial adjudication. Held, that the scheme sanctioned by the Bihar Government was merely of a recommendatory nature and since it had no statutory force it could not provide a basis for the direction made by the award. Its language showed that it was vague and not intended to be acted upon and so it could not have the effect of introducing a term of employment as between the employer and the workmen. Although there could be no doubt that, Industrial Tribunals had generally the power and jurisdiction, apart from any scheme or agreement between the parties, in appropriate cases, to impose new obligations on the employers in the interest of social justice and for securing peace and co operation between the employer and the workmen, the award in appeal could not be justified on the merits under the prevailing condition of the industrial evolution in the country. Western India Automobile Association vs The Industrial Tribunal, Bombay, A.I.R. 1949 F.C. III, The Bharat Bank Ltd., Delhi vs The Employees of the Bharat Bank Ltd., Delhi; , and Rohtas Industries Ltd. vs Brijnandan Pandey; , , referred to. It was the duty of Industrial Tribunals to take into consi deration the interests of national economy and progress and they were entirely right in taking the view, which they had consistently done, that it would be inexpedient in the present financial condition of the industries in the country to impose the additional burden of providing housing facilities on them which should be the primary responsibility of the State. Eastern Plywood Manufacturing Co., Ltd. vs Their Workers, , Mohomad Rai Akbarali Khan vs The Associated Cement Companies Ltd., , SamastipuR Central Sugar Co., Ltd. vs Their Workmen, and M/s. National Carbon Co. (India) Ltd. vs National Carbon Co. Mazdoor Union, Calcutta, [1956] L.A.C. 660, approved.

The Government of Uttar Pradesh under section 3 of the U.P. , and the Statutory orders framed thereunder referred certain. disputes between the respondent Ice Factories and the respective workmen to an Industrial Tribunal. The Tribunal heard the matters but failed to pronounce its award in open court, as required under the clause 9 (7) of the Statutory Orders. Instead the Registrar of the Tribunal informed the Ice Factories that the award of the Tribunal had been submitted to the Government. The award was published in the U.P. Gazette and the Regional Conciliation officer called upon the Ice Factories to implement the award immediately. The Ice Factories moved the High Court at Allahabad alleging that the award was a nullity as it had not been pronounced in open court as required under the clause 9 (7) of the Statutory Orders and asking for writs to quash it. High Court issued the writs quashing the Notification publishing the award. The questions are whether the provisions of sub cl. (7) of cl. 9 of the Statutory Orders are imperative or merely directory and whether that sub clause is ultra vires as being in conflict with the Act under which it had been framed. Held, that the clear intention of the legislature is to make it imperative that judgments should be pronounced in open court by the Tribunal and a judgment not so pronounced would therefore be a nullity. The provision in sub cl.(7) of cl. 9 of the Statutory Order is imperative and not directory. Held, further, that the provisions as to the pronouncement of the decision in open court contained in cl. 9 (7) of the Statutory Order was clearly within the powers contemplated in section 3 (g) of the Act and section 6 of the Act does not prohibit the making of such provisions. A rule duly framed under the Act requiring the Tribunal to pronounce its decision in open court is therefore not in conflict with section 6 of the Act. Montreal Street Railway Co. vs Normandin, ; , referred to.

The respondent was a Government servant in one of the departments of the Bombay Government. He was sent on deputation to another department and after serving there for a long period and getting a number of promotions he was re verted back to his parent department and ordered to be posted at a considerably lower grade, while another Government servant who was below his rank was promoted as Assistant Secretary. Thereupon the respondent filed a petition under article 226 of the Constitution challenging the order of his posting. A preliminary objection was raised by the appellant that the petition was not maintainable. But the High Court held that the respondent was entitled to invoke the jurisdiction of the Court when there is a violation of a statutory rule and on merits it held that the respondent was entitled to the relief claimed. The present appeal was filed on a certificate granted by the High Court under article 133 of the Constitution. Before this Court in view of the decision State of U.P. vs Babu Ram Upadhya. ; it was not disputed that if there was a breach of a statutory rule framed under article 309 or continued under article 313 in relation to the condition of service the aggrieved Government servant could have recourse to the Court. The main contention on behalf of the appellant was that the respondent was not entitled to be appointed to any higher post than as a Senior Assistant or to receive a salary higher than that which had been granted to him by the im pugned order. Held: (i) Assuming that this was a case where the respon ,dent had a lien and his lien had not been suspended it was not possible to interpret Rule 50(b) of the Bombay Civil Service Rules as providing different criteria to cases where a Government servant had a lien and where his lien has been suspended. The Rule and the circular make it abundantly clear that an officer on deputation in another department shall be re stored to the position he would have occupied in his parent department had he not been deputed. (ii) Where promotions are based on seniority cum merit basis an officer on deputation has a legal right to claim pro motion to a higher post in his parent department provided his service in the department to which he is lent is satisfactory. This may not be the case in regard to selection posts.

The appellants filed three suits (the earliest of the three suits was filed on December 18, 1945) for possession of lands claiming that K, the last owner of the lands died on August 15, 1945. Those suits were dismissed on August 3, 1951, as premature on the ground that the fact of the death of K had not been established. The appellants again instituted three suits in October 1952, December 1952 and May 1953 for the same relief as in the previous suits alleging that the right to sue had ac crued after August 16, 1952, that is, after a period of seven years, under section 108 of Evidence Act; that K died three years before the date. of the filing of the suits; and that they were within time under article 2(b) of the. Schedule annexed to the Punjab Limitation (Customs) Act, 1920 which provides that the period of limitation for a suit for pos session of ancestral immovable property which has been alienated, is three years, if a declatory decree has been obtained, and that period commences from the date on which the right to sue accrues. On appeal, a single Judge of the High Court decreed the suits holding that K having been treated as alive by the High Court when it passed the previous decree in 1951, the conclusion of the lower courts that he had been dead for seven. years before the institution of the suits could not be sustained and also excluded the time spent on the previ ous litigation from 1945 to 1951 under section 14(1) of the Limitation Act. On Letters Patent appeal, the Division Bench held: (1) that the single Judge was in error in ex cluding the time spent on the previous litigation by apply ing section 14(1) of the Limitation Act; (ii) that the words "or other cause of a like nature" occurring in section 14(1) had to be read ejusdem generis with the preceding words "relating to the defects of jurisdiction" and that it was not possible to give the benefit of that provision to the plaintiffs. Dismissing the appeal to this Court (per A.N. Ray, C.J. and Jaswant Singh, J) HELD: (1) Under article 2(b) of the Schedule to the Punjab Limitation (Customs) Act, 1920 in order to be able to succeed the plaintiffs must bring their suits within three years of the accrual of the right to sue (which ac cording to well settled judicial opinion means the accrual of the right to seek relief), namely within three years of the death of K. They had to prove affirmatively that the death of K took place within three years of the institution of the suits. Granting that K has to be presumed to be dead, it cannot be overlooked that under section 108 of the Evidence Act, the precise time of the death is not a matter of presumption but of evidence and the onus of proving that the death took place at any particular time within seven years lies upon the person who claims the right for the establishment of which the proof of that fact is essential. The plaintiffs had not only, therefore, to prove that K had not been heard of for a period of seven years and was to be taken to be dead, but it also lay heavily on them to prove the particular point of time within seven years when K 's death occurred. This they have failed to prove. In the absence of such proof, it cannot be held that the present suits had not been brought within three years of the accrual of the right to sue. [263 D G] 251 Nepean vs Doe D. Knight ; ; , Jayawant Jivarao Deshpande vs Ramachandra Narayan Joshi (A.1.R. 1916 Born. 300), Lalchand Marwari vs Ramrup. Gir (LIII I.A.24; A.I.R. 1926 P.C. 9), Jiwan Singh vs Kuar Reoti Singh & Anr. (A.I.R. 1930 All. 427), Kottappalli Venkates warla vs Kottapalli Bapayya & Ors. (A.I.R. 1957 A.P. 380), Punjab and Ors. vs Natha & Ors. (A.I.R. and Ram Kali & Ors. vs Narain Singh (A.I.R. 1934 Oudh 298 F.B.) referred to. (2) If K had died beyond three years, from the date of the suits, the suits would be barred by limitation because the appellants cannot claim the benefit of section 14 of the Limitation Act 1908. The three important requirements of the section are: (1) that the plaintiff must have prosecuted the earlier civil proceeding with due diligence; (2) the former proceeding must have been prosecuted in good faith in a court which from defect of jurisdiction or other cause of a like nature was unable to entertain it and (3) the earlier proceeding and the later proceeding must be based on the same cause of action. [265 D] (3) The contention that the appeals had been rendered untenable as a result of the amendment made to section 7 of the Punjab Customs Power to Contest) Act 1920 by the Amending Act 12 of 1973 has no force and must be rejected. Section 4 of the Act provides that the Act shall not affect any right to contest any alienation or appointment of an heir made before the Act came into force. This section has been left untouched by the Amending Act of 1973. In the instant case, the alienation was made before the 1920 Act came into force and was not affected by that Act. [261 F H] (4) The words "or other cause of a like nature" in section 14(1) take their colour from the preceding words "defect of jurisdiction" according to the rule of ejusdem generis. Therefore, the defect must be of a character analogous to jurisdiction barring the Court from entertaining the previ ous suit. In the instant case, the Court which tried and dismissed the previous suits as premature did not suffer from inability or incapacity to entertain the suits on the ground of lack of jurisdiction or any other ground analogous to the defect of jurisdiction. The exclusion of the period during which the previous suits were pending, could not, therefore, be allowed to the plaintiffs while computing the period of limitation. [265 E; I 1; 266 A] Bhai lai Kishan Singh vs People Bank of Northern India, I.L.R. , Dwarkanath Chakravarti vs Atul Chan dra Chakravarti (I.L.R. and Palla Pattabhira mayya & Ors. vs Velga Narayana Rao (A.I.R. referred to. [Obiter: The causes of action in the previous suits and in the present suits are also different. And hence the appellants cannot press section 14 into service.] Beg, .J. (Dissenting) The Division Bench of the High Court was wrong in ignor ing the effect of the finding of the single Judge that a new cause of action had arisen within three years before the filing of the plaintiffs ' suits. [281 C] The question of time bar or its removal by resorting to section 14(1) of Limitation Act postulates that a point of time from which limitation could run had been ascertained. As that point could not be the date of the death of K, which was unknown the suits could not be dismisses on that ground. [281 D] (1) The single Judge had sufficiently indicated that the cause of action in the previous litigation was different from the one in the later inasmuch as the facts proved in the later case showing that K must be presumed to be dead could not be and were not set up in the earlier suits. The cause of action had not accrued in 1945. The effect of the judgment in the former suits was that these suits were premature, which is not the case in the suits in appeal. The plaints in the later cases set out the case founded on new facts not in existence at the time of the earlier liti gation and expressly stated why the plaintiffs rely on the presumption of death of K. If the previous suits were dismissed on the ground that they were premature, the cause of action could only, be said to have accrued after their institution. [268 G; 269 C] 252 The findings of the single Judge showed that the. plain tiffs were entitled to the benefit of the presumption laid down by section 108 of the Evidence Act. He found that till August 3, 1951 when the judgment of the High Court in the previous suits was delivered, the position was that the death of K had not been established. This meant that on new facts asserted and proved, K could be presumed dead when the subsequent suits were instituted in 1952 and 1953. This presumption of death having become available to the plain tiffs within. three years of the suits and not before, no occasion for applying section 14 of the Limitation Act could arise. The evidence sought to be given in the previous suits was that K had died on a particular date but the evidence in the subsequent suit was not that he had died on a particular date but that he had not been heard of from August 5, 1945 upto the time of filing of the subsequent suits. [269 H; 270 H] Modi Khalil Khan vs Mahboob Ali Mian, A.I.R. 1949 PC 78 at 86 referred to. (2) (a) If causes of action differ from suit to suit, the accrual of the cause of action can also not be tied down to a particular kind of fact such as the date of actual death of the holder of the property. Once it is held that the causes of action differ for purposes of their accrual, their accrual could not be made to depend on facts of one type only. Facts denoting their accrual must differ from case to case. Proof of date of actual death is conclusive. But, where the basis of the right to sue is presumption of death, the. date; of accrual of the right is the date on which that presumption matures. [271 C] Indian Electric Works Ltd. vs James Montosh & ,Anr. ; followed. Rante Surno Moyee vs Shooshee Mokhee Burmonia & Ors. 12 Moore 's I.A. 244, State of Madras V.P. Agencies & Anr. AIR 1960 SC 1309 at 1310 and Mst. Chand Kour vs Partap Singh, , referred to. (b) The expression "cause of action" has sometimes been employed to convey the restricted idea of facts or circum stances which constitute either the infringement or the basis of a right and no more. In a wider and more compre hensive sense it has been used to denote the whole bundle of material facts which a plaintiff must prove in order to succeed. These are all those essential facts without the proof of which the plaintiff must fail in his suit. [272 G] (c) Applying these tests, in the instant case, the causes of action in the earlier and later litigations would be materially different. No cause of action had arisen at all if it is assumed that K had not died at all. K 's death was an essential part of the cause of action. It had to be proved to enable the plaintiffs to put forward their claims to succeed. But proof of the date of death was not essen tial or indispensable for that purpose. It could only become material in deciding whether the right accrued had been extinguished by the law of limitation. Both the narrow and wider sense of the term "cause of action ' would include all those facts and circumstances on the strength of which the plaintiffs urged that they were entitled to the benefit of the obligatory presumption of law contained in section 108 of the Evidence Act. As these were not available to the plain tiffs before the expiry of seven years from August 5, 1945, it was not possible to urge that this cause of action had arisen more than three years before the filing of the suits. Therefore, the date of its accrual could not lie a day earlier than seven years after August 5, 1945 when K was last heard of. [272 G H; 273 A B] (d) It was for the defendants to establish that K was either alive or had died more than three years before the suits were filed. The presumption under section 107 of the Evidence Act could not come to the aid of the defendants when the plaintiffs had established facts necessary to raise the presumption under section 108 of the Evidence Act. [273 E] (e) The suits are not barred by limitation. The plaintiffs discharged their burden as to when the accrual of their cause of action was within the prescribed period of limita tion. If the "media" upon which the plaintiffs rest their cases 253 are different in the previous and subsequent litigations, the causes of action are different. If the alleged date of death of K was the date of accrual of the previous cause of action, the date of accrual of the second could only be something other than the date of death of K, it could not possibly be the same. The other date of accrual could only be subsequent to August 5, 1945 because it was held in the previous suit that the suit was premature on the ground that seven years since K was last heard of had not elapsed then. Since the evidence was that he was last heard of on August 5, 1945, the only possible date of accrual of the subsequent cause of action could be seven years after the date. The suits were filed within three years of that date. [273 H; 274 A C] (3)(a) The term 'right to sue ' occurring in article 2 of Schedule to the Punjab Limitation (Customs) Act 1 of 1920 must be equated with cause of action. " The "date of death" cannot be substituted for the date of accrual of the "right to use". In the Limitation Act the accrual when intended to be tied to the date of some event is specified as the date of that event. In this case, it is not so. It cannot be held that the date of accrual in both sets of suits is one and the same, that is to say, the actual date. of death. [274 D] (b) Wherever the accrual of a right or commencement of a period of limitation, within which a suit must be shown by the plaintiffs to have been brought, could only be estab lished by proving the date of a person 's death, that duty must be discharged by the plaintiffs or the suit will fail. But to carry the doctrine beyond that and to lay down that the date of death must invariably be proved, whenever the question of limitation is raised in such cases must result in stultifying or defeating legal right and wiping out the effects of a statutory presumption. The accrual of a cause of action based on untraceability of the owner could not be said to depend at all on proof of either actual death or the date of actual death of the owner. It accrues as soon as death can be presumed and not a day earlier. [278 D F] (c) It is not in every suit for possession that the com mencement of the date of dispossession must be established by the plaintiffs. It is only in a suit for possession based on the allegation by the plaintiff of his own dispos session that the burden is governed by Art, 142 of the Limi tation Act. [274 G] (d) In the instant ease, the plaintiffs were never in pos session and, therefore,there was no question of their dis possession. It was a pure and simple suit for possession on the basis of title against which the defendants had not even alleged adverse possession. Therefore, there is no need to bring in the actual date of death constructively, as the date of the presumed dispossession or adverse possession has not been asserted anywhere. [275 B] (e) The plaintiffs have asserted and proved that the period of seven years when K was last heard of by those who would in the natural course of events have heard of or about him if he was alive, had elapsed and that their cause of action matured within three years of their suits. Assuming that the concept of adverse possession of the defendants was to be introduced, the legal position is that possession of defendants could not be adverse to K 's reversioners even before K could be presumed to be dead. The defendants them selves had set up. the plea that he must be still deemed to be alive. The plaintiffs could only be required to prove K 's death but not the date of his death or the date of the plaintiffs ' dispossession. Neither cases dealing with recov ery of possession on the plaintiffs ' allegation of their own dispossession nor those where proof of date of death was a necessary statutory duty for showing that the suit was within time; are applicable in these cases. [275 E F] Nepean vs Doe D. Knight (English Reports 150 Exchequer p. 1021), Jayawant Jivanrao Deshpande vs Ramachandra Narayan Joshi, AIR 1916 Bom. 300 & 301. , Lal Chand Marwari vs Mahant Ramrup Git & Anr. AIR 1926 PC 9, Jiwan Singh vs Kuar Reoti Singh & Anr. AIR 1930 All. 427, Kottapalli Venkateswarlu vs Kottapalli Bapayya & Ors. AIR 1957 AP 380 Punjab v Natha AIR 1931 Lab. 582 (FB) & Ram Kali & Ors vs Naraian Singh AIR 1934 Oudh 298 & 299 300, refrered to. 254 (f) It is neither a part of the case of any plaintiff in these cases nor necessary for the success of his case to prove that K died on a particular date or that K died before or after somebody else. The plaintiffs cannot be saddled with the responsibility to prove this date. [279 ,B] (4) The suits were not barred by limitation because the causes of action in the previous litigation and the litiga tion now are different and the subsequent cause of action has arisen within three years before the filing of the suits. Assuming that the suits were filed beyond the period of limitation on the actual basis of their claims the plaintiffs are entitled to succeed because this is a fit case in which section 14(1) Limitation Act could come to the aid of the appellants. They had been asserting repeatedly that the basis of their claim was that although the actual date of death of K could not be proved, yet, he has not been heard of for seven years. That basis having emerged within three years before the filing of the suits, their suits could not be barred by time. If the causes of action did not arise no question of its exceeding by the law of limitation, could emerge. [280 G] The previous suits did not fail for want of jurisdic tion. The delay in bringing the present suits was due to the fact that no court could decree the claim before the cause of action matured. Therefore, the cause of action of a "like nature" to a defect of jurisdiction is present in these cases, since the provision has to be liberally con strued. The defect revealed by the evidence in the latter litigation was that the suits did not lie at all as they were premature. This was a defect reasonably comparable to a want of jurisdiction. [280 A C] India Electric Works Ltd. vs James Mantosh & Anr. ; , followed. (5)(a) If no cause of action could accrue at all unless and until the date of actual death of K was established, there could be no commencement of a period of limitation. The only possible point from which limitation could start framing in these, cases is the date on which seven years expired from the date on which K was last heard of. This was within three years before filing of the suits. [280 D] (b) The issue in the earlier litigation was whether K was actually shown to have died on a particular date. This was quite different from the issue decided now, which was whether K 's whereabouts had remained unknown for seven years so that he could be presumed to be dead. [280 F] ARGUMENTS For the appeliants: The legal presumption under Section 108 was not sought to be raised in the prior suits. It was for the first time raised in the subsequent group of suits instituted in Octo ber, 1952 based on the allegation that Kishan Singh was not heard of since 15th August, 1945. This submission opens the questions (i) when is the presumption of death to be raised and (ii) whether for the purpose of proceedings in which it is raised or any prior proceedings. The presumption is to be raised in the pro ceedings where the question has been raised i.e. the second group of suit. However, there is no presumption as to the time of death of the person whose death is accepted as a result of presumption. The two are distinct matters (i) the legal presumption of death and (ii) the time of death preceding the period when presumption is drawn. The death may be at any time during the preceding period of 7 years the period that has enabled the court to draw presumption of death. The law requires that if one has to establish the pre cise period during these 7 years at which such person died he must do so by evidence. 255 The conclusion of the court of presumption of death based upon disappear ance from 15th August, 1945 cannot be ignored. Death at any time on or after 15th August, 1945 does not in any manner adversely affect the case of the appellants, inasmuch as the parties had instituted suits (of course premature) on 18th December 1945 (other suits some time later decided by a common judgment). If the parties are held entitled to the benefit of deduction of time from 18th December 1945 to 3rd August, 1951, the death of Kishan Singh even if it took place between 15th August, 1945 to any date before 3rd August, 1951 the suit are not barred by limita tion. On the pleading of the parties it cannot be assumed that the presumption of death would justify acceptance of date of death, any time prior to 15th August, 1945. The period of limitation for the suit for possession was 3 years The defendants had not pleaded in the prior suit that the suit was. barred by limitation as instituted. In other words it was not alleged that he had died at any time 3 years prior to the institution of the suit (18th December, 1945). Actually death has not been admitted even on 15th August, 1945. The trial Court and the District Judge held the suit to be time barred not on the ground that his death had taken place at a period exceeding 3 years from the date of the institution of the first suit. They have apparently not ignored the possibility of death having taken place during the period between 18th December, 1945 to 3rd August., 1951. They have held the. suit to be time barred because it was considered that the appellants are not entitled to deduct the stated period spent in the prior suits. Even if it is considered that death had taken place during this period or any time after 15th August, 1945 or during the 3rd August to 31st October, 1952 the suits are not time barred. Preliminary objection was raised by the respondents as to the effect of the Punjab Customs (Power to Contest) Amendment Act, 1973 (Punjab Act 12 of 1973). It was urged that the Act had come into force on 23rd January, 1973, it has retrospective operation and bars all suits to contest alienation also including the suits for possession of the property following a declaratory decree. It was urged that the appeals are barred as a consequence of repeal of the provisions of Punjab Act II of 1920. The contention as to the effect of Act 12 of 1973 is not correct. The previous law on the subject of right to contest alienation of immovable property and the limitation of suits relating to alienation of ancestral immovable property is regulated by two Acts. (1) Punjab Act II of 1920 Described an Act to restrict the powers of the descendents or collaterals to contest an alienation of immovable property; and (2) Punjab Act I of 1920 Described as an Act to amend and consolidicate the law govern ing the limitation of suits relating to alien ations of ancestral immovable property etc. The present Act 12 of 1973 repeals section 6 of Act II of 1920. It also amends section 7 of the aforesaid Act. Effect of the repeal of section 6 and amendment of section 7 merely is that the right to. contest vesting in the collaterals upto 5th degree has been done away with and the suit to contest alienation of ancestral property has been taken away. Under the previous existing law an alienation of non ances tral property could not be contested. Act I of 1920 has also not been repealed. The limitation provided for a suit for possession i.e. 3 years is still an existing provision of the Act. It is obvious that the legislature has retained 256 Act I of 1920 unrepealed so that the benefit of the decrees may be available to all persons under section 8 of the Act and the period of limitation may be retained as before. The effect of the declaratory decree in that the alienation is not binding against the inheritance. The succession never remains in abeyance. A person entitled to succeed to the last male holder is entitled to sue for possession on the basis of right to succession to the property. For the respondent: The principle of res judicata would be immediately attracted if the plaintiffs allege the "same cause of ac tion" and seek the exclusion of the time because the earlier suit was tried on merits by a competent court having jurisdiction and was dismissed holding that 'plaintiff failed to prove that Kishan Singh died on 15th August, 1945. This finding would be binding between the parties in the subsequent suits as they have been given after recording the evidence and a full trial by, the competent court having jurisdiction. Therefore, the plaintiff is barred by principles of res judicata from alleging the accrual of right to sue before the filing of the earlier suits as the same would be res judicata. The plaintiff is estopped from alleging the accrual of same cause of action, therefore, no question of exclusion of time inasmuch as the principle of section 14 of exclusion of time arises only if the cause of action is the same. Section 14 uses the words "the proceeding is founded upon the same cause of action". The language of section 14 of the Limitation Act by using the words "same cause of action" makes it very clear that time can be excluded for the same cause of action only if the earlier suit is dismissed be cause of defect of jurisdiction or other cause of a like nature. On the interpretation of section 14 also the time cannot be excluded for the reason that the earlier suit was dis missed as premature and the new suit was filed on a new cause of action, namely, Alla Singh and his line became extinct on the death of Kishan Singh on 15th of August, 1952 i.e. after the expiry of ' seven years from 15th August, 1945. Since a new cause of action was alleged after the dismissal of previous suit, section 14 cannot be attracted. The words "is unable to entertain it" mean that it is not able to admit the matter for consideration on merits i.e. the. inability is of a formal nature but it does not mean inability to grant relief. From the decisions one principle is deducible that section 14 of the Limitation Act has to be construed harmoniously with section 11 C.P.C. Section 11 C.P.C. bars the filing of a fresh suit on the same cause of action whereas section 14 of Limitation Act allows time to be. excluded in the previous litiga tions was "founded on the same cause of action ' '. Section 12 says that if plaintiff is barred under section 11 C.P.C. to file suit for any cause of action then plaintiff cannot file suit for a such cause of action in any court to which C.P.C. applies. If both. section 14 of Limitation Act and principles of res judicata are to operate then, it should be held that to apply section 14 the earlier suit had been dismissed on a technical ground of jurisdiction, or other cause of a similar nature, court is unable to entertain it without going into the merits of the case. In the present case earlier suits were dismissed because the plaintiff failed to prove the death of Kishan Singh and the extinction of line of Alia. The words used by the High Court at page 302 line 37 are: "The suit had been rightly dismissed as premature" do not mean that Kishan Singh was alive but it means that plaintiffs have not proved the accrual oj cause of action namely the extinction of line of Alia. In these circumstances it is submitted that the suits were not dis missed on the ground of defect of jurisdiction or other cause of similar nature. for which the court was unable to entertain it. Section 14 of the Limitation Act does not apply. Plaintiffs have failed to prove the date of death of Kishan Singh and the extinction of line of Alla within 3 years of the filing of the suit. Suits are therefore time barred. 257 Sections 107 and 108 of the Evidence Act do not help the appellants. Rule of evidence in section 107 is that it is for the plaintiff to prove the death of a person if he was alive within 30 years and section 108 says that burden of proving that a man was ,dive is on the person who alleges he is alive if it is proved that he has not been heard of for seven years by those who would naturally have heard of him if he had even alive. In this case the plaintiffs appellants have alleged that Kishan Singh was last heard of on 15th August, 1915 and singe then he is not heard of. The onus is, there fore, on the plaintiff appellant under section 107 of Evidence Act 10 prove as to when Kishan Singh died. It is; Submit ted that Kishan Singh may have died on any date either before 15th August, 1945 or immediately theereafter. There is no presumption that he died on the expiry of 7 years from the date he was last heard. The date of death is thus required to prove by the plaintiff like any other fact. The suits are, therefore, barred by time and should be dismissed plaintiffs ' failure to prove death of Kishan Singh within three years of the filing of suits.

The appellant firm filed appeals against orders assessing it to income tax and super tax for the years 1945 1946 and 1946 1947 beyond the time prescribed by section 30(2) of the Income tax Act. The appeals were numbered, and notices were issued for their hearing under section 31. At the hearing of the appeals before the Appellate Assistant Commissioner, the Department took the objection that the appeals were barred by time. The appellant prayed for condonation of delay, but that was refused, and the appeals were dismissed as time barred. The appellant then preferred appeals against the orders of dismissal to the Tribunal under section 33 of the Act, and the Tribunal dismissed them on the ground that the orders of the Assistant Commissioner were in substance passed under section 30(2) and not under section 31 of the Act and that no appeal lay against them under section 33 of the Act. On a reference under section 66(1) of the Act the High Court held that the orders of the Appellate Assistant Commissioner were made under section 30(2) and were not appealable under section 33 of the Act. On appeal by special leave to the Supreme Court the question for determination was whether an order dismissing an appeal presented under section 30 as out of time was one under section 30(2) or under section 31 of the Act because if it was the former there was no appeal provided against it; if it was the latter it was open to appeal under section 33. Held that the orders of the Appellate Assistant Commissioner fell within section 31. A right of appeal is a substantive right and is a creature of the statute. section 30(1) confers on the assessee a right of appeal against certain orders and an order of assessment under section 23 is one of them. The appellant had therefore a substantive right under section 30(1) to prefer appeals against orders of assessment made by the Income Tax Officer. 167 An appeal presented out of time is an appeal and an order dismissing it as time barred is one passed in appeal. Section 31 is the only provision relating to the hearing and disposal of appeals and if an order dismissing an appeal as barred by limitation as in the present case is one passed in appeal it must fall within section 31 and as section 33 confers a right of appeal against all orders passed under section 31, it must also be appealable. To fall within section 31 it is not necessary that the order should expressly address itself to and decide on the merits of the assessment and it is sufficient that the effect of the order is to confirm the assessment as when the appeal is dismissed on a preliminary point. An order rejecting an appeal on the, ground of limitation after it had been admitted is one under section 31, though there is no consideration of the merits of the assessment. Held therefore that the orders of the Appellate Assistant Commissioner holding that there were no sufficient reasons for excusing the delay and rejecting the appeals as time barred would be orders passed under section 31 and would be open to appeal, and it would make no difference in the position whether the orders of dismissal were made before or after the appeals were admitted. Commissioner of Income tax, Madras vs Mtt. `r. section Ar. Arunachalam Chettiar, ([1953] S.C.R. 463), explained. Case law discussed.

The appellant. was tried by the Sessions judge and acquitted of the charge of murder. On appeal the High Court convicted him and sentenced him to imprisonment for life. The appellant applied for and was granted a certificate under Art 134 (1) (c) of the Constitution for appeal to the Supreme Court on the ground that there was unusual delay in delivering the judgment of the High Court and that the judg ment failed to deal with certain questions of fact which were raised at the hearing of the appeal. Held, that the certificate granted by the High Court was not a proper certificate. The mere ground of delay in giving judgment did not fall within the words "fit one for appeal to the Supreme Court" in article 134 (1) (c). The points raised in the appeal before the High Court were questions of fact and the High Court was not justified in passing such questions on to the Supreme Court for further consideration thus converting the Supreme Court into a court of appeal on facts. Haripada Dev vs State of. West Bengal; , and Sidheswar Ganguly vs State of West Bengal, [1958] section C. R. 749, followed. Banaswmi Parshed vs Kashi Krishna Narain, (1900) L. R. 23 1. A I I and Radhakrishna Ayyar vs Swaminathna Ayyar, (1920) L. R. 48 I. A. 31, referred to.

A dispute regarding amendment of rules relating to privilege leave etc. arose between the Ahmedabad Millowners ' Association and the union of workmen employed in the textile industry. After conceliation proceedings were declared by the Conciliator to have failed, the union referred the dispute to the Industrial Court under section 73A of the Bombay Industrial Relations Act, 1946. The Industrial Court decided against the Millowners who filed a writ petition in the ' High Court and thereafter appealed to this Court. It was urged on behalf of the appellants that (i) section 73A was violative of article 14 of the Constitution since it gave a right to the workers union to make a reference but not to the employer (ii) the Act had not been made applicable to the cotton industry at Ahmedabad under section 2(4) and it was not applicable under section 2(3) because the Bombay Industrial Disputes Act, 1938 was repugnant to Central) and must be deemed to have been repealed. HELD:(i) Section 73A was not violative of article 14. Whenever any industrial dispute arises the employer can always ensure arbitration of that dispute by making an offer to the union under section 66 of the Act whereupon a registered and approved union is compelled to agree to submission of the dispute to arbitration. Clearly therefore there was no need to make any Provision empowering the employer to make a reference of the dispute for arbitration to the Industrial Court. On the other hand if a Union wants a dispute to be settled and even offers that the dispute be submitted to arbitration under section 66 of the Act, the employer can refuse, whereupon the union would be left without any remedy. It is obvious that section 73A was enacted to fill this gap and place the union on with the employer so as to enable the union to have any dispute = by arbitration even when the employer does not agree to arbitration. This section, in these circumstances did not at all require that the right granted to the union should also be granted to the employer. [441 G H] There was no difference in the procedure to be followed by the Industrial Court in a reference under section 73A and that to be followed when the reference is under section 66. In both the procedure under section 92 had to be followed. [443 E F] (ii)Chapter V of the Bombay Industrial Disputes Act 1938 was not repugnant to the Central Act of 1947 and therefore continued to be in force, and consequently under section 2(3) of the Bombay Industrial Relations Act 1947 the latter Act became applicable to the industry of the appellants and did not require a notification under section 2(4) to make it applicable [446 G H; 447 A B] 438 Ex Parte McLean, ; Victoria and Others vs The Commonwealth of Australia and Others, ; , Zaverbhai Amaidas vs The State of Bombay, [1955] 1 S.C.R. 799, Ch. Tika Ramji & Ors. vs The State of Uttar Pradesh & Ors., and Deep Chand vs The State of Uttar Pradesh and Others, [1959] Supp. 2 S.C.R. 8.

87 of 1959. Petition under article 32 of the Constitution of India for enforcement of Fundamental Rights. M. P. Amin, Dara P. Mehta, P. M. Amin; section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra for the petitioners. A. V. Viswanatha Sastri, R. Ganapathy Iyer, P. Kesava Pillai and T. M. Sen, for the respondents. H. N. Sanyal, Additional Solicitor General of India, B. Sen and R. H. Dhebar, for the Intervener. 541 1960. November, 21. The, Judgment of P. B. Gajendragadkar, A. K. Sarkar, K. Subba Rao and J. R. Mudholkar, JJ., was delivered by P. B. Gajendragadkar J., K. N. Wanchoo, J., delivered a separate judgment. GAJENDRAGADKAR, J. This is a petition filed under article 32 of the Constitution in which the validity of the Orissa Mining Areas Development Fund Act,( , 1952 (XXVII of 1952), is challenged. The first petitioner is a public limited company which has its registered office at Bombay. A large majority of its shareholders are citizens of India; some of them are themselves companies incorporated under the Indian Companies Act. Petitioners Nos. 2 to 7 are the Directors of Petitioner No. 1, the second petitioner being the Chairman of its Board of Directors. These petitioners are all citizens of India. At all material times the first petitioner carried on and still carries on the business of producing and selling coal excavated from its collieries at Rampur in the State 'of Orissa. Two leases have been executed in its favour; the first was executed on October 17, 1941, by the Governor of Orissa whereby all that piece or parcel of land in the registration district of Sambalpur admeasuring about 3341.79 acres has been demised for a period of 30 years commencing from September 1, 1939, in consideration of the rent reserved thereby and subject to the covenants and conditions prescribed thereunder; and the second is a surface lease executed in its favour by Mr. Mohan Brijraj Singh Dee on April 19, 1951, in relation to a land admeasuring approximately 211.94 acres for a like period of 30 years commencing from February 4, 1939, in consideration of the rent and subject to the terms and conditions prescribed by it. Pursuant to section 5 of the Orissa Estates Abolition Act, 1951, all the right, title and interest of the Zamindar of Rampur in the lands demised to the first petitioner under the second lease vested in respondents, the State of Orissa. Since then the first petitioner has duly paid the rent reserved by the said lease to the appropriate authorities appointed by respondent 1, 69 542 and has observed and performed all the conditions and covenants of the said lease. In exercise of its rights under the said two leases the first petitioner entered upon the lands demised and has been carrying on the business of excavating and producing coal at its collieries at Rampur. In December, 1952, the Legislature of the State of Orissa passed the impugned Act; and it received the assent of the Governor of Orissa on December 10, 1952. It was, however, not reserved for the consideration of the President of India nor has it received his assent. In pursuance of the rule making power conferred on it by the impugned Act respondent 1 has purported to make rules called the Orissa Mining Areas Development Act Rules, 1955; these rules have been duly notified in the State Gazette on January 25, 1955. Subsequently, the Administrator, respondent 2, appointed under the impugned Act issued a notification on June 24, 1958, whereby the first petitioner 's Rampur colliery has been notified for the purpose of liability for the payment of cess under the impugned Act. The area of this colliery has been determined at 3341.79 acres. In its appeal filed under rule 3 before the Director of Mines the first petitioner objected to the issue of the said notification, inter alia, on the ground that the impugned Act and the rules framed under it were ultra vires and invalid; no action has, however, been taken on the said appeal presumably because the authority concerned could not enter tain or deal with the objections about the vires of the Act and the rules. Thereafter on March 26, 1959, the Assistant Administrative Officer, respondent 3, called upon the first petitioner to submit monthly returns for the assessment of the cess. The first petitioner then represented that it had filed an appeal setting forth its objections against the notification, and added that until the said appeal was disposed of no returns would be filed by it. In spite of this representation respondent 3, by his letter of May 6, 1959, called upon the 543 first petitioner to submit monthly returns in the prescribed form and issued the warning that failing compliance the first petitioner would be prosecuted under section 9 of the impugned Act. A similiar demand was made and a similar warning issued by respondent 3 by his letter dated June 6, 1959. It is under these circumstances that the present petition has been filed. The petitioners contend that the impugned Act and ' the rules made thereunder are ultra vires the powers of the Legislature of the State of Orissa, or in any event they are repugnant to the provisions of an existing law. According to the petition the cess levied under the impugned Act is not a fee but is in reality and in substance a levy in the nature of a duty of excise on the coal produced at the first petitioner 's Rampur colliery, and as such is beyond the legislative competence of the Orissa Legislature. Alternatively it is urged that even if the levy imposed by the impugned Act is a fee relatable to Entries 23 and 66 in List II of the Seventh Schedule, it would nevertheless be ultra vires having regard to the provisions of Entry 54 in List I read with Central Act LIII of 1948. The petitioners further allege that even if the said levy is held to be a fee it would be similarly ultra vires having regard to Entry 52 in List I read with Central Act LXV of 1951. According to the petitioners the impugned Act is really relatable to Entry 24 in List III, and since it is repugnant with Central Act XXXII of 1947 relatable to the same Entry and covering the same field the impugned Act is invalid to the extent of the said repugnancy under article 254. On these allegations the petitioners have applied for a writ of mandamus or a writ in the nature of the said writ or any other writ, order or direction prohibiting the respondents from enforcing any of the provisions of the impugned Act against the first petitioner; a similar writ or order is claimed against respondent 3 in respect of the letters addressed by him to the 1st petitioner on March 3, 1959 and June 6, 1959. This petition is resisted by respondent 1 on several grounds. It is urged on its behalf that the levy 544 imposed by the impugned Act is a fee relatable to Entries 23 and 66 in List II and its validity is not affected either by Entry 54 read with Act LIII of 1948 or by 'Entry 52 read with Act LXV of 1951. In the alternative it is contended that if the said levy is held to be a tax and not a fee, it would be a tax relatable to Entry 50 in List II, and as such the legislative competence of the State Legislature to impose the same cannot be successfully challenged. Respondent 1 disputes the petitioner 's contention that the impugned Act is relatable to Entry 24 in List III; and so, according to it, no question of repugnancy with the Central Act XXXII of 1947 arises. After this appeal was fully argued before us Mr. Amin suggested and Mr. Sastri did not object that we should hear the learned Attorney General on the question as to whether even if the levy imposed by the impugned Act is a fee relatable to Entries 23 and 66 in List II of the Seventh Schedule, it would nevertheless be ultra vires having regard to the provisions of Entry 54 in List I read with Central Act LIII of 1948. Accordingly we directed that a notice on this point should be served on the learned Attorney General and the case should be set down for hearing on that point again. For the learned Attorney General the learned Additional Solicitor General appeared before us in response to this notice and we have had the benefit of hearing his arguments on the point in question. The first question which falls for consideration is whether the levy imposed by the impugned Act amounts to a fee relatable to Entry 23 read with Entry 66 in List II. Before we deal with this question it is necessary to consider the difference between the concept of tax and that of a fee. The neat and terse definition of tax which has been given by Latham, C. J., in Matthews vs Chicory Marketing Board (1) is often cited as a classic on this subject. "A tax", said Latham, C. J., "is a compulsory exaction of money by public authority for public purposes enforceable by law, and is not payment for services rendered". In bringing out the essential features of a tax this defini (1) ; , 276. 545 tion also assists in distinguishing a tax from a fee. It is true that between a tax and a fee there is no generic difference. Both are compulsory exactions of money. by public authorities; but whereas a tax is imposed for public purposes and is not, and need not, be supported by any consideration of service rendered in return, a fee is levied essentially for services rendered and as such there is an element of quid pro quo between the person who pays the fee and the public authority which imposes it. If specific services are rendered to a specific area or to a specific class of persons or trade or business in any local area, and as a condition precedent for the said services or in return for them cess is levied against the said area or the said class of persons or trade or business the cess is distinguishable from a tax and is described as a fee. Tax recovered by public authority invariably goes into the consolidated fund which ultimately is utilised for all public purposes, whereas a cess levied by way of fee is not intended to be, and does not become, a part of the consolidated fund. It is earmarked and set apart for the purpose of services for which it is levied. There is, however, an element of compulsion in the imposition of both tax and fee. When the Legislature decides to render a specific service to any area or to any class of persons, it is not open to the said area or to the said class of persons to plead that they do not want the service and therefore they should be exempted from the payment of the cess. Though there is an element of quid pro quo between the tax payer and the public authority there is no option to the tax payer in the matter of receiving the service determined by public authority. In regard to fees there is, and must always be, co relation between the fee collected and the service intended to be rendered. Cases may arise where under the guise of levying a fee Legislature may attempt to impose a tax; and in the case of such a colourable exercise of legislative power courts would have to scrutinise the scheme of the levy very carefully and determine whether in fact there is a co relation between the service and the levy, or whether the levy is either not co related with service or is levied to such an 546 excessive extent as to be a presence of a fee and not a fee in reality. In other words, whether or not a particular cess levied by a statute amounts to a fee or tax would always be a question of fact to be determined in the circumstances of each case. The distinction between a tax and a fee is, however, important, and it is recognised by the Constitution. Several Entries in the Three Lists empower the appropriate Legislatures to levy taxes; but apart from the power to levy taxes thus conferred each List specifically refers to the power to levy fees in respect of any of the matters covered in the said List excluding of course the fees taken in any Court. The question about the distinction between a tax and a fee has been considered by this Court in three decisions in 1954. In The Commissioner, Hindu Religious Endowments, Madras vs Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt (1) the vires of the Madras Hindu Religious and Charitable Endowments Act, 1951 (Madras Act XIX of 195 1), came to be examined. Amongst the sections challenged was section 76(1). Under this section every religious institution had to pay to the Government annual contribution not exceeding 5% of its income for the services rendered to it by the said Government; and the argument was that the contribution thus exacted was not a fee but a tax and as such outside the competence of the State Legislature. In dealing with this argument Mukherjee, J., as he then was, cited the definition of tax given by Latham, C.J., in the case of Matthews (2), and has elaborately considered the distinction between a tax and a fee. The learned judge examined the scheme of the Act and observed that "the material fact which negatives the theory of fees in the present case is that the money raised by the levy of the contribution is not earmarked or specified for defraying the expense that the Government has to incur in performing the services. All the collections go to the consolidated fund of the State and all the expenses have to be met not out of those collections but out of the general revenues by a proper method of appropriation as is done in the (1) ; (2) ; 547 case of other Government expenses". The learned judge no doubt added that the said circumstance was not conclusive and pointed out that in fact there was a total absence of any co relation between the expenses incurred by the Government and the amount raised by contribution. That is why section 76(1) was struck down as ultra vires. The same point arose before this Court in respect of the Orissa Hindu Religious Endowments Act, 1939, as amended by amending Act 11 of 1952 in Mahant Sri Jagannath Ramanuj Das vs The, State of Orissa (1). Mukherjea, J., who again spoke for the Court, upheld the validity of section 49 which imposed the liability to pay the specified contribution on every Mutt or temple having an annual income exceeding Rs. 250 for services rendered by the State Government. The scheme of the impugned Act was examined and it was noticed that the collections made under it are not merged in the general public revenue and are not appropriated in the manner laid down for appropriation of expenses for other public purposes. They go to constitute a fund which is contemplated by section 50 of the Act, and this fund to which the Provincial Government contributes both by way of loan and grant is specifically set apart for the rendering of services involved in carrying out the provisions of the Act. The same view was taken by this Court in regard to section 58 of the Bombay Public Trust Act, 1950 (Act XXIX of 1950) which imposed a similar contribution for a similar purpose in Ratilal Panachand Gandhi vs The State of Bombay (2). It would thus be seen that the tests which have to be applied in determining the character of any impugned levy have been laid down by this Court in these three decisions; and it is in the light of these tests that we have to consider the merits of the rival contentions raised before us in the present petition. On behalf of the petitioners Mr. Amin has relied on three other decisions which may be briefly considered. In P. P. Kutti Keya vs The State of Madras (3), the Madras High Court was called upon to consider, inter (1) ; (2) [1954] S.C.R. 1055. (3) A.I.R. 1954 Mad. 621. 548 alia, the validity of section 11 of the Madras Commercial Crops Markets Act 20 of 1933 and Rules 28(1) and 28(3) framed thereunder. Section 11(1) levied a fee on the sales of commercial crops within the notified area and section 12 provided that the amounts collected by the Market Committee shall be constituted into a Market Fund which would be utilised for acquiring a site for the market, constructing a building, maintaining the market and meeting the expenses of the Market Committee. The argument that these provisions amounted to services rendered to the notified area and thus made the levy a fee and not a tax was not accepted by the Court. Venkatarama Aiyar, J., took the view that the funds raised from the merchants for a construction of a market in substance amounted to an exaction of a tax. Whether or not the construction of a market amounted to a service to the notified area it is unnecessary for us to consider. Besides, as we have already pointed out we have now three decisions of this Court which have authoritatively dealt with this matter, and it is in the light of the said decisions that the present question has to be considered. In Attorney General for British Columbia vs Esquimalt and Nanaimo Railway Co. (1), the Privy Council had to deal with the validity of forest protection impost levied by the relevant section of the Forest Act R. section B. C. 1936. The lands in question were statutorily exempted from taxation, and it was urged against the validity of the impost that the levy of the said impost was not a service charge but a tax; and since it contravened the exemption from taxation granted to the land it was invalid. This plea was upheld by the Privy Council. The Privy Council did consider two circumstances which were relevant; the first that the levy was on a defined class of interested individuals, and the second that the fund raised did not fall into the general mass of the proceeds of taxation but was applicable for a special and limited purpose. It was conceded that these considerations were relevant but the Privy Council thought that the weight to be attached to them should not be exagge (1) 540 rated. In appreciating the weight of the said relevant circumstances the Privy Council was impressed by the fact that the lands in question formed an important part of the national wealth of the Province and their proper administration, including in particular protection against fire, is a matter of high public concern ' as well as one of particular interest to individuals. In other words, the effect of the impugned provision was, that the expenses of what was the public service of the greatest importance for the Province as a whole had been divided between the general body of tax. payers and those individuals who had a special interest in having their property protected. It would thus appear that this decision proceeded on the basis that what was claimed to be a special service to the lands in question was in reality an item in public service itself, and so the element of quid pro quo was absent. It is true that when the Legislature levies a fee for rendering specific services to a specified area or to a specified class of persons or trade or business, in the last analysis such services may indirectly form part of services to the public in general. If the special service rendered is distinctly and primarily meant for the benefit of a specified class or area the fact that in benefiting the specified class or area the State as a whole may ultimately and indirectly be benefited would not detract from the character of the levy as a fee. Where, however, the specific service is indistinguishable from pub lic service, and in essence is directly a part of it, diffe rent considerations may arise. In such a case it is necessary to enquire what is the primary object of the levy and the essential purpose which it is intended to achieve. Its primary object and the essential purpose must be distinguished from its ultimate or incidental results or consequences. That is the true test in determining the character of the levy. In Parton. vs Milk Board (Victoria)(1), the validity of the levy imposed on dairymen and owners of milk depots by section 30 of the Milk Board Act of 1933 as amended by subsequent Acts of 1936 1939 was (1) ; 70 550 challenged, and it was held by Dixon, J., that the levy of the said contribution amounted to the imposition of a duty of excise. This decision was substantially based on the ground that the statutory board "performs no particular service for the dairyman or the owner of a milk depot for which his contribution may be considered as a fee or recompense" that is to say the element of quid pro quo was absent qua the persons on whom the levy had been imposed. Therefore none of the decisions on which Mr. Amin has relied can assist his case. Let us now examine the scheme of the impugned Act. As the preamble shows it has been passed because it was thought expedient to constitute mining areas and a Mining Areas Development Fund in the State of Orissa. It consists of 11 sections. Section 3 of the Act provides for the constitution of a mining area whenever it appears to the State Government that it is necessary and expedient to provide amenities like communications, water supply and electricity for the better development of any area in the State of Orissa wherein any mine is situated, or to provide for the welfare of the residents or to workers in any such areas within which persons employed in a mine or a group of mines reside or work. Under this section the State Government has to define the limits of the area. and is given the power to include within such area any local area contiguous to the same or to exclude from such area any local area comprised therein; that is the effect of section 3(1). Section 3(2) empowers the owner or a lessee of a mine or his duly constituted representative in the said area to file objections in respect of any notification issued under section 3(1) within the period specified, and the State Government is required to take the said objection into consideration. After considering objections received the State Government is authorised to issue a notification constituting a mining area under section 3(3). Section 4 deals with the imposition and collection of cess. The rate of the levy authorised shall not exceed 5 per centum of the valuation of the minerals at the pit 's mouth. Section 5 provides for the constitution of the Orissa Mining Areas Development 551 Fund. This fund vests in the State Government and has to be administered by such officer or officers as may be appointed by the State Government in that, behalf Section 5(2) requires that there shall be paid to the credit of the said fund the proceeds of the cess recovered under section 4 for each mining area during the quarter after deducting expenses, if any, for collection and recovery. Section 5(3) contemplates that to the credit of the said fund shall be placed all collections of cess under section 5(2) as well as amounts from State Government and the local authorities and public subscriptions specifically given for any of the purposes of the fund. Section 5(4) deals with the topic of the appli cation of the said fund. The fund has to be utilised to meet expenditure incurred in connection with such measures which in the opinion of the State Government are necessary or expedient for providing amenities like communications, water supply and electricity, for the better development of the mining areas, and to meet the welfare of the labour and other persons residing or working in the mining areas. Section 5(5) lays down that without prejudice to the generality of the foregoing provisions the fund may be utilised to defray any of the purposes specified in cls. (a) to (e). Under section 5(6) the State Government is given the power to decide whether any particular expenditure is or is not debitable to the fund and their decision is made final; and section 5(7) imposes on the State Government an obligation to publish annually in the gazette a report of the activities financed from the fund together with an estimate of receipts and expenditure of the fund and a statement of account. Section 6 prescribes the mode of constituting an advisory committee. It has to consist of such number of members and chosen in such manner as may be prescribed, provided however that each committee shall include representatives of mine owners and workmen employed in mining industry. The names of the members of the committee are required to be published in the gazette. Section 7 deals with the appointment and functions of the statutory authorities to carry out the purpose of the Act, while section 8 confers on the State Government power to 552 make rules. Section 9 prescribes penalties and provides for prosecutions; and section 10 gives protection to the specified authorities or officers in respect of anything done or intended to be done by them in good faith in pursuance of the Act or any rules or order made thereunder. Section 11, which is the last section confers on the State Government the power to do anything which may appear to them to be necessary for 'the purpose of removing difficulties in giving effect to the provisions of the Act. The scheme of the Act thus clearly shows that it has been passed for the purpose of the development of mining areas in the State. The basis for the operation of the Act is the constitution of a mining area, and it is in regard to mining areas thus constituted that the provisions of the Act come into play. It is not difficult to appreciate the intention of the State Legislature evidenced by this Act. Orissa is an underdeveloped State in the Union of India though it has a lot of mineral wealth of great potential value. Un fortunately its mineral wealth is located generally in areas sparsely populated with bad communications. Inevitably the exploitation of the minerals is handicapped by lack of communications, and the difficulty experienced in keeping the labour force sufficiently healthy and in congenial surroundings. The mineral development of the State, therefore, requires that provision should be made for improving the communications by constructing good roads and by providing means of transport such as tramways; supply of water and electricity would also help. It would also be necessary to provide for amenities of sanitation and education to the labour force in order to attract workmen to the area. Before the Act was passed it appears that the mine owners tried to put up small length roads and tramways for their own individual purpose, but that obviously could not be as effective as roads constructed by the State and tramway service provided by it. It is on a consideration of these factors that the State Legislature decided to take an active part in unsystematic development of its mineral areas which would help the mine owners in moving their 553 minerals quickly through the shortest route and would attract labour to assist the excavation of the minerals. Thus there can be no doubt that the primary and the principal object of the Act is to develop ' the mineral areas in the State and to assist more efficient and extended exploitation of its mineral wealth. The constitution of the advisory committee as prescribed by section 4 emphasises the fact that the policy of the Act would be to carry out with the assistance of the mine owners and their workmen. Thus after a mining area is notified an advisory committee is constituted in respect of it, and the task of carrying out the objects of the Act is left to the care of the said advisory committee subject to the provisions of the Act. Even before an area is notified the mine owners are allowed an opportunity to put forward their objections. These features of the Act are also relevant in determining the question as to whether the Act is intended to render service to the specified area and to the class of persons who are subjected to the levy of the cess. Section 5 shows that the cess levied does not become a part of the consolidated fund and is not subject to an appropriation in that behalf; it goes into the special fund earmarked for carrying out the purpose of the Act, and thus its existence establishes a correlation between the cess and the purpose for which it is levied. It was probably felt that some additions should be made to the special fund, and so section 5(3) contemplates that grants from the State Government and local authorities and public subscriptions may be collected for enriching the said fund. Every year a report of the activities financed by the fund has to be published together with an estimate of receipt and expenditure and a statement of accounts. It would thus be clear that the administration of the fund would be subject to public scrutiny and persons who are called upon to pay the levy would have an opportunity to see whether the cess collected from them has been properly utilised for the purposes for which it is intended to be used. It is not alleged by the petitioners 554 that the levy imposed is unduly or unreasonably excessive so as to make the imposition a colourable exercise of legislative power. Indeed the fact that the accounts have to be published from year to year affords an indication to the contrary. Thus the scheme of the Act shows that the cess is levied against the class of persons owning mines in the notified area and it is levied to enable the State Government to render specific services to the said class by developing the notified mineral area. There is an element of quid pro quo in the scheme, the cess collected is constituted into a specific fund and it has not become a part of the consolidated fund, its application is regulated by a statute and is confined to its purposes, and there is a definite co relation between the impost and the purpose of the Act which is to render service to the notified area. These features of the Act impress upon the levy the character of a fee as distinct from a tax. It is, however, urged that the cess levied by section 4(2) is in substance and reality a duty of excise. As we have already noticed section 4(2) provides that the rate of such levy shall not exceed 5 per centum of the valuation of the minerals at the pit 's mouth; in other words it is the value of the minerals produced which is the basis for calculating the cess payable by mine owners, and that precisely is the nature in which duty of excise is levied under Entry 84 in List I. The said Entry empowers Parliament to impose duties of excise, inter alia, on goods manufactured or produced in India. When minerals are produced from mines and a duty of excise is intended to be imposed on them it would be normally imposed at the pit 's mouth, and that is precisely what the impugned Act purports to do. It is also contended that the rate prescribed by section 4(2) indicates that it operates not as a mere fee but as a duty of excise. This argument must be carefully examined before the character of the cess is finally determined. It is not disputed that under Entry 23 in List II read with Entry 66 in the said List the State Legislature can levy a fee in respect of mines and mineral development. Entry 23 reads thus: "Regu lation of Mines and mineral development subject to 555 the provisions of List I with respect to regulation and development under the control of the Union". We will deal with the condition imposed by the latter part of this Entry later. For the present it is enough to state that regulation of mines and mineral development is within the competence of the State Legislature. Entry 66 provides that fees in respect of any of the matters in the said List can be imposed by the State Legislature subject of course to the exception of fees taken in any Court. The argument is that though the State Legislature is competent to levy a fee in respect of mines and mineral development, if the statute passed by a State Legislature in substance and in effect imposes a duty of excise it is travelling outside its jurisdiction and is trespassing on the legislative powers of Parliament. This argument is based on two considerations. The first relates to the form in which the levy is imposed, and the second relates to the extent of the levy authorised. The extent of the levy authorised would always depend upon the nature of the services intended to be rendered and the financial obligations incurred thereby. If the services intended to be rendered to the notified mineral areas require that a fairly large cess should be collected and co relation can be definitely established between the proposed services and the impost levied, then it would be unreasonable to suggest that because the rate of the levy is high it is not a fee but a duty of excise. In the present case, if the development of the mining areas involves con siderable expenditure which necessitates the levy of the prescribed rate it only means that the services being rendered to the mining areas are very valuable and the rate payer in substance is compensating the State for the services rendered by it to him. It is significant that the petitioners do not seriously suggest that the services intended to be rendered are a cloak and not genuine, or that the taxes levied have no relation to the said services, or that they are unreasonable and excessive. Therefore, in our opinion, the extent of the rate allowed to be imposed by section 4(2) cannot by itself alter the character of the levy from a 556 fee into that of a duty of excise. If the co relation between the levy and the services was not genuine or real, or if the levy was disproportionately higher than the requirements of the services intended to be rendered it would have been another matter. Then as to the form in which the impost is levied, it is difficult to appreciate how the method adopted by the Legislature in recovering the impost can alter its character. The character of the levy must be determined in the light of the tests to which we have already referred. The method in which the fee is recovered is a matter of convenience, and by itself it cannot fix upon the levy the character of the duty of excise. This question has often been considered in the past, and it has always been held that though the method in which an impost is levied may be relevant in determining its character its significance and effect cannot be exaggerated. In Balla Ram vs The Province of East Punjab (1) the Federal Court had to consider the character of the tax levied by section 3 of the Punjab Urban Immoveable Property 'tax Act XVII of 1940. Section 3 provided as follows: "There shall be charged, levied and paid an annual to tax on buildings and lands situated in the rating areas shown in the schedule to this Act at such rate not exceeding twenty per centum of the annual value of such buildings and lands as the Provincial Government may by notification in official gazette direct in respect of each such rating area". The argument urged before the Federal Court was that the tax imposed by the said section was in reality a tax on income within the meaning of Item 54 in List I of the Seventh Schedule to the Constitution Act of 1935, and as such it was not covered by Item 42 in List II of the said Schedule. This argument was rejected on the ground that the tax levied by the Act was in pith and substance a tax on lands and buildings covered by Item 42. It would be noticed that the basis of the tax was the annual value of the building which is the basis used in the Indian Income tax Act for determining income from property; and so, the attack against the section was based on (1) 557 the ground that it had adopted the same basis for leaving the impost as the Income tax Act and the said basis determined its character whatever may be the appearance in which the impost was purported to be levied. In repelling this argument Fazl Ali, J. observed that the crucial question to be answered was whether merely because the Income tax Act has adopted the annual value as the standard for determining the income it must necessarily follow that if the same standard is employed as a measure for any other tax that tax becomes a tax on income. The learned judge then proceeded to add that if the answer to this question is to be given in the affirmative then certain taxes which cannot possibly be described as income tax must be held to be so. In other words, the effect of this decision is that the adoption of the standard used in Income tax Act for getting at the income by any other act for levying the tax authorised by it would not be enough to convert the said. tax into an income tax. During the course of this judgment Fazl Ali, J. also noticed with approval a similar view taken by the Bombay High Court in Sir Byramjee Jeejeebhoy vs The Province of Bombay (1). This decision has been expressly approved by the Privy Council in Governor General in Council vs Province of Madras (2). Consistently with the decision of the Federal Court their Lordships expressed the opinion that "a duty of excise is primarily a duty levied on a manufacturer or producer in respect of the commodity manufactured or produced. It is a tax on goods and not on sales or the proceeds of the sale of goods. The two taxes, the one levied on the manufacturer in respect of his goods and the other on the vendor in respect of his sales may in one sense overlap, but in law there is no overlapping; the taxes are separate and distinct imposts. If in, fact they overlap that may be because the taxing authority imposing a duty of excise finds it convenient to impose that duty at the moment when the excisable article (1) I.L.R. (2) (1945) L.R. 72 I.A. 91. 71 558 leaves the factory or workshop for the first time on the occasion of its sale". In that case the question was whether the tax authorised by the Madras General Sales Tax Act, 1939, was a tax on the sale of goods or was a duty of excise, and the Privy Council held it was the former and not the latter. Therefore, in our opinion, the mere fact that the levy imposed by the impugned Act has adopted the method of determining the rate of the levy by reference to the minerals produced by the mines would not by itself make the levy a duty of excise. The method thus adopted may be relevant in considering the character of the impost but its effect must be weighed along with and in the light of the other relevant circumstances. In this connection it is always necessary to bear in mind that where an impugned statute passed by a State Legislature is relatable to an Entry in List II it is not permissible to challenge its vires only on the ground that the method adopted by it for the recovery of the impost can be and is generally adopted in levying a duty of excise. Thus considered the conclusion is inevitable that the cess levied by the impugned Act is neither a tax nor a duty of excise but is a fee. The next question which arises is, even if the cess is a fee and as such may be relatable to Entries 23 and 66 in List II its validity is still open to challenge because the legislative competence of the State Legislature under Entry 23 is subject to the provisions of List I with respect to regulation and development under the control of the Union; and that takes us to Entry 54 in List I. This Entry reads thus: "Regulation of mines and mineral development to the extent to which such regulation and development under the control of the Union is declared by Parliament by law to be expedient in the public interest". The effect of reading the two Entries together is clear. The jurisdiction of the State Legislature under Entry 23 is subject to the limitation imposed by the latter part of the said Entry. If Parliament by its law has declared that regulation and development of mines should in public interest be under the control of the Union, to 559 the extent of such declaration the jurisdiction of the State Legislature is excluded. In other words, if a Central Act has been passed which contains a declaration by Parliament as required by Entry 54, and if the said declaration covers the field occupied by the impugned Act the impugned Act would be ultra vires, not because of any repugnance between the two statutes but because the State Legislature had no jurisdiction to pass the law. The limitation imposed by the latter part of Entry 23 is a limitation on the legislative competence of (,he State Legislature itself. This position is not in dispute. It is urged by Mr. Amin that the field covered by the impugned Act has already been covered by the Mines and Minerals (Regulation and Development) Act, 1948, (LIII of 1948) and he contends that in view of the declaration made by section 2 of this Act the impugned Act is ultra vires. This Central Act was passed to provide for the regulation of mines and oil fields and for the development of minerals. It may be stated at this stage that by Act LXVII of 1957 which has been subsequently passed by Parliament, Act LIII of 1948 has now been limited only to oil fields. We are, however, concerned with the operation of the said Act in 1952, and at that time it applied to mines as well as oil fields. Section 2 of the Act contains a declaration as to the expediency and control by the Central Government. It reads thus: "It is hereby declared that it is expedient in the public interest that the Central Government should take under its control the regulation of mines and oil fields and the development of minerals to the extent hereinafter provided". It is common ground that at the relevant time this Act applied to coal mines. Section 4 of the Act provides that no mining lease shall be granted after the commencement of this Act otherwise than in accordance with the rules made under this Act. Section 5 empowers the Central Government to make rules by notification for regulating the grant of mining leases or for prohibiting the grant of such leases in respect of any mineral or in any area. Sections 4 and 5 thus 560 purport to prescribe necessary conditions in accordance with which mining leases have to be executed. This part of the Act has no relevance to our present purpose. Section 6 of the Act, however, empowers the Central Government to make rules by notification in the official gazette for the conservation and development of minerals. Section 6(2) lays down several matters in respect of which rules can be framed by the Central Government. This power is, however, without prejudice to the generality of powers conferred on the Central Government by section 6(1). Amongst the matters covered by section 6(2) is the levy and collection of royalties, fees or taxes in respect of minerals mined, quarried, excavated or collected. It is true that no rules have in fact been framed by the Central Government in regard to the levy and collection of any fees; but, in our opinion, that would not make any difference. If it is held that this Act contains the declaration referred to in Entry 23 there would be no difficulty in holding that the declaration covers the field of conservation and development of minerals, and the said field is indistinguishable from the field covered by the impugned Act. What Entry 23 provides is that the legislative competence of the State Legislature is subject to the provisions of List I with respect to regulation and development under the control of the Union, and Entry 54 in List I requires a declaration by Parliament by law that regulation and development of mines should be under the control of the Union in public interest. Therefore, if a Central Act has been passed for the purpose of providing for the conservation and development of minerals, and if it contains the requisite declaration, then it would not be competent to the State Legislature to pass an Act in respect of the subject matter covered by the said declaration. In order that the declaration should be effective it is not necessary that rules should be made or enforced; all that this required is a declaration by Parliament that it is expedient in the public interest to take the regulation and development of mines under the control of the Union. In such a case the test must be whether the legislative declaration covers the field 561 or not. Judged by this test there can be no doubt that the field covered by the impugned Act is covered by the Central Act LIII of 1948. It still remains to consider whether section 2 of the said Act amounts in law to a declaration by Parliament as required by article 54. When the said Act was passed in 1948 the legislative powers of the Central and the Provincial Legislatures were governed by the relevant Entries in the Seventh Schedule to the Constitution Act of 1935. Entry 36 in List I corresponds to the present Entry 54 in List I. It reads thus: "Regulation of Mines and Oil Fields and mineral development to the extent to which such regulation and development under Dominion control is declared by Dominion law to be expedient in public interest". It would be notic ed that the declaration required by Entry 36 is a declaration by Dominion law. Reverting then to section 2 of the said Act it is clear that the declaration contained in the said section is put in the passive voice; but in the context there would be no difficulty in holding that the said declaration by necessary implication has been made by Dominion law. It is a declaration contained in a section passed by the Dominion Legislature ' and so it is obvious that it is a declaration by a Dominion law; but the question is: Can this declaration by a Dominion law be regarded constitutionally as declaration by Parliament which is required by Entry 54 in List I. It has been urged before us by the learned Additional Solicitor General and Mr. Amin that in dealing with this question we should bear in mind two general considerations. The Central Act has been continued under article 372(1) of the Constitution as an existing law, and the effect of the said constitutional provision must be that the continuance of the existing law would be as effective and to the same extent after the Constitution came into force as before. It is urged that after the said Act was passed and before the Con stitution came into force no Provincial Legislature could have validly made a law in respect of the field covered by the said Act, and it would be commonsense to assume that the effect of the continuance of the 562 said law under article 372(1) cannot be any different. In other words, if no Provincial Legislature could have trespassed on the field covered by the said Act before the Constitution, the position would and must be the same even after the Constitution came into force. It is also contended that for the purpose of bringing the provision of existing laws into accord with the provisions of the Constitution the President was given power to make by order appropriate adaptations and modifications of such laws, and the object of making such adaptations obviously was to make the continuance of the existing laws fully effective. It is in the light of these two general considerations, so the. argument runs, must the point in question be considered. The relevant clause in the Adaptation of Laws Order, 1950, on which reliance has been placed in support of this argument is el. 16 in the Supplementary Part of the said Order. This clause provides that subject to the provisions of this Order any reference by whatever form of words in any existing law to any authority competent at the date of the passing of that law to exercise any powers or authorities, or to discharge any functions, in any part of India shall, where a corresponding new authority has been constituted by or under the Constitution, have effect until duly repealed or amended as if it were a reference to that new authority. The petitioners contend that as a result of this clause the declaration made by the Dominion Legislature in section 2 of the Central Act must now be held to be the declaration made by Parliament. Is this contention justified on a fair and reasonable construction of the clause? That is the crux of the problem. In considering this question it would be relevant to recall the scheme of the Adaptation of Laws Order, 1950. It consists of Three Parts. Part 1 deals with the adaptation of Central Laws and indicates the adaptation made therein; Part 11 deals with the adaptation of Provincial Laws and follows the same pattern; and Part III is a Supplementary Part which contains provisions in the nature of supplementary provisions. A perusal of the clauses contained in Part 563 I would show that though some adaptation was made in Act LIII of 1948 it was not thought necessary to make an adaptation in section 2 of the said Act whereby the declaration implied in the said section has been expressly adapted into a declaration by Parliament. Now, the effect of el. 16 in substance is to equate an authority competent at the date of the passing of the existing law to exercise any powers or authorities, or to discharge any functions with a corresponding new authority which has been constituted by or under the Constitution. Reference to the authority in the con. text would suggest cases like reference to the Governor General eo nomine, or Central Government which respectively would be equated with the President or the Union Government. Prima facie the reference to authority would not include reference to a Legislature; in this connection it may be relevant to point out that article 372(1) refers to a competent Legislature as distinguished from other competent authorities. That is the first difficulty in holding that el. 16 refers to the Dominion Legislature and purports to equate it with the Parliament. It is clear that for the application of this clause it is necessary that a reference should have been made to the authority by some words whatever may be their form. In other words it is only where the existing law refers expressly to some authority that this clause can be invoked. It is difficult to construe the first part of this clause to include authorities to which no reference is made by any words in terms, but to which such reference may be implied; and quite clearly the Dominion Legislature is not expressly referred to in section 2. In construing the present clause we think it would be straining the language of the clause to hold that an authority to which no reference is made by words in any part of the existing law could claim the benefit of this clause. Besides, there is no doubt that when the clause refers to any authority competent to exercise any powers or authorities, or to discharge any functions, it refers to the powers, authorities or functions attributable to the existing law itself; that is to say, authorities 564 which are competent to exercise powers or to discharge functions under the existing laws are intended to be equated with corresponding new authorities. It is impossible to hold that the Dominion Legislature is an authority which was competent to exercise any power or to discharge any function under the existing law. Competence to exercise power to discharge functions to which the clause refers must inevitably be related to the existing law and not to the Constitution Act of 1935 which would be necessary if Dominion Legislature was to be included as an authority under this clause. The Constitution Act of 1935 had been repealed by the Constitution and it was not, and could not obviously be, the object of the Adaptation of Laws Order to make any adaptation in regard to the said Act. Therefore, the competence of the Dominion Legislature which flowed from the relevant provisions of the Constitution Act of 1935 is wholly outside this clause. We have carefully considered the arguments urged before us by the learned Additional Solicitor General and Mr. Amin but we are unable to hold that cl. 16 can be pressed into service for the purpose of supporting the conclusion that the declaration by the Dominion Legislature implied in section 2 of Act LIII of 1948 can, by virtue of cl. 16, be held to be a declaration by Parliament within the meaning of the relevant Entries in the Constitution. If that be the true position then the alternative challenge to the vires of the Act based on el. 16 of the Adaptation of Laws Order must fail. There is another possible argument which may prima facie lead to the same conclusion. Let us assume that the result of reading article 372 and cl. 16 of the Adaptation of Laws Order is that under section 2 of Act LIII of 1948 there is a declaration by Parliament as suggested by the petitioners and the learned Additional Solicitor General. Would that meet the requirements of Entry 54 in List I of the Seventh Schedule? It is difficult to answer this question in the affirmative because the relevant provisions of the Constitution are prospective and the declaration by Parliament specified by Entry 54 must be declaration made by 565 Parliament subsequent to the date when the Constitution came into force. Unless a declaration is made by Parliament after the Constitution came into force it will not satisfy the requirements of Entry 54, and that inevitably would mean that the impugned Act is validly enacted under Entry 23 in List II of the Seventh Schedule. If that be the true position then it would follow that even on the assumption that el. 16 of the Adaptation of Laws Order and article 372 can be construed as suggested by the petitioners the impugned Act would be valid. Faced with this difficulty, both the learned Additional Solicitor General and Mr. Amin argued that cl. 21 of the said Order may be of some assistance. Clause 21 reads thus: "Any Court, Tribunal, or authority required or empowered to enforce any law in force in the territory of India immediately before the appointed day shall, notwithstanding that this Order makes no provision or insufficient provision for the adaptation of the law for the purpose of bringing it into accord with the provisions of the Constitution, construe the law with all such adaptations as are necessary for the said purpose". Assuming that this clause is valid we do not see how it is relevant in the present case. All that this clause purports to do is to empower the Court to construe the law with such adaptations as may be necessary for the purpose of bringing it in accord with the provisions of the Constitution. There is no occasion to make any adaptation in construing Act LIII of 1948 for bringing it into accord with the provisions of the Constitution at all. The said Act has been continued under article 372(1) and there is no constitutional defect in the said Act for the avoidance of which any adaptation is necessary. In fact what the petitioners seek to do is to read in section 2 of the said Act the declaration by Parliament required by Entry 54 so as to make the impugned Act ultra vires. Quite clearly cl. 21 cannot be pressed into service for such a purpose. Therefore, we reach this position that the field covered by Act LIII of 1948 is substantially the same as the field covered by the 72 566 impugned Act but the declaration made by section 2 of the said Act does not constitutionally amount to the requisite declaration by Parliament, and so the limitation imposed by Entry 54 does not come into operation in the present case. Act LIII of 1948 continues in operation under article 372; with this modification that so far as the State of Orissa is concerned it is the impugned Act that governs and not the Central Act. Article 372(1) in fact provides for the continuance of the existing law until it is altered, repealed or amended by a competent Legislature or other competent authority. In the absence of the requisite parliamentary declaration the legislative competence of the Orissa Legislature under Entry 23 read with Entry 66 is not impaired, and so the said Legislature is competent either to repeal, alter or amend the existing law which is the Central Act LIII of 1948; in effect, after the impugned Act was passed, so far as Orissa is concerned the Central Act must be deemed to be repealed. This position is fully consistent with the provisions of article 372. The result is that the material words used in cls. 16 and 21 being unambiguous and explicit, it is difficult to give effect to the two general considerations on which reliance has been placed by the petitioners. Incidentally the present case discloses that in regard to the requisite parliamentary declaration prescribed by Entry 54 in List I in its application to the pre Constitution Acts under corresponding Entry 36 in List I of the Constitution Act of 1935, there is a lacuna which has not been covered by any clauses of the Adaptation of Laws Order; that, however, is a matter for Parliament to consider. There is one more point which is yet to be considered. Mr. Amin contends that Entry 23 in List II is subject to the provisions in List I with respect to regulation and development under the control of the Union, and according to him Entry 52 in List I is one of such provisions. In this connection he relies on the said Entry which deals with industries the control of which by the Union is declared by Parliament by law to be expedient in the public interest, and Industries (Development and Regulation) Act, 1951 (LXV 567 of 1951). This Act has been passed to provide for the development and regulation of certain industries one of which undoubtedly is coal mining industry. Section 2 of this Act declares that it is expedient in the public interest that the Union should take under its control the industries specified in the First Schedule. This declaration is a declaration made by Parliament, and if the provisions of the Act read with the said declaration covered the same field as is covered by the impugned Act, it would undoubtedly affect the vires of the impugned Act; but in dealing with this question it is important to bear in mind the doctrine of pith and substance. We have already noticed that in pith and substance the impugned Act is concerned with the development of the mining areas notified under it. The Central Act, on the other hand, deals more directly with the control of all industries including of course the industry of coal. Chapter II of this Act provides for the constitution of the Central Advisory Council and Development Councils, chapter III deals with the regulation of scheduled industries, chapter IIIA provides for the direct management or control of industrial undertakings by Central Government in certain cases, and chapter IIIB is concerned with the topic of control of supply, distribution, price, etc, of certain articles. The last chapter deals with miscellaneous incidental matters. The functions of the Development Councils constituted under this Act prescribed by section 6(4) bring out the real purpose and object of the Act. It is to increase the efficiency or productivity in the scheduled industry or group of scheduled industries, to improve or develop the service that such industry or group of industries renders or could render to the community, or to enable such industry or group of industries to render such service more economically. Section 9 authorises the imposition of cess on scheduled industries in certain cases. Section 9(4) provides that the Central Government may hand over the proceeds of the cess to the Development Council there specified and that the Development Council shall utilise the said proceeds to achieve the objects mentioned in cls. (a) to (d). These 568 objects include the promotion of scientific and industrial research, of improvements in design and quality, and the provision for the training of technicians and labour in such industry or group of industries. It would thus be seen that the object of the Act is to regulate the scheduled industries with a view to improvement and development of the service that they may render to the society, and thus assist the solution of the larger problem of national economy. It is difficult to hold that the field covered by the declaration made by section 2 of this Act, considered in the light of its several provisions, is the same as the field covered by the impugned Act. That being so, it cannot be said that as a result of Entry 52 read with Act LXV of 1951 the vires of the impugned Act can be successfully challenged. Our conclusion, therefore, is that the impugned Act is relatable to Entries 23 and 66 in List II of the Seventh Schedule, and its validity is not impaired or affected by Entries 52 and 54 in List I read with Act LXV of 1951 and Act LIII of 1948 respectively. In view of this conclusion it is unnecessary to consider whether the impugned Act can be justified under Entry 50 in List II, or whether it is relatable to Entry 24 in List III and as such suffexs from the vice of repugnancy with the Central Act XXXII of 1947. The result is the petition fails and is dismissed with costs. WANCHOO, J. I have read the judgment just delivered by my learned brother Gajendragadkar J. and regret that I have not been able to persuade myself that the cess levied in this case on all extracted minerals from any mine in any mining area at a rate not exceeding five per centum of the value of the minerals at the pit 's mouth by the Orissa State Legislature under section 4 of the Orissa Mining Areas Development Fund Act, No. XXVII of 1952, (hereinafter called the Act) is a fee properly so called and not a duty of ex cise. The facts are all set out in the judgment just delivered and I need not repeat them. The scheme of the Act, as appears from section 3 thereof is to give power to the State Government, whenever it 569 thinks it necessary and expedient to provide amenities, like communications, water supply and electricity for the better development of any area in the State where , in any mine is situated or to provide for the welfare of residents or workers in any such area within. which persons employed in a mine or a group of mines reside or work, to constitute such an area to be a mining area for the purposes of the Act, to define the limits of the area, to include within such area any local area contiguous to the same and defined in the notification and to exclude from such area any local area comprised therein and defined in the notification. A notification under section 3 is made, after hearing objections from owners or lessees of mines. After such an area is con stituted under section 3, a cess is imposed under section 4 on all extracted minerals from any mine in any such area at the rate not exceeding five per centum of the value of the minerals at the pit 's mouth. The cess so collected is credited to a fund called the Orissa Mining Area Development Fund created under section 5 of the Act, besides other amounts with which we are not concerned in this case. The Fund is to be applied to meet expenditure incurred in connection with such measures, which in the opinion of the State Government, are necessary or expedient for providing amenities like communications, water supply and electricity, for the better development of mining areas and to meet the welfare of labour and other persons residing or working in the mining areas. Then come other provisions for working out the above provisions including section 8, which gives power to the State Government to frame rules to carry. into effect the purposes of the Act. The Rules were framed under the Act in January, 1955. The constitutional competence of the Orissa State Legislature to levy the cess under the Act is attacked on two main grounds. In the first place, it is urged that the cess is in pith and substance a duty of excise under item 84 of List I of the Seventh Schedule and therefore the levy of such a cess is beyond the competence of the Orissa State Legislature. In the second place, it is urged that even if the cess is a fee, in view 570 of the two Acts of the Central Legislature and Parliament, namely, The Mines and Minerals (Regulation and Development) Act, No. LIII of 1948 and The Industries (Development and Regulation) Act, No. LXV of 1951, the Orissa Legislature was not competent to pass the Act. The petition has been opposed on behalf of the State of Orissa and the main contentions urged on its behalf are that the cess is a fee properly so called and not a duty of excise and therefore the Orissa State Legislature was competent to levy it and the two Central Acts do not affect that competence. In the alternative it has been urged that even if the cess is a tax the State Legislature was competent to levy it under item 50 of List If of the Seventh Schedule. The first question therefore that falls for consideration is whether the cess in this ' ease is a tax or a fee. Difference between a tax properly so called and a fee properly so called came up for consideration before this Court in three cases in 1954 and was considered at length. In the first of them, namely, The Commissioner, Hindu Religious Endowments, Madras vs Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt it was pointed out that "though levying of fees is only a particular form of the exercise of the taxing power of the State, our Constitution has placed fees under a separate category for purposes of legislation and at the end of each one of the three legislative lists, it has given a power to the particular legislature to legislate on the imposition of fees in respect to every one of the items dealt with in the list itself". It was also pointed that "the essence of a tax is compulsion, that is to say, it is imposed under statutory power without the taxpayer 's consent and the payment is enforced by law. The second characteristic of a tax is that it is an imposition made for public purpose without reference to any special benefit to be conferred on the payer of the tax. This is expressed by saying that the levy of tax is for the purposes of general revenue, which when (1) ; 571 collected forms part of the public revenues of the State. As the object of a tax is not to confer any special benefit upon any particular individual, there is, as it is said, no element of quid pro quo between the tax payer and the public authority. Another feature of taxation is that as it is a part of the common burden, quantum of imposition upon the tax payer depends generally upon his capacity to pay. " As to fees, it was pointed out that "a 'fee ' is generally defined to be a charge for a special service rendered to individuals by some governmental agency. The amount of fee levied is supposed to be based on the expenses incurred by the Government in rendering the service, though in many cases the costs are arbitrarily assessed. Ordinarily, the fees are uniform and no account is taken of the varying abilities of different recipients to pay. " Finally, it was pointed out that "the distinction between a tax and a fee lies primarily in the fact that a tax is levied as a part of a common burden, while a fee is a payment for a special benefit or privilege. . . Public interest seems to be at the basis of all impositions, but in a fee it is some special benefit which the individual receives. " The consequence of these principles was that "if, as we hold, a fee is regarded as a sort of return or consideration for services rendered, it is absolutely necessary that the levy of fees should, on the face of the legislative provision be co related to the expenses incurred by Government in rendering the services. . . If the money thus paid is set apart and appropriated specifically for the performance of such work and is not merged in the public revenues for the benefit of the general public, it could be counted as fees and not a tax." Having laid down these principles, that case then considered the vires of section 76 of the Madras Hindu Religious and Charitable Endowments Act, No. XIX of 1951, and it was pointed out that the material fact which negatived the theory of fees in that case was that the money raised by levy of the contribution was not ear marked or specified for defraying the expenses 572 that the Government had to incur in performing the services. All the collections went to the consolidated fund of the State and all the expenses had to be met not out of those collections but out of the general revenues by a proper method of appropriation as was done in the case of other government expenses. That in itself might not be conclusive, but in, that case there was total absence of any co relation between the expenses incurred by the Government and the amount raised by contribution under the provision of section 76 and in those circumstances the theory of return or counter payment or quid pro quo could not have any possible application to that case. Consequently, the contribution levied under section 76 was held to be a tax and not a fee. In the second case of Mahant Sri Jagannath Ramanuj Das vs The State of Orissa (1), a similar imposition by the Orissa Legislature came up for consideration. After referring to the earlier case, it was pointed out that "two elements are thus. essential in order that a payment may be regarded as a fee. In the first place, it must be levied in consideration of certain services which the individuals accepted either willingly or unwillingly. But this by itself is not enough to make the imposition a fee, if the payments demanded for rendering of such services are not set apart or specifically appropriated for that purpose but are merged in the general revenue of the State to be spent for general public purposes." The Orissa imposition was held to be a fee because the collections made were not merged in the general public revenue and were meant for the purpose of meeting the expenses of the Commissioner and his office which was the machinery set up for due administration of the affairs of the religious institution. They went to constitute a fund which was contemplated by section 50 of the Orissa Act and this fund was specifically set apart for rendering services involved in carrying out the provisions of the Act. The third case, namely, Ratilal Panachand Gandhi (1) ; 573 vs The State of Bombay (1) came from Bombay. 58 of the Bombay Act, No. XXIX of 1950, provided for an imposition in proportion to the gross annual income of the trust. This imposition was levied for the purpose of due administration of the trust property and for defraying the expenses incurred in connection with the same. After referring to the two earlier cases, the Court went on to say that "taxis a common burden and the only return which the taxpayer gets is participation in the common benefits of the State. Fees, on the other hand, are payments primarily in the public interest, but for some special service rendered or some special work done for the benefit of those from whom the payments are demanded. Thus in fees there is always an element of quid pro quo which is absent in a tax. . But in order that the collections made by the Government can rank as fees, there must be co relation between the levy imposed and the expenses incurred by the State for the purpose of rendering such services. " It was then pointed out that the contributions, which were collected under section 58, were to be credited in the Public Trusts Administration Fund as constituted under section 57. This fund was to be applied exclusively for the payment of charges for expenses incidental to the regulation of public trusts and for carrying into effect the provisions of the Act. The imposition therefore was in that case held to be a fee. These decisions clearly bring out the difference between a tax and a fee and generally speaking there is always an element of quid pro quo in a fee and the amount raised through a fee is co related to the expenses necessary for rendering the services which are the basis of quid pro quo. Further, the amount collected as a fee does not go to augment the general revenues of the State and many a time a special fund is created in which fees are credited though this is not absolutely necessary. But as I read these deci sions, they cannot be held to lay down that 'What is in pith and substance a tax can become a fee merely (1) [1954] S.C.R. 1055. 574 because a fund is created in which collections are credited and some services may be rendered to the persons from whom collections are made. If that were so, it will be possible to convert many taxes not otherwise leviable into fees by the device of creating a special fund and attaching some service to be rendered through that fund to the persons from whom collections are made. I am therefore of opinion that one must first look at the pith and substance of the levy, and if in its pith and substance it is not essentially different from a tax it cannot be converted into a fee by creating a special fund in which the collections are credited and attaching some services to be rendered through that fund. Let me then look at the pith and substance of the cess, which has been imposed in this case. The cess consists of a levy not exceeding five per centum of the value of the minerals at the pit 's mouth on all extracted minerals. Prima facie such a levy is nothing more nor less than a duty of excise. Item 84 of List I gives power to levy duties of excise exclusively to the Union and is in these terms : "Duties of excise on tobacco and other goods manufactured or produced in India except (a) alcoholic liquors for human consumption; (b) opium, Indian hemp and other narcotic drugs and narcotics, but including medicinal and toilet preparations containing alcohol or any substance included in sub paragraph (b) of this entry. " This item gives power to Parliament to impose duties of excise on all goods manufactured. or produced in India with certain exceptions mentioned therein. Taking this particular case, coal is produced from the mine and would clearly be covered by the words " other goods produced in India" and a duty of excise can be levied on it. What then exactly is meant by a duty of excise? Reference in this connection may be made to Governor General in Council vs Province of Madras (1). In that case the point arose whether the sales tax imposed by the Madras Legislature was a duty of excise. The Privy Council pointed out that (1) (1945) L.R. 72 I.A. 91. 575 "in a Federal constitution in which there is a division of legislative powers between Central and Provincial legislatures, it appears to be inevitable that controversy should arise whether one or other legislature is not exceeding its own, and encroaching on the other 's, constitutional legislative power, and in such a controversy it is a principle, which their Lordships do not hesitate to apply in the present case, that it is not the name of the tax but its real nature, its 'pith and substance ' as it has sometimes been said which must determine into what category it falls. " The Privy Council went on to consider what a duty of excise was and said that "it is primarily a duty levied on a manufacturer or producer in respect of the commodity manufactured or produced. It is a tax on goods not on sales or the proceeds of sale of goods. Though sometimes a duty of excise may be imposed on first sales, a duty of excise and a tax on the sale of goods were separate and distinct imposts and in law do not overlap." The Privy Council approved of the decisions of the Federal Court in re The Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938 (1) and The Province of Madras vs Messrs. Boddu Paidanna and Sons (2). It seems to have been urged that because in some cases a duty of excise may be levied on the occasion of the first sale and a sales tax may also be levied on the same occasion, there is really no difference between the two. It is however clear that a duty of excise is primarily a tax on goods manufactured or produced; it is not a tax on the sale of goods, though the taxing authority may as a matter of concession to the producer not charge the tax immediately the goods are produced and may postpone it, to make it easy for the producer to pay the tax, till the first sale is made by him; nevertheless the charge is still on the goods and is therefore a duty of excise. On the other hand, a sales tax can only be levied when a sale is made and there is nothing to prevent its levy on the first sale. The two concepts (1) (2) (1948) F.C.R. go. 576 are however different and, as the Privy Council pointed out, a sales tax and a duty of excise are separate and distinct imposts and in law do not overlap. The pith and substance of a duty of excise is that it is primarily a duty levied on a manufacturer or producer in respect of the commodity manufactured or produced. Let me therefore see what the Orissa Legislature has done in the present case. It has levied a cess at a rate not exceeding five per centum on the value of minerals at the pit 's mouth on all extracted minerals. All the extracted minerals are nothing other than goods produced and the cess is levied on the goods produced at a rate not exceeding five per centum of the value at the pit 's mouth. The cess therefore in the present case cannot be anything other than a duty of excise. The pith and substance of the cess in this case falls fairly and squarely within entry 84 of List I and is therefore a duty of excise, which cannot be levied by the Orissa State Legislature. I may in this connection refer to the cesses levied by the Central Legislature and Parliament by Act XXXII of 1947 and by the Act No. LXV of of Act XXXII of 1947 lays down that there shall be levied and collected as a cess for the purposes of that Act a duty of excise on all coal and coke dispatched from collieries at such rate not less than four annas and not more than eight annas per ton as may from time to time be fixed by the Central Government by notification in the Official Gazette. This is obviously a tax on the goods produced, the basis of the tax being so much per ton. Again sec. 9 of Act LXV of 1951 lays down that there may be levied and collected as a cess for the purposes of that Act on all goods manufactured or produced in any such scheduled industry as may be specified in this behalf by the Central Government by notified order a duty of excise at a rate not exceeding two annas per centum of the value of the goods. This again is clearly a tax on goods produced or manufactured and is in the nature of a duty of excise, the basis of the tax being so much of the value of the goods. If these two taxes are duties of excise, 577 I fail to see any difference in pith and substance between these two taxes and the cess levied under the Act. It is however urged that the method employed in the Act for realising the cess is only a method of quantification of the fee and merely because of this quantification, the pith and substance of the impost does not change from a fee to a duty of excise. Reference in this connection was made to three cases of quantification. In Sir Byramjee Jeejeebhoy vs The Province of Bombay (1), a question arose with respect to a tax imposed on urban immovable property, whether it was a tax on lands and buildings. The challenge to the tax was on the ground that it was tax on income or capital value within items 54 and 55 of List I of the Seventh Schedule of the Government of India Act and could not therefore be imposed by the Bombay Legislature. It was held that the tax was a tax on lands and buildings within the meaning of item 42 of List II of the same Schedule and that the basis of the tax, which was the annual value, would not convert it into a tax on income or capital value. The High Court considered the pith and substance of the said Act and came to the conclusion that every tax on annual value was not necessarily a tax on income and it was held that the mode of assessment of a tax did not determine its character and one has to look to the essential character of the tax to decide whether it was a tax on income or on lands and buildings. Looking to the pith and substance of the tax it was held in that case that it was a tax on lands and buildings. That decision was in the circumstances of that case right because the intention of the legislature was not to tax the income of any one; the essential character of the tax in that case was to tax the lands and buildings and the annual value of the lands and buildings was only taken as a mode of levying the tax. In the present case, however, the very mode of the levy of the cess is nothing other than the levy of a duty of excise and therefore the principle of quantification for purposes of a fee cannot be extended to (1) I.L.R. 578 such an extent as to convert what is in pith and substance a tax into a fee on that basis. The next case to which reference was made is Municipal Corporation, Ahmedabad vs Patel Gordhandas Hargovandas (1). In that case the Ahmedabad Bo. rough Municipality had levied a rate on open lands and the basis of the levy was one per centum of the capital value of the land. It was urged that this amounted to a capital levy within entry 54 of List I; but the court repelled that contention and held that the levy was in pith and substance a tax on lands, which came within entry 42 of List II of the Seventh Schedule to the Government of India Act. A distinction was made between a tax on land which is levied on the basis of its capital value and a tax which is on capital treating it as an asset itself. This decision also, if I may say so with respect, is correct, for the basic idea was to tax lands and some method had to be found for doing so and the method evolved, though it might look like a capital levy, was in pith and substance not so. But the theory of quantification which is the basis of these two cases cannot be stretched so far as to turn levies which are in pith and substance taxes into fees, by the process of attaching certain services and creating a fund. The third case is Ralla Ram vs The Province of East Punjab (2). That was a case of a tax on lands and buildings and annual value was the basis on which the tax was levied. The Federal Court rightly pointed out that the pith and substance of the levy had to be seen and on that view it was not income tax but a tax on lands and buildings and the method adopted was merely a method of quantification. The Federal Court also pointed out that "where there is an apparent conflict between an Act of the Federal Legislature and an Act of the Provincial Legislature, we must try to ascertain the pith and substance or the true nature and character of the conflicting provisions and that before an Act is declared ultra vires, there should be an attempt to reconcile the two conflicting jurisdictions, and, only if such a reconciliation should prove (1) I.L.R. (2) 579 impossible, the impugned Act should be declared invalid. " It may also be pointed out that in all these three cases, one source of income of an individual or one item out of the total capital of an individual was the basis of calculation while income tax or capital levy is generally on the total income or the total capital of a person. That aspect must have gone into the decision that the method employed was merely a mode for imposing a tax on lands and buildings. In the present case, however, I see no difference between the method of imposing a duty of excise and the method employed in the Act for imposing a cess a matter which will be clear from the cesses imposed under the two Central Acts already referred to (No. XXXII of 1947 and No. LXV of 1951). It is not as if there could be no method of imposing a fee properly so called in this case except the one employed. Two methods readily suggest themselves. A lump sum annual fee could be levied on each mine even on a graded scale depending on the size of the mine as evidenced by its share capital. Or a similar graded fee could be levied on each mine depending on its size determined by the number of men employed therein. Where therefore the result of quantification is to bring a particular impost entirely within the ambit of a tax it would not be right to say that such an impost is still a fee, because certain services have to be rendered and a fund has been created in which collections of the impost are credited. If this were permissible many taxes not otherwise leviable would be converted into fees by the simple device of creating a special fund and attaching certain services to be rendered from the amount in that fund. That would in my opinion be a colourable exercise of the power of legislation, as explained in K. C. Gajapati Narayan Deo vs The State of Orissa (1). Let me illustrate how taxes can be turned into fees on the so called basis of quantification with the help of the device of creating a fund and attaching certain services to be rendered out of monies in the fund. Take the case of income tax under item 82 of List I of the Seventh Schedule, which is exclusively reserved (1) ; 580 for the Union. Suppose that some State Legislature wants to impose a tax on income other than agricultural income in the garb of fees. All that it has to do is then to create a special fund out of the amounts collected and to attach rendering of certain services to the fund. All that would be necessary would be to define the services to be rendered so widely that the amount required for the purpose would be practically limitless. In that case there would be no difficulty in levying any amount of tax on income, for the amount collected would always be insufficient for the large number of services to be rendered. What has to be done is to find out a number of items in Lists II and III of the Seventh Schedule in respect of which fees can be levied by the State Legislature. These fees can be levied on a total basis for a large number of services under various entries of Lists II and III. A fund can be created, say, for rendering services of various kinds to residents of one district. In order to meet the expenses of tendering such services, suppose, the legislature imposes a tax on every one in the district at 10 per centum of the net total income (other than agricultural income); the amount so collected is put in a separate fund and ear marked for such special services to be rendered to the residents of that district. Can it be said that such a levy is a fee justified under various entries of Lists II and III, and not a tax on income, on the ground that this is merely a mode of quantification? As an instance, take, item 6 of List II, "Public health and sanitation, hospitals and dispensaries"; item 9, "Relief of the disabled and unemployable"; item II, Education; item 12, Libraries, museums and similar institutions"; item 13, communications, that is to say, roads, bridges and other means of communications; item 17, "Water, that is to say, water supplies, irrigation and canals, drainage and embankments, water storage and water power"; and item ', 25, "Gas and gas works"; item 23 of List III, "Social security and social insurance, employment and unemployment"; item 24, "Welfare of labour including conditions of work, provident funds, employers ' liability workmen 's compensation, invalidity and old age 581 pensions and maternity benefits"; item 25, "Vocational and technical training of labour"; and item 38, "Electricity". Assume that a fund is created for rendering, these services to the residents of a district. The State Legislature is entitled to impose fees for rendering these services to the residents of the district; the costs of these services would obviously be limitless and in order to meet these costs, the State legislature levies a consolidated fee for all these purposes at 10 per centum of the total net income on the residents of the district (excluding his agricultural income) as a measure of quantification of the fee. Can it be said in the circumstances that such a levy would not be Income tax, simply because a fund is created to be used in the district where collections are made and these services have to be rendered out of the fund so created to the residents of that district and to no others? The answer can only be one, viz., that the nature of the impost is to be seen in its pith and substance; and if in pith and substance it is income tax within item 82 of List I of the Seventh Schedule it will still remain income tax in spite of the creation of a fund and the attaching of certain services to the monies in that fund to be rendered in a particular area. Such an impost can never be justified as a consolidated fee on the ground that it is merely a method of quantification. Compare what has been done in this case. Sec. 3 of the Act which refers to the services to be rendered mentions communications, that is,, roads, bridges and other means of communication (barring those given in List I), water supply and electricity, for the better development of the area. These three items themselves would mean expenditure of such large amounts that anything could be charged as a fee to meet the costs, particularly in an undeveloped State like Orissa. Further, the section goes on to mention provision for the welfare of residents or workers in any such area, which would include such things as social security and social insurance, provident funds, employer 's liability, workmen 's compensation, invalidity and old age pensions and maternity benefits and may be even employment and unemployment. Again large funds would 74 582 be required for these purposes. Therefore, the services enumerated in section 3 being so large and requiring such large sums, any amount can be levied as a fee and in the name of quantification any tax, even though it may be in List I, can be imposed; and that is exactly what has been done, namely, what is really a duty of excise has been imposed as a fee for these purposes which fall under items 13 and 17 of List II and 23, 24 and 38 of List III. There can be no doubt in the circumstances that the levy of a cess as a fee in this case is a colourable piece of legislation. I do not say that the Orissa State Legislature did this deliberately. The motive of the legislature in such cases is irrelevant and it is the effect of the legislation that has to be seen. Looking at that, the cess in this case is in pith and substance nothing other than a duty of excise under item 84 of List I and therefore the State legislature was incompetent to levy it as a fee. The next contention on behalf of the State of Orissa is that if the cess is not justified as a fee, it is a tax under item 50 of List II of the Seventh Schedule. Item 50 provides for taxes on mineral rights subject to any limitations imposed by Parliament by law relating to mineral development. This raises a question as to what are taxes on mineral rights. Obviously, taxes on mineral rights must be different from taxes on goods produced in the nature of duties of excise. If taxes on mineral rights also include taxes on minerals produced, there would be no difference between taxes on mineral rights and duties of excise under item 84 of List I. A comparison of Lists I and II of the Seventh Schedule shows that the same tax is not put in both the Lists. Therefore, taxes on mineral rights must be different from duties of excise which are taxes on minerals produced. The difference can be understood if one sees that before minerals are extracted and become liable to duties of excise somebody has got to work the mines. The usual method of working them is for the owner of the mine to grant mining leases to those who have got the capital to work the mines. There should 583 therefore be no difficulty in holding that taxes on mineral rights are taxes on the right to extract minerals and not taxes on the minerals actually extracted. Thus tax on mineral rights would be confined, for example, to taxes on leases of mineral rights and on premium or royalty for that. Taxes on such premium and royalty would be taxes on mineral rights while taxes on the minerals actually extracted would be duties of excise. It is said that, there may be cases where the owner himself extracts minerals and does not give any right of extraction to somebody else and that in such cases in the absence of mining leases or sub leases there would be no way of levying tax on mineral right, ,. It is enough to say that these cases also, rare though they are, present no difficulty. Take the case of taxes on annual value of buildings. Where there is a lease of the building, the annual value is determined by the lease money; but there are many cases where owners themselves live in buildings. In such cases also taxes on buildings are levied on the annual value worked out according to certain rules. There would be no difficulty where an owner himself works the mine to value the mineral rights on the same principles on which leases of mineral rights are made and then to tax the royalty which, for example, the owner might have got if instead of working the mine himself he had leased it out to somebody else. There can be no doubt therefore that taxes on mineral rights are taxes of this nature and not taxes on minerals actually produced. Therefore the present case is not a tax on mineral rights; it is a tax on the minerals actually produced and can be no different in pith and substance from a tax on goods produced which comes under Item 84 of List I, as duty of excise. The present levy therefore under section 4 of the Act cannot be justified as a tax on mineral rights. In the view I have taken, it is not necessary to consider the other point, raised on behalf of the petitioners, namely, that even if it is a fee, in view of the two Central Acts (mentioned earlier) the, Orissa Legislature was not competent to pass the Act. I would 584 therefore allow the petition, and declare that the Orissa Mining Areas Development Fund Act, 1952, is beyond the constitutional competence of the Orissa Legislature to pass it. The whole Act must be struck down because there will be very little left in the Act if section 4 falls as it must. The legislature would never have passed the Act without section 4. By COURT. In accordance with the majority Judgment of the Court, the Writ Petition is dismissed with costs.

The petitioners challenged the constitutional validity of the Orissa Mining Areas Development Fund Act, 1952, which by section 3 empowered the State Government to constitute mining areas for the purpose of providing them with certain amenities after hearing objections from the lessees, by section 4 to impose and collect a cess not exceeding 5% of the valuation of the minerals at the pit 's mouth and by section 5 created a fund to which the cess was to be credited. The petitioners ' case, inter alia, was that the impugned Act and the rules made thereunder were ultra vires the powers of the State Legislature, the cess levied thereunder was not a fee but a duty of excise on coal within Entry 84 of List I of the Seventh Schedule to the Constitution and repugnant to Coal Mines Labour Welfare Fund Act, 1947 (Act XXXII of 1947), and, alternatively, even supposing it was a fee relatable to Entries 23 and 66 of List II, it was hit by Entry 54 of List I read with the Mines and Minerals (Regulation and Development) Act 1948 (Act LIII of 1948), or by Entry 52 of List I read with the Industries (Development and Regulation) Act, 1951 (Act LXV of 1951). It was urged on behalf of the State, inter alia, that the cess was a fee and not a duty of excise and the competence of the State Legislature to levy it was not affected by the Central Acts. Held (per Gajendragadkar, Sarkar, Subba Rao and Mudholkar, JJ.), that the cess imposed by the Act was a fee relatable to Entries 23 and 66 of List II of the Seventh Schedule to the Constitution and the Constitutional validity of the impugned Act was beyond question. Although there can be no generic difference between a tax and a fee since both are compulsory exactions of money by public authorities, there is this distinction between them that whereas a tax is imposed for public purposes and requires no consideration to support it, a fee is levied essentially for services rendered and there must be an element of quid pro quo between the person 538 who pays it and the public authority that imposes it. While a tax invariably goes into the consolidated fund, a fee is earmarked for the specified services in a fund created for the purpose. Whether a cess is one or the other would naturally depend on the facts of each case. If in the guise of a fee, the Legislature imposes a tax, it is for the Court on a scrutiny of the scheme of the levy, to determine its real character. The distinction is recognised by the Constitution which while empowering the appropriate Legislatures to levy taxes under the Entries in the three lists refers to their power to levy fees in respect of any such matters, except the fees taken in court, and tests have been laid down by this Court for determining the character of an impugned levy. Matthews vs Chicory Marketing Board, ; , The Commissioner, Hindu Religious Endowments, Madras vs Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, ; , Mahant Sri Jagannath Ramanuj Das & Any. vs The State of Orissa, ; , and Ratilal Panachand Gandhi vs The State of Bombay, [1954] S.C.R. 1055, referred to. P. P. Kutti Keva & Ors. vs The State of Madras, A.I.R. , Attorney General for British Columbia vs Esquimalt and Nanaimo Railway Co., and Parton & Any. vs Mils Board (Victoria), (1949) 80 C.L.R. 229, considered and held inapplicable. In determining whether a levy is a fee the true test must be whether its primary and essential purpose is to render specific services to a specified area or class, it being of no consequence that the State may ultimately and indirectly be benefited by it. So judged, the scheme of the impugned Act leaves no manner of doubt that the levy authorised by it is a fee and not a tax. The amount of the levy must depend on the extent of the services sought to be rendered and if they are proportionate, it would be unreasonable to say that since the impost is high it must be a duty of excise. The rate specified by section 4(2) of the Act, therefore, cannot by itself alter the character of the levy and constitute a trespass by the State Legislature on the legislative powers of the Parliament under Entry 84 of the List I. Nor can the method prescribed by the Legislature for re covering the levy by itself alter its character. The method is a matter of convenience and, though relevant, has to be tested in the light of other relevant circumstances. It is not permissible to challenge the vires of a statute relatable to an Entry in List II solely on the ground that the method adopted for the recovery of the impost can and generally is adopted in levying a duty of excise. Ralla Ram vs The Province of East Punjab, , Byramjee Jeejeebhoy vs The Province of Bombay & Anr. I.L.R. 539 and Governor General in Council vs Province of Madras, (1945) 'L.R. 72 I.A. 91, considered. The limitation imposed by the latter part of Entry 23 of List II is a limitation on the legislative competence of the State ' Legislature itself and the test whether a statute passed by the State Legislature thereunder was ultra vires would be whether the requisite declaration under Entry 54, List I, has been made by Parliament by law covering the same field or not; it is not necessary in order to make the declaration effective that rules should also be made and enforced. Although by operation of article 372 of the Constitution Act LIII of 1948 was an existing Act substantially covering the same field as covered by the impugned Act, there was no adaptation of section 2 of that Act whereby a declaration implied by it could be said to have been adapted to a declaration by Parliament. Clause 16 of the Adaptation of Laws Order, 1950, properly construed, cannot be held to refer to the Dominion Legislature and equate it with the Parliament. It can be resorted to only where the existing law expressly refers to some authority that can be equated with the corresponding new authorities. Since the Dominion Legislature was not so referred to, its competence under the Constitution Act of 1935, repealed by the Constitution of India, was clearly outside the clause. Nor can Cl. 21 of the order be of any help to the petitioners. Consequently, in the absence of the requisite Parliamentary declaration, the competence of the Orissa State Legislature under Entry 23 read with Entry 66 of the List II was not impaired and the impugned Act must be deemed to have repeal ed the Central Act, so far as that State was concerned. This case incidentally discloses that in regard to the requisite Parliamentary declaration prescribed by Entry 54 in List I in its application to the pre constitution Acts under corresponding Entry 36 in List I of the Constitution Act of 1935, there is a lacuna which has not been covered by any clauses of the Adaptation of Laws Order, 1950. Nor was the impugned Act ultra vires the State Legislature by operation of Entry 52 of List I read with section 2 of the Industries (Development and Regulation) Act, 1951 (LXV of 1951). That Act, in pith and substance, deals more directly with the control of certain specified industries including the coal industry, while the impugned Act is concerned with the development of the mining areas notified under it. The field covered by the two Acts was not, therefore, the same. per Wanchoo, J. In order to determine whether a levy is a tax or a fee, what has to be considered is the pith and sub stance of the levy. Where the levy in pith and substance is not essentially different from a tax, it cannot be converted into a fee by crediting it to a special fund and attaching certain services to it. 540 The Commissioner, Hindu Religious Endowments, Madras, vs Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, ; , Mahant Sri Jaannath Ramanuj Das vs The State of Orissa, ; and Ratilal Panachand Gandhi vs The State of Bombay, [1954] S.C.R. 1055, discussed. A duty of excise in pith and substance is primarily a duty levied on a manufacturer or producer in respect of the commodity manufactured or produced. It is different and distinct from a sales tax and in law they do not overlap. Governor General in Council vs Province of Madras, 72 I.A. 91, referred to. What the impugned Act did was to provide for the levying of the cess on the goods produced at a rate not exceeding five per centum of the value at the pit 's mouth. The cess was, therefore, in pith and substance a duty of excise falling within Entry 84 of List I, which the State legislature could not levy. It was not correct to say that the method employed by the impugned Act for realising the cess was a mere method of quantification and did not affect its character which was that of a fee. In the present case the very mode of the levy of the cess is nothing other than the levy of a duty of excise, and, therefore, the principle of quantification for purposes of a fee could not be so extended as to convert what was in pith and substance a tax into a fee. Sri Byramjee Jeejeebhoy vs The Province of Bombay, I.L.R. , Municipal Corporation, Ahmedabad vs Patel Gor dhandas Hargovandas, I.L.R. and Ralla Ram vs The Province of East Punjab, , considered. K. C. Gajapati Narayan Deo vs The State of Orissa, ; , referred to. The cess levied under section 4 of the Act could not be justified as a tax on mineral rights under Entry 50 of List II of the Seventh Schedule and the impugned Act was in effect a colourable piece of legislation.

The appellant sued the State of Orissa for a declaration that the Orissa Estates Abolition Act of 1951 was in its application to the Kanika Raj, of which he was the Raja and owner, invalid, unconstitutional and ultra vires the State Legislature and for an injunction restraining the State of Orissa from taking any action under the Act. It was contended, inter alia, that no notification under section 3(1) of the Act vesting the Kanika Raj in the State of Orissa could issue as the Raj was not an estate as defined by section 2 (g) of the Act. The contrary was asserted by the State of Orissa and its further contention was that the appellant was estopped by a compromise decree between his predecessors in title on the one band and the Secretary of State on the other from denying that the Raj was an estate as defined by the Act. Held, that the Kanika Raj was an estate as defined by the Orissa Estates Abolition Act of 1951 and the appellant was estopped from denying it by the compromise decree. That the real intention of the Act in defining 'estate ' as it has done in section 2(g) of the Act, was to include all lands, such as the appellant 's, which were as a matter of fact included ill the register prepared under the Bengal Land Registration Act Of 1876, and in construing the definition it is wholly unnecessary to consider whether such inclusion was valid or proper or in conformity with the meaning of an estate under that Act. That a judgment by consent is as effective in creating an estoppel between the parties as a judgment on contest and the test is whether the judgment in the previous case could have been passed without the determination of the question which is put in issue in the subsequent case where the plea of estoppel is raised. Held further, that there is no rule corresponding to Rule 4 of Order XIX of the Supreme Court Rules imposing a similar disability on the respondent, and even with regard to the appellant the court may in appropriate cases, give him leave to raise a ground not specified in the Statement of the Case filed by him.

The Bill which came to be enacted as the Rajasthan Land Re forms and Resumption of Jagirs Act was prepared in the Ministerial Department of the Government of Rajasthan. It was approved by the Rajpramukh on 8 2 1952, and reserved for the consideration of the President, who gave his assent to it on 13 2 1952. By notification issued on 16 2 1952, the Act came into force on 18 2 1952. In pursuance of section 21(1) of the Act, the State of Rajasthan issued notifications resuming the jagirs specified therein, whereupon petitions under article 226 of the Constitution were filed by the persons aggrieved challenging the validity of the Act before the Rajasthan High Court. The petitions were dismissed and thereupon they filed petitions before the Supreme Court under article 32 of the Constitution of India, impugning the Act. They contended inter alia that the Rajpramukh had no competence to enact the law, that the Bill was not prepared by the Rajpramakh as required by article 212 A(2), that resumption was not one of the topics of legislation enumerated either in the State List or in the Concurrent List in the Seventh Schedule of the Constitution and that the Act was therefore ultra vires the powers of the State, that the Act did not provide for adequate compensation nor was there any public purpose involved in it and therefore it contravened article 31(2), and that as the Act was discrimi natory it contravened article 14. There were some special contentions that the Act was not saved by article 31 A, because the lands resumed were neither estates nor jagirs nor grants similar to jagirs, inams or muafi and that some of the properties sought to be resumed were not jagirs as defined in the Act and therefore the notifications under section 21 of the Act in so far as they related to them were illegal. 39 304 Held that, (1) the Rajpramukh was competent to enact the im pugned law, under article 385, as he was the authority functioning immediately before the commencement of the Constitution as the legislature of Rajasthan under article X (3) of the Covenant of the United State of Rajasthan. The expression "Ordinance" in article X (3) must be construed as meaning "Law". Article VII (3) of the Covenant has reference to the executive power which the Rulers had to resume jagirs and does not operate as a restriction on the legislative powers under article X (3). The Legislature of the corresponding State mentioned in article 385 refers not to the legislature under the Constitution, but to the body or the authority which was functioning as the legislature of the State before the commencement of the Constitution and under article X (3) of the Covenant of the United State of Rajasthan, that authority was the Rajpramukh. Article 385 does not require that that authority should have had absolute and unlimited powers of legislation. If it was functioning as the legislative authority before the Constitution, it would, under the article, have all the powers conferred by the Constitution on the House or Houses of legislature of the States. (ii) Article 212 A(2) which provides that the Rajpramukh should prepare the Bill, does not require that he should himself draft it. It is sufficient if he decides questions of policy which are of the essence of the legislation. It is open to the Rajpramukh to adopt a Bill prepared by his ministers and the only matter that will have to be con sidered is whether in fact he did so. There is no provision in article 212 A(2) for the Rajpramukh approving of a Bill and an endorsement of approval on the Bill prepared in the ministerial department must therefore signify its adoption by him. When the Bill is produced with an endorsement of approval under his signature, the question must be held to be concluded and any further discussion about the legislative or executive state of mind of the Rajpramukh must be ruled out as inadmissible. (iii) The impugned Act is not ultra vires the powers of the State Legislature as the subject matter of the legislation is in substance acquisition of properties falling under entry 36 of List II of the Seventh Schedule. Resumption and acquisition connote two different concepts, but whether the impugned Act is one for acquisition of jagirs or for their resumption must be determined with ref erence to the pith and substance of the legislation, the name given to it by the legislature not being decisive of the matter. The resumption for which the Act provides is not in enforcement of the rights which the Rulers had to resume jagirs in accordance with the terms of the grant or the law applicable to it, but in exercise of the sovereign rights of eminent domain possessed by the State. Under the circumstances, the taking of the properties is in substance acquisition notwithstanding that it is labelled as resumption. The payment of compensation to the Jagirdars is consistent only with the taking being an acquisition and not resumption in 305 accordance with the terms of the grant or the law applicable to it. Though the legislation also falls under entry 18 of List II of the Seventh Schedule, there being an entry 36 dealing with acquisition, it must be held that the Act falls under that entry and is valid. (iv) The word 'jagir ' connoted originally grants made by Rajput Rulers to their clansmen for military services rendered or to be rendered. Later on grants made for religious and charitable purposes and even to non Rajputs were called jagirs, and both in its popular sense and legislative practice, the word jagir came to be used as connoting all grants which conferred on the grantees rights in respect of land revenue, and that is the sense in which the word jagir should be construed in article 31 A. The object of article 31 A was to save legislation which was directed to the abolition of intermediaries so as to establish direct relationship between the State and the tillers of the soil. Construing the word in that sense which would achieve that object in full measure, it must be held that jagir was meant to cover all grants under which the grantees had only rights in respect of revenue and were not tillers of the soil. Maintenance grants in favour of persons who were not cultivators such as members of the ruling family would be jagirs for purposes of article 31 A. (v) Bhomicharas. The Bhomicharas are the representatives of Rajput Rulers who conquered the. country and established their sovereignty over it in the thirteenth century. Later on the Ruler of Jodhpur imposed his sovereignty over the territory but permitted the previous rulers to continue in possession of the lands on payment of an annual sum. The question was whether they held the lands as jagirs. Held that, there could be a jagir only by grant by the Rul ing power but that such a grant need not be express, and could be implied and when the Ruler of Jodhpur imposed his sovereignty over the territory of the Bhomicharas but recognised their possession of the lands, it is as if there was annexation by him and re grant to them of these lands. Vajesinghji Joravar Singji and Others vs Secretary of State [(1924) L.R. 51 I.A. 357] and Secretary of State vs Sardar Bustam Khan [(1941) L.R. 68 I.A. 109], referred to. Though the Bhomicharas enjoyed large powers, their status was only that of subjects. The status of a person must be either that of a sovereign or a subject. There is no tertium quid. The law does not recognise an intermediate status of a person being partly a sovereign and partly a subject. And when once it is admitted that the Bhomicharas had acknowledged the sovereignty of Jodhpur, their status can only be that of a subject. Even if the Bhomicharas did not prior to the enactment of the Marwar Land Revenue Act XL of 1949 hold the lands as grantees 306 from the State, they must be deemed to have become such grantees by force of section 169 of the Act which provides that all lands in the State vest in the Maharajah and all proprietary interests therein are deemed to be held under a grant from him. The Bbomicharas bad by long usage and recognition and by the legislative practice of the State come to be recognised as jagirdars and their tenure is a jagir within the intendment of section 169. For the purposes of article 31 A, it would make no difference whether the grant is made by the sovereign in the exercise of his prerogative right or by the legislature in the exercise of its sovereign rights, Grants which are the creatures of statutes called legislative grants are equally within the operation of that article. Bhomicharas are, accordingly, within the operation of article 31 A. (vi) The position of Bhumias in Mewar is similar to that of Bhomicharas in Marwar and in addition it was a condition of the terms on which their title to the lands was recognised by the rulers of Chittoor and Udaipur, that they had to render military service when called upon and also pay quit rent. Their title to the lands therefore rested on an implied grant and their tenure would be jagir even in its stricter sense. Section 27 of the Mewar Government Kanoon Mal Act (V of 1947) enacts that all lands belong to His Highness and that no person has authority to take possession of any lands unless the right is granted by His Highness. Section 106 (1) of the Act declares that a Tikanadar, Jagirdar, Muafidar or Bhumia shall have all such revenue rights in the lands comprised in his jagir, muafi, or Bhom under this Act, as are granted to him by His Highness". The effect of these provisions was to impress on the Bhom tenure the charac teristics of a grant. Article 13, Clause (1) of the Constitution of Mewar provided that, "no person shall be deprived of his life, liberty or property without due process of law, nor shall any person be denied equality before the law within the territories of Mewar". It was contended for the petitioners that the impugned Act was void as contravening the above provisions. Held that, as the authority which enacted the Constitution of Mewar was His Highness, it could be repealed or modified by the same authority, and the impugned Act must be held to have repealed the Constitution to the extent that it was in consistent with it. (vii) The Tikanadars of Shekwati got into possession of lands as ijaradars or lessees and were subsequently treated as jagirdars. Their tenure was, if not jagirs, at least other "similar grants" within article 31 A. It is included in Schedule I to the impugned Act as item 6. The nature of the tenures of lands held by Subeguzars, Mansubdars, maintenance holders (Lawazma and Kothrikarch), Tikanadars and of Naqdirazan, Sansan grants, etc., considered, 307 (viii) The Khandela estate was granted in 1836 on a permanent lease. The definition of jagir in section 2(h) includes the tenures mentioned in Schedule I to the Act and Istimrari tenure is item 2 therein. The question was whether the Istimrar ijara was within item 2. Held that, the essential features of Istimrari tenure are that the lands are assessed to a nominal quit rent, and that it is permanent. The amount of Rs. 80,001 fixed as assessment under the deed of 1836 cannot be said to be nominal. The grant is, therefore, not an Istimrari tenure, but a permanent Izara. (ix) Objections raised as to the validity of the Act on the ground that it did not provide for payment of compensation, that there was no public purpose involved in the resumption and that therefore it contravenes article 31(2) or that the provisions of the Act offend article 14, are barred by the provisions of article 31 A of the Constitution. Even apart from article 31 A, the impugned Act must be held to be supported by public purpose and is not in contravention of article 31(2). Nor is there a contravention of article 14, as under the Act all jagirs are liable to be resumed, no power having been conferred on the Government to grant exemption. State of Bihar vs Maharajadhiraja Sir Kameshwar Singh of Darbhanga and Others ([1952] S.C.R. 889) and Biswambhar Singh vs The State of Orissa and Others ([1954] S.C.R. 842), referred to. The true scope of the rule of ejusdem generis is that words of a general nature following specific and particular words should be construed as limited to things which are of the same nature as those specified and not its reverse, that specific words 'which precede are controlled by the general words which follow.

No question of infringement of any fundamental right under article 21 arises where the detention complained of is by a private person and not by, a State or under the authority or orders of a State, and the Supreme Court will not, therefore, entertain an application for a writ of have a corpus, under article 32 of the Constitution. Consequently a petition under article 32 of the Constitution for a writ of habeas corpus founded on article 21 and directed against a father for alleged detention of his daughter does not lie. A. K. Gopalan vs The State of Madras ([1950] S.C.R. 88) and P. D Shamdasani vs Central Bank of India ([1952] S.C.R. 391), relied on.

The petitioner, the Editor of the Searchlight, an English daily newspaper published from Patna, was called upon to show cause before the Committee of Privileges of the Bihar Legislative Assembly why he should not be proceeded against for the breach of privilege of the Speaker and the Assembly for publishing an inaccurate account of the proceedings of the Legislative Assembly. He moved this Court under article 32 of the Constitution for quashing the said proceeding and the question for decision in substance was whether the said privilege conferred by article 194(3) of the Constitution was subject to the fundamental 97 rights of a citizen under article 19(1)(a) of the Constitution. This Court by a majority found against the petitioner. Thereafter the Assembly was prorogued several times, the Committee of Privileges reconstituted and a fresh notice was issued to the petitioner. By the present petition the petitioner in substance sought to reopen the decision, raise the same controversy once again and contend that the majority decision was wrong. The question was whether he could be allowed to do so. Held, that the general principles of res judicata applied and the judgment of this Court could not be allowed to be reopened and must bind the petitioner and the Legislative Assembly of Bihar and the reconstitution of the Committee of Privileges in the meantime could make no difference. Raj Lakshmi Dasi vs Banamali Sen, ; , applied. Since this Court had held that the Legislature bad the power to control the publication of its proceedings and punish any breach of its privilege, there could be no doubt that it had complete jurisdiction to carry on its proceedings in accordance with its rules of business and a mere non compliance with rules of procedure could be no ground for interference by this Court under article 32 of the Constitution. Janardan Reddy vs The State of Hyderabad, ; , referred to. Prorogation of the Assembly does not mean its dissolution and the only effect it has is to interrupt its proceedings which can be revived on a fresh motion to carry on or renew them. It was, therefore, not correct to contend that since the Assembly was prorogued several times since after the alleged breach of privilege, the proceeding must be deemed to be dead.

The areas in question which were parts of two estates belonging to the appellants, called Gangole A and Gangole C, were situated in what was known as the Godavari Agency tract which was governed by the Scheduled Districts Act, 1874. By section 92 of the Government of India Act, 1935, no Act of the Provincial Legislature was applicable to certain areas in which the Godavari Agency was included, unless the Governor by public 536 notification so directed. The Madras Estates (Abolition and Conversion into Ryotwari) Act, 1948, was enacted in 1948, and on August 15, 1950, the Government of Madras issued a notification under section 1(4) Of the Act by which, among other estates, Gangole A and Gangole C in their entirety were purported to be taken over, specifying September 7, 195o, as the date on which the vesting was to take place. But as no action as contemplated by section 92 of the Government of India Act, 1935, had been taken to render the Madras Act of 1948 applicable to the Godavari Agency tract, only parts of the Gangole estates were within the operation of that Act, while there were portions of the estates which were outside its purview and operation. When this legal situation was noticed another notification was issued on September 5, 1950, by which the areas in question were excluded from the scope of the notification dated August 15, 1950. In exercise of the power under para 5(2) Of the Fifth Schedule to the Constitution, Madras Regulation IV of 1951 was passed on September 8, 1951 by which, inter alia, the Act Of 1948 was made applicable to the areas in which the two Gangole estates were situate with retrospective effect from April 19, 1949. On January 14, 1953, the Government of Madras issued a notification vesting those portions of the Gangole estates to which the Act Of 1948 was extended. The appellants challenged the legality of the notification on the ground that the various provisions of the Madras Estates (Abolition and Conversion into Ryotwari) Act, 1948, showed that the Act contemplated the taking over of estates as a unit and not in parts, while what the Government had done in the present case was to deal with the two estates of Gangole A and Gangole C as if each one of them were really two estates, one that which lay in the Godavari Agency tract and the other outside that area, and had issued notifications in respect of these units separately. Held, that the first notification dated August 15, 1950, as modified by that dated September 5, 1950, was valid and effective in law to vest the portion of the estate to which it related in the State Government. Held further, that the notification dated January 14, 1953, was equally valid. The action taken by the Government in issuing the said notification was in conformity with the scheme of the Act of 1948 that the entirety of the estate should be taken over.

The Assam Acquisition of Land for Flood Control and Prevention of Erosion Act, 1955, was passed before the Constitution was amended by the Constitution (Fourth Amendment) Act. As the Act did not apply to the lands which were taken possession of before it came into force, the Assam Acquisition of Land for Flood Control and Prevention of Erosion (Validation) Act, 1959, Act XXI of 1960 was pass ed, validating the acquisition of lands of which such possession had been taken. Under section 2 of the 1960 Act any land taken over for the construction of embankments before the 1955 Act came into force unless the acquisition was validly made under any other law for the time being in force shall be deemed to have been validity acquired under the 1955 Act and is deemed to have vested in the State Government from the date the land was actually taken possession of; and compensation was payable in accordance with the principles in section 6 of the 1955 Act. Under section 6(1) of the 1955 Act the owner of the land shall get compensation for land including standing crops and trees, if any, but excluding buildings or structures, a sum not. exceeding 40 times the annual land revenue in case of periodic patta land and 15 times the annual land revenue in case of annual patta land. Under section 6(2) the owner shall get compensation for the building or structure, if any, a sum equivalent to the sale proceeds of the materials plus fifteen per cent thereof. In 1954. the Assam Government took possession of the lands of the respondent for the construction of an embankment and the respondent was asked to submit his claim for compensation under the 1955 and 1960 Acts after the 1960 Act was passed. He then filed a writ petition challenging the validity of both the Acts and prayed for a direction prohibiting the State Government from taking action under those Acts as the compensation payable was illusory and in adequate. The High Court held that the 1955 Act was violative of article 31(2), as it stood before the Fourth Amendment Act, that it was not protected by article 31A, and that, the 1960 Act was not independent of the 1955 Act and fell with it. In appeal by the State Government to this Court the appellant submitted that the two Acts were not violative of articles 14 and 31(2) and were in any event protected by articles 31A and 31 (5) (b) (ii). HELD: (1) The constitutional validity of the 1955 Act must be judged by article 31(2) as it stood before the Fourth Amendment Act. Since the assessment of land. revenue in Assam many years ago. the market value of the lands has increased by leaps and bounds. Under s, 6(1) of the Act, the Collector, in determining the compensation, L/J(N)6SCI 10 562 should take into account the value of the land as at the date of the acquisition and other factors, but this is meaningless because under the first part of section 6(1) the compensation cannot exceed a fixed multiple of the annual land revenue. The State made no attempt to show that a multiple of land revenue payable for the land is a just equivalent of or has any relation to the market value of the land ,on the date of the acquisition. The sale proceeds under section 6(2) can not be regarded as a just equivalent of the value of the building and it stood at the time of the acquisition. The Act, therefore, does not ensure payment of just equivalent of the land appropriated and is violative of article 31(2) as it stood before the Fourth Amendment. [576H; 577F H , 578A C] State of West Bengal vs Bela Banerjee, ; and State of Madras vs D. Namasivaya Mudaliar, [1964] 6 S.C.R. 936, followed. (2) The Act is a purely expropriatory measure. It provides for acquisition of lands both urban and agricultural for executing works in connection with flood control or prevention of erosion. A piece of land acquired under the Act need not be an estate or part of an estate. The Act is not a law concerning agrarian reform and hence is not protected by article 31A of the Constitution. [568G H] Kochuni vs State of Madras, ; Ranjit Singh vs State of Punjab, ; and P. V. Mudaliar vs Special Deputy Collector, Madras, followed. (3) The Act is a law for the acquisition of property and not a law for preventing danger to life or property, and so, it is not protected by article 31 (5) (b) (ii). Article 31 (5) (b) (ii); provides that nothing in article 31(2) would affect the provisions of any law which the State might make after the commencement of the Constitution for the promotion of public health or the prevention of danger to life or pro perty. A law for promotion of public health or for prevention of danger to life or property sometimes has to provide for destruction and impairment of the value of private property and the taking of temporary possession of the property by the State. Any substantial abridgment of the right of ownership of property including its destruction or injuriously affecting it or taking away its possession and enjoyment from the owner, amounted to a taking of property within the purview of article 31(2), before it was amended by the Fourth Amendment Act. But for article 31(5)(b)(ii) a law authorising such a taking of property would have been invalid unless it provided for compensation. The clause saved such laws from the operation of cl. (2) and these laws were not invalid because they authorised such a taking without payment of compensation. A law authorising the abatement of a public menace by destroying or taking temporary possession of private properties, if the peril cannot be abated in some other way, can be regarded as a law for promotion of public health or prevention of danger to life or property within the purview of cl. 5(b)(ii). But it is not possible to say that a law for permanent acquisition of property is such a law. The object of the acquisition may be the opening of a public park for the improvement of public health or the erection of an embankment to prevent danger to life or property from flood. As the acquired property belongs to the State, the State is free to deal with it as it chooses after the acquisition. It may close the public park and use the property for other purposes, or the river may recede or change its course so that it may no longer be necessary to keep the embankment. The State may then sell the property and appropriate the sale proceeds to its own use. Acquistions of property for the opening of a public park or for the erection of dams and embankments were always made under the 563 Land Acquisition Act and it could not have been intended that such acquisition could be made under laws coming within the Purview of el. (5)(b)(ii) without payment of compensation. 5(b)(11) did not protect laws for acquisition of property from the operation of article 31(2) as it stood before the Constitution (Fourth Amendment) Act. [574C H; 575A D] State of West Bengal vs Subodh Gopal Bose, [1954] S.C.R. 587, and Dwarkadas Shriniwas of Bombay vs Sholapur Spinning and Weaving Co. Ltd. ; , referred to. (4) The effect of the Constitution (Fourth Amendment) Act is that a deprivation of property, short of the transfer of the ownership or the right to possession of any property to the State, is not within the purview of article 31(2). A law, made after the Fourth Amendment Act providing for destruction of property or impairment of its value, is not invalid on the ground that it does not provide for payment of compensation, because, it is no longer within the purview of article 31(2), and, it is not necessary to invoke cl. (5) (b) (ii) to save it. It cannot therefore be contended that laws for permanent acquisition of property for the promotion of public health or prevention of danger to life or property, should be held to be saved by article 31 (5) (b) (ii) and that otherwise the clause would be otiose. Even now the clause will protect laws providing for requisitioning or temporary occupation of property strictly necessary for promotion of public health or prevention of danger to life or property. But as the Fourth Amendment did not amend cl. (5)(b)(ii) and did not change its original meaning, the clause will not save laws for the Permanent acquisition of property, from the operation of article 31(2). [575G H; 576A C] (5) There is unjust discrimination between owners of land similarly situated by the mere accident of some land being required the purposes mentioned in the 1955 Act and some land being required or other purposes, and therefore, the Act is violative of article 14. In the State of Assam, some land may be taken under the 1955 Act for the purpose of works and other measure in connection with flood control and prevention of erosion on payment of nominal compensation while, an adjoining land may be taken for other public purposes under the Land Acquisition Act on payment of adequate compensation. Article 14 permits reasonable classification and differential treatment based on substantial differences having reasonable relation to the object sought to be achieved. It is not possible to hold that the differential treatment of the land acquired under the Land Acquisition Act, 1894, and those acquired under the Assam Act of 1955 has any reasonable relation to the object of the acquisition by the State. [578E G; 579C E] P. Vajravelu Mudaliar vs Dy. Collector, [1965] 1 S.C.R. 614, followed. [Whether the Act is ultra vires on the ground that the State may acquire lands at its option either under the 1955 Act or under the Land Acquisition Act, left open.] [579H] (6) The core of the 1960 Act is the deeming provision of s, 2, under which, certain lands are deemed to be acquired under the earlier Act. The 1960 Act is entirely dependent upon the continuing existence and validity of the earlier Act of 1955. As the earlier Act is unconstitutional and has no legal existence the deemed acquisition tinder the 1960 Act is equally invalid. As this deeming provision is invalid all the ancillary provisions fall to the ground along with it and the provisions of the 1960 Act are incapable of enforcement and are invalid. The State Legislature has no power to enact that an acquisition made under a constitutionally invalid Act is valid. [580D F H] 564

The appellant and his mother (the lessors), granted a lease of an open site in the town of coimbatore to Abirama Chettiar under a registered 'deed dated September 19,1934. The annual rent stipulated under the lease was Rs. 10,80 and the period of the lease was 20 years. The term under the lease was that the land was to be utilised for constructing buildings thereon for "purposes of cinema. drama etc. " It was further agreed between the parties that at the end of the term the lessee would demolish the buildings which he had. constructed and deliver vacant possession of the site Lo the lessor. Abirama Chettiar constructed a theatre on the site, and assigned his rights to the respondent company. In an action against the company for a decree in ejectment and for mesne profits, the Trial Court awarded to the lessors a decree for possession and mesne profits. Against the decree the company respondent preferred an appeal to the District Court which was transferred for trial to the High Court. During the pendency of this appeal, the State of Madras extended the Madras City Tenants ' Protection Act, 3 of 1922, as amended by Madras Act 19 of 1955 to the Municipal Town of Coimbatore. The company then applied under a. 9 of the Act and on this application the High Court directed that the lessors do sell to the company the site in dispute under section 9 of the Madras City Tenants Protection Act, 1922. against payment of the full market value of the land on the date of the order. The order was confirmed in an appeal under the Letters Patent Held: Per Gajendragadkar, C.J., Shah and Sikri, JJ. section 12 has been enacted to protect the tenants against any contractual engagements which may have been made expressly or by implication to deprive themselves wholly or partially of the protection intended to be conferred by the Statute. And the only class of cases in which the protection becomes ineffective is where the tenant has made a stipulation in writing registered as to the erection of buildings, erected after the date of the contract of lease. The stipulations not protected in section 12 are only those in writing registered and relate to erection of buildings. such as restrictions about the size and nature of the building constructed, the building materials to be used therein and the purpose for which the building is to be utilised. (ii)Section 9(1) of the Act was manifestly in the interest of the general public to effectuate the mutual understanding between the, landlords and the tenants as to the duration of the tenancies, and to conserve building materials by maintaining existing buildings for purposes for which the leases were granted. Restriction imposed upon the right of the landlord to obtain possession of the premises demised according to the terms of the lease would, therefore not be regarded as imposing an unreasonable restriction in the exercise of the right conferred upon 1017 the landlord by article 19(1) of the Constitution, because the restriction would be regarded as one in the interests of the general public. What section 9 does is not so much to deprive the landlord of his property or to acquire his rights to it as to give effect to the real agreement between him and his tenant which induced the tenants to construct his building on the plot let out to him. If the law is not invalid as offending article 19(1)(f) of the Constitution, no independent infringement of article 31(1) of the Constitution may be set up. Per Wanchoo and Ayyangar, JJ (dissenting) (1) The preamble of the Act would indicate that the Act would not apply to afford protection in a case where by an express term in a registered lease deed a tenant agreed to surrender the site on which he had erected a building, where he specifically contracted that he would demolish the building and deliver vacant possession of the site on the termination of his tenancy. If the scope of the proviso to section 12 had to be construed in the light of the preamble, it is obvious that the tenant who had entered into a contract with a stipulation of the sort as stated above could not be said to have constructed the buildings on another 's land "in the hope that he would not be evicted so long as he pays rent for the land". The High Court erred in interpretting the proviso to section 12 of the Act. (ii) These words "as to the erection of buildings" mean a stipulation which bears on or is in relation to the erection of buildings. Such a construction would reconcile the proviso with the preamble which sets out the object sought to be achieved by the Act. If the lease deed contains no stipulation whatsoever in regard to the erection of buildings, as was the case with the large number of leases in the city of Madras which were entered into prior to the enactment of the Act in 1922, the tenant who erected the building exconcessis without contravening any undertaking on his part, obtains protection under the Act. The test would therefore be "did the parties advert to and have in mind the Lontingency of the tenant erecting buildings on the leased land"? If they had and had included in a solemn registered instrument a provision which would bear upon the relative rights of the parties in the event of the erection of buildings on the site, the stipulation would have effect notwithstanding the Act; for in such an event the tenant would not have constructed buildings on the land in the hope that he would not be disturbed from possession so long as he paid the rent agreed upon.

Appeal No. 364 of 1957. Appeal from the judgment and order dated February 22, 1956, of the former Bombay High Court in I.T.R. No. 31/1955. N. A. Palkhivala and I. N. Shroff, for the Appellants. A. N. Kripal and D. Gupta, for the Respondent. 1960. November 22. The Judgment of the Court was delivered by SHAH, J. This is an appeal by seven appellants with leave granted by the High Court of Judicature at Bombay certifying that it involves a question of importance. The appellants held 570 out of a total issue of 800 shares of the Navjivan Mills Ltd., Kalol, a public limited company hereinafter referred to as the Mills. Between the years 1943 47, the Mills purchased 5,000 shares of the Bank of India Ltd. At an extraordinary general meeting of the shareholders of the Bank of India held on May 6, 1948, a resolution was passed increasing the share capital of the Bank and for that purpose offering new shares to the existing shareholders in the proportion of one new share for every three shares held by the shareholders. The face value of the new shares was to be Rs. 50, but the shares were issued at a premium of Rs. 50. The shareholders had to pay Rs. 100 for each new share. The Mills as the holder of 5,000 shares became entitled to receive 1,6662 shares of the Bank of India at the rate of Rs. 100 per share. The Bank of India communicated its resolution by letter dated May 25, 1948 and enclosed therewith three forms, form A for acceptance, form 586 B for renunciation and 'form C which may compendiously be called a form for allotment to nominees. On receiving the circular letter, the Directors of the Mills passed the following resolution: "Resolved that the company having a holding of 5,000 ordinary shares in the capital of the Bank of India Ltd. having now received an intimation from the said Bank that this company is entitled to get 1,6662 more ordinary shares on payment of Rs. 50 as capital and Rs. 50 as premium per each share and it is considered proper to invest in the said issue of the said Bank the funds of this company to the extent of 66 shares only and to distribute the right of this company to the remaining 1,600 shares of the said issue amongst the shareholders of this company in the proportion of the shares held by them in this company. IT IS HEREBY RESOLVED that the funds of this company may be invested in the 66 shares out of 1,666 shares offered by 'the Bank of India Ltd., and the right to the remaining 1,600 shares is hereby distributed among 800 shares of this company in the proportion of right to two shares of the Bank per one ordinary share held in this company. The Managing Agents may take steps to intimate the shareholders to exercise the right if they like to do so. " Accordingly, the Mills exercised the right to take over only 66 shares out of the shares offered and resolved that the right to the remaining 1,600 shares be distributed amongst its 800 share holders. The seven appellants as holders of 570 shares of the Mills became entitled to 1,140 shares of the Bank of India. The appellants agreed to the allotment of these shares and ultimately transferred them to a private company Jesinghbai Investment Co. ' Ltd. The assessment of the seven appellants and of other shareholders of the Mills was reopened under section 34(1)(a) of the Indian Income Tax Act by the Income Tax Officer on the footing that, the release by the Mills of the shares of the Bank of India amounted to a distribution of "dividend" and the value of the right released in favour of the shareholders though taxable 587 under section 12 of the Act, had escaped tax. The order of the Income Tax Officer reassessing the income of the seven appellants was confirmed in appeal by the Appellate Assistant Commissioner and by the Appellate Tribunal. At the instance of the appellants, the i following question was submitted by the Tribunal to the High Court at Bombay under section 66(1) of the Income Tax Act: "Whether on the facts and circumstances of the case the distribution of the right to apply for the shares of the Bank of India by Navjivan Mills Ltd. in favour of the assessees amounted to a distribution of "dividend" within the meaning of section 2(6A) of the Indian Income Tax Act. " The High Court reframed the question as follows: "Whether on the facts and circumstances of the case, the distribution of the right to apply for the shares of the Bank of India by Navjivan Mills Ltd., in favour of the assessees amounted to a distribution of "dividend"?" and answered it in the affirmative. The High Court observed that the definition of "dividend" in section 2(6A) was an inclusive and not an exhaustive definition, and even if the distribution of the right to the shares of the Bank of India could not be regarded as dividend within the extended meaning of that expression in section 2(6A), it was still dividend within the ordinary meaning of that expression and was taxable as income in the hands of the appellants. Counsel for the appellants contended that the High Court was not justified, having regard to the form of the question which expressly related to the distribution of the right to the Bank of India shares being dividend within the meaning of the definition in section 2(6A) of the Income Tax Act, in enlarging the scope of the question and in answering it in the light of its ordinary meaning. There is no substance in this contention. "Dividend" is defined in section 2(6A) as inclusive of various items and exclusive of certain others which it is not necessary to set out for the purpose of this appeal. "Dividend" in its ordinary meaning is a 588 distributive share of the profits or income of a company given to its shareholders. When the Legislature by section 2(6A) sought to define the expression "dividend" it added to the normal meaning of the expression several other categories of receipts which may not otherwise be included therein. By the definition in section 2(6A), "dividend" means dividend as normally understood and includes in its connotation several other receipts set out in the definition. The Tribunal had referred the question whether the distribution of the right to apply for the Bank of India shares amounted to distribution of dividend within the meaning of section 2(6A) and in answering that question, the High Court had to take into account both the normal and the extended meaning of that expression. In the question framed by the Tribunal, there is nothing to indicate that the High Court was called upon to advise on the question whether the receipts by the appellants amounted to dividend only within the extended definition of that expression in section 2(6A). It was also urged that in nominating its shareholders to exercise the option to purchase the new issue of the Bank of India, the Mills did not distribute any dividend. The Mills were, it is true, not obliged to accept the offer made by the Bank of India, however advantageous it might have been to the Mills to accept the offer: it was open to the Mills to renounce the offer. The Mills had three options, (1) to accept the shares, (2) to decline to accept the shares, or (3) to surrender them in favour of its nominee. It is undisputed that when the shares were offered by the Bank of India to its shareholders, the right to apply for the shares had a market value of Rs. 100 per share. The face value of the new share was Rs. 50 but the shareholders had to pay a premium of Rs. 50, thus making a total payment of Rs. 100 for acquiring the new share. The new shares were quoted in the market at more than Rs. 200: and the difference between the amount payable for acquiring the shares under the right offered by the Bank of India and the market quotation of the shares was indisputably the value of the right. The Mills could not be compelled to obtain 589 this benefit if it did not desire to do so: it could accept the shares or decline to accept those shares or exercise the option of surrendering them in favour of its nominees. This last option could be exercised by nominating the persons who were to take over the shares and that is what the Mills did. The Mills requested the Bank of India to allot the shares to its nominees, and the request for allotment to its nominees amounted to transfer of the right. By its resolution, the Mills in truth transferred a right of the value of Rs. 200 for each share held by its shareholders. This was manifestly not distribution of the capital of the Mills. It was open to the Mills to sell the right to the shares of the Bank of India in the market, and to distribute the proceeds among the shareholders. Such a distribution would undoubtedly have been distribution of dividend. If instead of selling the right in the market and then distributing the proceeds, the Mills directly transferred the right, the benefit in the hands of the shareholders was still dividend. Dividend need not be distributed in money; it may be distributed by delivery of property or right having monetary value. The resolution, it is true, did not purport to distribute the right amongst the shareholders as dividend. It did not also take the form of a resolution for distribution of dividend; it took the form of distribution of a right which had a monetary value. But by the form of the resolution sanctioning the distribution, the true character of the resolution could not be altered. We are therefore of the view that the High Court was right in holding that the distribution of the right to apply for and obtain two shares of the Bank of India (at half their market value) for each share held by the shareholders of the Mills amounted to distribution of dividend. The appeal fails and is dismissed with costs. Appeal dismissed.

The appellants were shareholders of a company known as Navjivan Mills Ltd. which held a large number of shares of the Bank of India. The Bank with the object of increasing their share capital offered some more shares to the Mills for a price including premium which was about half the market value. The Mills purchased a small number of the shares so offered with their own funds and distributed their right to acquire the remaining shares to their shareholders in the proportion of two shares of the Bank for one share held by them. The assessment of the appellant was reopened by the Income Tax Officer under section 34(1)(a) of the Income tax Act on the footing that the release of the right to the shares of the Bank of India amounted to distribution of dividend. Appeals against the order of the Income Tax Officer having failed, the High Court at the instance of the appellants framed the following question: "Whether on the facts and circumstances of the case, the distribution of the right to apply for the shares of the Bank of India by Navjivan Mills Ltd. in favour of the assessees amounted to a distribution of "dividend"? 585 The High Court answered the question in the affirmative. On appeal with a certificate of the High Court, Held, that the view taken by the High Court was correct. The distribution to the shareholders of the Mills of the right to obtain two shares of the Bank of India for each share held by them at half the market value amounted to distribution of "dividend" which was liable to be taxed.

The appellant No. 1 is a private limited Company incor porated under the Indian Companies Act. The Company had at all relevant times 7 share holders and the total number of shares subscribed and paid up was 2010 shares. The appellant No. 2 is a shareholder and a whole time Director of the Company. Consequent upon the death of one share holder, Mr. S.K. Desor, who had controlling interest in the Company, his legal representatives, wife and children respondents herein. filed a petition under Section 397 and 398 of the Act and in the alternative prayed for winding up of the company. A preliminary objection was raised on behalf of Mrs. Amrit K. Singh, appellant No. 2 regarding the maintainability of the petition on the ground that the respondents were not members of the company as their names had not been recorded in the register of members and as such they had no locus standi to file the petition in question. A further objection was also taken that a composite petition under Sections 397 and 398 of the Act with an alternative prayer for winding up of the company was not maintainable. A company Judge of the High Court before whom the peti tion came up for hearing held that the respondents who were the wife and children of the deceased share holder and who having obtained Reserve Bank 's permission and letters of administration according to law should be treated as members for the purpose of maintaining a petition under Sections 397 and 398 of the Act. The company Judge also held that a composite petition was maintainable. Appellant No. 2 preferred an appeal against the order of the Company Judge. The appellants also moved this Court under Article 136 of the Constitution against the order of the Company Judge. This court by its order dated 18th Janu ary 1989 stayed the further proceedings before the Single Judge and directed expeditious disposal of the appeal. The Division Bench dismissed the appeal holding that the peti tion under 546 Sections 397 and 398 was maintainable. Hence this appeal. The same two questions as stated above arose for deter mination by this Court, Dismissing the appeal, this Court, HELD: Succession is not kept in abeyance and the proper ty of the deceased member vests in the legal representatives on the death of the deceased and they should be permitted to act for the deceased member for the purpose of transfer of shares under Section 109 of the Act. [558D] In some situations and contingencies, the 'member ' may be different from a 'holder '. A 'member ' may be a 'holder ' of shares but a 'holder ' may not be a 'member '. [558E] To hold that the legal representatives of a deceased shareholder could not be given the same right of a member under Sections 397 and 398 of the Act would be taking a hyper technical view which does not advance the cause of enquiry or justice. [558B] In the instant case, the legal representatives have been more than anxious to get their names put on the register of members in place of deceased member, who was the Managing Director and Chairman of the company and had the controlling interest. It would. therefore, be wrong to insist that their names must be first put on the register before they can move an application under Sections 397 and 398 of the Act. This would frustrate the very purpose of the necessity of action. [558F G] The decision of the English courts are not binding on the courts in India. But the observations or the reasoning are of persuasive value. [555C] Re Jermyn Street Turkish Baths Ltd., [1970] 3 All E.R. 37; Re Bayswater Trading Co. Ltd. ; James vs Quena Venture Nitrate Grounds Syndicate Ltd., [1896] 1 Chancery Division 456; Re Dlewellyn vs Kasintoe Rubber Estate Ltd., ; New Zealand Gold Extraction Company, (Newberyvautin Process) Ltd. vs Peocock, ; Re Meyer Dougals Pty Ltd., [1965] V.R. 638; Kedar Nath Agarwal vs Jay Engg. Works Ltd. and Ors. , ; Rajahmundry Electric Supply Corpn. Ltd. vs A. Nageshwara Rao and Ors. , ; ; Life Insurance Corporation of India vs Escorts Ltd. and Ors., AIR 1986 SC 547 1370 at p. 1412; Shanti Prasad Jain vs Kalinga Tubes, and Bilasrai Joharmal and Ors. vs Akola Electric Supply Co. Pvt. Ltd., , re ferred to.

The Governor General of India, finding that on account of mismanagement and neglect a situation had arisen in the affairs of the Sholapur Spinning and Weaving Company Ltd. which had prejudicially affected the production of an essen tial commodity and had caused serious unemployment amongst a certain section of the community, and that an emergency had thereby arisen which rendered it necessary to make special provision for the proper management and administration of the said company, promulgated an Ordinance, which was subse quently reenacted in the form of an Act of the Legislature called the sholpur Spinning and Weaving Company (Emergency Provisions)Act, 1950, the net result of which was that the Managing Agents of the said company were dismissed, the directors holding office at the time automatically vacated their office, the Government was authorised to appoint new directors, the rights of the shareholders of the company were curtailed in the matters of voting, appointment of directors, passing of resolutions and applying for winding up, and power was also given to the Government to further modify the Indian Companies Act in its application to the company; and in accordance with the provisions of the Ordi nance new directors were appointed by the Government. A shareholder of the company made an application under article 32 of the Constitution for a declaration that the Act was void and for enforcement of his fundamental rights by a writ of mandamus against the Central Government, the Government of Bombay and the directors, restraining them from exercising any powers under the Act and from interfering with the management of the company, on the ground that the Act was not within the Legislative competence 870 of the Parliament and infringed his fundamental rights guaranteed by articles 19 (1) (f), 31 and 14 of the Constitu tion and was consequently void under article 13. The company was made a respondent and opposed the petition. Held per KANIA C.J., FAZL ALI, MUKHERJEA and DAS JJ. (i) that the impugned Act did not infringe any fundamental right of the petitioner under article 31 (1), as if did not deprive the company or the petitioner of any property save under authority of law; (ii) that the impugned Act did not infringe any fundamen tal right guaranteed by article 31 (2.) inasmuch as it did not authorise the "acquisition" of any property of the company or of the shareholders or "the taking possession" of the property of the petitioner, namely, the shares which he held in the company, though he was disabled from exercising some of the rights which an ordinary shareholder in a company could exercise in respect of his shares, such as the right to vote, to appoint directors, and to apply for winding up; and, if the Act had authorised the "taking possession" of the property of the company, the petitioner was not entitled to any relief on that score under article 32; (iii) that, as the Act did not impose any restrictions on the petitioner 's right "to acquire, hold and dispose of" his shares, there was no infringement of article 19 (1) (f); and assuming that the restrictions imposed on the right of voting etc. were restrictions on the right to acquire, hold or dispose of property within article 19 (1) (f), such restric tions were reasonable restrictions imposed in the interests of the public, namely, to secure the supply of a commodity essential to the community and to prevent serious unemploy ment amongst a section of the people, and were therefore completely protected by cl. (5) of article 19. Held also per KANIA C.J., FAZL ALI, and MUKHERJEA JJ. (PATANJALI SASTRI AND DAS JJ. dissenting). that though the Legislature had proceeded against one company only and its shareholders, inasmuch as even one corporation or a group of persons can be taken to be class by itself for the purposes of legislation, provided there is sufficient basis or reason for it and there is a strong presumption in favour of the constitutionality/of an enactment, the burden was on the petitioner to prove that there were also other companies similarly situated and this company alone had been discrimi nated against, and as he had failed to discharge this burden the impugned Act cannot be held to have denied to the peti tioner the right to equal protection of the laws referred to in article He and the petitioner was not therefore entitled to any relief under article 32. Per PATANJALI SASTRI J. As the impugned Act plainly denied to the shareholders of this particular company the protections of the law relating to incorporated Joint Stock Companies as embodied in the Indian Companies Act. it was Prima facie within 871 the inhibition of article 14; and, even though when a law is made applicable to a class of persons or things and the classification is based on differentia having a rational relation to the object sought to be attained, it can be no objection to its constitutional validity that its applica tion is found to affect only one person or thing. since the impugned Act selected a particular company and imposed upon it and its shareholders burdens and disabilities on the ground of mismanagement and neglect of duty on the part of those charged with the conduct of its undertaking no ques tion of reasonable classification arose and the Act was plainly discriminatory in character and within the constitu tional inhibition of article 14. Whilst all reasonable pre sumptions must undoubtedly be made in favour of the consti tutional validity of a law made competent legislature, no such presumption could be raised in this case as on the face of it the Act was discriminatory and the petitioner could not be called upon to prove that similar mismanagement existed in other companies. The issue was not whether the impugned Act was ill advised or not justified by the facts on which it was based but whether it transgressed the ex plicit constitutional restriction on legislative power imposed by article 14. Per DAs J. The impugned Act, ex facie, is nothing but an arbitrary selection of a particular company and its shareholders for discriminating and hostile treatment, and, read by itself, is palpably an infringement of article 14 of the Constitution. Assuming that mismanagement and neglect in conducting the affairs of a company can be a basis of classification and that such a classification would bear a reasonable relation to the conduct of all delinquent compa nies and shareholders and may therefore create no inequali ty, a distinction cannot be made between the delinquent companies inter se or between shareholders of equally delin quent companies, and one set cannot he punished for its delinquency while another set is permitted to. continue, or become, in like manner, delinquent without any punishment unless there be some other apparent difference in their respective obligations and unless there be some cogent reason why prevention of mismanagement is more imperative in one instance than in the other. The argument that the pre sumption being in favour of the Legislature, the onus is on the petitioner to show that there are other individuals or companies equally guilty of mismanagement prejudicially affecting the production of an essential commodity and causing serious unemployment amongst, certain section of the community does not, in such circumstances, arise, for the simple reason that here there has been no classification at all and, in any case, the basis of classification by its very nature is much wider and cannot, in its application, be limited only to this company and its shareholders; and that being so, there is no reason to throw on the petitioner the almost impossible burden of proving that there are other companies which are in fact precisely and in all particulars similarly situated. In any event the petitioner, 872 may well claim to have discharged the onus of showing that this company and its shareholders have been singled out for discriminating treatment by showing that the Act, on the face of it, has adopted a basis of classification which, by its very nature, cannot be exclusively applicable to this company and its shareholders but which may be equally ap plicable to other companies and their shareholders and has penalised this particular company and its shareholders, leaving out other companies and their shareholders who may be equally guilty of the alleged vice of mismanagement and neglect of the type referred to in the preamble in the Ordinance. Per PATANJALI SASTRI, MUKHERJEA and DAS JJ. (KANIA, C.J,, dubitante). In so far as the petitioner 's rights as a shareholder were curtailed he was entitled to apply for relief under article 30, in his own right on the ground that the Act denied to him the equal protection of the laws and therefore contravened article 14 even though the other share holders did not join him in the application. Per MUKHERJEA J. The fundamental rights guaranteed by the Constitution are available not merely to individual citizens but to corporate bodies as well except where the language of the provision or the nature of the right, com pels the inference that they are applicable only to natural persons. An incorporated company, therefore, can come up to the Supreme Court for enforcement of its fundamental rights and so may the individual shareholders to enforce their own; but as the company and its shareholders are in law separate entities, it would not be open to an individual shareholder to complain of a law which affects the fundamental right of the company except to the extent that it constitutes an infraction of his own rights as well. In order to redress a wrong to the company the action should prima facie be brought by the company itself. Article 32 of the Constitution is not directly concerned with the determination of the constitutional validity of particular enactments, what it aims at is the enforcement of fundamental rights guaranteed by the Constitution and to make out a case under the Article it is incumbent on the petitioner to establish not merely that the law complained of is beyond the competence of the Legislature but that it affects or invades his fundamental rights guaranteed by the Constitution, of which he could seek enforcement by an appropriate writ or order. Under article 32 the Supreme Court has a very wide discre tion in the matter of framing writs to suit the exigencies of particular cases and an application under the article cannot be thrown out simply on the ground that the proper writ or direction has not been prayed for. In the context in which the word "acquisition" is used in article 31 i2) it means and implies the acquiring of the entire title of the expropriated owner whatever the nature or extent of that right might be, 873 The guarantee against the denial of equal protection of the laws does not mean that identically the same rules of law should be made applicable to all persons within the territory of India in spite of differences of circumstances and conditions. It means only that there should be no discrimination between one person and another if as regards the subject matter of the legislation their position is the same. Quaere : Whether the word "property" in article 31 means the totality of the rights which the ownership of the property connotes, and whether clause (1) of article 31 contem plates only confiscation or destruction of property in exercise of what are known as police powers in American law for which no compensation is necessary. DAS J. The question whether an Act has deprived a person of his "property" must depend on whether it has taken away the substantial bulk of the rights constituting his property. Where the most important rights possessed by the shareholders of a company are still preserved by an Act even though certain privileges incidental to the ownership of the shares have been put in abeyance, the shareholders cannot be said to have been deprived of their "property" in the sense in which that word is used in article 19(1) (f) and article 31. If on the face of the law there is no classification at all, or at any rate none on the basis of any apparent dif ference specially peculiar to the individual or class af fected by the law, it is only an instance of an arbitrary selection of an individual or class for discriminating and hostile legislation and, therefore, no presumption can, in such circumstances, arise at all Assuming, however, that even in such a case the onus is thrown on the complainant, there can be nothing to prevent him from proving, if he can, from the text of the law itself, that it is actually and palpably unreasonable and arbitrary and thereby discharging the initial onus. The right to vote, to elect directors, to pass resolu tions and to present an application for winding up, are privileges incidental to the ownership of a share, but they are not by themselves apart from the share, "property" within the meaning of article 19 (1) (f) and article 31; and even assuming that they are "property" such rights cannot be said to have been acquired or taken possession of by the Govern ment in this case within article 31 (2). The language of clause (1) of article 31 is wider than that of clause (2), for deprivation of property may well be brought about otherwise than by acquiring or taking possession of it and in such a case no question payment of compensation arises. FAZAL ALI MUKHERJEA and DAS JJ. Except in the matter writs in the nature of habsas corpus no one but those whose rights are directly affected by a law can raise the question of the constitutionality of a law and claim relief under article 39. A corporation being a different entity from the shareholders, a 112 874 share holder cannot complain on the ground that the rights of the company under articles 19 (1) (f) or 31 are infringed. FAZL ALl J. A classification which is arbitrary and which is made without any basis is no classification and a proper classification must always rest upon some difference and must hear a reasonable and lust relation to the things in respect of which it is proposed. But the presumption is always in favour of the constitutionality of an enactment and the burden is upon him who attacks it to show that there has been a clear transgression of constitutional principles. Though article 14 lays down an important fundamental 'right, which should be closely and vigilantly guarded, a doctri naire approach which might choke all beneficial legislation should not be adopted, in construing it. i A.K. Gapalan vs The State ([1950] S.C.R. 87), Minister of State for the Army vs Dalziel ; , Yick Wo vs Hopkins , Southern Railway Co. vs Greene ; , Gulf C. & S.F. Co. Ellis ; , Middle ton vs Texas Power and Light & Co. ; , Badice vs New York (264 U.S. Pennsylvania Coal Co. vs Mahon (960 U.S. 3931, McCabe vs Archison ; , Jeffrey Manufactur ing Co. vs Blang , Newark Natural Gas and Fuel Co. vs City of Nework U.S 403), Truax vs Raich (939 U.S. 33), Buchanan vs W 'arley ; Darnell vs The State of Indiana , Lindely vs Natural Carbonic Gas Co. , and Barbier vs Connolly ; referred to.

These appeals by special leave arose from applications made by the respondents, who were employed as timekeepers in the time office of the Central Railway Workshop and Factory, Parel, Bombay, claiming payment of overtime wages under the (4 of 1936). The case of the respondents was that they were workers within the meaning of section 2(1) of the (LXIII Of 1948) and as such were entitled to overtime wages under section 59 of the said Act. Alternatively, they urged that even if they were not workers within the meaning of section 2(1) of the said Act, they would nevertheless be entitled to overtime wages under the section 59 by reason Of section 70 of the Bombay Shops and Establishments Act, 1948 (Bom. 79 of 1948). The validity of the claim on both the grounds was disputed by the appellant. The Authority under the found that only four of the respondents, who were required to do the work of progress timekeepers, could claim the status of workers within the meaning Of section 2(1) Of the and the rest were merely employees of the workshop, but the Authority accepted the alternative case made by the respond ents and directed the appellant to file a statement showing the overtime wages due to each of the respondents and ordered it to pay the same. Held, that the Authority was right in the view that it took Of section 70 Of the Bombay Shops and Establishments Act, 1948, and its decision must be affirmed. On a proper construction Of section 70 Of the Act it is clear that the first part of the section excludes a factory and its employees from the operation of the Act; but the second part makes the relevant provisions of the applicable to them. The non obstante clause in the section shows that the employees in a factory, although they might not be workers within the meaning Of section 2(1) of the , are entitled to claim overtime wages as provided for by that Act. It is not correct to say that section 4 Of the Bombay Shops and Establishments Act, 1948, has the effect of excluding the operation Of section 70 Of the Act. Section 4 applies only to establishments and not to factories; but even if it applied, to factories 18 138 that cannot materially affect the application Of section 70 which is intended to operate not withstanding the other provisions of the Act. Consistently with its policy, the Act, which provides for overtime wages for employees in all establishments, provides for overtime wages for employees in factories as well by making the relevant provisions of the applicable to them.

The appellant company carried on the business of manufacturing textile goods at Indore and had offices at Indore and Bombay. During its account years 1942 to 1947 it supplied goods to the Indian Stores Department, Government of India. The purchase orders were placed by the latter with the appellant at Indore which was then in an Indian State. On receipt of bills from the appellant the Government of India used to draw cheques on the Reserve Bank of India, Bombay, in favour of the appellant and used to send them by post to the appellant at Indore. The appellant used to deposit the cheques with the Imperial Bank of India Indore for the purpose of realisation from the Reserve Bank of India. In connection with the assessment years 1943 44 to 1948 49 the question that arose in income tax proceedings was whether the profits of the appellant a non resident in respect of the supplies were received by the appellant in British India and therefore taxable under section 4(1)(a) of the Indian Income tax Act, 1922. The departmental authorities held that the payment was received by the appellant at Bom bay where the cheques were encashed but the Appellate Tribunal took the view that the payment was received at Indore. In reference the High Court held on the basis of this Court 's decision in Commissioner of Income tax vs Kirloskar Bros. Ltd. which had meanwhile been delivered that the cheques were received by the assessee through its agent, the post office in British India and further held that the Revenue authorities were entitled to raise the contention for the first time in the High Court. With certificate the appellant came to this Court. HELD : (i) Whereas in the present case the question of law in issue between the parties and referred to the High Court is the broad question whether or not the assessee is liable to pay tax on the ground that the sale proceeds including the profits of the sale were received by the assessee in British India, the Revenue authorities may be permitted to argue for the first time at the hearing of the reference that on the facts found by the Tribunal, the post office was the agent of the assessee for the purpose of receiving the cheques representing the sale proceeds and the assessee received the sale proceeds in British India where the chequest were posted though this aspect of the question was not argued before the Tribunal and though the only point there argued was that the proceeds were received at Bombay where the cheques were encashed. [655 H] Commissioner of Income tax vs M/s. Ogale Glass Works Ltd. , Zoraster & Co. vs Commissioner of Income tax, ; and Commissioner of Income tax, Bombay vs Scindia Steam Navigation Co. Ltd., ; , referred to. The New Jahangir Vakil Mills Ltd. vs Commissioner of Income tax ; and Keshav Mills Co. Ltd. vs Commissioner of Income tax; , , distinguished. 652 (ii) If by an agreement, express or implied, between the creditor and the debtor or by request, express or implied, by the creditor, the debtor is authorised to pay the debt by a cheque and to send the cheque to the creditor by port, the post office is the agent of the creditor to receive the cheque and the creditor receives payment as soon as the cheque is posted to him. [656 G] Commissioner of Income tax vs M/s. Ogale Glass Works Ltd., , Jagdish Mills Ltd. vs The Commissioner of Income tax, ; , Norman vs Ricketts, (1886) 3 Times Law Reports 182 and Thairlwall vs The Great Northern Railway, , relied on. (iii) In the instant case cl. 9 of the terms and conditions of the contract read with the prescribed form of the bills and the instructions regarding payment showed that the parties had agreed that the assessee would submit to the Government of India, Department of Supply, New Delhi, bills in the prescribed form requesting payment of the price of the supplies by cheques together with signed receipts and the Government of India would pay the price by crossed cheques drawn in favour of the assessee. Having regard to the fact that the assessee, was at Indore and the Supply Department of the Government of India was at Now Delhi, the parties must have intended that the Government would send the cheques to the assessee by post from New Delhi, and this inference was supported by the fact the cheques used to be sent to the assessee by post. In the circumstances there was an implied agreement between the parties that the Government of India would send the cheques by post. The Government of India was entitled to ignore the subsequent request of the. assessee for cheques on an Indore bank and the assessee received payment of the price as and when the cheques on the Reserve Bank of India Bombay, were posted in British India in accordance with the contract (657 D; 658 Al Thairlwall vs The Great Northern Railway, [1910] 2 K.B. 509 and Commissioner of Income tax vs Patney & Co. , referred to. On the above view the profits in respect of the sales were taxable under section 4(1) (a) of the Indian Income tax Act, 1922.

The appellant company having its registered office at Calcutta, with branches at Bombay, Delhi, Lucknow, has a principal factory Cum branch at Madras. The registered office and the various branches are registered as dealers both under the Central Sales Tax Act and the local Sales Tax Acts. The appellant company in respect of the assessment year 1965 66, did not include a sum of Rs. 21.88,540.41 in its turnover in the return filed under the Central Sales Tax Act on the ground that the turnover represented sales out side the State of Madras. The said sale related to a Bombay buyer who placed the order with the Bombay branch of the appellant company after it was informed by the said branch in consultation with the Madras branch factory that the price was f.o.r. Madras at the buyer 's risk and that the delivery would be ex works, Madras. The Bombay buyer was also informed by the Bombay branch of all the particulars, condition of sale, the fact that the goods would be manufac tured at the Madras branch factory and would be supplied by the Madras Branch etc. as advised by the Madras branch to the Bombay branch. The respondent treated it as inter State sale under section 3(a) of the Central Sales Tax Act and issued a notice of demand whereupon the appellant filed an applica tion under article 226 of the Constitution in the Madras High Court praying for a writ of Prohibition restraining the respondents from taxing and/or including in the turnover for the purposes of assessment for the year 1965 66. The said petition was dismissed. Dismissing the appeals by certificate, the Court. HELD: (1) When the movement of the goods from one State to another is an incident of the contract it is a sale in the course of inter State sale. It does not matter in which State the property in the goods passes. What is decisive is whether the sale is one which occasioned the movement of goods from one State to another. 'the inter State movement must be the result of a covenant, express or implied in the contract of sate or an incident of the contract. It is not necessary that the sale must precede the inter State move ment in order that the sale may be deemed to have occasioned such movement. It is also not necessary for a sale to be deemed to have taken place in the course of inter State trade or .commerce, that.the covenant regarding inter State movement must be specified in the contract itself. It will be enough if the movement is in pursuance of 2nd incidental to the contract of sale. [634D E] (2) Branches have no independent and separate entity. Branches are different agencies. In the instant case, the contract of sale is between the appellant company and the Bombay buyer. [634C]

The appellant advanced various sums of money to the res pondent, in lieu of which the respondent passed a deposit receipt for 12 months from August 1, 1939 to July 31, 1940 On June 16, 1944 the appellant filed a suit to recover the amount with interest on the allegation that the amount became due on May 17, 1941 when the demand for the amount was made and limitation for the suit expired on May 17, 1944 and the suit was filed on the reopening day of the Court thereafter. The appellant also relied upon the acknowledgments of his debt by the respondent in the resolu tion passed by the Board of Directors on May 2o, 1941 and in the balance sheet of the respondent for the year 1940 41 dated October 10, 1941 : Held, that the suit was barred by limitation as the monies due under the deposit receipt became payable on July 31, 1941 and as no agreement had been proved that the monies due under the deposit receipt were re payable on demand. Held further, that limitation was not saved by the alleged acknowledgments. The resolution of the Board of Directors merely proposed a settlement of a claim of the appellant, which, if accepted by the appellant, was to be placed before a general meeting of the shareholders. The resolution only referred to a past liability of the respondent to the appellant and it could. not be construed as an 169 1332 acknowledgment of the liability of the respondent under the deposit receipt in question. A copy of the balance sheet of 1940 41 obtained from the Registrar of Companies which was filed in the case was wrongly rejected by the High Court as inadmissible on the ground that no evidence was adduced to prove it. This copy was admissible under section 3(b) of the Commercial Documents Evidence Act. Under that section the Court could also raise a presumption as regards the balance sheet having been duly made by or under the appropriate authority or in rggard to the statements contained therein. The presumption was not compulsory but was discretionary with the Court. In the circumstances of this case, where there were factions in the Company and the regularity of the meeting at which the balance sheet was passed was in dispute, the High Court would have been perfectly justified in not raising the presumption. Consequently, the acknowledgment in the balance sheet was of no avail to the appellant.

D. B and J were partners in a firm which carried on the business entitled the Ambala Flour Mills. On April 29, 1948 J filed a suit for the dissolution of the firm. The litigation ended with the judgment of the Panjab High Court delivered on September 25, 1951. According to the judgment the partnership stood dissolved with, effect from the date of the filing of the suit, but since the firm had continued to use J 's share in the property of the firm after that date he was held entitled to a corresponding shares in the profits of the firm after that date, or at his option, to interest at six per cent on the value of his share in the property of the firm. During the pendency of the suit B also served his connection with the business which was thereafter carried on by D alone. In the assessment year 1950 51 D filed three returns of income : (i) on 4 10 50 in the status of a firm; (ii) on 14 4 51 in the status of an individual; and (iii) on 1 7 51 in the status of a firm consisting of J and D partners. For the assessment year 1951 52 D filed a return in the status of an unregistered firm. For the assessment year 1952 53 D submitted a return in the status of a Hindu Undivided Family. The income tax Officer assessed the Ambala Flour Mills in the three years of assessment in the status of an association of persons. In appeals by D the Appellate Assistant Commissioner annulled the orders of assessment and remanded the case to the Income tax Officer with a direction that the income be assessed as the income of the family of D. In appeals by D the Income tax Appellate Tribunal confirmed the order of annulment but ordered that the direction to assess the income in the hands of D be deleted. The Tribunal 's order was based on the view that D was a stranger to the assessment proceedings. At the instance of the Commissioner of Income tax the following questions were referred to the High Court : (i) Whether D was a stranger in respect of the income tax proceedings against Ambala Flour Mills ? (ii) Whether the Appellate Assistant Commissioner could give a direction in the case of Ambala Flour Mills to the effect that the income should be assessed in the hands of D after annulling the assessment in the case of the Ambala Flour Mills ? (iii) Whether on the facts and in the circumstances of the case the appeals filed by D were maintainable in law? 'Me High Court answered the first question in the negative, the second in the affirmative with the rider that the assessment against D 'could only be in his individual capacity '; and the third question in the affirmative. Appeals were filed in this Court by both the parties. In this appeal the Commissioner of Income tax questioned the order of the High Court by which they sought to modify the order of the Appellate Assistant Commissioner. 389 HELD : (i) The first and third of the questions referred to it were correctly answered by the High Court. (a) D was competent to maintain the appeals filed by him to the Tribunal because by the order of the Appellate Assistant Commissioner it was directed that he may be personally assessed by the Income tax Officer in respect of the income of the Ambala Flour Mills. [391 C D] (b) In making a direction against 'D ' the Appellate Assistant Commissioner did not exercise his powers qua a stranger to the assessment proceeding. D had submitted returns and had also appealed against the orders of the assessment. The income earned by the assessee was assessed to tax as income of an association of persons of which on finding of the Income tax Officer 'D ' was a member. :Since the Appellate Assistant Commissioner set aside the order assessing the income in the status of association of individuals, he had to give directions with regard to the assessment of the income. He was competent to give the directions in view of the provisions of section 31 read with section 34(3) of the Income tax Act, 1922 and the interpretation placed on the litter section by this Court in the cases of Murlidhar Bhagwan Das and Kanpur Coal Syndicate. [392 G E; 394 D F] Commissioner of Income tax, U.P. vs Kanpur Coal Syndicate, and Income tax Officer, 'A Ward, Sitapur vs Murlidhar Bhagwan 'Das, , applied. section C. Prashar and another vs Vasantsen Dwarkadas and others, , referred to. (ii) The High Court exercising advisory, jurisdiction was incompetent to amend the order of the Appellate Assistant Commissioner. On the question referred to the High Court, no inquiry into the power of the Appellate Assistant Commissioner to make the impugned direction was competent. The second question only related to the assessment of the income in the hands of D after annulling the assessment of the Ambala Flour Mills. it was not contended before the Tribunal that the income of the Ambala Flour Mills could not be assessed in the hands of the family of 'D The competence of the Appellate Assistant Commissioner to make the direction could not be and was not referred to the High Court. [395 ,k C]

iminal Appeal No. 80 of 1963. Appeals by special leave from the judgment and order dated March 26, 1963, of the Punjab High Court in Criminal Mis. No. 186 of 1963. Criminal Appeals Nos. 86 to 93 of 1963. Appeal by special leave from the judgment and order dated February 21, 1963 of the Punjab High Court in Criminal Misc. No. 155, 102, 108, 105, 104, 101 and 107 of 1963 and judgment and order dated February 1963 of the same High Court in Criminal Misc. No. 99 of 1963. Criminal Appeals Nos. 109 to 111 of 1963. Appeals from the judgment and order dated May 31, 1963 of the Maharashtra High Court in Criminal Applications Nos. 217, 218 and 114 of 1963. Criminal Appeals Nos. 114 to 126 of 1963. Appeals from the judgment and order dated May 31, 1963 of the Maharashtra High Court in Criminal Applications Nos. 271, 265, 270, 267, 219, 220, 269, 264, 263, 266 and 273 of 1963. Criminal Appeal No. 65 of 1963. Appeal by special leave from the judgment and order dated April 3, 1963, of the Maharashtra High Court (Nagpur Bench) in Criminal Application No. 11 of 1963. M. C. Setalvad, N. C. Chatterjee, A. V. Viswanatha Sastri, section Mohan Kumaramangalam, C. B. Agarwala, Sarjoo Prasad, D. R. Prem, A. section R. Chari, section G. Patwardhan, W. section Barlingay, Etharajalu Naidu, Veda Vyas, Raghubir Singh, K. T . Sule, Asif Ansari, Hardayal Hardy, Bawa Shiv Charan Singh, section N. Mukherjee, Durgabhai Deshmukh, M. section K. Sastri, G. B. Rai, Ganpat Rai, D. N. Mukherjee, A. N. Sinha, Udayaratnam, K. V. Raghnatha Reddy, Janardhan Sharma, K. R. Choudhury, B. P. Maheshwari, I. B. Goyal, I. K. Nag, Y. Kumar, Hardev Singh,, M. I. Khowaja, section section Shukla, K. K. lain, Bishambar Lal Khanna, section Murthi, P. K. Chakravarti, P. K. Chatterjee, A. George Pudussary, Girish Chandra Mathur, Udai Pratap 804 Singh,Yogeshwar Prasad,M. R. Krishna Pillai, B. D.Sharma, K. P. Gupta, T. section Venkataraman, M. Veerappa,T.R.Ramachandra, R. C. Prasad, Santosh Chatterjee,N.N. Keshwani, K. Jayaram, R. Ganapathy Iyer, Thyagarajan, R. Vasudeva Pillai, R. V. section Mani, section C. Majumdar, Shaukat Hussain, K. Baldev Mehta, Mohan Behari Lal, Sadhu Singh, V. G. Row, section N. Kakkar, section K. Kapur, Parthasarathy, Shanti Swarup Bhatnagar, K. L. Mehta, Satish Mehta, Brij Kishore Prasad, Ali Ahmad, V. A. Syeid Muhammad, Narayanarayan Gooptu, Tapesh Roy, Madhan Bhaittia, Ajit Singh Banis and Brij Raj Kishore, J. B. Dada chanji O. C. Mathur, Ravinder Narain, D. P. Singh, M. K. Ramamurthi, R. K. Garg, and section C. Agarwal, for the appellant (in Cr. A. No. 80 of 1963). C. K. Daphtary, Attorney General, L. K. Kaushal, Deputy Advocate General, Punjab, D. D. Chaudhuri, R. N. Sachthey and R. H. Dhebar, for the respondent (in Cr. A. No. 80 of 1963). A. section R. Chari, D. P. Singh, M. K. Ramamurthi, R. K. Garg and section C. Agarwal for the appellant (in Cr. A. No. 86 of 1963). Hardev Singh and Y. Kumar, for the appellants (in Cr. A. Nos. 87 to 93 of 1963). L. D. Kaushal, Deputy Advocate General, Punjab, D.D.Chaudhri, R. N. Sachthey and R. H. Dhebar, for the respondent (in Cr. A. Nos. 86 to 93 of 1963). A. section R. Chari, 0. P. Malhotra, B. Parthasarathy, J. B. Dadachanji, 0. C. Mathur and Ravinder Narain, for the appellant (in Cr. A. No. 65 of 1963). N. C. Chatterjee, and Janardan Sharma, for the appellant (in Cr. A. No. 109 of 1963). K. T. Sule, Jitendra Sharma and Janardan Sharma, for the appellants (in Cr. A. Nos. 111 and 114 to 126 of 1963) and for the Detenue Interveners Nos. 12, 14, 16, 18 and 37). C. K. Daphtary, Attorney General, N. section Bindra, B. R. G. K. Achar, R. N. Sachthey and R. H. Dhebar, for the respondents (in Cr. A. No. 65, 109 to 111 and 114 to 126/1963). C. K. Daphtary, Attorney General, H. N. Sanyal, Solicitor General, section V. Gupte, Additional Solicitor General, R.N.Sachthey and R. H. Dhebar, for intervener No. 1 Naunit Lal, for intervener No. 1. B. Sen and P. K. Bose, for intervener No. 3. section P. Varma, for intervener No. 4. M. Adhikari, Advocate General, Madhya Pradesh and I.N.Shroff, for intervener No. 5. A. Ranganadham Chetty and A. F. Rangam, for intervener No. 6. G. C. Kasliwal, Advocate General, Rajasthan, R. H.Dhebar, R. N. Sachthey, for intervener No. 7. C. P. Lal, for intervener No. 8. N. C. Chatterjee, Narayan Gooptu, Tapesh Roy, D. P.Singh, M. K. Ramamurthi, R. K. Garg and section C. Agarwal, for intervener No. 69. A. section R. Chari, Narayan Gooptu, Tapesh Roy, D. P. Singh, M. K. Ramamurthi, R. K. Garg and section C. Agarwal, for intervener No. 70. A. section Peerbhoy A. Desai, M. Rajagopalan and K. R. Choudhari, for interveners Nos. 79 and 80. September 2, 1963. The judgment of P. B. Gajendragadkar, A. K. Sarkar, K. N. Wanchoo, M. Hidayatullah,B. Gajendragadkar, J. K. Subba Rao, J. delivered a dissenting Opinion. GAJENDRAGADKAR, J. This group of 26 criminal appeals has been placed for hearing and disposal before a special Constitutional Bench, because the appeals constituting the group raise two common important questions of Constitutional law. Nine of these appeals have been preferred against the decisions of the Punjab High Court, whereas seventeen have been preferred against the decisions of the Bombay High Court. All the appellants are detenues who have been detained respectively by the Punjab and the Maharashtra State Governments under Rule 30(1)(b) of the Defence of India Rules (hereinafter called the Rules) made by the Central Government in exercise of the powers conferred on it by section 3 of the Defence of India Ordinance, 1962 (No. 4 of 1962) (hereinafter called the Ordinance). They applied to the Punjab and the Bombay High Courts respectively under section 491 (1) (b) of the Code of Criminal Procedure and alleged that they had been improperly and illegally detained. Their contention was that section 3(2)(15)(1) and section 40 of the Defence 806 of India Act, 1962 (No. 51 of 1962) (hereinafter called 'the Act ') and Rule 36(1)(b) under which they have been detained are constitutionally invalid, because they contravene their fundamental rights under Articles 14, 21 and 22(4), (5) & (7) of the Constitution, and so, they claimed that an order should be passed in their favour directing the respective State Governments to set them at liberty. These petitions have been dismissed on the ground that the Presidential Order which has been issued under article 359 of the Constitution creates a bar which precludes them from moving the High Court under section 491 (1) (b) Cr. That is how the decisions of the two High Courts under appeal raise two common questions of considerable importance. The first question is : what is the true scope and effect of the Presidential Order which has been issued under article 359 (1) ? The answer to this question would depend upon a fair and reasonable construction of article 359(1) itself. The second question is : does the bar created by the Presidential Order issued under article 359(1) operate in respect of applications made by detenues under section 491 (1) (b) of the Code? The answer to this question would depend upon the determination of the true character of the proceedings which the detenues have taken under section 491(1)(b), considered in the light of the effect of the Presidential Order issued under article 359(1). Both the Punjab and the Bombay High Courts have held against the appellants. Meanwhile, when similar petitions were made before the Allahabad High Court in Criminal Cases Nos. 1618, 1759 and 1872 of 1963 Sher Singh Negi vs District Magistrate, Kanpur & Anr., the said High Court took a contrary view and directed the release of the detenues who had moved it under section 491 (1) (b) of the Code. It is because the questions raised are important and the answers given by the different High Courts have disclosed a sharp difference of opinion that a Special Bench has been constituted to deal with these appeals. If the two principal questions are answered in favour of the detenues, a third question would arise and that relates to the validity of the impugned sections of the Act and the relevant statutory Rules. On the 8th September, 1962, the Chinese aggressively attacked the northern border of India and that constituted a threat to the security of India. That is why on 807 the 26th October, 1962, the President issued a Proclamation under article 352 of the Constitution. This Proclamation declared, that a grave emergency existed whereby the security of India was threatened by external aggression. On the same day, the Ordinance was promulgated by the President. This Ordinance was amended by Ordinance No. 6 of 1962 promulgated on November 3, 1962. On this day, the President issued the Order under article 359(1), suspending the rights of citizens to move any Court for the enforcement of the rights conferred by articles 21 and 22 of the Constitution for the period during which the proclamation of emergency issued on October 26, 1962 would be in force. On November 6, 1962, the rules framed by the Central Government were published. Then followed an amendment of the Presidential Order on November 11 1962. By this amendment, for the words and figures "article 21" the words and figures "articles 14 and 21" were substituted. On December, 6, 1962, Rule 30 as originally framed was amended and Rule 30 A added. Last came the Act on December 12 1962. Section 48(1) of the Act has provided for the repeal of the Ordinances Nos. 4 and 6 of 1962. Section 48(2) provides that notwithstanding such repeal, any rules made, anything done or any action taken under the aforesaid two Ordinances shall be deemed to have been made, done or taken under this Act as if this Act had commenced on October 26, 1962. That is how the Rules made under the Ordinance continued to be the Rules under the Act, and it is under Rule 30(1) (b) that the appellants have been detained. Before dealing with the points which have been raised for our decision in the present appeals, it is necessary to indicate briefly at the outset the general argument which has been urged before us by Mr. Setalvad on behalf of the appellants, and the learned Attorney General on the other side. article 359(1.) which falls to be construed, occurs in Part XVIII of the Constitution which makes emergency provisions. Whenever the security of India or any part of the territory of India is threatened whether by war or by external aggression or internal disturbance, the President may, under article 352, by proclamation, make a declaration to ,hat effect. Articles 353 to 360 which occur in this Part thus constitute emergency provisions. The learned 808 Attorney General contends that in construing an emergency provision like article 359(1), we must bear in mind the fact that the said Article is intended to deal with a situation which has posed a threat to the security of India, and so, fundamental rights guaranteed by Part III which are un doubtedly of vital importance to the democratic way of life guaranteed by the Constitution have to be regulated during an emergency, because the very security of the nation is exposed to serious jeopardy. The security of the nation on such a solemn occasion must have precedence over the liberty of the individual citizens, and so, it is urged that if article 359 is capable of two constructions, one in favour of the fundamental rights of the citizens, and the other in favour of the grant of power to the President to control those rights, the Court should lean in favour of the grant rather than in favour of the individual citizen 's fundamental rights. In support of this argument, the learned Attorney General has relied on two decisions of the House of Lords. In The King (At the Prosecution of Arthur Zadig) vs Halliday,(1) Lord Finlay L. C. who was called upon to construe Regulation 14B of the Defence of the Realm (Consolidation) Regulations Act, 1914, noticed the argument that if the Legislature had intended to interfere with personal liberty, it would have provided, as on previous occasions of national danger, for suspension of the rights of the subject as to a writ of habeas corpus, and rejected it with the observations that the Legislature bad selected another war of achieving the same purposes, probably milder as well as more effectual than those adopted on the occasion of previous wars. He added that the suggested rule as to construing penal statutes and the provision as to trial of British subjects by jury made by the Defence of the Realm Act, 1915, have no relevance in dealing with an executive measure by way of preventing a public danger. The majority decision of the House of Lords in Liversidge vs Sir John Anderson (2 ) has also been relied upon by the learned Attorney General. In that case, the House or Lords had to consider the true scope and effect of Regulation 18B of the Defence (General) Regulations, 1939. (1) ; , 270. (2) ; 809 Viscount Maugham in I rejecting the argument of the detenu that the liberty of the subject was involved and that the legislation dealing with the liberty of the subject must be construed, if possible, in favour of the subject and against the Crown, quoted with approval the language of Lord Finlay, L. C., in the case of Rex vs Halliday(1). Lord Macmillan who took the same view observed that it is right so to interpret emergency legislation as to promote rather than to defeat its efficacy for the defence of the realm. That is in accordance with a general rule applicable to the interpretation of all statutes or statutory regulations in peace time as well as in war time. Lord Wright and Lord Romer adopted the same approach. The Attorney General relies on the fact that this approach has also been adopted by Gwyer, C. J., in Keshav Talpade vs The King Emperor(2). In making his contention in regard to the proper approach. which the Court should adopt in construing article 359, the learned Attorney General no doubt contended that the question about the approach would arise only if two constructions are reasonably possible. According to him, article 359 was capable of only one construction and that is the construction which the High Courts of Punjab and Bombay have accepted. On the other hand, Mr. Setalvad has argued that article 359 is not an emergency legislation properly so called and on the merits, he has strongly resisted the suggestion made by the learned Attorney General that if two reasonable constructions are possible, we should adopt that which is in favour of the grant of power to the President and not in favour of the citizens fundamental rights. He has relied on the minority speech of Lord Atkin in the case of Liversidge(3) and has argued that the view taken by Lord Atkin should be preferred to the majority view which the House of Lords adopted in that case. "In this country", observed Lord Atkin, "amid the clash of arms, the laws are not silent. They maybe changed, but they speak the same language in war as in peace. It has always been one of the pillars of freedom, one of the principles of liberty for which on recent authority we are now fighting, that the judges are no respecters of persons and stand between (1) ; , 270. (3) ; (2) , 63. 52 2 section C. lndia/64 810 the subject and any attempted encroachments on his liberty by the executive, alert to see that any coercive action is justified in law. In this case, I have listened to arguments which might have been addressed acceptably to the Court of King 's Bench in the time of Charles I." Realising that he was in a minority, Lord Atkin added that he protested, even if he did it alone, against a strained construction put on words with the effect of giving ail uncontrolled power of imprisonment to the Minister. In this connection, Mr. Setalvad referred to two subsequent decisions of the Privy Council in which the view taken by Lord Atkin has been accepted, vide Nakkuda Ali vs M. F. De section layaratne(1), and King Emperor vs Vimalabai Deshpande(2). In the former case, Lord Radcliffe observed that indeed, it would be a very unfortunate thing if the decision of Liversidge 's case came to be regarded as laying down any general rule as to the construction of such phrases when they appear in statutory enactments, and he added that the said decision is an authority for the proposition that the words "if A. B. has reasonable cause to believe" are capable of meaning "if A. B. honestly thinks that he has reasonable cause to believe" and that in the context and attendant circumstances of Defence Regulation 18B they did in fact mean just that. In distinguishing the said decision, Lord Radcliffe made the somewhat significant comment that the elaborate consideration which the majority of the House gave to the context and circumstances before adopting that construction itself shows that there is no general principle that such words are to be so understood. Mr. Setalvad has also invited our attention to the fact that the majority decision of the House of Lords in Liversidge(3) has not received the approval from jurists, (vide Maxwell on Interpretation of Statutes p. 276, footnote 54, Craies on Statue Law p. 309, and Friedmann, Law in a Changing Society p. 37.) Like the Attorney General, Mr. Setalvad also urged that the stage to choose between two rival constructions would not arise in the present appeals because, according to him, the construction for which he contended was the only reasonable construction of article 359. (1) , 76. (2) 73 I.A. 144. (3) ; 811 In our opinion, it is unnecessary to decide the merits of the rival contentions urged before us in regard to the rule of construction and the approach which the Court should adopt in construing article 359. It is common ground that the question of approach would become relevant and material only if we are satisfied that article 359 is reasonably capable of two alternative constructions. As we will presently point out, after hearing counsel on both sides, we have reached the conclusion that article 359 is reasonably ,capable of only one construction and that is the construction which has been put on it by the Punjab and Bombay High Courts. That is why we are relieved of the task of dealing with the merits of the controversy between the parties on this point. Let us then revert to the question of construing article 359. In doing so, it may be relevant and somewhat useful to compare and contrast the provisions of Articles 358 and 359. Indeed, both Mr. Setalvad and the learned Attorney General contended that article 359 should be interpreted in the light of the background supplied by the comparative examination of the respective provisions contained in articles 358 and 359 (1) & (2). The said two Articles read as under : "358. While a Proclamation of Emergency is in operation, nothing in article 19 shall restrict the power of the State as defined in Part III to make any law or to take any executive action which the State would but for the provisions contained in that Part be competent to make or to take, but any law so made shall, to the extent of the competency, cease to have effect as soon as the Proclamation ceases to operate, except as respects things done or omitted to be done before the law so ceases to have effect 359 (1) Where a Proclamation of Emergency is in operation, the President may by order declare that the right to move any Court for the enforcement of such of the rights conferred by Part III as may be mentioned in the order and all proceedings pending in any court for the enforcement of the rights so mentioned shall remain suspended for the period during which the Proclamation is in force or for such shorter period a may be specified in the order. 812 (2)Any order made as aforsesaid may extend to the whole or any part of the territory of India. " It would be noticed that as soon as a Proclamation of Emergency has been issued under article 352 and so long as it lasts, article 19 is suspended and the power of the legis latures as well as the executive is to that extent made wider. The suspension of article 19 during the pendency of the Proclamation of emergency removes the fetters created on the legislative and executive powers by article 19 and if the legislatures make laws or the executive commits acts which are inconsistent with the rights guaranteed by article 19, their validity is not open to challenge either during the 'continuance of the emergency or even thereafter. As soon as the Proclamation ceases to operate, the legislative enactments passed and the executive actions taken during the course of the said emergency shall be inoperative to the extent to which they conflict with the rights guaranteed under article 19 because as soon as the emergency is lifted, article 19 which was suspended during the emergency is automatically revived and begins to operate. Article 358, however, makes it clear that things done or omitted to be done during the emergency cannot be challenged even after the emergency is over In other words, the suspension of article 19 is complete during the period in question and legislative and executive action which contravenes article 19 cannot be questioned even after the emergency is over. Article 359, on the other hand, does not purport expressly to suspend any of the fundamental rights. It authorises the President to issue an order declaring that the right to move any court for enforcement of such of the rights in Part III as may be mentioned in the order and all proceedings pending in any court for the enforcement of the rights so mentioned shall remain suspended for the period during which the Proclamation is in force or for such shorter period as may be specified in the order. What the Presidential Order purports to do by virtue of the power conferred on 'the President by article 359(1) is to bar the remedy of the citizens to move any court for the enforcement of the specified rights. The rights are not expressly suspended, but the citizen is deprived of his right to move any court for their enforcement. That is one important 813 distinction between the provisions of article 358 and article 359(1). Before proceeding further, we may at this stage, in parenthesis, observe that there has been some argument before us on the question as to whether the fundamental rights specified in the Presidential Order issued under article 359 are even theoretically alive during the period specified in the said Order. The learned Attorney General has contended that the suspension of the citizens ' right to move any court for the enforcement of the said rights, in law, amounts to the suspension of the said rights themselves for the said period. We do not propose ,to decide this question in the present appeals. We will assume in favour of the appellants that the said rights arc, in theory, alive and it is on that assumption that we 'will deal with the other points raised in the present appeals. The other distinction lies in the fact that the suspension of article 19 for which article 358 provides continues so long as the Proclamation of Emergency is in operation, whereas the suspension of the right to move any court which the Presidential Order under article 359(1) brings about can last either for the period of the Proclamation or for a shorter period if so specified by the Order. It would be noticed that the Presidential Order cannot widen the authority of the legislatures or the executive; it merely suspends the rights to move any court to obtain a relief on the ground that the rights conferred by Part III have been contravened if the said rights are specified in the Order. The inevitable consequence of this position is that as soon as the Order ceases to be operative, the infringement of the rights made either by the legislative enactment or by executive action can perhaps be challenged by, a citizen in a court of law and the same may have to be tried on the merits on the basis that the rights alleged to have been infringed were in operation even during the pendency of the Presidential Order. If at the expiration .of the Presidential Order, Parliament passes any legislation to protect executive action taken during the pendency, of the Presidential Order and afford indemnity to the executive in that behalf, the validity and the effect of such legislative action may have to be carefully scrutinised. 814 Since the object of article 359(1) is to suspend the rights of the citizens to move any court, the consequence of the Presidential Order may be that any proceeding which may be pending at the date of the Order remains suspended during the time that the Order is in operation and may be revived when the said Order ceases to be operative; and fresh proceedings cannot be taken by a citizen after the Order has been issued, because the Order takes away the right to move any court and during the operation of the Order, the said right cannot be exercised by instituting a fresh proceeding contrary to the Order. If a fresh proceeding failing within the mischief of article 359(1) and the Presidential Order issued under it is instituted after the Order has been issued, it will have to be dismissed as being incompetent. In other words, article 359(1) and the Presidential Order issued under it may constitute a sort of moratorium or a blanket ban against the institution or continuance of any legal action subject to two important conditions. The first condition relates to the character of the legal action and requires that the said action must seek to obtain a relief on the ground that the claimant 's fundamental rights specified in the Presidential Order have been contravened, and the second condition relates to the period during which this ban is to operate. The ban operates either for the period of the Proclamation or for such shorter period as may be specified in the Order. There is yet another distinction between the provisions of article 358 and article 359(1). The suspension of Art '. 19 for which, provision is made under article 358 applies to the whole of the country, and so, covers all legislatures and also States. On the other hand, the Order issued under article 359(1) may extend to the whole of India or may be confined to any part of the territory of India. These, broadly stated, are the points of distinction between article 358 and article 359(1), What then is the true scope and effect of, article 359(1).? Mr. Setalvad contends that the right to move any court for the enforcement of such of the rights conferred by Part III as may be mentioned in the Order should be construed to mean the right to move the Supreme Court which has been guaranteed by article 32(1). He suggests that as one reads the relevant clause in article 359(1), one seems 815 to hear the echo of the right which has been constitu tionally guaranteed by article 32(1). His argument, therefore, is that the only right of which a citizen can be deprived under article 359(1) is the right to, move the Supreme Court, and so, his case is that even in regard to fundamental rights specified in the Presidential Order, a citizen is entitled to ask for reliefs from the High Court under article 226 because the right to move the High Court flowing from article 226 does not fall within the mischief of article 359(1). This argument attempts to interpret the words "the right to move for the enforcement of the specified rights" in isolation and without; taking into account the other words which indicate that the right to move which is specified in the said Article is the right to move "any courts$. In plain language, the words "any court" cannot mean only the Supreme Court they would necessarily take in all courts of competent jurisdiction. If the intention of the Constitution makers was to confine the operation of article 359(1) to the right to move only the Supreme Court, nothing could have been easier than to say so expressly instead of using the wider words "the right to move any court. ') To meet this difficulty,Mr. Setalvad attempted to invoke the assistance of article 32(3). article 32(3) provides that without prejudice to the: powers conferred on the Supreme Court by clauses (1) and ' (2), Parliament may by law empower any other court, to exercise within the local limits of its jurisdiction all or any of the powers exercisable by the Supreme Court under clause (2). The argument is that the Constitution contemplates that there may be some other courts in the country on which the powers exercisable by the Supreme Court under article 32(2) may be conferred, and so, the words "any court" may have been intended to take within their purview the Supreme Court and such other courts oil whom the Supreme Courts powers under article 32(2) may have been conferred. This argument is fallacious. The scheme of article 32 clearly indicates that the right to move this Court which itself is a guaranteed fundamental right,, cannot be claimed in respect of courts falling under article 32(3). article 32(3) merely provides for the conferment of this Court 's 816 powers under article 32(2) on the courts specified in clause (3). The right guaranteed by article 32(1) cannot be claimed in respect of the said other courts. Therefore, oh a plain construction of the relevant clauses of article 32, it is impossible to accept the argument that courts under article 32(3) must be regarded as having the same status as the Supreme Court and as such the right to move them must also be held to constitute a fundamental right of the citizen in respect of such courts. Besides, it would be irrational to suggest that whereas the Constitution did not confer on the citizens a guaranteed fundamental right to move the High Court under article 226, it thought of conferring such a guaranteed fundamental right in regard to courts on which the Supreme ' Court 's powers under article 32(2) would be conferred by article 32(3). Therefore, the attempt to suggest that 'the use of the words "any Court" used in article 359(1) is justified because they take in the Supreme Court and some other courts, fails and the conclusion inevitably follows that the words "any court" must be given their plain grammatical meaning and must be construed to mean any court of competent jurisdiction. In other words the words "any court" include the Supreme Court and the High Courts before which the specified rights can be enforced by the citizens. In this connection, it was attempted to be argued that the power of the High Court to issue the writs or orders specified in article 226(1) is a discretionary power and as such, no citizen can claim to have a right to move the High Court in that behalf, and '. so, it was suggested that the proceedings contemplated by article 226(1) are outside the purview of article 359(1). In our opinion, this argument is not well founded. It is true that in issuing writs or orders under article 226(1), the High Courts have discretion to decide whether a writ or, %,order should be issued as claimed by the petitioner; but the discretion conferred on the High Courts in that behalf has to be judicially exer cised, and having regard to the scheme of article 226(1), it cannot be said that a citizen. has no right to move the High Court for invoking its jurisdiction under article 226(1); article 226(1) confers wide powers on the High Courts to issue the specified writs, or other appropriate orders or directions; having regard to the nature of the said powers, 817 and the object intended to be achieved by their conferment there can be little doubt that in dealing with applications made before them the High Courts have to exercise their discretion in a judicial manner and in accordance with principles which are well settled in that behalf. The High Courts cannot capriciously or unreasonably refuse to en tertain the said applications and to deal with them on the merits on the sole ground that the exercise of their juris diction under article 226(1) is discretionary. Therefore, it is idle to suggest that the proceedings taken by citizens under article 226(1) are outside the purview of article 359(1). We must accordingly hold that the right to move any court under article 359(1) refers to the right to move any court of competent jurisdiction. The next question to consider is, what is the nature of the proceedings which are barred by the Presidential Order issued under article 359(1) ? They are proceedings taken by citizens for the enforcement of such of the rights conferred by Part III as may be mentioned in the order. If a citizen moves any court to obtain a relief on the ground that his fundamental rights specified in the Order have been contravened, that proceeding is barred. In determining the question as to whether a particular proceeding falls within the mischief of the Presidential Order or not, what has to be examined is not so much the form which the proceeding has taken, or the words in which the relief is claimed, as the substance of the matter and consider whether before granting the relief claimed by the citizen, it would be necessary for the Court to enquire into the question whether any of his specified fundamental rights have been contravened. If any relief cannot be granted to the citizen without determining the question of the alleged infringement of the said specified 'fundamental rights, that is a proceeding which falls under article 359(1) and would, therefore, be hit by the Presidential Order issued under the said Article. The sweep ,of article 359(1) and the Presidential Order issued under it is thus wide enough to include all claims made by citizens in any court of competent 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 any of the 818 said specified fundamental rights. We have already seen that the operation of article 359(1) and the Presidential Order issued under it is limited to the period during which the proclamation of emergency is in force, or for such shorter period as may be specified in the Order. That being so, we feel no difficulty in holding that proceedings taken by a citizen either under article 32(1) or under article 226(1) are hit by article 359(1) and the Presidential Order issued under it. In this connection it would be legitimate to add that the contention of the appellants which seeks to confine the operation of article 359(1) only to the right to move the Supreme Court, would make the said provision almost meaningless. There would be no point in preventing the citizen from moving this Court, while leaving it open to him to move the High Courts for the same relief and then to come to this Court in appeal, if necessary. That takes us to the question as to whether proceedings taken by a citizen under section 491(1)(b) are affected by article 359(1) and the Presidential Order issued under it. Section 491 (1) (b), inter alia, provides that any High Court may, whenever it thinks fit, direct that a person illegally or improperly detained in public custody be set at liberty. It has been strenuously urged before us that the proceedings for obtaining directions of the nature of habeas corpus which are taken under section 491 (1) (b) are outside article 359(1), and so, the Presidential Order cannot create a bar against a citizen asking the High Court to issue a writ in the nature of habeas corpus under the said provision. It is necessary to examine this argument very carefully. It is well known that after section 491 was enacted in the Code of Criminal Procedure in the present form in 1923, the right to obtain a direction in the nature of a habeas corpus became a statutory right in India. After 1923, it was not open to any party to ask for a writ of habeas corpus as a matter of common law. This question was elaborately considered by Rankin, C. J., in Girindra Nath Banerjee vs Birendra Nath Pal(1), where the learned C.J. considered the history of the development of the law on this point and came to the conclusion that the relief of a writ in the nature of a habeas corpus could be claimed (1) I.L.R. 819 after 1923 solely under Cr. P. C. The same view was taken by a full Bench of the Madras High Court in District Magistrate, Trivandrum vs K. C. Mammen Mappillal(1), where the said High Court held that it had no power to issue a writ of habeas corpus as known to the English Common Law. Its powers are confined in that respect to those conferred by section 491 of the Code of Criminal Procedure which gives authority to issue directions of the nature of habeas corpus. When this point was raised before the Privy Council in Matthen vs District Magistrate of Trivandrum (2), their Lordships observed that the reasoning of Rankin C.J. in the case of Girindra Nath Banerjee(3) was so clear and convincing that they were content to adopt it, as also to state that they were in entire agreement with the views expressed by him. The same view was expressed by the Privy Council in King Emperor vs Sibnath Banerji(4). Basing himself on these decisions, Mr. Setalvad contends that the statutory right to obtain relief under section 491 (1) (b) is a right which is separate and distinct from the Constitutional right guaranteed by the relevant Articles of the Constitution, and so, article 359(1) cannot be said to apply to the proceedings under section 491 (1) (b). In support of the same contention, Mr. Setalvad has also pressed into service the provisions of article 372 by which the existing laws are continued and he has invited our attention to the provisions of article 225 and 375 to show that the jurisdiction conferred on the High Courts by section 491 Cr. P. C. continues unless it is expressly taken away by a competent piece of legislation. In this connection, reliance has also been placed on the fact that in the past whenever the operation of section 491 was intended to be suspended, the legislature made a specific provision in that behalf and as an illustration, reference is made to section 10 of the Restriction and Detention Ordinance, 1944 (No, III of 1944). Section 10 specifically refers to section 491 of the Code and provides that no Court shall have power to make any order under the said section in respect of any order made under or having, effect under the Ordinance, or in respect of any person the subject of such an order. It is urged that the Presidential Order is con (1) I.L.R. 66 I.A. 222. (3) I.L.R. :54 Cal, 727.(4) 72 I.A. 241. 820 fined only to proceedings taken for enforcement of consti tutional rights and if it was intended that the proceedings under section 491(1)(b) should also be prohibited, it was essen tial that the said provision should, in terms, have been suspended by a competent piece of legislation. Mr. Setalvad has also emphasised the fact that the approach in dealing with a proceeding under section 491(1)(b) is different from the approach which the courts adopt in dealing with proceedings under article 226 or article 32. In invoking the Jurisdiction of the High Courts under article 226(1), or that of the Supreme Court under article 32(1), the Courts always enquire whether the party concerned is aggrieved by the order against which complaint is made. Under section 491(1)(b), however, the court can take action suo motu and that brings out the difference in the character of the two respective categories of proceedings. That, broadly stated, is the manner in which Mr. Setalvad has raised his contention that proceedings under section 491 (1) (b) are outside the purview of the Presidential Order and do not fall within the mischief of article 359(1). There is no doubt that the right to ask for a writ in the nature of habeas corpus which could once have been treated as a matter of Common Law has become a statutory right after 1923, and as we have already seen after section 491 was introduced in the Cr. P. C., it was not open to any citizen in India to claim the writ of habeas corpus on grounds recognised by Common Law apart from the provisions of section 491(1)(b) itself. It has, however, been suggested by the learned Attorney General that just as the common law right to obtain a writ of habeas corpus became a statutory right in 1923, a part of the said statutory .tight has now become a part of the fundamental rights guaranteed by the Constitution, and so, after the Constitution came into force, whenever a detenu claims to be released from illegal or improper ' detention, his claim can, in some cases, be sustained on the ground that illegal or improper detention affects his fundamental rights guaranteed by articles 19, or 21 or 23 as the case may be. If that be so, it would not be easy to accede to the argument that the said part of the statutory right recognised by section 491(1)(b) retains its distinctive and independent character even after 821 the Constitution came into force to such an extent that it cannot be said to form part of the fundamental rights guaranteed by the Constitution. It is true that there are two remedies open to a party whose right of personal freedom has been infringed; he may move the Court for a writ under article 226(1) or article 32(1) of the Constitution, or he may take a proceeding under s.491(1)(b) of the Code. But it seems to us that despite the fact that either of the two remedies can be adopted by a citizen who has been detained improperly or illegally, the right which he claims is the same if the remedy sought for is based on the ground that there has been a breach of his fundamental rights; and that is a right guaranteed to the citizen by the Constitution, and so, whatever is the form of the remedy adopted by the detenu, the right which he is seeking to enforce is the same. It is no doubt urged that under section 491 (1) (b) a stranger can apply for the release of a detenu improperly or illegally detained, or the Court itself can act suo motu. This argument is based on the provision that the High Court may, whenever it thinks fit, issue the appropriate direction. The learned Attorney General contended that the clause "whenever it thinks fit" postulates that some application or petition has been filed before the Court and on perusing the application or petition it appears to the Court fit to take the appropriate action. In other words, his argument is that the Court cannot take suo motu action under section 491(1)(b). He has also urged that a third person may apply, but he must show that he has been duly authorised to act on behalf of the detenu or he must at least purport to act on his behalf. We do not think it necessary to express any opinion on this part of the controversy between the parties. We are prepared to assume that the court can, in a proper case, exercise its power under section 491(1)(b) suo motu, but that, in our opinion, does not affect the decision of the question with which we are concerned. If article 359(1) and the Presidential Order issued under it govern the proceedings taken under section 491 (1) (b), the fact that the court can act suo motu will not make any difference to the legal position for the simple reason that if a party is precluded from claiming his release on the ground set out by him in his petition, the 822 Court cannot, purporting to act suo motu, pass any order inconsistent with the provisions of article 359(1) and the Presidential Order issued under it. Similarly, if the pro ceedings under section 491(1)(b) are hit by article 359(1) and the Presidential Order, the arguments based on the provisions of article 372 as well as articles 225 and 375 have no validity. The obvious and the necessary implication of the suspension of the right of the citizen to move any Court for enforcing his specified fundamental right. , is to suspend the Jurisdiction of the Court pro tanto in that behalf. Let us take a concrete case which will clearly bring. out the character of the proceedings taken by the detenues in the present cases. An application is made on behalf of the detenu that he is illegally or improperly detained. The State in its return pleads that the detention is neither illegal nor improper because it has been effected under rule 30(1) (b), and in support of this return reliance is placed on the provisions of section 3(2)(15)(i) of the Act. On receiving this return, it is urged on behalf of the detenu that the provisions of section 3(2)(15)(i) as well as Rule 30(1)(b) are invalid because they contravene the fundamental rights guaranteed to the citizens under articles 14, 21 and 22 and so, the sole issue which falls to be determined between the parties relates to the validity of the relevant statutory provisions and Rules. If the impugned provisions in the Act and the Rules are ultra Vires the detention is illegal and improper, but if, on the other hand, the said provisions are valid, the detention is legal and proper. In deciding this point, the Court will naturally have to take into account the provisions of section 45(1) of the Act. Section 45(1) provides that no order made in exercise of any power conferred by or under this Act shall be called in question in any Court; and the reply of the detenu inevitably would be that notwithstanding this provision, the validity of the impugned legislation must be tested. This clearly brings out the true nature and character of the dispute which is raised before the Court by the detenu in asking for the issue of a writ of habeas corpus in the present proceedings. The question which thus arises for our decision is, can it be said that the proceedings taken under section 491 (1) (b) are 823 of such a distinctly separate character that they cannot fall under article 359(1) ? Under section 491 as it stood before the date of the Constitution, it would have been open to the detenu to contend that the law under which he was detained was invalid, because it was passed by a legislature without legislative competence. The validity of the law might also have been challenged on the ground that the operative provision in the law suffered from the vice of excessive.delegation. The detenu might also have urged that in detaining him the mandatory provisions under the Act had not been complied with. But before the Constitution was adopted, it would not have been open to the detenu to claim that the impugned law was invalid because it contravened his fundamental rights guranteed by the relevant Articles of the Constitution. The right to challenge the validity of a statute on the ground that it contravenes the fundamental rights of the citizens has accrued to the citizens of this country only after and as a result of the provisions of the Constitution itself, and SO, there can be no doubt that when in the present proceedings the detenues seek to challenge the validity of the impugned statutory provision and the Rule, they are invoking their fundamental rights under the Constitution. If section 491. is treated as standing by itself and apart from the provisions of the Constitution, the plea raised by the detenues cannot be entertained in the proceedings taken under that section ; it is only when the proceedings taken under the said section are dealt with not only in the light of section 491 and of the rights which were available to the citizens before 1950, but when they are considered also in the light of the fundamental rights guaranteed by the Constitution that the relevant plea can be raised. In other words, it is clear that the content of the detenu 's right to challenge the legality of his detention which was available to him under section 491(1)(b) prior to the Constitution, has been enlarged by the fundamental rights guaranteed to the citizens by the Constitution, and so, whenever a detenu relies upon his fundamental rights even in support of his petition made under section 491(1)(b) he is really enforcing the said rights and in that sense, the proceedings inevitably partake of the character of proceedings taken by the detenu for enforcing these rights; that is why the argument that article 359(1) 824 and the Presidential Order issued under it do not apply to the proceedings under section 491(1)(b) cannot be sustained. The prohibition contained in the said Article and the Presidential Order will apply as much to proceedings under section 491(1)(b) as to those under article 226(1) & article 32(1). In this connection, it is hardly necessary to emphasise that in deciding the present question, we must take into account the substance of the matter and not attach undue or exaggerated importance to the form of the proceedings. If the form which the proceedings take is held to be decisive in the matter, it would lead to this irrational position that an application containing the requisite averments in support of a plea for the release of the detenu, would be thrown out by the High Court if in form it purports to be made under article 226, whereas it would be entertained and may indeed succeed if it purports to be made under section 491(1)(b). Indeed, this argument seems to suggest that when the Constitution makers drafted article 359, they intended that whenever an emergency arises and a Presidential Order is issued under article 359(1) in regard to the fundamental rights guaranteed by articles 21 and 22, it would be necessary to pass another piece of legislation providing for an appropriate change or repeal of a part of the provision of section 491(1)(b), Cr. P. C.; and since the legislature has through oversight omitted to pass the necessary Act in that behalf, proceedings under section 491(1)(b) must be allowed to be continued free from the bar created by the Presidential Order. In our opinion, this position is wholly untenable. Whether or not the proceedings taken under section 491(1)(b) fall within the purview of the Presidential Order, must depend upon the construction of article 359(1) and the Order, and in dealing with this point, we must look at the substance of the matter and not its form. Before giving relief to the detenu who alleges that he has been illegally and impropely detained, is the High Court required to consider the validity of the operative provisions of the impugned Act on the ground that they infringe the specified fundamental rights? If yes, the bar created by article 359(1) and the Presidential Order must inevitably step in even though the proceedings in form may have been taken under section 49t(1)(b) of the Code. In our opinion, therefore, once it is shown that the proceedings under 825 s.491(1)(b) cannot make a substantial progress unless the validity of the impugned law is examined on the ground of the contravention of the specified fundamental rights, it must follow that the bar created by the Presidential Order operates against them as much as it operates against proceedings taken under article 226(1) or article 32(1). Thus, the true legal position, in substance, is that the clause "the right to move any court" used in article 359(1) and the Presidential Order takes in all legal actions intended to be filed, or filed, in which the specified rights are sought to be enforced, and it covers all relevant categories of Jurisdictions of competent courts under which the said actions would otherwise normally have been entertained and tried. At this stage, we may conveniently refer to the recent decision of this Court in Sree Mohan Chowdhury vs The Chief Commissioner, Union Territory of Tripura(1), wherein this Court rejected the detenu 's petition on the ground that it was barred by the Presidential Order and it refused to entertain the argument that the Ordinance and the Act and the Rules framed thereunder were void for the reason that they contravened articles 14, 21 & 22, with the observation that the challenge made by the petitioner in that behalf really amounted to "arguing in the circle". If the Presidential Order precludes a citizen from moving the Court for the enforcement of the specified fundamental rights, it would not be open to the citizen to urge that the Act is void for the reason that it offends against the said fundamental rights. It is in order to prevent the citizen from making such a claim that the Presidential Order has been issued, and so, during the period of its operation, the challenge to the validity of the Act cannot be entertained. Incidentally, it may be observed that a petition for a writ of habeas corpus made by Mohan Chowdhury which was rejected by this Court on the ground that it was barred under the Presidential Order would, on the view for which the appellants contend, be competent if it is presented before the appropriate High Court under section 491(1)(b) of the Code; and that incidentally illustrates how exaggerated importance to the form of the petition would lead to extremely anomalous and irrational consequences. Therefore, our conclusion is that the proceedings (1) [1964] 3 S.C.R.412. 53 2 SC India/64 826 taken on behalf of the appellants before the respective High Courts challenging their detention on the ground that the impugned Act and the Rules arc void because they contravene articles 14, 21 and 22, arc incompetent for the reason that the fundamental rights which are alleged to have been contravened are specified in the Presidential Order and all citizens ire precluded from moving any Court for the enforcement of the said specified rights. The next question to consider is the validity of tile Presidential Order itself which was issued on the 3rd November, 1962. This is how the Order reads: "G.S.R. 1464. In exercise of the powers conferred by clause (1) of article 359 of the Constitution, the President hereby declares that the right of any person to move any court for the enforcement of the rights conferred by article 21 and article 22 of the Constitution shall remain suspends for the period during which the Proclamation of Emergency issued under clause (1) of article 352 thereof on ,lie 26th October, 1962 is in force, if such person has been delivered of any such rights under the Defence of India Ordanance, 1962 (4 of 1.962) or any rule or order made thereunder. " We have already stated that this Order was subsequently modified on the 11th November, 1962, by the addition of article 14. The first argument which has been urged against the validity of this Order is that it is inconsistent with the provisions of article 359(1). It is argued that the Order which the President is authorised to issue under this Article must be an Order of general application; in fact, the Order purports to be confined to persons who have been deprived of any of the specified rights under the Defence of India Ordinance, 1962, or any Rule or Order made thereunder. In other words, there is no doubt that this Order does not apply to persons who have been detained under the provisions of the earlier No. 4 of 1950, and so, in limiting the application of the Order to persons who have been detained under the Ordinance, the President has acted outside the powers conferred on him by article 359(1). In our opinion, this argument cannot be sustained. The power conferred on the President is wide enough to enable him to make an Order applicable to all parts of the country and to all 827 citizens and in respect of any of the rights conferred by Part 111. This wide power obviously includes the power to issue a limited order. What the Order purports to do is to provide that all persons wherever they reside who have been detained under the Ordinance or the Act, will be precluded from moving any court for the enforcement of the rights specified in the Order. It is not easy to see how this Order can be said to contravene or be otherwise inconsistent with the powers conferred on the President by article 359(1). It is then argued that the said Order is invalid because it seeks to give effect to the Ordinance which is void. It will be recalled that Ordinance No. 4 of 1962 was promul gated on the 26th October, 1962, whereas the Order was issued under article 359(1) on the 3rd November, 1962. The argument is that during the period between the 26th October and the 3rd November the validity of the said Ordinance could have been challenged on the ground that it contravened articles 14, 21 and 22, and so, the said Ordinance can be held to have been a still born piece of legislation and yet detentions effected under such a void law are sought to be protected by the Presidential Order by depriving the the detenues of their right to move any court to challenge the validity of the orders of detention passed against them. In our opinion, this argument is wholly misconceived. We have already stated that for the purpose 'of these appeals, we are prepared to assume that despite the issue of the Order under article 359(1), the fundamental rights guaranteed by articles 14, 21 and 22 are not suspended; what is suspended is the enforcement of the said rights during the prescribed period, and so, what is said about the invalidity of the Ordinance during the period between 26th October and 3rd November is true even after the Order was issued on the 3rd November. If the detenues are justified in contending that the Ordinance and the Act which took its place contravened the fundamental rights guaranteed by articles 14, 21 and 22, the said Ordinance and the Act would be and would continue to be invalid; but the effect of the Presidential Order is that their invalidity cannot be tested during the prescribed period. Therefore, the argument that since the Ordinance or the Act is invalid, the Presidential Order cannot preclude a citizen from test 828 ing its validity, must be rejected. The same argument is put in another form. It is urged that we have merely to examine the Ordinance and Act to be satisfied that articles 14, 21 and 22 (4), (5) and (7) have been contravened and it is suggested that if these infirmities in the Ordinance and the Act are glaring, it would not be open to the President to issue an Order pre venting the detenues from challenging the validity of the said statutory provisions. That, in substance, is what is described by this Court in Mohan Choudhury 's case(1) as arguing in the circle". Therefore, we are satisfied that the challenge to the validity of the Presidential Order is not well founded. It still remains to consider what are the pleas which are now open to the citizens to take in challenging the legality or the propriety of their detentions either under section 491(1)(b) of the Code, or article 226(1) of the Constitution. We have already seen that the right to move any court which is suspended by article 359(1) and the Presidential Order issued under it is the right for the enforcement of such of the rights conferred by Part III as may be mentioned in the Order. If in challenging the validity of his detention order, the detenu is pleading any right outside the rights specified in the Order, his right to move any court in that behalf is not suspended, because it is outside article 359(1) and consequently outside the Presidential Order itself. Let us take a case where a detenu has been detained in violation of the mandatory provisions of the Act. In such a case, it may be open to the detenu to contend that his detention is illegal for the reason that the mandatory provisions of the Act have been contravened. Such a plea is outside article 359(1) and the right of the detenu to move for his release on such a ground cannot be affected by the Presidential Order. Take also a case where the detenu moves the Court for a writ of habeas corpus on the ground that his detention has been ordered malafide. It is hardly necessary to emphasise that the exercise of a power malafide is wholly outside the scope of the Act conferring the power and can always be successfully challenged. It is true that a mere allegation that the detention is malafide would not be (1) ; 829 enough; the detenu will have to prove the malafides. But if the malafides are alleged, the detenu cannot be precluded from substantiating his plea on the ground of the bar created by article 359(1) and the Presidential Order. That is another kind of plea which is outside the purview of article 359(1). Section 491(1) deals with the power of the High Court to issue directions in the nature of the habeas corpus, and it covers six categories of cases in which such a direction ,can be issued. It is only in regard to that class of cases falling under section 491(1)(b) where the legality of the deten tion is challenged on grounds which fall under article 359(1) and Presidential Order that the bar would operate. In all other cases falling under section 491(1) the bar would be inap plicable and proceedings taken on behalf of the detenu will have to be tried in accordance with law. We ought to add that these categories of pleas have been mentioned by us by way of illustration, and so, they should not be read as exhausting all the pleas which do not fall within the purview of the Presidential Order. There is yet another ground on which the validity of the detention may be open to challenge. If a detenu contends that the operative provision of the law under which he is detained suffers from the vice of excessive delegation and is, therefore, invalid, the plea thus raised by the detenu cannot at the threshold be said to be barred by the Presi dential Order. In terms, it is not a plea which is relatable to the fundamental rights specified in the said Order. It is a plea which is independent of the said rights and its validity must be examined. Mr. Chatterjee has urged before us that section 3(2) (15) (i) as well as section 40 of the Act are invalid, because they confer oil the rule making authoritypower which is often described as excessive delegation. It is,therefore, necessary to consider this point. The Actwhich took the place of the Ordinance was passed, because it was thought necessary to provide for special measures to ensure the public safety and interest, the defence of India and civil defence and for the trial of certain offences and for matters connected therewith. Section 3(2)(15)(i) whose validity is challenged purports to confer on the Central Government power to make Rules. Section 3(1) reads thus : 830 "The Central Government may, by notification in the Official Gazette, make such rules as appear to it necessary or expedient for securing the defence of India and civil defence, the public safety, the maintenance of public order or the efficient conduct of military operations, or for maintaining supplies and services essential to the life of the community." Section 3(2) provides that without prejudice to the gene rality of the powers conferred by sub section (1) the rules may provide for, and may empower any authority to make orders providing for, all or any of the following matters; then follow clauses (1) to (57), including several subclauses which provide for the matters that may be covered by the Rules. Amongst them is cl. (15)(i) which reads as under: "Notwithstanding anything in any other law for the time being in force, the rules to be made may provide for the apprehension and detention in custody of any person whom the authority empowered by the rules to apprehend or detain (the authority empowered to detain not being lower in rank than that of a District Magistrate) suspects, on grounds appearing to that authority to be reasonable, of being of hostile origin or of having acted, acting, being about to act or being likely to act in a manncr prejudicial to the defence of India and civil defence, the security of the State, the public safety or interest, the maintenance of public order, India 's relations with foreign States, the maintenance of peaceful conditions in any part or area of India or the efficient conduct of military operations, or with respect to whom that authority is satisfied that his apprehension and detention are necessary for the purpose of preventing him from acting in any such prejudicial manner. " The argument is that in conferring power on the Central Government to make rules, the legislature has abdicated its essentially legislative function in favour of the Central Government. In our opinion, this argument is wholly un tenable. Right up from the time when this Court dealt with Special References in 1951, In re The etc.(1) the question about the limits within which (1) ; 831 the legislature can legitimately confer powers on its dele gate has been examined on several occasions and it has been consistently held that what the legislature is prohibited from doing is to delegate its essentially legislative func tion and power. If it appears from the relevant provisions of the impugned statute that powers which have been delegated include powers which can legitimately be regarded as essentially legislative powers, then the legislation is bad and it introduces a serious infirmity in the Act itself. On the other hand, if the legislature lays down its legislative policy in clear and unambiguous terms and leaves it to the delegate to execute that policy by means of making appropriate rules, then such delegation is not impermissible. In Harishanker Bagla vs The State of Madhya Pradesh(1) where the validity of section 3 of the Essential Supplies (Temporary Powers) Act, 1946, was challenged, this Court in upholding the validity of the impugned statute held that the preamble and the body of the relevant sections of the said Act sufficiently formulate the legislative policy and observed that the ambit and the character of the Act is such that the details of that policy can only be worked out by delegating that power to a subordinate authority within the framework of that policy. The same view has been expressed in Bhatnagars and Co., Ltd., vs The Union of India( ). In the present cases, one has merely to read section 3(1) and the detailed provisions contained in the several clauses of section 3(2) to be satisfied that the attack against the validity of the said section on the ground of excessive delegation is patently unsustainable. Not only is the legislative policy broadly indicated in the preamble to the Act, but the relevant provisions of the impugned section itself give such detailed and specific guidance to the rule making authority that it would be idle to contend that the Act has delegated essentially legislative function to the rule making authority. In our opinion, therefore, the contention that section 3(2)(15)(i) of the Act suffers from the vice of excessive delegation must be rejected. What we have said about this section applies with equal force to section 40. If the impugned sections of the Act are valid, it follows that Rule 30(1)(b) which is challenged by the appellants must be (1) (2) ; 832 held to be valid since it is consistent with the operative provisions of the Act and in making it, the Central Gov ernment has acted within its delegated authority. This conclusion is, of course, confined to the challenge of the appellants based on the ground that the impugned provisions and the Rule suffer from the vice of excessive delegation. If we had held that the impugned provision in the Act suffered from the vice of excessive delegation, it would have become necessary to consider what the effect of that conclusion would have been on the merits of the controversy between the parties in the present proceedings. If we had reached the conclusion that the impugned sections were invalid because they conferred power on the rule making authority which suffers from the vice of excessive delegation, the question would have arisen whether in challenging the validity of the Order of detention passed against him the detenu is enforcing his fundamental right under article 21 of the Constitution. article 21 is one of the articles specified in the Presidential Order and if at any stage of the proceedings, the detenu seeks to enforce his right under the said Article, that would be barred. It may be urged that if the detenues had been able to show that the impugned provisions of the Act were invalid because they suffered from the infirmity of excessive delegation, the next step which they would have been entitled to take was to urge that their detention under such an Act is void under article 21, because the law referred to in that Article must be a valid law; and that would raise the question as to whether this latter plea falls within the ambit of article 359(1) and the Presidential Order issued under it. We do not propose to express any opinion on this question in these appeals. Since we have held that the Act does not suffer from the vice of excessive delegation as alleged, it is unnecessary to pursue the enquiry as to whether if the challenge had been upheld, the detenu would have been precluded from urging the said invalidity in support of his plea that his detention was illegal. We must now turn to some other arguments which were urged before us at the hearing of these appeals. Mr. Sule contends that part of the Act containing the im 833 pugned sections was a colourable piece of legislation. His argument was that since the No. 4 of 1950 was already on the statute book, it was hardly necessary for the Legislature to have passed the impugned Act, and he urges that since the sole object of the Legislature in passing the impugned Act was to deprive the citizens of their fundamental rights under articles 21 and 22, it should be deemed to be a colourable piece of legislation. The legislative competence of the Parliament to pass this Act is not disputed. Entry No. 9 in List I in the Seventh Schedule confers on the Parliament jurisdiction to make laws in regard to the preventive detention for reasons connected with defence, foreign affairs, or the security of India as well as in regard to persons subjected to such detention. If the Legislature thought that having regard to the grave threat to the security of India posed by the Chinese aggression, it was necessary to pass the impugned Act notwithstanding the fact that another Act had already been passed in that behalf, it would be difficult to hold that the Legislature had acted malafide and that the Act must, therefore, be struck down as a colourable exercise of legislative power. It is hardly necessary to emphasise that a plea that an Act passed by a legislature competent to pass it is a colourable piece of legislation, cannot succeed on such flimsy grounds. Whether or not it was wise that this part of the Act should have been passed, is a matter which is wholly irrelevant in dealing with the plea that the Act is a colourable piece of legislation. In this connection, we may refer to another aspect of the same argument which has been pressed before us. Before doing so, however, let us briefly indicate the effect of the relevant Articles. Article 14 guarantees equality before law. Article 21 provides, inter alia, that no person shall be deprived of his personal liberty, except according to procedure established by law, and article 22(4), (5) (6) & (7) lay down Constitutional safeguards for the protection of the citizen whose personal liberty may be affected by an order of detention passed against him. Article 22(4) requires that an Advisory Board should be constituted and that cases of detenues should be referred to the Advisory Board for its opinion as provided therein. Article 22(5) 834 imposes an obligation on the detaining authority to commu nicate to the detenu grounds on which the order of detention has been passed against him with a view to afford him the earliest opportunity of making a representation against the order. Article 22(6) provides that in giving notice to the detenu under article 22(5), facts need not be disclosed which the detaining authority considers to be against public interest to disclose, and article 22(7) prescribes certain conditions which have to be satisfied by any law which the Parliament may pass empowering the detention of citizens. It is thus clear that the Constitution empowers the Parliament to make a law providing for the detention of citizens, but this power has to be exercised subject to the mandatory conditions specified in article 22(4), (5) & (7). It is common ground that the of 1950 complies with these requirements inasmuch as it has enacted sections 7 to 13 in that behalf. It is also clear that these Constitutional safeguards have not been provided for by the impugned Act. The argument is that even if the Parliament thought that during the period of emergency, citizens reasonably suspected to be engaged in prejudicial activities should be detained without affording them the benefit of the Con stitutional safeguards guaranteed by article 22(4), (5) & (7), the Parliament need not have enacted the Act and might well have left the executive to take action under the of 1950, and since Parliament has chosen to pass the Act under challenge and has disregarded the Constitutional provisions of Articles 14 and 22, the exercise of legislative power by Parliament must, in the context, be held to be a colourable exercise of legislative power. This argument seems to assume that if the Parliament had expected the executive to detain citizens under the of 1950 without giving them the benefit of the Constitutional safeguards prescribed by article 22, their cases could have been covered if a Presidential Order had been issued under article 359(1) in respect of such detentions. The question is: is this assumption well founded? Assuming that the Presidential Order had suspended the citizens ' right to move any court for enforcing their fundamental rights under articles 14, 21 and 22 and had made 835 the said Order applicable to persons detained under the of 1950, could that Order have effectively prevented the detenues from contending that their detention was illegal and void? In such a case, if the detenu was detained under the of 1950 and he challenged the validity of his detention on the ground that the relevant provisions of the said Act had not been complied with, would his challenge be covered by article 359(1) and the Presidential Order issued under it? In other words, can it be said that in making the said challenge, he was enforcing his fundamental rights specified in the Presidential Order? If it is held that he was challenging the validity of his detention because the mandatory provisions of the Act had not been complied with, his challenge may be outside article 359(1) and the Presidential Order. If, on the other hand, it is held that, in substance, the challenge is to enforce his aforesaid fundamental rights, though he makes the challenge by reference to the relevant statutory provisions of the Act themselves that would have brought Ills challenge within the prohibition of the Presidential Order. Normally, as we have already held, a challenge against the validity of the detention on the ground that the statutory provisions of the Act under which the detention is ordered have not been complied with, would fall outside article 359(1) and the Presidential Order, but the complication in the hypothetical case under discussion arises because unlike other provisions of the Act, the mandatory provisions in question essentially represent the fundamental rights guaranteed by article 22 and it is open to argument that the challenge in question sub stantially seeks to enforce the said fundamental rights. In the context of the alternative argument with which we arc dealing at this stage, it is unnecessary for us to decide whether the challengein question would have attracted the provisions ofArt. 359(1) and the Order or not. We are referringto this matter only for the purpose of showing thatthe Parliament may have thought that the executive would not be able to detain citizens reasonably suspected of prejudicial activities by taking recourse to the of 1950, and that may be the genesis of the impugned Act. If that 836 be so, it would not be permissible to suggest that in passing the Act, Parliament was acting malafide. It is quite true that if the Act has contravened the citizens ' fundamental rights under articles 14 and 22, it would be void and the detentions effected under the relevant provisions of the said Act would be equally inoperative; but it must be remembered that it is precisely in this set of circumstances that article 359(1) and the Presidential Order issued under it step in and preclude the citizen from enforcing his fundamental rights in any court. The said Article as well as the Presidential Order issued under it indicate that there may be cases in which the specified fundamental rights of citizens have been contravened by executive action and the impugned executive action may be invalid on that account. That is precisely why the said Article and the Presidential Order impose a ban against the investigation of the merits of the challenge during the period prescribed by the Order. Therefore, the alternative argument urged in support of the plea that the impugned provisions of the Act amount to a colourable piece of legislation fails. Mr. Parulekar who argued his own case before us with remarkable ability, contended that a detenu cannot be prevented from disputing the validity of the Ordinance, Act and the Rules under the Presidential Order if he did not ask for any consequential relief. His argument was that the prayer made in his petition under section 491(1)(b) consists of two parts; the first prayer is to declare that the impugned Act and the Order are invalid, and the second prayer is that his detention should be held to be illegal and his release should accordingly be ordered. The first prayer, says Mr. Parulekar, cannot fall within the mischief of the Order because he is not enforcing any of his rights when he asks merely for a declaration that the law is invalid, and he suggested that even if we take the view that he is precluded from challenging the validity of his detention by virtue of the said Order, we should not preclude him from challenging the validity of the law merely with a view to obtain a declaration in that behalf. In our opinion, this argument cannot be accepted. What section 359(1) purports to do is to empower the President to make an Order by which the right of the detenue to move the Court 437 to challenge the validity of his detention on the ground that any of his fundamental rights specified in the Order have been contravened, is suspended, and so, it would be unreasonable to suggest that what the detenu cannot do in order to secure his release, he should be allowed to do merely for the purpose of obtaining an academic declaration. A proceeding taken under section 491(1)(b) like a petition filed under article 226(1) or article 32(1) is intended to obtain relief, and the relief in such cases means the order for the release of the detenu. If the detenu is prohibited from asking for an order of release on the ground that the challenge to the validity of his order of detention cannot be made during the pendency of the Presidential Order, we do not see how it would be open to the same detenu to claim a mere declaration either under s.491, Cr. P.C. or article 226(1) or article 32(1) of the Constitution. We do not think that it was open to the High Court to consider the validity of the impugned Act without relation to the prayer made by the detenu in his petition. The proceedings commenced by the detenu by means of his petition under section 491(1)(b) constitute one proceeding and if the sole relief which the detenu seeks to obtain cannot be claimed by him by virtue of the Presidential Order, it would be unreasonable to hold that he can claim a different relief, VI Z., a mere declaration; such a relief is clearly outside the purview of the proceedings under section 491(1)(b) and articles 226(1) and 32(1). During the course of the hearing of these appeals, it has been strenuously pressed before us by Mr. Setalvad that the emergency created by the Chinese act of aggression may last long and in consequence, the citizens would be precluded from enforcing their fundamental rights specified in the Presidential Order during the period that the Order is in operation. That, however, has no material bearing on the points with which we are concerned. How long the Proclamation of Emergency should continue and what restrictions should be imposed on the fundamental rights of citizens during the pendency of the emergency, are matters which must inevitably be left to the executive because the executive knows the requirements of the situation and the effect of compulsive factors which operate during periods of grave crisis, such as our country is facing 838 today. As Lord Wright observed in the case of Liver sidge(1), "the safeguard of British liberty is in the good sense of the people and in the system of representative and responsible government which has been evolved. If extra ordinary powers are here given, they are given because the emergency is extraordinary and are limited to the period of the, emergency. " The other aspect of Mr. Setalvad 's argument was that during Operation the Presidential Order, the executive may abuse. Its powers and the citizens would have no remedy. This argument is essentially political and its impact on the constitutional question with which we are concerned is at best indirect. Even so, it may be permissible to observe that in a democratic State, the effective safeguard against abuse of executive powers whether in peace or in emergency, is ultimately to be found in the existence of enlightened, vigilant and vocal public opinion. The appellants have also relied upon the made by Lord Atkin in the case of Eshuqbavi Elecko vs Officer Administering the Government of Nigeria (2). "In accordance with British jurisprudence," said Lord Atkin, "no member of the executive can interfere with the liberty or property of a British subject except on the condition that he can support the legality of his action before a Court of Justice. And it is the tradition of British Justice that Judges should not shrink from deciding such issues in the face of the executive. " These noble sentiments so eloquently expressed by Lord Atkin as well as his classic minority speech in the case of Liversidge evoke a spontaneous response in the minds of all of us who have taken the oath to administer law in accordance with our Constitution and to uphold the fundamental rights of citizens guaranteed by the Constitution. This Court is fully conscious of the solemn duty imposed on it by article 32 which constitutes it the Custodian and Guardian of the citizens ' fundamental rights. But we must remember that the democratic faith in the inviolable character of individual liberty and freedom and the majesty of law which sustains it must ultimately be governed by the Constitution itself. The Constitution is the law of laws the paramount (1) ; (2) 839 and supreme law of the country. It has itself enshrined the fundamental rights of the citizens in the relevant Articles of Part III and it is no doubt the duty of this Court as the Custodian of those rights to see that they are not contravened contrary to the provisions of the Constitution. But the Constitution itself has made certain emergency provisions in Chapter XVIII with a view to en ,Able the na tion to meet grave emergencies like the present, and so, in dealing with the question about the citizen 's right to chal lenge the validity of his detention, we will have to give effect to the plain words of article 359(1) and the Presidential Order issued under it. As we have already indicated, the only reasonable construction which can be placed upon article 359)(1) is to hold that the citizen 's right to take any legal proceeding for the enforcement of his fun damental rights which have been specified in the Presi dential Order is suspended during the prescribed period. It is, in our opinion, plain that the right specified in article 35)(1) includes the relevant right, whether it is statutory, Constitutional or Constitutionally guaranteed, and the words "any court" refer to all courts of competent jurisdiction and naturally include the Supreme Court and the High Courts. If that be so, it would be singularly inappropriate for this Court to entertain an argument which seeks to circumvent this provision by suggesting that the right of the detenu to challenge the legality of his detention under section 491(1)(b) does not fall within the scope of the said Article. The said argument concentrates attention on the mere form of the petition and ignores the substance of the matter altogether. In the context, we think, such a sophisticated approach which leans solely on unrealistic and artificial subtlety is out of place and is illogical, unreasonable and unsound. We must, therefore, hold that the Punjab and the Bombay High Courts were right in coming to the conclusion that the detenues before them were not entitled to contend that the impugned Act and the statutory Rule under which they were deained were void for the reason that they contravened articles 14, 21 and 22(4), (5) & (7). Before we part with these appeals, we ought to mention one more point. At the commencement of the hearing of these appeals when Mr. Setalvad began to argue about 840 the validity of the impugned provisions of the Act and the Rules, the learned Attorney General raised a preliminary contention that logically, the appellants should satisfy this Court that it was open to them to move the High Courts on the grounds set out by them before the validity of the said grounds is examined. He suggested that, logically, the first point to consider would be whether the detenues can challenge the validity of the impugned Act on the ground that they arc illegally detained. If they succeed in showing that the applications made by them under section 491(1)(b) are competent and do not fall within the purview of article 359(1) and the Presidential Order, then the stage would be reached to examine the merits of their complaint that the said statutory provisions are invalid. If, however, they fail on the first point, the second Point would not fall to be considered. We then took the view that since a large number of appeals were placed for hearing before us and they raised important issues of Constitutional Law, it would be better to allow Mr. Setalvad to argue the case in the manner he thought best, and so, Mr. Setalvad addressed us on the validity of the Act in the first instance and then dealt with the question about the competence of the applications made under section 491 (1) (b) of the Code. In the main, the same method was adopted by the learned Advocates who followed Mr. Setalvad on the appellants ' side. Naturally, when the learned Attorney General made his reply, he also had to address us on both the points. It appeared that as regards the validity of the impugned provisions of the Act and the Rules he was not in a position to challenge the contention of the appellants that the Act contravened articles 14, 21 and 22(4), (5) & (7). Even so, he strongly pressed before us his original contention that we would not reach the stage of expressing our opinion on the validity of the Act if we were to uphold the preliminary objection that the applications made by the detenues were incompetent. In our opinion, the learned Attorney General is right when he contends that we should not and cannot pronounce any opinion on the validity of the impugned Act if we come to the conclusion that the bar created by the Presidential Order operates against the detenues in the present cases. In fact, that is the course which this Court 841 adopted in dealing with Mohan Choudhury 's case(1), and we are satisfied that that is the only course which this Court can logically and with propriety adopt. In the result, we hold that the Punjab and the Bombay High Court are right in coming to the conclusion that the applications made by the detenues for their release under section 491 (1) (b), Cr. P. C. are incompetent in so far as they seek to challenge the validity of their detentions on the ground that the Act and the Rule under which they are detained suffer from the vice that they contravene the fundamental rights guaranteed by articles 14, 21 and 22(4), (5) and (7). Since these appeals were placed before the Special Bench for the decision of the common questions of law raised by them, we do not propose to examine the other contentions which each one of the appellants seeks to raise in his appeal. Therefore, we direct that all the appeals included in the present group should now be set down before a Constitution Bench and each one of them should be dealt with in accordance with law. SUBBA RAO J. I have had the advantage of reading the judgment of my learned brother, Gajendragadkar J. I regret my inability to agree with him wholly. I agree with his conclusion in regard to the applicability of article 359 of the Constitution to a right to move a court both under article 32(1) and article 226 thereof, but not with his conclusion in regard to the exercise of power by the High Court under s.491 of the Code of Criminal Procedure. These appeals raise questions of great importance touching apparently conflicting, but really harmonious, concepts of individual liberty and security of the State, for the former cannot exist without the latter. My only Justification for a separate treatment of the subject even on questions on which ,here is general agreement is my conviction that on important questions I should express my thoughts in my own way. Broadly, two questions are posed for the consideration of this Court, namely (i) whether section 3(2) (15) (i) of the Defence of India Act, 1962 (51 of 1962), hereinafter called the Act, and r. 30(1)(b) of the Rules made in exercise of the power conferred under the Act are constitutionally void; and (ii) whether the Order made by the President in exercise of the power conferred on 'him under article 359(1) of the Constitution would be a (1) ; 54 2 section C. India/64 842 bar against the maintainability.of any action in any court to question the validity of the detention order made under the Act. I shall deal with the two questions in the said order. Before dealing with the first question it would be conveni ent to quote the impugned provisions of the Act. Section 3. ( 1) The. Central Government may by notification in the Official Gazette, make such rules as appear to it necessary or expedient for securing the defence of India and civil defence, the public safety, the maintenance of public order or the efficient conduct of military operations, or for maintaining supplies and services essential to the life of the community. (2)Without prejudice to the generality of the powers conferred by sub section (1), the rules may provide for, and may empower any authority to make orders providing for, all or any of the following matters, namely. (15)notwithstanding anything in any other law for the time being in force, (i) the apprehension and detention in custody of any person whom the authority empowered by the rules to apprehend or detain (the authority empowered to detain not being lower in rank than that of a District Magistrate) suspects, on grounds appearing to that authority to be reasonable, of being of hostile origin or of having acted, acting, being about to act or being likely to act in a manner prejudical to the defence of India and civil defence, the security of the State, the public safety or interest, the maintenance of public order, India 's relations with foreign States, the maintenance of peaceful conditions in any part or area of India or the efficient conduct of military operations, or with respect to whom that authority is satisfied that his apprehension and detention are necessary for the purpose of preventing him from acting in any such prejudicial manner, * * * * Rule 30. (1) The Central Government or the State Government, if it is satisfied with respect to any particular person that with a view to preventing him from 843 acting in any manner prejudicial to the defence of India and civil defence, the public safety, the maintenance of public order, India 's relations with foreign powers, the maintenance of peaceful conditions in any part of India, the efficient conduct of military operations or the maintenance of supplies and services essential to the life of the community, it is necessary so to do, may, make an order * * * * (b)directing that he be detained. Rule30A. (2) Every detention order shall be reviewedin accordance with the provisions hereinafter contained. (3)A detention order made by the Central Government Or the State Government or the Administrator shall be reviewed by the Central Government or the State Government or the Administrator, as the case may be. (4)A detention order made by an officer (who shall in no case be lower in rank than that of a District Magistrate) empowered by the State Government or the Administrator shall be reviewed : (a) in the case of an order made by an officer empowered by the State Government, by a reviewing authority consisting of any such two officers from among the following officers of that Government, that is to say, the Chief Secretary, a mem ber of the Board of Revenue, a Financial Commissioner and a Commissioner of a Division, as may be specified by that Government by notification in the Official Gazette ; (b) in the case of an order made by an officer empowered by the Administrator, by the Administrator himself. Under the said provisions the Central Government or the State Government or an officer on whom the power to detain is delegated can direct the detention of any person if the detaining authority is satisfied that his detention is necessary for one or other of the reasons mentioned in r. 30. No grounds of detention need be served upon the detenu; no opportunity need be given to him to make representations or establish his innocence. The period of detention can be indefinite. The Central Government or the 844 State Government or the Administrator of a Union Territory, as the case may be, is authorised to review the order of detention made by them. So too, a detention order made by an officer empowered by the State Government in that behalf can be reviewed by one or other of the officers mentioned in r. 30A (4) It is contended that the said provisions infringe article 22(4) and (5) of the Constitution and, therefore, void. This Court in Deepchand vs The State of Uttar Pradesh(1) laid down the effect of a law made in infringement of fundamental rights; and observed : "The result of the aforesaid discussion may be summarized in the following propositions; (i) whether the Constitution affirmatively confers powers on the legislature to make laws subject wise or negatively prohibits it from infringing any fundamental right, they represent only, two aspects of want of legislative power; (ii) the Constitution in express terms makes the power of a legislature to make laws in regard to the entries in the Lists of the Seventh Schedule subject to the other provisions of the Constituion and thereby circumscribes or reduces the said power by the limitations laid down in Part III of the Constitution; (iii) it follows from the premises that a law made in derogation or in excess of that power would be ab initio void wholly or to the extent of the contravention, as the case may be;. . . . " This view was accepted by a later decision of this Court in Mahandra Lal vs State of U.P.(2). It is, therefore, manifest that if the Act and the rules framed thereunder infringed the provisions of article 22(4) and (5) of the Constitution, they would be ab initio void they would be stillborn law and any detention made thereunder would be an illegal detention. Articles 21 and 22 enshrine fundamental rights relating to personal liberty,. Clauses (4) to (6) of article 22 specifically deal with preventive detention. This Court has held in A. K . Gopalan vs State of Madras(3) that the word '.,law" in article 21 means State made law or enacted law and that article 22 lays down only the minimum procedural conditions which such a (1) [1959] Supp. 2 S.C.R. 8, 40. (2 ) ; (3) ; 845 a statutory law cannot infringe in the matter of pre ventive detention. The minimum conditions arc as follows: (1) Parliament may make a law prescribing the maximum period for which any person may be detained; (2) he shall not be detained for a period more than 3 months unless an Advisory Board constituted for that purpose reports before the expiry of three months that there is sufficient cause for detention ; and (3) the authority making the order shall communicate to such person the grounds on which the order has been made and afford him the earliest opportunity of making representations against the order. At the same time cl. (7) enables Parliament to make a law prescribing the circumstances under which and the class or classes of cases in which a person may be detained for a period longer than three months without obtaining the opinion of the Advisory Board. Clause (6) of article 22 enables an authority not to disclose facts to the detenu which it considers to be against the public interest to disclose. While cls. (4) to (6) of article 22 provide for the minimum safeguards for a dctenu in the matter of preventive detention, cl. (7) removes them enabling Parliament to make a law for preventive detention ignoring practically the said safeguards. The only outstanding safeguard, therefore, is that Parliament can only make a law in derogation of the said safeguards by defining the circumstances under which and the class or classes of cases in which a person may be so detained. Parliament did not make such a law. Neither the Act nor the rules made thereunder satisfy the conditions laid down in that clause. The Act and the rules do not provide for the maximum period of detention, for the communication to the detenu of the grounds of detention, for affording him an opportunity of making representations against his detention, or for an Advisory Board consisting of persons with the requisite qualifications. The power to review given to the detaining authority cannot conceivably satisfy the condition of an Advisory Board provided for under cl. (4)(a) of article 22. It is, therefore, a clear case of Parliament making a law in direct infringment of the relevant provisions of article 22 of the Constitution, and therefore the law so made is void under the said Article., 846 In this context a relevant aspect of the argument advanced by the learned Attorney General may be noticed. He contends that, on a true construction of article 359(1) of the Constitution, if the requisite order is made by the President, a law can be made in infringement of article 22 of the Constitution. Under article 359, the President may by order declare that the right to move any court for the enforcement of such of the rights conferred by Part III as may be mentioned in the order shall remain suspended for the period during which a Proclamation of Emergency is in force or for such shorter period as may be specified in the order. It is contended that when remedy is suspended in respect of infringement of article 22, the right thereunder also falls with it. It is said that right and remedy are reciprocal; and if there cannot be a right without a remedy, there cannot also be a remedy without a right. In "Salmond on jurisprudence", 11th Edn., the following interesting passage is found, at p. 531, under the heading "Ubi jus Ibi Remedium"; "Whenever there is a right, there should also be an action for its enforcement. That is to say, the substantive law should determine the scope of the law of procedure, and not vice versa. Legal procedure should be sufficiently elastic and comprehensive to afford the requisite means for the protection of all rights which the substantive law sees fit to recognize. In early systems this is far from being the case. We there find remedies and forms of action determining rights than rights determining remedies. The maxim of primitive law is rather, Ubi remedium ibi jus. " I understand this passage to mean that a right pertains to the substantive law and the remedy, to procedural law; that where a right is provided by a statute a remedy, though not expressly provided for, may necessarily be implied. But the converse, though obtained in primitive law, cannot be invoked in modern times. To put it in other words, the suspension of a remedy cannot abrogate the right itself. Indeed, a comparative study of articles 358 and 359 of the Constitution indicates that it could not have been the intention of the makers of the Constitution, for article 358 expressly suspends the right whereas article 359 suspends the remedy. If the contention of the learned Attorney 847 General be accepted, both have the same effect: if that was the intention of the makers of the Constitution, they would not have expressed themselves in different ways in the two articles. Where they intended to suspend the right, they expressly said so, and where they intended only to suspend the remedy, they stated so. We cannot, therefore, accept this contention. At this stage I may also notice the argument of the learned Attorney General that article 359, by enabling the President to suspend the right to move for the enforcement of the fundamental rights mentioned therein, impliedly permitted Parliament to make laws in violation of those fundamental rights in respect whereof the right to move the court is suspended. I cannot appreciate this argument. It is one thing to suggest that in view of the amplitude of the phraseology used in article 359, the right to move for the enforcement of fundamental rights infringed by a void law, even deliberately made by Parliament, is suspended but it is a different thing to visualize a situation when the Constitution permitted Parliament under the shelter of executive fiat to make void laws. Indeed, a comparison of article 358 and article 359 I shall deal with them in detail later on indicates the contrary. I cannot for a moment attribute to the august body, the Parliament, the intention to make solemnly void laws. It may have made the present impugned Act bona fide thinking that it is sanctioned by the provisions of the Constitution. Whatever it may be, the result is, we have now a void Act on the statute book and under that Act the appellants before us have been detained illegally. To use the felicitous language of Lord Atkin, in this country "amid the clash of arms, the laws are not silent; they may be chanced, but they speak the same language in war as in peace". The tendency to ignore the rule of law is contagious, and, if our Parliament, which unwittingly made a void law, not only allows it to remain on the statute book, but also permits it to be administered by the executive, the contagion may spread to the people, and the habit of lawlessness, like other habits, dies hard. Though it is not my province, I venture to suggest, if I may, that the Act can be amended in conformity with our Constitution without it losing its effectiveness. This leads us to the question whether the appellants, 948 who are illegally detained, can move this Court under article 32 of the Constitution or the High Court under article 226 thereof or under section 491 of the Code of Criminal Procedure, hereinafter called the Code. It would be convenient at this stage to read the relevant provisions of the Constitution. Article 32.(1) The right to move the Supreme Court by appropriate proceedings for the enforcement of the rights conferred by this Part is guaranteed. * * * * (3)Without prejudice to the powers conferred on the Supreme Court by clauses (1) and (2), Parliament may by law empower any other Court to exercise within the local limits of its jurisdiction all or any of the powers exercisable by the Supreme Court under clause (2). (4)The right guaranteed by this article shall not be suspended except as otherwise provided for by this Constitution. Article. 226 (1) Notwithstanding anything in article 32, every High Court shall have power, throughout the territories in relation to which it exercises jurisdiction, to issue to any person or authority, including in appropriate cases any Government, within those territories directions, orders or writs, including writs in the nature of habeas corpus, mandamus, prohibition, ' quo warranto and certiorari, or any of them, for the enforcement of any of the rights conferred by Part III and for any other purpose. (2)The power conferred on a High Court by clause (1) shall not be in derogation of the power conferred on the Supreme Court by clause (2) of article 32. Article 358. While a Proclamation of Emergency is in operation nothing in article 19 shall restrict the power of the State as defined in Part III to make any law or to take any executive action which the State would but for the provisions contained in the Part be competent to make or to take, but any law so made shall, to the extent of the incompetency, cease to have effect as soon as the Proclamation ceases to operate, 849 except as respects things done or omitted to be done before the law so ceases to have effect. Article 359 (1) Where a Proclamation of Emergency is in operation, the President may by order declare that the right to move any court for the enforcement of such of the rights conferred by Part III as may be mentioned in the order and all proceedings pending in any court for the enforcement of the rights so mentioned shall remain suspended for the period during which the Proclamation is in force or for such shorter period as may be specified in the order. Article 33 confers power on Parliament to modify the rights conferred by Part III in their application to Armed Forces or the Forces charged with the maintenance of public order; article 34 enables Parliament to impose restrictions an the rights conferred by Part III while martial law is in force in any area. The contention of learned counsel for the appellants on the construction of the said provisions may be classified under the following heads: (1) article 358 permits the State to make laws only in infringement of article 19 of the Constitution, and article 359 suspends only the right to move the enforcement of the fundamental rights specified in the President 's Order and, therefore, article 359 cannot be so construed as to enlarge the legislative power of Parliament beyond the limits sanctioned by article 358 and, therefore, it should be confined only to executive infringements of the said rights. (2) Article 359 does not permit the executive to commit fraud on the Constitution by doing indirectly what Parliament cannot do directly under article 358 and article 13(2) of the Constitution. (3) For invoking article 359 two conditions must be complied with, namely, (i) the party shall have a right to move any court, and (ii) only for the enforcement of the rights conferred by Part III. Such a right to move for such a relief is expressly conferred by the Constitution under article 32. Therefore, the President 's order under article 359 would only suspend the right to move under article 32 and not for approaching the Court under article 226 of the Constitution. In any view, those words are inappropriate to a pre existing statutory right under section 491 of the Code. 850 To appreciate the contentions from a correct perspective it is necessary at the outset to notice the nature of the fundamental rights enshrined in the Constitution and the remedy or remedies provided for their enforcement. It would be pedantic to go into the question whether fundamental rights provided for under our Constitution are natural rights or primordial rights : whatever their origin might have been and from whatever source they might have been extracted, they are enshrined in our Constitution in Part III and described as fundamental rights. The constitution declared under article 13(2) that the State shall not make any law taking away or abridging the said rights and any law made in contravention of this clause shall be void to the extent of the contravention. After declaring such a law void, it proceeds to provide for the mode of enforcement of the said rights. Article 32(1) makes the right to move the Supreme Court by appropriate proceedings for the enforcement of the said rights a guaranteed right. Appropriate proceedings are described in cl. (2) thereof, that is to say, a person can move the said Court for directions, orders, or writs in the nature described thereunder for the enforcement of any of the said rights. The right to move, therefore, is regulated by the procedure prescribed thereunder. Article 226, though it does not find a place in Part III of the Constitution, confers a power on every High Court throughout the territories in relation to which it exercises jurisdiction to issue such directions, orders, or writs in the nature described thereunder for the enforcement of any of the rights conferred by Part III. There is a material difference between article 32 and article 226 of the Constitution, namely, while in article 32 the right to move the court is guaranteed, under article 226 no such guarantee is given. But a fair construction of the provisions of article 226 indicates that the right to move, though not guaranteed, is necessarily implied therein. As I have pointed out, under article 32 the right to move the Court is given a practical content by the provision indicating the different modes open to the person who has the said right to approach the Supreme Court. Article 226 employs the same procedure for approaching the High Court and that procedure must necessarily be for the exercise of the right to move that 851 court. When a power is conferred upon the High Court and a procedure is prescribed for a party to approach that court, it is reasonable to imply that the person has a right to move that court in the manner prescribed thereunder. The only difference between article 32 and article 226 is that the Supreme Court cannot say, if it is moved in the manner prescribed, that it will not decide on merits, but the High Court, in exercise of its jurisdiction can do so. The decision on merits is left to its discretion, though the exercise of that discretion is regulated by convention and precedent. Further, article 32(3) also enables Parliament to make a law empowering any other court to exercise within the local limits of itsjurisdiction all or any of the powers exercisable by theSupreme Court under cl. (2) thereof. One thing to benoticed is that Parliament can only empower any othercourt to exercise any of the powers exercisable under cl.(2) ; it cannot confer the guaranteed right mentioned in cl. (1) on any person to move that court. That is to say, the court or courts to which such powers are given would be in the same position as the High Court in respect of the enforcement of the fundamental rights. To put it shortly, no person will have a guaranteed right to move any such other court for the enforcement of fundamental rights. A discretionary jurisdiction similar to that of the High Court can only be conferred on them. For the same reason given in the case of the High Court, an aggrieved party will also have a right to move those courts in the manner prescribed. This analysis leads us to the following position Under the Constitution every person has a right to move, for the enforcement of a fundamental right, the Supreme Court, the High Courts or any other court or courts constituted by Parliament by law in the manner prescribed i.e., by one or other of the procedural writs or directions or orders described thereunder. With this background let me have a close look at the provisions of article 359. The expressions used in article 359 are clear and unambiguous. Three expressions stand out in bold relief, namely, (i) "right to move", (ii) "any Court", and (iii) "for the enforcement of such of the rights conferred by Part III". "Any Court" implies more 852 than one court, but it cannot obviously be any court in India, for it must be a court where a person has a right to move for the enforcement of the fundamental rights. It can, therefore, be only the Supreme Court, High Court or the courts or courts constituted by Parliament under article 32(3). If the contention of learned counsel for the appellants be accepted, the expression "court" should be confined to the Supreme Court. But the Article does .not say either Supreme Court or that the right to move is the guaranteed one under article 32(1). The next question is, what do the words "right to move" mean? The right to move is qualified by the expression "for the enforcement of such of the rights conferred by Part 111". Therefore, the right to move must be a right to move the Supreme Court or the High Court in the manner prescribed by article 32(2) or article 226(1) of the Constitution for the enforcement of the fundamental rights. The words in the second limb of the Article viz., that "all proceeding.s pending in any court for the enforcement of the rights so mentioned shall remain suspended" only relate to the proceedings instituted in exercise of the said right : they do not throw any light on the scope of the "right to move '. This construction gives full meaning to every expression used in the Article. if so construed, it can only mean that the temporary bar that can be imposed by an order of the President is not confined only to the guaranteed right of a person to move the Supreme Court for the enforcement of his fundamental rights, but also extends to the right of a person to move the High Court or the Court or Courts constituted by Parliament for the enforcement of such of the fundamental rights as mentioned in the order. I would, therefore, hold that the President 's order under article 359 suspending the right to move any court in respect of specified fundamental rights includes not only the right to move under article 32 but also that under article 226. The more difficult question is whether article 359 can be so construed as to empower the President to suspend all actions which a person may take under a statute or common law, if he seeks thereby to protect his liberty against unlawful encroachment by State or its officers. To put it in other words, can a person, who is illegally 853 detained under a void law, approach the High Court under section 491 of the Code or file a suit in a civil court for damages for illegal confinement or take any other legal proceedings open to him? Learned Attorney General contends that "any court" in article 359 means any court in India and that the expression "enforcement of fundamental rights" implies any relief asked for by a party if the granting of such relief involves directly or indirectly a decision on the question whether any of the fundamental rights specified in the President 's order has been infringed. This argument, if I may say so, completely ignores the scheme of the Constitution. Under the Constitution, a person may have three kinds of rights, namely, (i) fundamental rights, (ii) constitutional rights, and (iii) statutory or common law rights. Under article 32(1) a person has a fundamental right to move the Supreme Court for enforcement of his fundamental rights; under article 226, a person has a constitutional right to move the High Court for the enforcement of the said rights. Parliament, by law, in exercise of its powers conferred on it under article 245, may confer a right on a person to move any court for a relief wider in scope than that provided by article 32 or article 226 of the Constitution. Though Parliament may not have power, except in the cases specified to circumscribe the fundamental rights enshrined in Part III it can certainly make a law enlarging the content of the substantive and procedural rights of parties beyond those conferred by Part III. Under this category there may also be laws made by competent authority before the commencement of the Constitution, but continued under article 372, which do not any way infringe the fundamental rights created by the Constitution. Section 491 of the Code is one of the pre Constitution statutory provisions continued under article 372 of the Constitution. It does not in terms posit any right to move the High Court for the enforcement of fundamental rights. Therefore, the argument of the learned Attorney General involves considerable strain on the express language of article 359, for, he in effect asks us to equate the expression "a right to move for the enforcement of fundamental rights" with any relief asked for in any proceedings in any court, whether initiated at the instance of the party affected or not, 854 or whether started suo motu by the court, if it involves a decision on the question whether a particular law was void for the reason that it infringed the fundamental rights mentioned in the President 's order. In support of this contention he presses on us to hold that in days of stress and strain i.e., when there is a threat of war and conse quently an emergency is declared, a court has to adopt the principle of "strained construction" which will achieve the object behind article 359 of the Constitution and the order issued by the President. I shall briefly examine the decisions cited by him to ascertain whether any such novel doctrine of construction of statutes exists. Rex vs Halliday(1) is a decision of the House of Lords made in 1917 i.e., during the First World War. Regulation 14B of the Defence of the Realm (Consolidation) Regulation, 1914, empowered the Secretary of State to order the internment of any person of hostile origin or associations, where on the recommendation of a competent naval or military authority it appeared to him expedient for securing the public safety or the defence of the realm. This regulation was authorized by the Defence of the Realm Consolidation Act, 1914, section 1, sub section 1. The House of Lords, by a majority, held that the Act conferred upon , the King In Council power, during the continuance of the war, to issue regulations for securing the public safety and the defence of the realm and, there fore, the regulation was valid. It was urged there that no such restraint of personal liberty should be imposed except as a result of judicial enquiry. It was also contended that if the Legislature intended to interfere with personal liberty it should have provided for suspending the right of the subject as to the writ of heabeas corpus. The argument was negatived. Lord Atkin observed "The subject retains every right which those statutes confer upon him to have tested and determined in a Court of law, by means of a writ of Habeas Corpus,, addressed to the person in whose custody he may be, the legality of the order or warrant by virtue of which he is given into or kept in that custody. If the Legislature chooses to enact that he can be deprived of his liberty and incarcerated or (1) ; , 272. 855 interned for certain things for which he could not have been heretofore incarcerated or interned, that enactment and the orders made under it, if intra vires, do not infringe upon the Habeas Corpus Acts in any way whatever, to take away any rights conferred by Magna Charta, for the simple reason that the Act and these Orders become part of the law of the land. " This decision does not lay down any new rule of cons truction. Parliament is supreme in England. It its wisdom it did not take away the habeas corpus, but empowered the executive to issue regulations for public safety and defence of the nation. The regulation made did not exceed the power conferred by the Parliament. The House of Lords held that the detention was in accordance with law. Nor does the controversial decision in Liverside vs Sir John Anderson(1), which was the subject of servere criticism in later years, lay down any such new rule of construction. There, the Secretary of State, acting in good faith under reg. 18B of the Defence (General) Regulations, 1939, made an order in which he recited that he bad reasonable cause to believe a person to be of hostile associations and that by reason thereof it was necessary to exercise control over him and directed that that person be detained. The validity of the detention turned upon the construction of the express provisions of reg. 18B of the said Regulations. In that regulation the expression used was "reasonable cause to believe any person to be of hostile origin". The House of Lords, by a majority, held that the expression meant that "the Secretary of State thinks fit to be reasonable". There was a powerful dissent by Lord Atkin on the question of construction. With the correctness of the construction put upon by the majority on the said provision we are not concerned ; but none of the learned law Lords laid down in their speeches any new rule of construction peculiar to war conditions. Viscount Maugham observed : "My Lords, I think we should approach the construction of reg. 18B of the Defence (General) Regulations without any general presumption as to its (1) ; , 219, 251. 856 meaning except the universal presumption, applicable to Orders in Council and other like instruments, that, if there is a reasonable doubt as to the meaning of the words used, we should prefer a construction which will carry into effect the plain intention of those responsible for the Order in Council rather than one which will defeat that intention." Lord Atkin, in his dissenting judgment, protested against the strained construction put on words with the effect of giving an uncontrolled power of imprisonment to the minister. Then he proceeded to observe : "The words have only one meaning. They arc used with that meaning in statements of the common law and in statutes. They have never been used in the sense now imputed to them." These observations by the dissenting Lord may at the most indicate that the majority in fact put a strained cons truction on the express words used in the regulation; but they do not show that they have laid down any such rule of construction. This is made clear by Lord Macmillan when he stated: "In the first place, it is important to have in mind that the regulation in question is a war measure. This is not to say that the courts ought to adopt in wartime canons of construction different from those Which they follow in peace time. The fact that the nation is at war is no Justification for any relaxation of the vigilance of the courts in seeing that the law is duly observed,. especially in a matter so fundamental as the liberty of the subject matter the contrary. But in a time of emergency when the life of the whole nation is at stake it may well be that a regulation for the defence of the realm may quite properly have a meaning which because of its drastic invasion of the liberty of the subject the courts would be slow to attribute to a peace time measure. The purpose of the regulation is to ensure public safety, and it is right so to interpret emergency legislation as to promote rather than to defeat its efficacy for the defence of the realm. That is in accordance with a general rule applicable to the interpretation of 857 all statutes or statutory regulations in peace time as well as in war time. " These observations should be understood in the background of the earlier observation : "I do not agree that the critical phrase in the context in which I find it is susceptible only of one meaning, namely that for which the appellant contends. Were it so it would be strange that several learned judges should have found it to possess quite a different meaning." This judgment, therefore, is no authority for the position for which it is relied upon. The decision in substance says that the rule of construction of a statute is the same both in peace time and in war time and that when there is an ambiguity in the expressions used, the court may give such meaning to the words used which are capable of bearing that meaning as would promote rather than defeat the object of the legislation. Indeed, the Privy Council, in Nakkuda Ali vs Jayaratna(1), confined the interpretation put upon reg. 18B of the Defence (General) Regulations, 1939, by a majority of the House of Lords to the particular cricumstances of that case and they did not accept that construction when similar words were used in the Regulation 62 of the Defence (Control of Textiles) Regulations, 1945. I cannot, therefore, hold that the said decisions suggested a new rule of construction peculiar to war measures. The rules of construction are the same in war time as well as in peace time. The fundamental rule of construction is that the courts have to find out the expressed intention of the Legislature from the words of the enactment itself. Where the language is unambiguous, no more is necessary than to expound those words in their natural and ordinary sense. But where the words are ambiguous and reasonably capable of bearing two meanings, the court may be justified in adopting that meaning which would further the intention of the Legislature rather than that which would defeat it. In the present case we are not dealing with a war measure, but a constitutional provision which was designed to govern the affairs of our country for all times so (1) L.R. 1 55 2 S C India/64. 858 long the Constitution remains in force ; and it cannot certainly be strained to meet a passing phase in a country 's life. A strained construction put upon a statutory provison to meet a particular emergency may be rectified by a subsequent enactment. But such a construction put upon a constitutional provision might entail serious consequences. Even if Liversidge 's case(1) had laid down a new rule of construction, that construction cannot be invoked in the case of a constitutional provision. In Gibbons vs Ogden(2) the following rule of construction of a constitutional provision is stated : "That which the words declare is the meaning of an instrument ; and neither Courts nor legislatures have the right to add or to take away from that meaning. This is true of every instrument, but when we arc speaking of the most solemn and deliberate of all human writings those which ordain the fundamental law of states, the rule rises to a very high degree of significance. It must ' be very plain, nay absolutely certain, that the people did not intend what the language they have employed in its natural signifi cation, imports, before a Court will feel itself at liberty to depart from the plain reading of a constitutional pro vision. " No doubt a constitution should receive a fair, liberal and progressive construction so that the true objects of the instrument may be promoted ; but such a construction could not do violence to the natural meaning of the words used in particular provision of the Constitution. The relevant provisions of section 491 of the Code read (1) Any High Court may, whenever it thinks fit, direct (a) that a person within the limits of its appellate criminal jurisdiction be brought up before the Court to be dealt with according to law ; (b) that a person illegally or improperly detained in public or private custody within such limits be set at liberty * * * * Bearing in mind the said rules of construction, I ask myself the question whether the exercise of the power un (1) ; (2) ; 859 der section 491 of the. Code can be equated with a right to move the High Court to enforce such of the fundamental rights conferred by Part III of the Constitution as may be mentioned in the order of the President. It is necessary to ascertain the correct scope of the section to answer the question raised before us. The section is framed in wide terms and a discretionary power is conferred on the High Court to direct one or other of the things mentioned therein "whenever it thinks fit". Unlike article 32 and article 226, the exercise of the power is not channelled through well recognized procedural writs or orders. With the result the technicalities of such procedural writs do not govern or circumscribe the court 's discretion. A short history of this section reinforces the said view. Originally, the Supreme Courts in India purported to exercise the power to issue a writ of habeas corpus which the Kings ' Bench Division in England exercised. In 1861 Parliament passed Acts 24 25 Vict. 104 authorising the establishment of High Courts of judicature in India. The Letters Patents issued under that Act in 1865 were expressly made subject to the legislative powers of the Governor General in Council. The courts were given the same jurisdiction, power and authority which the Supreme Courts possessed but subject to the legislative power of the Governor General in Council. Pursuant to the power so conferred, the Governor General in Council passed successive Codes of Criminal Procedure in the years 1872, 1875, 1882;and,1898, and in 1923 by the Criminal Law (Amendment) Act, some of the provisions of the Code of 1898 were amended. The High Courts Act of 1861 authorized the Legislature, if it thought fit, to take away the powers which the High Courts exercised as successor to the Supreme Courts, and Acts of Legislatures passed in 1872 and subsequent years had taken away the power of the High Courts to issue prerogative writs ; and instead a statutory power precisely defined was conferred upon the High Courts. That statutory power underwent various changes and finally took the form of section 491 of the Code, as at present it stands. The attempt to resuscitate the prerogative writs was rejected by the Calcutta High Court in Girindra Nath Banerjee vs Birendra Nath Pal(1) and (1) Cal. 727. 860 by the Madras High Court in District Magistrate, Trivandrum vs Mammen Mappillai(1). The Privy Council in Matten vs District Magistrate, Trivandrum(2) approved the said decisions and held that the said Act. ,, have taken away the power of the High Courts to issue prerogative writs and thereafter the only power left in the High Court was that conferred by the statute. By reason of article 372 of the Constitution, the Code of Criminal Procedure, including section 491 thereof, continued to be in force until altered, repealed or amended by the competent Legislature or other competent authority. Article 225 of the Constitution expressly preserved the High Courts ' powers and jurisdiction, subject to other provisions thereof. Admittedly, Parliament has not made any law repealing section 491 of the Code. The statutory power conferred on the High Courts under that section is not inconsistent either article 32 or with article 226 or with any other Article in Part III or any other Chapter of the Constitution. So, it cannot be held that section 491 of the Code has been impliedly superseded by article 226 even to the extent it empowers the High Court to give relief to persons illegally detained by the State. Now what is the scope of that section? Though section 491 of the Code is remedial in form, it postulates the existence of the substantive right. In India, as in England, the rule of law was the accepted principle. No person can be deprived of his liberty except in the manner prescribed by the law of the land. If a person is illegally or improperly detained in violation of the law of the land, the High Court can direct his release "whenever it thinks fit" so to do. The section prima facie does not predicate a formal application ; nor does it insist that any particular person shall approach it. The phraseology used is wide enough for the exercise of the power suo motu by the High Court. Nor does the section introduce an antithesis between the exercise of jurisdiction on application and that exercised suo motu ; that is to say, even if an application was filed before the High Court and for one reason or other, no orders could be passed thereon, either because of procedural defect or because it was not pressed, (1) L.I.R. (2) L.R. (1939) 66 I.A. 222. 861 nothing prevents the High Court from acting suo motu ,on the basis of the information brought to its notice. It is said that various High Courts framed rules regulating the procedure of the respective High Courts, but that fact is not much relevance in the matter of construing the section. Shortly stated, the High Court is given an absolute discretion to direct a person, who has been illegally detained, to be released, whenever that fact is brought to its notice through whatever source it may be. This juris diction existed long before the Constitution was made and long before the fundamental rights were conferred upon the people under the Constitution. The rights, substantive as well as procedural, conferred under Part III and article 226 on the one hand and under section 491 of the Code on the other, are different. Under articles 32 and 226, an affected party can approach the Supreme Court or the High Court, as the case may be, only in the manner prescribed under article 32(2) or article 226 i.e., by way of writs and orders mentioned therein : he must ask the court for the enforcement of this fundamental right. The relief implies that he must establish that he has a fundamental right, that his fundamental right has been infringed by the State and, therefore, the Court should give the appropriate relief for the enforcement of that right. Both the right as well as the procedure are the creatures of the Constitution. Whereas section 491 of the Code assumes the existence of the "rule of law" and confers a power on the High Court to direct persons in illegal detention to be set at liberty. It is not bound by any technical procedures envisaged by the Constitution. If a person approaches the High Court alleging that he or some other person has been illegally detained, the Court calls upon the detaining authority to sustain the validity of the action. The onus of proof lies on the custodian to establish that the person is detained under a legal process ; but if it fails to establish that the person is detained under law, the said person may be released. It is true that the detaining authority will have to satisfy the court that the law under which the detention is made is a valid one. It may also be true that in scrutinizing the validity of that law the court has to go into the question whether the law offends any of the fundamental rights mentioned 862 in Part III of the Constitution. But that circumstance does not by any process of involved reasoning make the said proceeding one initiated in exercise of the right to move the High Court for the enforcement of the petitioner 's fundamental right. The distinction between the two lies in the fact that one is an enforcement of a petitioner 's fundamental right and the other, a decision on the unconstitutionality of a law because of its infringement of fundamental rights generally. Further, the right and the relief have a technical and specific significance given to them by the Constitution. They cannot be equated with the mode of approach to the High Court under section 491 of the Code or with the expression"whenever it thinks fit" confers an absolute discretionon the court to exercise its power thereunder or not todo so, having regard to the circumstances of each case. While the word "may" used in a statute was sometimes construed as imposing a duty on the authority concerned on whom a power is conferred to exercise the. same if the circumstances necessitated its exercise, the expression "whenever it thinks fit" does Rot warrant any such limitation on its absolute discretion. Though ordi narily a High Court may safely be relied upon to exercise its powers when the liberty of a citizen is illegally violated by any authority, the said unlimited discretion certainly enables it in extraordinary circumstances to refuse to come to his rescue. The absolute discretionary jurisdiction conferred under section 491 of the Code cannot be put on a par with the jurisdiction conferred under article 226 of the Constitution hedged in by constitutional limitations ' A brief reference to decided cases on the scope of section 491 of the Code will make my meaning clear. In Alam Khan vs The Crown(1), the Full Bench of the Lahore High Court has defined the scope of section 491 of the Code. Ram Lall, J., who spoke for the majority, stated, after quoting the relevant part of the section "The language of the section places no limit on the class of person or persons who can move a High Court with relation to a person in custody and if the (1) Lahore 274, 303. 863 High Court on hearing the petition thinks fit. to do so, may make an order that he be dealt with according to law. " In Ramji Lal vs The Crown(1), a Full Bench decision of the East Punjab High Court, Mahajan, J., as he then was, defined the wide scope of the section thus "Whatever may be the state of English law on the subject so far as section 491 of the Criminal Procedure Code is concerned it has been very widely worded and confers Jurisdiction on the Court to issue directions whenever it thinks fit. The Court may be moved by the prisoner or by some relation of his, or it may act suo motu if it acquires knowledge that a certain person has been illegally detained. The mode and manner in which the judge has to be satisfied cannot affect the Jurisdiction conferred on him under section 491 of the Criminal Procedure Code. " In King Emperor vs Vimlabai Deshpande(2), a police officer made an arrest of the respondents under sub rule I of r. 129 of the Defence of India Rules, 1939, which read : "Any police officer. . may arrest without warrant any person whom he reasonably suspects of having acted. . (a) in a manner prejudicial to the public safety or to the efficient prosecution of the war." ' The Judicial Committee held that the burden was upon the police officer to prove to the satisfaction of a court before whom the arrest was challenged that he had reasonable grounds of suspicion and that if he failed to discharge that burden, an order made by the Provincial Government under sub rule 4 of r. 129 for the temporary custody of the detenu was invalid. As the police officer failed to discharge the onus, the Privy Council held that the High Court was right in ordering the release of the person from custody under section 491 of the Code of Criminal Procedure. This shows that when a person is detained by a police officer, the burden of establishing that the detention is valid is on him. These authorities well establish that section 491 of the Code does not contemplate any right to move a court by any affected party, but the court can exercise the (1) I.L.R. (1949). II E.P. 28, 54. (2) (1946) L.R. 73 I.A. 144. 864 statutory power whenever it thinks fit, if the fact of illegal detention of a person is brought to its notice. The problem may be approached from a slightly different perspective. Three questions may be posed, namely, (1) has any person the right to move the High Court under section 491 of the Code to enforce his fundamental right? (2) would it be necessary for a person detained or any other on his behalf to allege that the detenu has a fundamental right and that it has been infringed by State action and seek a relief for enforcement of that right? (3) would it be obligatory on the Court to enforce the right if the said right had been established? All the questions must be answered in the negative. Under section 491 of the Code there is neither a right in the person detained to move the High Court for the enforcement of the fundamental right nor there is an obligation on the part of the High Court to give the said relief. It is only a discretionary jurisdiction conceived as a check on arbitrary action. There is another aspect of the question. Article 359 has nothing to do with statutory powers conferred by Parliament. Article 359 expressly deals with the constitutional right to move a court and the constitutional enforcement of that right. So far as ordinary laws are concerned, Parliament can always amend the law, having regard to the circumstances obtaining at a particular point of time ; for instance, Parliament could have amended section 491 of the Code by repealing that section altogether or by suitably amending it. Briefly stated, article 359 provides for the suspension of some constitutional rights in the manner prescribed thereunder. The statutory rights are left to be dealt with by the appropriate Legislature in exercise of the powers conferred on them. The argument that the intention of the makers of the Constitution in enacting article 359 would be defeated, if section 491 of the Code was salvaged, does not appeal to me. If Parliament had amended section 491 of the Code, which it should have done if it intended to do so, this alleged anomaly pointed outby the learned Attorney General could not have arisen. I would, therefore, hold that the expression "rightto move any Court for the enforcement of such of the rights conferred by Part III" could legitimately refer 865 only to the right to move under article 32 or article 226 of the Constitution for the said specific relief and could not be applied without doing violence to the language used to the exercise of the statutory power conferred on the High Courts under section 491 of the Code. If that be so, the expression "all proceedings pending in any Court for the enforcement of the rights" used in the second limb of article 359 must also necessarily refer to proceedings initiated in exercise of the right to move envisaged in the first limb of the article. I shall now proceed to consider some of the minor points raised at the Bar. Another argument advanced on behalf of the respondents may also be briefly noticed. It is said that while article 358 maintains the legislative incompetency to make laws in derogation of fundamental rights other than those enshrined in article 19, Art, 359 enables the President by an indirect process to enlarge the said legislative competency and, therefore, article 359 must be so read as to confine its scope only to executive acts. I cannot agree. Article 359 does not ex facie enlarge the legislative competency of Parliament or a State Legislature. It does not enable them to make laws during the period covered by the order of the President infringing the fundamental rights mentioned therein. It does not empower the Legislatures to make void laws ; it only enables the President to suspend the right to move the Court during the period indicated in his order. Once that period expires, the affected party can move the Court in the manner prescribed by the Constitution. Despite article 358 it may happen that void laws are made and executive actions are taken inadvertently or otherwise ; and article 359 is really intended to put off the enforcement of the rights of the people affected by those laws and actions till the expiry of the President 's order. The invalidity of the argument would be clear if it was borne in mind that article 358 also saved executive acts infringing article 19, but nonetheless article 359 gave protection against the exercise of the right to move any court in respect of such acts not saved by article 358. If the infringement of fundamental rights by executive action not saved by article 358 could not be a basis for the exercise of a right to move during the period of suspension, 866 by the same token, laws not saved by article 358 could not equally be the basis for such an action during the said. period. Be it as it may, the phraseology of article 359 is wide enough to comprehend laws made in violation of the specified fundamental rights. Another argument advanced is, while article 358 read with article 13(1) and (2), maintained the constitutional position that all laws infringing fundamental rights other than that enshrined in article 19 would be void during the emergency, the President by issuing the order he did, indirectly, in effect and substance, validated the laws infringing Arts.14, 21 and 22, and, therefore, the issuing of the said order must be held to be a fraud on hi s powers. This argument has no merits. It is based upon a misapprehension of the doctrine of fraud on powers. In the context of the application of the doctrine to a statutory law, this Court observed in Gullapally Nageswara Rao vs Andhra Pradesh Road Transport Corporation(1) thus : "The legislature can only make laws within its legislative competence. Its legislative field may be circumscribed by specific legislative entries or limited by fundamental rights created by the Constitution. The legislature can not overstep the field of its competency, directly or indirectly. The Court will scrutinize the law to ascertain whether the legislature by device purports to make a law which, though in form appears to be within its sphere, in effect and substance, reaches beyond it. If, in fact it has power to make the law, its motives in making the law are irrelevant. " To the same effect are the observations in Gajapati Narayan Deo vs The State of Orissa(2). On the same analogy, the President cannot overstep the limits of his power defined under article 359 of the Constitution. So long as he does not exceed his power, the effect of his order made within bounds could not conceivably sustain the plea of fraud on powers. Fraud on power implies that a power not conferred is exercised under the cloak of a power conferred. But if an act can legitimately be referred to a power conferred the intention of the person exercising (1) [1959] Supp. 1 S.C.R. 319, 329. (2 ) ; 867 the power or the effect of his exercise of the power is ir relevant. Now, on the construction placed by me on article 359, the President has clearly the constitutional power ' to suspend the aforesaid right. The fact that Parliament by taking shelter under that order may enforce void laws cannot make a valid exercise of a power of the President one in fraud of his power. The next argument is that the order issued by the President is in excess of the powers conferred under article 359 of the Constitution. Under article 359, the argument proceeds, the order made by the President can relate to a period or the whole or a part of the territory of India and cannot be confined to a class of persons. As the order is restricted to persons that have. been deprived of their rights under the Defence of India Ordinance, it is said that it is not sanctioned by the provisions of article 359. There are no merits in this contention. Under the order the right to move for the enforcement of the rights mentioned therein is suspended during the period of emergency and it applies to the entire country. The fact that only persons, who are deprived of their rights under the Defence of India Ordinance, cannot exercise their right to move the Court does not make the order one confined to a class of persons. The Ordinance has force throughout India and ex hypothesis only persons affected would move the Court. That does not mean that the order is confined only to a class of persons. The next contention is that the impugned section suffers from the vice of excessive delegation and that in any view the relevant rules framed are in excess of the power conferred upon the Government by the said Act. I cannot agree with either of the two contentions. On this aspect I have nothing more to add to that found in the judgment of my learned brother. But the order made by the President still leaves the door open for deciding some, questions even under article 32 or article 226 of the Constitution. The order is a conditional one. , In effect it says that the right remains suspended if such person has been deprived of any such right under the Defence of India Ordinance, 1962, or under any rule or order made thereunder. The condition is that the person should have been deprived of a right under the 868 Defence of India Ordinance or under any rule or order made thereunder. If a person was deprived of such a right not under the Ordinance or a rule or order made thereunder, his right would not be suspended. If the order was made in excess of the power conferred upon the Government by the said Ordinance, it would not be covered by that order. If the detention was made mala fide, it would equally be not an order made under the Ordinance. My view on the basis of the aforesaid discussion may be stated thus : (1) The detenus cannot exercise their right to enforce their fundamental rights under articles 21, 22 and 14 of the Constitution, during the period for which the said right was suspended by the President 's order. (2) This does not preclude the High Court to release the detenus in exercise of its power under section 491 of the Code of Criminal Procedure, if they were imprisoned under a void law, though the voidness of the law arose out of infringement of their fundamental rights under articles 14, 21 and 22 of the Constitution. (3) The President 's order does not preclude, even under article 32(1) and article 226 of the Constitution, the petitioners from proving that the orders of detention were not made under the Defence of India Ordinance or the Act either because they were made, (i) outside the provisions of the Ordinance of the Act, or (ii) in excess of the power conferred under them, or (iii) the detention were made mala fide or due to a fraudulent exercise of power. I would close with a few observations. In the view I have taken. there are three courses open to Parliament : either it can make a valid law without infringing the fundamental rights other than those enshrined in article 19 or amend section 491 of the Code in order to maintain the enforcement of void laws, or do both. It is not for me to suggest the right course. In the result, the petitions will now go to the Constitution Bench for disposal on the said questions. ORDER BY COURT In accordance with the opinion of the majority the constitutional points raised in the Appeals are dismissed. Appeals to be set down individually before a Constitution Bench for dealing with the other contentions raised in each one of them.

The appellants were detained under r. 30(l) of the Defence of India Rules made by the Central Government under section 3 of the Defence of India Ordinance, 1962. They applied to the Punjab and Bombay High Courts under section 491(1)(b) of the Code of Criminal Procedure and their case was that sections 3(2)(15)(i) and 40 of the Defence of India Act, 1962, and r. 30(1)(b) of the Defence of India Rules, which were continued under the Act, were unconstitutional and invalid inasmuch as they contravened their fundamental rights under articles 14, 21, 22(4), (5) and (7) of the Constitution and that, therefore, they should be set at liberty. The High Courts held that the Presidential Order which had been issued on November 3, 1962, under article 359(1) of the Constitution, after a declaration of emergency under article 352, consequent on the Chinese invasion of India, barred their right to move the said petitions and dismissed them. These appeals raised two common questions in this Court, (1) what was the true scope and effect of the Presidential Order issued under article 359(1), and (2) did the bar created by the Order operate in respect of the applications under section 491(1)(b) of the Code. The Presidential Order was as follows: "G.S.R. 1464 In exercise of the powers conferred by cl. (1) of article 359 of the Constitution, the President hereby declares that the right of any person to move any court for the enforcement of the right conferred by article 21 and article 22 of the Constitution shall remain suspended for the period during which the Proclamation of Emergency issued under clause (1) of article 352 thereof on the 26th October 1962 is in force, if such person has been deprived of any such rights under the Defence of India Ordinance, 1962 (4 of 1962) or any rule or order made thereunder. " By a later amendment of the Order article 14 was incorporated into it. 798 Held:(per Gajendragadkar, Sarkar, Wanchoo, Hidayatullah, Das Gupta and Shah, JJ.) that the proceedings taken by the appellants in the High Courts under section 491(1)(b) of the Code were hit by the Presidential Order and must be held to be incompetent. Article 359 of the Constitution was not capable of two interpretations and it was, therefore not necessary to decide the controversy raised by the parties as to whether that Article should be interpreted in favour of the President 's power granted by it or the fundamental rights of the citizens. The King (At the Prosecution of Arthur Zadig) vs Halliday, ; , Liversidge vs Sir John Anderson, ; , Keshav Talpade vs The King Emperor, [1943] F.C.R. 49, Nakkuda Ali vs M. F. De section Jayaratne, and King Emperor vs Vimalabal Deshpande, L.R. 73 1. A. 144, considered. The words 'any court ' in article 359(1), construed in their plain grammatical meaning, must mean any court of competent jurisdiction including ' the Supreme Court and the High Courts before which the rights specified in the Presidential Order can be enforced. It was not correct to say that the use of the words was necessary so as to include such other courts as might be empowered in terms of article 32(3). Nor was it correct to say that the words could not include a High Court as its power to issue a writ under article 226(1) was discretionary. In judging whether a particular proceeding fell within the purview of the Presidential Order the determining factor was not its form nor the words in which the relief was couched but the substance of it. If in granting the relief the court had to consider whether any of the fundamental rights mentioned in the Presidential Order, had been contravened, the proceeding was within the Order, whether it was under article 32(l) or 226(1) of the Constitution. The right to move the court for writ of habeas corpus under section 491(1)(b) of the Code of Criminal Procedure was now a statutory right and could no longer be claimed under the common law. Girindra Nath Banerjee vs Birendra Nath Pal I.L.R. 54 Cal. 727, District Magistrate, Trivandrum vs K. C. Mammen Map pillai, I.L.R. , Matthen vs District Magistrate, Trivandrum L.R. 66 I.A. 222 and King Emperor vs Sibnath Banerji, L.R. 72 I.A. 241, referred to. Since the promulgation of the Constitution the two methods by which a citizen could enforce his right of personal freedom were (i) by a writ under article 226(1) or article 32(l), or (ii) under section 491(1)(b) of the Code of Criminal Procedure. Whichever method he adopted if the right he sought to enforce was a fundamental right guaranteed by the Constitution the matter must, come within article 359(1) of the Constitution. That the court could exercise its power under section 491(1)(b) suo motu could make no 799 difference and articles 372, 225 or 375 could provide no valid ground of attack. The suspension of the right to move any court, as under the Presidential Order, must necessarily suspend the Court 's jurisdiction accordingly. The right to challenge a detention order under section 491(1)(b) of the Code had been enlarged by the fundamental rights guaranteed by the Constitution and when a detenu relied upon such rights in his petition under that section he was in substance seeking to enforce his fundamental rights. The prohibition contained in article 359(1) and the Presidential Order must, therefore, apply. The expression "right to move any court" in article 359(1) and the Presidential Order takes in all legal actions, filed or to be filed, in which the specified rights are sought to be enforced and covers all relevant categories of jurisdictions of competent courts under which the said actions would other wise have been normally entertained and tried. Sree Mohan Chowdhury vs Chief Commissioner Union Territory of Tripura, ; , referred to. Even though the impugned Act may be invalid by reason of contravention of articles 14, 21 and 22, as contended by the appellants, that invalidity could not be challenged during the period prescribed by the Presidential Order and it could not be said that the President could not because of such invalidity issue the order. Where, however, the challenge to the validity of the detention order was based on any right other than those mentioned in the Presidential Order, the detenu 's right to move any court could not be suspended by the Presidential Order because the right was outside article 359(1). Where again the detention was challenged on the ground that it contravened the mandatory provisions of the relevant act or that it was malafide and was proved to be so and in all cases falling under the other categories of section 491(1) of the Code excepting those under section 491(1)(b), the bar of the Presidential Order could have no application. So also the plea that the operative provision of the law under which the order of detention was made suffered from the vice of excessive delegation, was an independent plea not relatable to the fundamental rights mentioned in the Presidential Order and its validity had to be examined. The plea that section 3(2)(15)(i) and section 40 of the impugned Act suffered from excessive delegation must fail. The legislative policy was broad stated in the preamble and the relevant provisions of sections 3(1) and 3(2) gave detailed and specific guidance to the rule making authority and it was not correct to say that the Act had by the impugned sections delegated essentially legislative function to that authority. Rule 30(1)(b) which was consistent with the operative provisions of the Act could not also be challenged on that ground. 800 In " The etc. ; , Harishankar Bagla vs The State of Madhya Pradesh, , Bhatanagars and Co. Ltd., vs The Union of India, ; , relied on. The impugned Act could not also he struck down as a piece of colourable legislation because the , was already on the Statute book. The Parliament had power under Entry 9, List I of the Seventh Schedule to the Constitution and if in view of the grave threat to the security of India it passed the Act, it could not be said to have acted malafide. If the Parliament thought that the executive would not be able to detain citizens reasonably suspected of prejudicial activities by a recourse to the , which provided for the required constitutional safeguards and the impugned Act which it enacted did not, it could not be suggested that it was acting malafide. Even if the impugned Act contravened articles 14 and 22 and the detentions thereunder were invalid, article 359(1) and the Presidential Order, which were precisely meant to meet such a situation, barred investigation on the merits during the period prescribed by the Order. The proceeding under section 491(1)(b) of the Code is one pro ceeding and the sole relief that can be claimed under it is release from the detention. If that could not be claimed because of the Presidential Order it was unreasonable to say that a mere declaration that the impugned Act and the detention thereunder were invalid could be made. Such a declaration is clearly outside the purview of section 491(1)(b) of the Code as also of articles 226(1) and 32(l) of the Constitution. The period for which the emergency should continue and the restrictions that should be imposed during its continuance are matters that must inevitably be left to the executive. In a democratic state the effective safeguard against any abuse of power in peace as also in emergency is the existence of enlightened, vigilant and vocal public opinion. Liversidge vs Sir John Anderson, [19421 A.C. 206, referred to. The inviolability of individual freedom and the majesty of law that sustains it are equally governed by the Constitution which has made this Court the custodian of the fundamental rights on the one hand and, on the other, provided for the declaration of the emergency. Consequently, in dealing with the right of a citizen to challenge the validity of his detention, effect must be given to article 359(1) and the Presidential Order issued under it. The right specified in that Article must be held to include such right whether constitutional or constitutionally guaranteed and the words "any court" must include the Supreme Court and the High Court. The Punjab and the Bombay High Courts were, therefore right in their decision that the applications under section 491(1)(b) of 801 the Code were incompetent in so far as they sought to challenge the validity of the detentions on the ground that the Act and the Rules under which the orders were made contravened articles 14, 21 and 22(4)(5) and (7) of the Constitution. Per Subba Rao, J. It was clear that section 3(2)(15)(i) of the Defence of India Act, 1962, and r. 30(1)(b) made under the Act contravened the relevant provisions of article 22 of the Constitution and were, therefore, void. Deep Chand vs The State of Uttar Pradesh, [1959] Supp. 2 S.C.R. 840, Mahendra Lal vs State of U.P., A.I.R. 1963 S.C. 1019, A. K. Gopalan vs State of Madras, ; , referred to. Under the Constitution, every person has a right to move the Supreme Court, the High Courts or any other court or courts constituted by the Parliament under article 32(3) for the enforcement of fundamental rights in the manner prescribed. But while the right to move the Supreme Court is a guaranteed right, the right to move the others is not so. Article 359, properly construed, meant that the bar imposed by the Presidential Order applied not only to the guaranteed right to move the Supreme Court but also the rights to move the other courts under article 32 and article 226 of the Constitution. There is no new rule of construction peculiar to war measures. It is always the same, whether in peace or in war. The fundamental rule is that the courts have to find out the expressed intention of the Legislature from the words of the enactment itself. Words must be given their natural and ordinary meaning unless there is ambiguity in the language in which case the court has to adopt that meaning which furthers the intention of the Legislature. A constitutional provision such as article 359, however, cannot be given a strained construction to meet a passing phase such as the present emergency. Rex vs Halliday, L.R. [19171 A.C. 260, Liversidge vs Sir John Anderson; , , Nakkuda A1i vs jayaratna, , Gibbon vs Ogden, (1824) 6 L. Ed. 23, discussed. Section 491 of the Code of Criminal Procedure is wide in its terms and gives a discretionary power to the High Courts. Unlike articles 32 and 226, the exercise of the power is not channelled through procedural writs or orders and their technicalities cannot circumscribe the court 's discretion. Girindra Nath Banerjee vs Birendra Nath Pal, (1927) I.L.R. , District Magistrate, Trivandrum vs Mammen Mappillai, I.L.R. , Matten vs District Magistrate, Trivandrum, L.R. (1939) 66 I.A. 222, referred to. Section 491 is continued by article 372 and article 225 preserves 802 the jurisdiction of the High Court. The power it confers on the High Court is not inconsistent either with article 32 or article 226 or any other Article of the Constitution and the section cannot, therefore, be said to have been impliedly superseded even to the extent article 226 empowers the High Court to give relief in cases of illegal detention. Though remedial in form the section postulates the existence of the substantive right that no person can be deprived of his liberty except in the manner prescribed by law. It assumes the existence of the rule of law and empowers High Court to act suo motu. The rights, substantive and procedural conferred by it arc different from those under articles 32 or 226 of the Constitution. It places the onus on the custodian to prove that the detention is legal and although in scrutinising the legality of the detention the court may have to consider whether the law offends any fundamental rights, that cannot make the proceeding one for the enforcement of fundamental rights or the decision anything but one on the unconstitutionality of a law because of infringement of fundamental rights generally. The mode of approach to the High Court under section 491 of the Code or the nature of the relief given thereunder cannot be equated with those under the Constitution. The absolute discretionary jurisdiction under it cannot be put on a par with the jurisdiction under article 226 which is hedged in by constitutional limitations. Alam Khan vs The Crown, Lahore 274, Ramji Lal vs The Crown, I.L.R. (1949) 11 E.P. 28, King Emperor vs Vimlabai Deshpande, (1946) L.R. 73 I.A. 144, referred to. While section 491 gives no right to enforce fundamental rights, operating as it does as a check on arbitrary action, article 359 is concerned not with statutory powers but deals with the constitutional right and the constitutional enforcement of it. It was not, therefore, correct to say that article 359 would be frustrated if section 491 was allowed to stand for Parliament might amend that section any time it liked. The expression "right to move any court for enforcement of such of the rights conferred by Part 111" in article 359 must refer only to the right to move under article 32 or article 226 for the said specific relief and could not be applied to the exercise of the statutory power of the High Courts under section 491 of the Code and, consequently, the expression "all proceedings pending in any court for the enforcement of the rights" must refer to the proceedings initiated in exercise of that right. The detenus could not, therefore, enforce their fundamental rights under articles 21, 32 and 14 while the Presidential Order lasted, but that did not affect the High Court 's power under section 491 of the Code. The President 's Order cannot bar the detenus from proving even under articles 32(l) and 226 that the detentions were not made 803 under the Defence of India Ordinance or the Act as they were outside the Ordinance or the Act or in excess of the power conferred by them or that the detentions were made malafide or in fraudulent exercise of power.

The appellants migrated to India in 1947 from West Pakistan. To begin with, they were given temporary allotment of land in two villages. In 1949, land was allotted to them on quasi permanent basis, and they have remained in possession of the same eversince. Originally, land was classified into two kinds: urban and agricultural land. Later on, a third classification was introduced, known as sub urban land. The two villages in which land was allotted to the appellants were not included in the notification with respect to sub urban land. In February, 1952, the Director of Rehabilitation passed and order declaring those villages as 734 sub urban land. The result of the order was that the allotment made to the appellants was to be reduced. The appellants went in revision to the Custodian General, and their revision petitions were dismissed on the ground that the view of Rule 14(6)(iii)(d) of the Rule it was open to the Central Government by a special order to direct cancellation or variation of the allotment made in favour of the appellants, and the Central Government has on the representation of the Punjab Government agreed to declare the two villages in question as sub urban by its order dated October 11, 1955. The appellants filed a writ petition in the High Court but that was dismissed summarily. The have come in appeal to this Court by special leave. ^ Held, that when the notification of March 24, 1955, was made under section 12 of the placed Persons (Compensation and Rehabilitation) Act, 1954, the evacuee property in those villages ceased to be evacuee property and became a part of the compensation pool. That property could only be dealt with under the Act of 1954. If any variation or cancellation of allotment was to he made that could be done only under the provisions of section 19 of Act of 1954. There was no power left in the Central Government to act under Rule 14(6)(iii)(d) of the Rules framed under the with respect to that land after the notification of March 24, 1955. Balmukand vs The State of Punjab, I.L.R. 1957 Punjab 712 and Major Gopal Singh vs Custodian of Evacuee Property, ; , followed.

The respondents were convicted under Section 20 of the Forward Contracts. (Regulation) Act, 1952. The District Magistrate found the firms and persons in management of business guilty of the offences with which they were charged and inflicted a consolidated fine of Rs. 2000/ with the direction that they would suffer simple imprisonment for three months in default of payment of fine. Against their conviction and sentence the accused preferred an appeal to the Sessions Judge. The Sessions Judge while dismissing the appeals found that the law required imposition of a minimum sentence of fine of Rs. 1000/ for each offence and as the sentence passed by the Trial Court was not in accordance with the law, he referred the matter to the High Court for passing an appropriate, sentence. The accused also preferred revision petition against the order of the Sessions Judge. Both the proceedings were heard together The High Court dismissed the revision petition preferred by the accused and accepted the reference by the Sessions Judge and enhanced the sentence so far as the firms are concerned, to a sum of Rs. 3,900/ . As regards the Managers or the Managing partners the High Court sentenced them to six months rigorous imprisonment. The Managers or Managing Partners filed miscellaneous petitions before the High Court for review of its order. The High Court accepted the petition for review and recalled its previous judgment imposing sentence of six months rigorous imprisonment on the petitioners and instead imposed a fine of Rs. 3900/ . The High Court came to the conclusion that no comprehensive notice was given to the accused to show cause why sentence of film should not have been enhanced to true sentence of substantive imprisonment and that the notice was only to show cause why the fine should not be increased. The State of Orissa filed an appeal by certificate in this Court The appellants contended. (1) The High Court had no jurisdiction to review its own judgment. (2) The High Court erred in holding that proper notice was not issued. (3) The notice issued to the accused was clear and wide enough to include the imposition of substantive sentence of imprisonment. The respondent contended: 1. The High Court has ample jurisdiction under section 561(A) and other provisions of the Criminal Procedure Code to review its own judgment. Section 369 of the Criminal Procedure Code is not applicable to judgments on appeal passed by the High Court much less to the judgment of the High Court passed in exercise of its criminal jurisdiction, under section 439 1115 Allowing the appeal the Court, ^ HELD: (1) Section 369 as enacted in 1898 provided that no Court other than High Court, when it has signed its judgment shall alter or review the same except as provided in Section 395 and 484 or to correct a clerical error. The section was redrafted in 1921 which gave power to the High Court to review its judgment only if it is provided by the code or by any other law for the time being in force. Section 362 of the Criminal Procedure Code 1974 also provides: "that save as otherwise provided by the Code or by any other law no court, when it has signed its judgment or final order disposing of a case shall alter or review the same except to correct a clerical or arithmetical error." [1119 A E] (2) The Letters Patent of the High Court at Bombay, Calcutta and Madras provide that the High Court shall have full power to review a case if such points or points of law are reserved under clause 25 or on it being certified by the Advocate General that there is an error and the points should be further considered. No other provisions relating to the power of review of the consideration of the High Court was brought to the notice of the Court.[1120 A C] (3) The provisions of Sec. 424 which make the procedure of the Court of original Jurisdiction applicable to the Appellate Court cannot confer the power of review. [1127 C] (i) The inherent power of the High Court conferred by Sec. 561(A) are restricted to making orders to give effect to any order under the Code or to prevent abuse of the process of any court or otherwise to secure the ends of justice. Section 561 (A) does not confer increased powers to the Court which it did not possess before that section was enacted. It only provides that those powers which the Court inherently possessed shall be preserved. [1121 ,H, 1122 A C] Emperor vs Khweja Nazir Ahmad, AIR 1945 Privy Council 18; Lala Jairam Das & Ors. vs Emperor, 1945 Law Reports 72 I.A. 120 State of U.P. vs Mohammad Naim, ; at 370 relied on. (2) Sec. 561(A) was added to the Code in 1923 because doubts were expressed about the existence of such inherent powers in the High Court after the passing of the criminal procedure code. The inherent powers cannot relate to any of the matters specifically dealt with by the Code. Inherent powers cannot be invoked to exercise powers which would be inconsistent with any of the specific provisions of the Code. The inherent power is only for giving effect to orders passed under the code, to prevent abuse of process of any court or otherwise to secure the ends of justice. [1122 D G] R. J. section Chopra vs State of Bombay, ; distinguished. Raj Narain & Ors. vs The State, AIR 1959 All. 315, U. J. section Chopra vs State of Bombay, ; ; Nirbhay Singh vs State of M.P., ; Sankatha Singh vs State of U.P.; , ; Superintendent and Remembrance of Legal Affairs W.B. vs Mohan Singh & Ors., referred to. 1116

The petitioner was appointed as Excise Sub Inspector in February 1964 in the State of U.P. and was later promoted as Excise Inspector on ad hoc basis on February 24, 1972. He was confirmed as Excise Sub Inspector w.e.f. April 1, 1967. Though promoted on ad hoc basis, the petitioner has continuously been working as Excise Inspector since February 24, 1972. Raghubir Singh and Ram Dhan, respondents are direct recruits to the post of Excise Inspector and they had joined the cadre later in point of time than the petitioner i.e. after 24.2.1972. They were promoted to the post of Excise Superintendent on 29.9.1983 and the petitioner was ignored. Being aggrieved the petitioner has filed this petition under Article 32 of the Constitution. According to the State and other respondents, the petitioner 's promotion to the post of Excise Inspector being on ad hoc basis was against the 1967 rules, he continues to be an ad hoc appointed and as such is not a member of the Excise Inspectors service constituted under the rules. His name has not been shown in the seniority list of Excise Inspectors. According to them his case has rightly not been considered for further promotion. On the other hand, it is contended on behalf of the petitioner that the 1967 Rules in as much as they confine the channel of promotion to Tari Inspectors and Clerks were wholly arbitrary and as such violative of Articles 14 and 16 of the Constitution. It is submitted on his behalf that the petitioner is, in any case, entitled to be promoted substantively to the cadre of excise Inspectors under 1983 rules and he is also entitled to fixation of seniority by counting his entire service as Excise Inspector from 1972 onwards. Respondents concede that the petitioner can be appointed under 1983 rules, but contend that he is not entitled to the benefit of past service for purposes of seniority. 885 Allowing the writ petition this Court HELD: When the 1967 rules were enforced on May 24, 1967 there was in existence a permanent cadre of Excise Sub Inspectors. The nature of duties of both the cadres were similar. The Excise Inspectors, on molasses duty of the ranges, used to supervise the work of excise Sub Inspectors under them. The Excise Sub Inspectors were thus natural contenders for the post of Inspectors. There was no justification whatsoever with the framers of the 1967 rules to have kept the Excise Sub Inspectors out of the channel of promotion to the post of Excise Inspectors. Prime facie there is no escape from the conclusion that the Excise Sub Inspectors were dealt with in an arbitrary manner by the framers of 1967 rules. [890H 891B] It is not disputed that under the 1983 rules, the petitioner is eligible to be promoted and appointed as Excise Inspector. [891C D] The 1983 rules came into force on March 24, 1983. There is nothing on the record to show as to why the petitioner was not considered for promotion under the 1983 rules till today. Inaction on the part of the State Government is wholly unjustified. The petitioner has been made to suffer for no fault of his. He has been serving the State Government as Excise Inspector since February 24, 1972 satisfactorily. [891E] Rule 21(i) of the 1983 rules specifically permits substantive appointment to the cadre of Excise Inspectors with back date. In all probability the provision of back date appointment was made in the 1983 rules to do justice to persons like the petitioner. The petitioner is eligible under the rules to be appointed as Excise Inspector by way of promotion. Accordingly the Court directed that the petitioner shall be deemed to be appointed by way of promotion as substantive Excise Inspector under the 1983 rules with effect from February 24, 1972. The petitioner shall be entitled to the benefit of his entire period of service as Excise Inspector from February 24, 1972 towards fixation of his seniority in the cadre of Excise Inspector. The petitioner shall be considered for promotion to the post of Excise Superintendent from a date earlier than the date when respondents Ram Dhan and Raghubir Singh were promoted to the said post. The petitioner shall also be entitled to be considered to the post of Assistant Excise Commissioner in accordance with the rules from a date earlier than the date when any of his juniors were promoted to the said post. [891G, 892B E] None of the respondents who have already been promoted to the 886 higher rank of Excise Superintendents or Assistant Excise Commissioners be reverted to accommodate the petitioner or any other person similarly situated. The State Government shall create additional posts in the cadre of Excise Superintendents and Assistant Excise Commissioners to accommodate the petitioner and other similar persons, if necessary. [892F] Masood Akhtar Khan & Ors. vs State of Madhya Pradesh, ; Direct recruits Class II Engineering Officers Association vs State of Maharashtra & Ors., ; ; P. Mahendran & Ors, etc. vs State of Karnataka Singh & Ors. , ; ; Krishena Kumar & Ors. vs Union of India & Ors. , ; ; A.K. Bhatnagar & Ors. vs Union of India & Ors. , ; ; Baleshwar Dass & Ors. etc. vs State of U.P. & Ors. , [1981] 1 S.C.C. 449; Narender Chadha & Ors. vs Union of India & Ors. , ; and Kumari Shrilekha Vidyarthi etc. vs State of U.P. & Ors. , , referred to.

The accused was tried and convicted by a Special judge for offences under section 161 of the Indian Penal Code and section 5 of the Prevention of Corruption Act. On appeal the whole proceedings were quashed as being ab initio invalid for want of proper sanction. The authorities accorded fresh sanction and directed the accused to be tried by a Special judge for the same offences. It was contended by the accused that the second trial was barred by article 20 (2) of the Constitution of India and by section 403 Of the Code of Criminal Procedure. Held, that the trial was not barred. article 20 (2) had no application in the case. The accused was not being prosecuted and punished for the same offence more than once, the earlier proceedings having been held to be null and void. The accused was not tried in the earlier proceedings by a Court of competent jurisdiction, nor was there any conviction or acquittal in force within the meaning of section 403(1) of the Code to stand as a bar against the trial for the same offence. Yusofalli 'Mulla vs The King, A.I.R. (1949) P. C. 264, Basdeo Agarwalla vs King Emperor, and Budha Mal vs of Delhi, Criminal Appeal No. 17 Of 1952, decided on October 1952, followed.

The appellant was convicted under section 8 read with section 16 of the Prevention of Food Adulteration Act by the Sub Divisional Magistrate, Jalaun and sentenced to six months rigorous imprisonment, the minimum sentence awardable under the P.O.F.A. 1950. In appeal the Session Court reversed it, but in further appeal by the State against his acquittal and reversal of the trial court decision, the High Court of Allahabad set aside the Session 's orders and restored that of the trial court. Dismissing the appeal by special leave the Court, ^ HELD: 1. Sections 8 and 9 of the Prevention of Food Adulteration Act, 1950 as amended by section S of the Amending Act 49 of 1964 cannot be read as repealing the old sections and empowering the Central Government or the State Government to appoint the Public Analyst or the Food Inspector after the coming into force of the amending Act, implying that any prior appointment o '. a Public Analyst or Food Inspector stood repealed. [345A] 2 Whether the notifications of the Government in 1968 appointing the public Analyst and the Food Inspector with retrospective effect from March 05 are valid or not need not be looked into because being an amendment Act, the appointment of the Public Analyst and the Food Inspector made by the State Government continued to be valid. [345B C] 3. The amended sections 8 and 9 do not in any way repeal sections 8 and 9 as they originally stood. As to the effect of the amendment the language of the amending sections will have to be examined to find out whether the original conditions were intended to be repealed. The amending provisions should be held as part of the original statute. [345D E] 4. Whenever the amended section has to be applied subsequent to the date of the amendment, the unamended provisions of the Act have to be read along with the amended provisions as though they are part of it. Reading the amended section, it is clear that there is no provision, express or implied, repealing the existing provisions or the rules made thereunder. The section will have to be construed as being in addition to what had already existed. The effect will be that the power of the State Government which already existed under the unamended section and the appointments made thereunder preserved and the action taken under the amended sections with be in addition to the powers of the State Government and the appointments which had already been made. [345F G] 342 Nagar Mahapalika, Lucknow vs Ram Dhani, A.I.R. 1971 All. 53 approved. The contention that the analysis of the milk after 44 days must yield to an adverse inference against the State as to adulteration cannot be accepted. [346A] In the present case there is evidence of the Food Inspector that he added formalin as a preservative and the report of the Public Analyst that no change had taken place in the constituents of milk which would have interfered with the analysis. This statement of the analyst was not challenged in any of the courts below. Apart from the statement of the Analyst not having been questioned, in this case it is admitted that formalin was added to the milk by the Food Inspector. The Food Inspector added 16 drops of formalin in each of the bottles and had them sealed properly. Rule 20 of the Prevention of Food Aduleration Rules requires that in the case of milk, cream Dahi, Khoa and Gur a preservative known as "formalin", that is to say, a liquid containing about 40 per cent of 'formaldehyde ' in aqueous solution in the proportion of 0.1 ml. (two drops) for 25 ml. Or 25`grams shall be added. There is also the clear evidence of Public Analyst that no change had taken place in the constituents of milk which would interfere with the analysis.[346D G, 347A] Babboo vs State, A.I.R. 1970 All 122; approved. Dattappa Mahadappa vs Secy. , Municipal Committee, Baldana, A.I.R. 1951 Nag.191 referred to.

Section 36(1) of the East Punjab Public Safety Act, 1949, (Punj. 5 Of 1949), which was passed in the wake of the partition disturbances in India with a view to ensure public safety and the maintenance of public order, provided that offences mentioned therein land committed in the area declared to be dangerously disturbed under section 20 Of the Act, should be tried under the summons procedure prescribed by Ch. XX of the Code of Criminal Procedure. By the first notification issued under section 2o of the Act, the whole of the Province of Delhi was declared to be a dangerously disturbed area; subsequently the second notification purported to cancel the first. The third notification then sought to modify the second by inserting into it the words "except as respect things done or omitted to be done before this notification ". The fourth and last notification issued under section 36(1) of the Act sought to save proceedings thereunder pending after the cancellation of the first notification. The appellant who was put up for trial in three cases for offences ordinarily triable under the warrant procedure, was tried under the summons procedure according to section 36(1) of the Act and the first notification and the trials were continued even after the expiry of the Act in respect of substantial parts of them under the same procedure and ended in his conviction which was affirmed by the High Court in appeal. The Act was a temporary Act and contained no provision saving pending proceedings. 'It was contended on behalf of the appellant that the first part of section 36(1) of the Act in treating the disturbed areas as a class by themselves and providing a uniform procedure for the trial of specified offences violated article 14 Of the Constitution and that the continuance of the trials under the summons procedure even after the expiry of the Act was invalid. Held, that the two tests of the validity of the classification made by the Legislature were, (1) that the classification must be based on an intelligible differentia and (2) that this differentia must be reasonably connected with the object of the legislation. Thus tested, there could be no doubt, in the present case, that the classification on a geographical basis made by the impugned 88 Act between areas that were dangerously disturbed and other areas, in the interest of speedy trial of offences, was perfectly justified. Ram Krishna Dalmia vs justice Tendolkar; , , relied on. Lachmandas Kewalram Ahuja vs The State of Bombay, ; , held inapplicable. But since the impugned Act was a temporary Act and contained no appropriate provision saving the summons procedure prescribed by it, that procedure could not, on the expiry of the Act, apply to the cases pending against the appellant. Krishnan vs The State of Madras, ; , relied on. Wicks vs Director of Public Prosecutions, [1947] A.C. 362, referred to. The third and the fourth notifications, obviously intended to cure the absence of a saving provision in the Act, were 'wholly outside the authority conferred on the delegate by section 2o or section 36(1) of the Act and must be held to be invalid. With the issue of the second notification, therefore, the entire province of Delhi ceased to be a dangerously disturbed area. It was erroneous to apply by analogy the provisions of section 6 of the General Clauses Act to cases governed by a temporary Act, such as the one in question, which did not contain the appropriate saving provision and contend that since the trials had commenced validly, their continuance under the same procedure even after the declaration had ceased to operate and subsequent orders of conviction and sentence passed therein were valid as well. Srinivasachari vs The Queen, Mad. 336, Mukund vs Ladu, and Gardner vs Lucas, , held inapplicable. Ram Singh vs The Crown, A.I.R. 1950 East Punjab 25, dis approved. Syed Qasim Razvi vs The State of Hyderabad, [1953] S.C.R. 589, referred to and distinguished.

On the application for pre mature release, made by the respondent, who was undergoing sentence of life imprisonment and had served a period of eleven and a half years the High Court directed that the respondent 's mercy petition pending before the Governor, should be decided within three months. Since this was not done, the High Court directed his release on bail, observing that if his mercy petition was dismissed he would have to surrender. Against this decision the State filed an appeal before this Court. Allowing the appeal, this Court, HELD: The High Court has not taken into consideration the provisions of Section 433A of the Criminal Procedure Code, 1973 while passing the order for the respondent 's release on bail. The judicial proceeding dealing with the conviction and sentence of the accused had been earlier concluded, and the order was passed while finally disposing of the writ petition alleging delay in disposal of the mercy petition. Thus, no case is now pending before the court. The order for the respondent 's release on bail has not therefore, been passed as an interim measure pending the decision of a case before the Court. In such a situation the provisions of Section 433A are attracted. The words "such person shall not be released from prison" are wide in their application and cannot be restricted only to case where the person has been released finally. The judgment in question is set aside and the case remitted to the High Court for reconsideration of writ petition confined to its limited scope.

Appeal No. 405 of 1957. Appeal from the judgment and order dated May 15, 1956, of the Calcutta High Court in I.T.R. No. 20 of 1953. section Mitra, B. Das and section N. Mukherjee, for appellants Nos. 2 to 41. A. N. Kripal and D. Gupta, for the respondent. November 23. The Judgment of the Court was delivered by HIDAYATULLAH, J. The point involved in this appeal is a very short one; but it requires a long narration of facts to reach it. The appeal is against the judgment and order of the High Court of Calcutta dated May 15, 1956, arising out of an Income tax Reference. By the Calcutta Municipal Act VI of 1863, there was established a Corporation under the name of "The Justices of the Peace for the Town of Calcutta". By a notification issued on November 2, 1864, one square mile of land forming part of the Panchannagram Estate was acquired by the Government of Bengal at the instance of the Justices. Section CXII of the Municipal Act provided that the Justices might "agree with the owners of any land for the absolute purchase thereof. . for any other purpose whatever connected with the conservancy of the Town". Under section CXIII, it was provided that if there was any hindrance to acquisition by private treaty, the Government of Bengal upon the representation of the Justices would compulsorily acquire the land and vest 600 such land in the Justices on their paying compensation awarded to the proprietor. The action which was taken by the notification was under section CXIII of the Municipal Act, and the acquisition was under Act VI of 1857, an Act for the acquisition of land for public purposes. The Panchannagram Estate was permanently settled under Regulation 1 of 1793. After the acquisition, the proprietor of Panchannagram Estate was granted abatement of land revenue assessed on the Estate to the extent of Rs. 386 7 1. This represented the proportionate land revenue on the land acquired. In August, 1865, the Justices were required to pay Rs. 54,685 2 10 as compensation payable to the proprietor and to other persons holding interest in the land. Another piece of land which is described as an open level sewer, was also acquired about the same time, and separate compensation was paid for it. With the amount of conveyance charges, the total compensation thus paid by the Justices was Rs. 57,965 8 10. On October 27,1865, the Government called upon the Justices to pay a further sum of Rs. 7,728 13 8. This order has not been produced in the case; but from other correspondence, it is easy to see that the amount represented an amount capitalized at 20 years ' purchase of land revenue attributed to the area acquired, which, as has been stated above, came to Rs. 386 7 1. This payment was made on or about January 12, 1866. Similarly, another amount was paid in July of the same year for redemption of the land revenue in respect of the strip of land for the open sewer. On December 5, 1870, a conveyance was executed by the Secretary of State in favour of the Justices of the Peace. It was there stated, inter alia: "Whereas the Honourable the Lieutenant Governor of Bengal hath thought fit that the said land so acquired as aforesaid would be vested in the said Justices of the Peace for the Town of Calcutta a Corporation created by and authorised to hold land under the said Act No. VI of 1863 of the Council of the Lieutenant Governor of Bengal to the end and intent 601 that the said land may be held by the said Justices for a public purpose, namely, for the conservancy of the Town. . and subject in every way to the same ' Act but free and discharged from all payment of land revenue, land tax and all and every tax or imposition in the nature of revenue derivable from land payable to Government in respect thereof; NOW THIS IN DENTURE WITNESSETH. .to hold the saidpieces of land, hereditaments and premises intended to be conveyed with the appurtenances except as aforesaid unto the said Justices of the Peace for the Town of Calcutta and their successors for ever free and clear and for ever discharged from all Government land revenue whatever or any payment or charge in the nature thereof to the end and intent that the said land may be used for a public purpose namely for the conservancy of the town upon the trusts and subject to the powers, provisions, terms and conditions contained in the said Act No. VI of 1863 of the Council of the Lieutenant Governor of Bengal and to the rules heretofore passed or hereafter to be passed by the Government of Bengal under the the said last mentioned Act;". On January 23, 1880, a temporary lease of the land known as the 'Square Mile ' was granted by the Justices of the Peace to the predecessors in title of the appellant (assessee), Srish Chandra Sen who has, since the filing of the appeal, died, leaving behind 40 legal representatives who have been shown in the cause title of the appeal. The lease was renewed for further periods, and the rent was also progressively increased. The conservancy arrangements for which the land 'was held were carried out, but, the lessee had the right to carry on cultivation with the aid of sewage. The assessee derived from this land various kinds of income, some being purely agricultural and some, non agricultural. For the assessment year 1942 43, the total agricultural income was computed at Rs. 99,987 9 6, and non agricultural income, at Rs. 12,503 8 0. Agricultural income tax was charged by the State of Bengal under the Agricultural Income 602 tax Act, on the agricultural income less expenses. For the assessment years, 1943 44, 1944 45, 1945 46 and 1946 47, the assessments were made along similar lines. In 1947, the Income tax Officer reassessed the income for the assessment year, 1942 43 after reopening the assessment under section 34 of the Income tax Act on the ground that the so called agricultural income had escaped assessment to income tax under the Indian Income tax Act. Assessments for the other years, 1943 44, 1944 45, 1945 46 and 1946 47 were also reopened, and the income in those years wag also similarly reassessed. The assessee appealed to the Appellate Assistant Commissioner against all these orders of the Income tax Officer, but his appeals failed. Against the orders of the Appellate Assistant Commissioner, appeals were filed before the Income tax Appellate Tribunal (Calcutta Bench). The Tribunal dealt with the assessment for 1942 43 separately, and allowed the appeal as regards assessment for that year. It held that the reassessment was improper under section 34 of the Income tax Act, because the Income tax Officer had not proceeded on any definite information but in the course of a "roving enquiry". The Tribunal also held that the income was exempt from taxation to income tax under section 4(3)(viii) of the Act, inasmuch as this income was derived from land used for agricultural purposes, which continued to be assessed to land revenue. In the appeals arising out of assessments for the subsequent years, a common order was passed by the Tribunal, remanding the appeals to the Appellate Assistant Commissioner for a rehearing. The Tribunal stated that the appellants had filed a number of documents to establish that land revenue was assessed on the land which, the Department contended, proved the contrary. The Tribunal felt that the matter should be reconsidered by the Appellate Assistant Commissioner, and hence remanded the cases. The Appellate Assistant Commissioner in the rehearing held that the land in question continued subject to land revenue, and that the lump sum payment was merely payment of revenue in advance. He accordingly allowed the appeals, and ordered exclusion of the income 603 from the assessments for the four years in question. On appeal by the Department, the Tribunal changed its opinion, and came to the conclusion that the ' payment of a lump sum was not a payment in advance of the land revenue due from year to year but was land revenue capitalised. It referred to the deed by which the proprietorship in the land was ves ted in the Corporation by the Secretary of State, and stated that by the document and the capitalisation of land revenue, the demand for land revenue was extinguished for ever. It accordingly allowed the appeals, and restored the orders of assessment made by the Income tax Officer. The assessee next moved the Tribunal for a reference setting out a number of questions which, he contended, arose out of the Tribunal 's order. The Tribunal referred the following question of law for the opinion of the High Court: "Whether on the facts and in the circumstances of this case the Tribunal 's conclusion that the land was not assessed to land revenue within the meaning of section 2(1)(a) of the Indian Income tax Act is justified?" The reference was heard by Chakravarti, C. J., and Sarkar, J., (as he then was). In an elaborate judgment, the learned Chief Justice upheld the conclusions of the Tribunal, and answered the question in the affirmative. Sarkar, J., in an equally elaborate order expressed his doubts about the correctness of the Chief Justice 's reasons, but declined to disagree with him. The question that arises in this case, as we have stated in the opening of this judgment, is a very short one. It is an admitted fact that by payment of ' a lump sum the liability to pay land revenue was redeemed and no land revenue was de manded or was ever demandable from the Justices or their assigns in perpetuity. The contention of the assessee is that this redemption saved the Justices from the liability for payment but did not affect the assessability of the land to revenue under Regulation I of 1793. Unless, it is contended,. there was a cancellation of the assessment, a,% is to be found in the 604 Land Tax and Tithe Redemption Acts in England, the liability must be deemed% to continue and land would still be assessed to land revenue for purposes of section 2(1)(a) of the Indian Income tax Act. That section reads as follows: "2(1) 'Agricultural income ' means (a) any rent or revenue derived from land which is used for agricultural purposes, and is either assessed to land revenue in (the taxable territories) or subject to a local rate assessed and collected by Officers of (the Government) as such". It is not denied that both the conditions, namely, "used for agricultural purposes" and "is either assessed to land revenue or subject to a local rate. . . have to co exist. It is admitted by the Department that there is no question of subjection to a local rate assessed and collected, in this case. The income derived from the land was from its use for agricultural purposes, and the first condition is thus satisfied. The dispute centres round the point whether the land .can be said to be assessed to land revenue, in spite of the lump sum payment in 1865. In the High Court, the matter was examined from three different points of view. The first was the effect of acquisition of the land by Government upon the continued assessability of the land to land revenue. The learned Chief Justice held that by the acquisition the assessment ceased to subsist. The second was the effect of the redemption of land revenue by the Justices by a lump sum payment. The learned Chief Justice was of opinion that it had the effect of cancelling the assessment. The last was the effect of the grant free from land revenue, about which the learned Chief Justice was of opinion that it freed the land from assessment to land revenue. Sarkar, J., agreed as to the first, but expressed doubts about the second and third propositions. According to the learned Judge, the acceptance of a lump sum payment in lieu of recurring annual payments was more a matter of agreement than a cancellation of assessment to land revenue. The matter has been argued before us from the 605 argument about the interpretation to be placed on the, conveyance by the Secretary of State which, according to him, only freed the Justices from 'payment ' of the assessed land revenue but did not cancel the assessment. No Act of Legislature bearing upon the power of Government to accept a Iump sum payment in lieu of the annual demands for land revenue has been brought to our notice. Counsel admitted that they were unable to find any such legislative provision. We have thus to proceed, as did the High Court, without having before us the authority of a legislative enactment. The only materials to which reference was made are: an extract from the explanatory notes in the Revenue Roll of the Touzi which shows that an abatement of land revenue pro tanto was granted to the proprietor of Panchannagram Estate, and a despatch from the Secretary of State for India (Lord Stanley) No. 2 (Revenue) dated December 31, 1858 recommending redemption of land revenue by an immediate payment of a sum of equivalent value, together with a Resolution of Government (Home Department No. 3264 (Rev) dated October 17, 1861) on permission to redeem the existing land revenue by the immediate payment of one sum equal in value to the revenue redeemed. By the resolution, it was provided that such redemption would be limited to 10 per cent of the total revenue in the Collectorate and the price to be paid was to be fixed at 20 years ' purchase of the existing assessment. It may be mentioned that in Despatch No. 14 dated July 9, 1862, the Secretary of State for India (Sir Charles Wood) did not agree with the earlier policy, but did not cancel it. It may thus be assumed that what was done was under the authority of the Crown, which was then paramount, which paramountcy included the prerogative to free land from the demand of land revenue with or without conditions. We have, therefore, to examine three things: the effect of acquisition on the continuance of the assessment to land revenue, the effect of redemption by a down payment on the same, 77 606 and the effect of the grant, free from land revenue, to the Justices. The acquistion was under Act VI of 1857. That Act provided in B. XXVI as follows: "When any land taken under this Act forms part of an estate paying revenue to Government, the award shall specify the net rent of the land including the Government Revenue, and the computed value of such rent: and it shall be at the discretion of the Revenue authorities either to pay over the whole of such value to the owner of the estate on the condition of his continuing to pay the jumma thereof without abatement; or to determine what proportion of the net rent shall be allowed as a remission of revenue, in which case a deduction shall be made from the said value proportionate to the value of such remission. " This provision only saved the Estate assessed to land revenue from liability to pay land revenue proportionately falling upon the land acquired compulsorily, subject to a like proportionate reduction in the amount of compensation payable to the proprietor of the estate, but the provision cannot be stretched to mean that the liability of the land actually acquired, to land revenue in the hands of grantees from the Government also ceased. Be that as it may, it is hardly necessary to view the present case from this angle at all, because, whether the land acquired continued to be subject to an assessment or must be deemed to be reassessed as a separate estate, the result would be the same if Government demand still subsisted on it, as, in fact, it did. There could have been no redemption of the liability by a down payment if no land revenue could have been demanded. The fact that the recurring liability was redeemed by a lump sum payment itself shows that in the view of Government as well as of the Justices, the 'Square Mile ' was still subject to the recurring demand and was thus still assessed to land revenue. It is, therefore, not profitable to investigate the effect of acquisition on the continued liability of the land to land revenue between the time there was acquisition and the vesting of the land in the Justices. For the above reason, we need not examine at 607 length the case in Lord Colchester vs Kewnoy where the acquisition by the Crown was held not to make, the area acquired immune from land tax, because the burden of the tax would then have fallen upon the remaining land situated in the unit from which it was acquired and on which unit a quota of the land tax was chargeable. Such a position does not arise here, because the Panchannagram Estate was given abatement and a lump sum was paid to free the land acquired from the liability to land revenue. Similarly, the decision of this Court in The Collector of Bombay vs Nusserwanji Rattanji Mistri and Others (2), where on the acquisition of some Foras lands held under Foras Land Act (Bombay Act VI of 1851) the Foras tenure was declared to have come to an end and on the same lands being resold by Government as freehold, they were declared not to be subject to assessment to which they were previously subject, is not very helpful. There do not appear to be any rules prior to 1875, which were framed under the Land Acquisition Act of 1870 (Act X of 1870) and which are to be found in the Calcutta Gazette of July 7, 1875, p. 818. If there were, they have not been brought to our notice. But a practice similar to the rules seems to have obtained under section XXVI of the Act of 1857. That Act also did not contain any provision for making rules, as are to be found in the subsequent Acts for compulsory acquisition of land. In the absence of any statutory law or rules, we must take the facts to be that after acquisition the Panchannagram Estate was given abatement of land revenue, and the demand for land revenue was transferred to the land acquired and granted to the Justices. At that stage, the liability to assessment remained, and it was that liability which was redeemed by a down payment. We next consider the effect of redemption. Learned counsel for the appellant contends that redemption in this connection means that by a single payment, the liability for periodical payments is saved but the assessment on the land remains uncancelled. He has cited Wharton 's Law Lexicon to show the meaning of (1) (2) ; 608 the word "redemption", which is "commutation or the substitution of one lump payment for a succession of annual ones: e.g. See the Land Tax and the Tithe Redemption Acts and many other statutes". Redemption is the act of redeeming which in its ordinary meaning is equal to bringing off a charge or obligation by payment. To what extent this redemption freed the land or its holder from the obligation depends not so much upon what the obligation was before redemption as what remained of that obligation after it. Here, the payment itself was meant to be "an immediate payment of one sum equal in value to the revenue redeemed" (vide the Resolution of Government dated October 17, 1861). By the down payment, the entire land revenue to be recovered from that land was redeemed. The payment was equal to the capitalised value of the land revenue. When such a payment took place, it cannot be said that the assessment for land revenue remained. The land was freed from that assessment as completely as if there was no assessment. Thenceforward, the land would be classed as revenue free, in fact and in law. In The Land Law of Bengal (Tagore Law Lectures, 1895) p. 81 section C. Mitra described these revenue free lands as follows: "There is another class of revenue free lands which comes within these rules laid down in the Registration and Tenancy Acts, namely, lands of which Government has, in consideration of the payment of a capitalised sum, granted proprietary title free in perpetuity from any demand of land revenue. " That this is what had happened here is quite apparent from the conveyance by the Secretary of State vesting the land in the Justices. It is significant that there is no mention of the payment of Rs. 7,728 13 8, nor of the assessability of the lands to land revenue. On the other hand, the deed of conveyance merely reaffirmed the position, which existed before by stating: ". to hold the said pieces of land, hereditaments and premises intended to be conveyed with the appurtenances except as aforesaid unto the said Justices of the Peace for the Town of Calcutta and their successors for ever free and clear and for ever discharged 609 from all Government land revenue whatever or any payment or charge in the nature thereof. " There can be no doubt that the land revenue was for ever extinguished and the land became free from land revenue, assessment in perpetuity. It cannot thereafter be said that the land was still assessed to land revenue. Mr. Mitra made a great effort to construe the operative part quoted above with the aid of the recital in the deed, where it was stated: ". but free and discharged from all payment of land revenue, land tax and all and every tax or imposition in the nature of revenue derivable from land payable to Government. He drew attention to the word 'payment ', and contended that what was saved was payment of land revenue. He argued that in case of ambiguity it was permissible to construe the operative portion of a deed in the light of the recitals, and cited Halsbury 's Laws of England, 3rd Edn., Vol. XI, p. 421, para. 680, Gwyn vs Neath Canal Co. (1) and Orr vs Mitchell (2). If there was any ambiguity in the operative portion of the deed, we may have taken the aid of the recitals. But there is no ambiguity in the deed. The history of redemption is a matter of record, and it is plain that Government was accepting a down payment and freeing land from land revenue. This is precisely what was done, and the result of the down payment is set out with great clarity in the deed itself, and it is that there was no land revenue assessed on or demandable from that land. In fact, no demand or payment or charge in the nature of land revenue could ever be made on it. In view of this, it is, in our judgment, quite satisfactorily established that this land was not assessed to land revenue and the income from it did not fall within section 2(1)(a) of the Income tax Act. The answer given by the High Court was thus correct. In the result, the appeal fails, and will be dismissed with costs. (1868) L R. Appeal dismissed (2) , 254.

By a notification dated November 2, 1864, a piece of land forming part of the Panchannagram Estate which was permanently settled under Regulation 1 of 1793, was acquired by the Government of Bengal at the instance of the justices of the Peace for the Town of Calcutta, which was a corporation established under the provisions of the Calcutta Municipal Act, 1863, and the justices were required to pay the compensation payable to the proprietor of the Estate. After the acquisition, the proprietor of the Estate was granted abatement of land revenue assessed on the Estate to the extent of Rs. 386 7 1, being the proportionate land revenue on the land acquired. On October 27, i865, the Government called upon the justices to pay a sum of Rs. 7,728 13 8, which represented the amount capitalised at 20 years ' purchase of land revenue attributed to the area acquired. On December 5, i870, the Secretary of State executed in favour of the justices of the Peace a conveyance of the land acquired, which stated, inter alia, that it was "ever free and clear and for ever discharged from all Government land revenue whatever or any payment or charge in the nature thereof to the end and intent that the said land may be used for a public purpose, namely, for the conservancy of the town." On January 23, 1880, a lease of the land was granted by the Justices to the predecessors in title of the appellant, under which the lessee had the right to carry on cultivation with the aid of sewage. Before the income tax authorities the appellant claimed that the agricultural income derived by him from the land was not liable to income tax, but the claim was rejected on the ground that on the payment of a lump sum in 1865 the liability to pay land revenue was redeemed and no land revenue was demanded thereafter; consequently, the income derived from the land was not agricultural income within the meaning of section 2(1) of the Indian Income tax Act, 1922, and was not, therefore, exempt from tax. The appellant 's contention was that the redemption only saved the justices from liability for payment but did not affect the assessability of the land to revenue under Regulation 1 of 1793. 599 Held, that by the down payment of a lump sum in 1865 the entire land revenue to be recovered from the land was redeemed and the land became free from land revenue assessment in perpetuity, as completely as if there was no assessment. Thereafter, the land could not be said to be assessed to land revenue within the meaning of section 2(1) of the Indian Income tax Act, 1922, and, consequently, the income derived therefrom could not be considered to be agricultural income under that section. The Collector of Bombay vs Nusserwanji Rattanji Mistri and others; , , distinguished.

These appeals arose out of a representative suit filed on behalf of the creditors of defendants I to 6 who hat executed a trust deed on August 26, 1936, conveying their properties to three trustees with authority to dispose of the one and distribute the ale proceeds ratably amongst the creditors. The trust deed required "the three trustees to act according to the decision arrived at either unanimously or by majority." The trustees accepted the trust and conveyed all the properties except the family house in administration of the trust. Two of the sale deeds in favour of two of the creditors, defendants 13 and 14, a mortgagee creditor, in the suit were executed by only two or the trustees . In a suit brought by the said defendants 1 to 6 for administration of trust the trial court passed a preliminary decree. The High Court on appeal remanded the matter to the trial court for a finding as to the market value of the lands sold. The trial court submitted its finding. At this stage defendants 1 to 6 withdrew the suit which we dismissed. The present suit under O. I, r. 8 of the Code of Civil Procedure we filed on October 29, 1947, before such withdrawal. The claimed made therein, inter alia, were for a declaration that the properties in question were still impressed with the trust, for the removal the surviving trustee and appointment of an a administrator to realise the amount, recover position of the properties and re sell them. The trial Judge passed a decree infavour of the plaintiffs . The High Court in substance confirmed that decree but modified it by awarding simple interest 207 instead of compound Interest decreed in favour of defendant 14. The two sale deeds, executed by only two of the trustees, were declared invalid and it was found that the third trustee did not give his consent to it. The sale deed in favour of defendant 12 was declared invalid on the ground that he had intermeddled with the trust estate and had thus become a trustee de sou tort. The courts below also rejected the pleas of limitation and res judicata raised on behalf of the defendants. Some of the creditor detendants appealed. After the appeals had been admitted by this Court the High Court amended the decretal order by substituting the words 'mesne profits ' by 'net profits ' under sections 151 and 152 of the Code of Civil Procedure. ^ Held, that the question whether article 120 or article 134 of Indian Limitation Act applied to a case had to be decided on the case made in the plaint, read as whole and properly construed. Since the present suit was not one for a mere declaration but for possession of property, having been valued and framed as such, deliverable to the administrator, it was governed by article 134 and not by article 120 of the Act and was thus within time. It was not correct to say that section 63 of the Indian Trust Act was exhaustive as to the remedies available to a beneficiary under a private trust or that claim for constructive possession, such as was made in the present suit, was prohibited under that section. Rani Chhatra Kumari Devi vs Prince Mohan Bikram Shah, Pat. 851, distinguished. Subbaiya Pandaram vs Mohammad Mustapha merachayar , (1923) L. R. 50 IE A. 295, A Subramania Iyer vs P. Nagarathna Naicker , (1910)20 Mad. L. J. 151 and Masjid shahid Ganj vs Shiromani Gurdwara Prabandhak Committee Amritsar (1940) L. R. 67 I. A. 251, referred to. Nor could the suit be said to be barred by res judicata since it did not fall within the scope of section II of the Code of civil Procedure. The suit being one under o. 1, r. 8 of the Code, it could not be said that defendants I to 6, plaintiff in the earlier suit, and the creditors, plaintiffs in the present suit, where the same party or parties claiming through each other. Clause 23 of the trust deed, properly construed, conformed to the provision of section 48 of the Trusts Act that where there are more trustees than one, they must all join in the execution of the trust, and did not provide for an exception to that rule, even though it provided that decisions by the trustees need not a ways be unanimous but could be by majority as well. Such sale deeds as had been executed by 208 two of the trustees only must therefore fail. The alternative. case of consent given by the third trustee to the transaction could be of no avail since it could not be substantiated by evidence Lala man Mohan Das vs Janaki Man Prasad, (1944) L. R. 72 I. A. 39, referred to. The High Court had jurisdiction under sections 151 and 152 of the Code of Civil Procedure to correct the obvious error in the decretal order even though the appeals from the said decree had already been admitted by this Court. Nor could the amendment be challenged on merits. Although a successful plaintiff would not normally be entitled to mesne profits for more than three years in view of article 109 of the Limitation Act, the court had jurisdiction in the case of a trust to make appropriate direction in the decree, while awarding net profiles to the trust and interest to the mortgagee, in adjustment of the equities between them. Salgur Prasad V Har Narain Das (1932) L.R. 59 I. A. 147, Bhagwat Dayal Singh vs Debi Dayal Sahu, (1908) L. R. 35 I. A. 48 and Jagannath Prasad Singh Chowdhury vs Surajmal Jalal , (1926) L. R. 54 I. A. 1, referred to. Even slight intermeddling with the trust estate is sufficient to make a person trustee de son tort. Since in the instant case, the acts of intermeddling by one of the defendant covered a fairly long period, the courts below were right in holding that the sale in his favour must be set aside as one in favour, of a trustee de son tort.

The appellant had filed a suit in the High Court of Calcutta for a declaration that the properties set out in the schedule belonged to a joint family and that the trust created by the father of the plaintiff/appellant in respect of the said properties was void. Pending the suit, a Receiv er was appointed by Justice A.N. Sen. While making the appointment the learned Judge had passed an order restrain ing the Receiver from selling or ' 'transferring ' ' any of the properties. The property in dispute is a building at Alipore, Calcutta, which comprised of four fiats. Grindlays Bank Ltd., respondent No. 1, had taken all the four flats on lease for 10 years from 1st June, 1958. After the expiry of the period of lease, Grindlays continued to be the tenant. On 1st April, 1978 Grindlays surrendered a portion of the tenancy, namely, two fiats i.e. fiats Nos. 1 and 2, in favour of Tatas. The Receiver let out these two fiats to M/s Tata Finlay Ltd. with effect from February 1979. Questioning the action of the Receiver, an application was filed in the High Court contending that the Receiver had no authority to create 962 any tenancy, that he had virtually created two new tenancies after terminating the original tenancy of Grindlays, and that neither Grindlays nor Tatas was entitled to occupy the premises and they were liable to be evicted summarily. The learned Single Judge was not inclined to order summary eviction as prayed for. An appeal was filed before the Division Bench. The Division Bench inter alia observed that any such relief could be obtained in a suit but the same could not be filed in the High Court inasmuch as the per mises in question was situated outside the Original Side Jurisdiction of the High Court. Before this Court it was contended on behalf of the appellant that (i) the Receiver had only such powers as were expressly granted by the Court; (ii) "transfer" included lease and therefore the Receiver by creating a new lease i.e. tenancy, had violated the injunction order passed by Justice A.N. Sen; (iii) after the expiry of the stipulated period of lease in favour of Grindlays, the tenancy turned to be a monthly tenancy and therefore the entire character of tenancy changed, and the monthly tenancy therefore was a new tenancy; (iv) protection under the West Bengal Premises Tenancy Act could not be extended to the tenant of a Receiv er; (v) the break up of the tenancy affected the integrity of the tenancy inasmuch as by virtue of this break up two new tenancies had come into existence; and (vi) the lease in favour of Grindlays had expired and by creating a monthly tenancy which may even go beyond three years, the Receiver had created a new lease in violation of Chapter 21 Rule 5(a) of the Original Side Rules. In reply, it was contended on behalf of Tatas that a monthly tenancy in respect of the said two flats had been created in their favour and therefore they were entitled to protection under the Tenancy Act. On behalf of Grindlays it was contended that after the expiry of the period of the original lease in 1968, rela tionship between Grindlays and the Trust continued to be of landlord and tenant; that at all material times they re tained the tenancy in respect of flats Nos. 3 and 4, and were governed by the Tenancy Act; that the surrender of flats Nos. 1 and 2 by the Grindlays and their continuation as tenants at reduced rent did not amount to a new lease in respect of flats Nos. 3 and 4, and hence there was no trans fer and no violation of the injunction. Dismissing the appeal as against respondent No. 1 and allowing it against respondent No. 2, this Court, HELD: (1) In the Transfer of Property Act, the word 'trans fer ' is 963 defined with reference to the word 'convey '. Similarly, the term 'transfer ' as used in Section 11 or Section 88 of the Bengal Tenancy Act, included a lease, as a lease is a trans fer of an interest in immovable property. A lease, there fore, comes within the meaning of the word 'transfer ' [968A B] Hari Mohan alias Hari Charan Pal vs Atal Krishana Bose & Ors., XXIII Vol. Indian Cases 925, referred to. (2) Surrender of part of the tenancy did not amount to implied surrender of the entire tenancy. Likewise the mere increase or reduction of rent also would not necessarily import a surrender of an existing lease and the creation of a new tenancy. [972C D] Konijeti Venkayya & Anr. vs Thammana Peda Venkata Subba rao & Anr. AIR 1957 A.P. 619 and N.M. Ponniah Nadar vs Smt. Kamalakshmi Ammal, AIR 1989 S.C. 467, referred to. (3) The Tenancy in favour of Grindlays continued as monthly tenancy for a period exceeding three years. It was an accretion to the old tenancy and not a new tenancy It could not therefore be said that the Receiver had created tenancy for a period exceeding three years in violation of Chapter 21 Rule 5(a) of the Original Side Rules. Merely because there was change in the character of a tenancy, namely that it had become a monthly tenancy, it did not amount to a new tenancy. [972G H] Utility Articles Manufacturing Co. vs Raja Bahadur Motilal Bombay Mills Ltd., , referred to. (4) A clear injuction order was passed by Justice A.N. Sen specifically restraining the Receiver from creating any new tenancy. But the injunction did not apply to the tenancy in favour of Grindlays in respect of fiats Nos. 3 and 4 inasmuch as it was an old tenancy though in a modification form. The Grindlays were therefore entitled to the protec tion under the provisions of the Tenancy Act. [974G H; 975A, C] Damadilal & Ors. vs Parshram & Ors., [1976] Supp. SCR 645 and Biswabani (P) Ltd. vs Santosh Kumar Dutta, ; , referred to. Ashrafi Devi & Anr. vs Satyapal Gupta & Ors., Suit No. 966 58 dated 9th Sept. 1977. Calcutta High Court and Armugha Gounder vs Ardhanari Mudaliar & Ors., , distinguished. 964 (5) In the case of Tatas, it was a new tenancy. Such a lease came within the meaning of 'transfer ' and in view of the injunction order passed by Justice A.N. Sen, creation of such a new tenancy was legally barred. Consequently the Tatas could not claim any protection under the provisions of the Act and were liable to be evicted. [978C] Kanhaiyalal vs Dr. D.R. Banaji, ; at p. 729; Smt. Ashrafi Devi & Anr. vs Satyapal Gupta & Ors., (supra) and Armugha Gounder vs Ardhanari Mudalier, (supra), referred to.

The lands in question owned by a Trust, of which the appellant was the Managing Trustee, were leased to respond ent. On his failure to pay rent the Trust filed a suit for his ejectment. The District Munsiff passed the decree on condition that the appellant would pay the respondent, costs of the building or superstructure, which had been built by the respondent 's predecessor in interest, and which the respondent had purchased from him. The litigation went upto High Court, which ultimately upheld the decree. During the pendency of second appeal, the respondent filed before the District Munsiff an application under Section 9 of the Tamil Nadu Tenants ' Protection Act, 1921 as amended by Act XIX of 1955 and Tamil Nadu Adaptation of Laws Order, 1969. The provisions of the said Act were extended to the town in which the lands were situated. In the said application he prayed for the issue of a direction to the appellant to sell to the respondent the said property, the land adjoining the building, as it was necessary for the beneficial enjoyment of the building. The application was rejected on the ground that such a prayer had been rejected earlier. The respond ent 's first appeal was allowed by the Subordinate Judge. The respondent had not surrendered the possession of the proper ty despite the deposit of the compensation amount by the appellant and the execution proceedings had remained stayed. Hence the appellant filed an appeal in .the High Court which, however, held that the respondent was entitled to file the application under Section 9 of the Act during the pendency of the execution proceedings, and the right of the respondent had not been affected by the deposit of the compensation amount. In the appeal before this Court, on behalf of the appel lant Managing Trustee, it was contended that the respondent was not entitled to exercise his right to purchase the land immediately adjoining the superstructure as might be re quired for the beneficial enjoyment of the said structure as the 22 said structure had not been put up by him, and 'that al though the respondent might have been in possession at the relevant time, he had lost the possession thereafter and hence he had lost his right under Section 9. Dismissing the appeal, this Court, HELD: 1.1 Under Section 9 of the Tamil Nadu Tenants ' Protection Act, 1921, any tenant, as defined in Section 2(4)(ii)(a), who is entitled to compensation under Section 3, and against whom a suit in ejectment has been instituted or proceedings under Section 41 of the , taken by the landlord may, within one month from the date of the Madras City Tenants ' Protec tion (Amendment) Act, 1955, coming into force, or the date with effect from which this Act is extended to the municipal town or village in which the land is situated, or within one month after the service on him of summons, apply to the Court for an order that the landlord be directed to sell for a price to be fixed by the court, the whole or part of the extent of land specified in the application. Section 10 of the Act makes the provisions under Section 9 applicable to cases where decree for ejectment has not been executed before the date from which the provisions of the Act are extended to the area in question. [25 C E] 1.2 In the instant case, although the decree for eject ment was passed against the respondent, as he had continued to remain in possession of the property and the decree had remained unexecuted till the date on which the provisions of the said Act had been extended to the area in question, the right of the respondent under Section 9 was not lost. [25 F] 1.3 As regards the superstructure, it was put up by the predecessor in interest from whom the respondent had pur chased. Thus, the High Court was entitled to take the view that it was put up by a predecessor in interest of the re spondent. [25 G] 1.4 In these circumstances, the respondent was certainly a tenant, within the meaning of Section 2(4)(ii)(a) of the Act, which takes within its ambit a tenant whose tenancy has been determined but continues to remain in possession, entitled to compensation under Section 3 of the Act and was, therefore, entitled to make an application under Section 9 of the Act. [25 H, 25 B] 23 2. The plea that although the respondent might have been in possession at the relevant time, but since he lost it thereafter, he lost his right under Section 9 cannot be allowed to be raised in this Court since this has not been pleaded in or considered in any of the courts below. [26 A B]

After the land in suit was sold in June, 1957, for an ostensible sum of Rs. 1,35:000/ , the appellants and respondents 1 to 3 instituted two separate suits for pre emptions in which the sale price inserted in the sale deed was also questioned. The two suits were consolidated and the plaintiffs in each suit were joined as defendants in the other suit under section 38 of Punjab Pre emption Act, 1913. The vendees thereafter admitted the rights of preemptors in both the suits conceding that a decree may be passed in their favour. The appellants accepted the sale price of Rs, 1,35,000 on or before 30th July 1958 and although respondents 1 to 3 wanted this issue to be decided on the merits, the trial court passed a decree in both the ,suits granting respondents 1 to 3 the right to preemption in the first instance on payment of Rs. 1,35,000 and, on their failure to so pay, holding the appellants entitled to exercise the right to pre emption on payment of the said amount on or before 30th October 1958. In an appeal to the High Court, respondents 1 to 3 challenged the correctness of the amount of the deposit to be made. Allowing the appeal, the High Court reduced the amount of deposit to Rs. 1,05,800/ and directed respondents 1 to 3 to deposit the amount within three months. In an appeal by the appellants to this Court against the decision of the High Court, a preliminary objection was taken challenging the appelants right to appeal it was contended that the appellants had based their right to pre emption in their suit on the ground of their being proprietors of the village where the land was situated. They were deprived of that right by the amendment of section 31 of the Punjab Pre emption Act by Punjab Act 10 of 1969 which amendment was retrospective in its operation and prohibited the Courts from passing any decree inconsistent with the amended Act. On the other hand it was contended inter alia for the appellants that they had already secured a decree in their favour by the trial court which had become final 'and with the terms of which the had complied: in the present appeal they were merely seeking modification of the decree of the High Court in favour of respondents 1 to 3 by getting the amount of pre emption money enhanced t0 Rs. 1,35,000/ without claiming any rights of pre emption in their own favour furthermore, the only appeal preferred by respondents 1 to 3 to the High Court was from the decree in 'heir own suit and for this reason also the decree in favour of the appellants by the trial court had become conclusive and unassailable. 130 HELD: Upholding the preliminary objection, It was not open to this Court to pass a decree of pre emption in favour of the appellants who were deprived by the Amendment Act of 1960 of their right to secure such a decree. [133 C D] The contention that the decree in the appellants ' suit had become final and the High Court 's order was only in relation to the suit of respondents 1 to 3 ignored the scheme of section 28 of the Act read with O.20, r. 14, C.P.C. which does not postulate decrees of pre emption in favour of rival preemptors on payment of different amounts of purchase money in respect of the same sale. Such a course may lead to conflicting decisions on the question of value of the property sought to be pre empted for the purposes of a pre emption suit. Besides., the appellants ' right to pre empted the sale under the unamended law was admittedly inferior to that of respondents 1 to 3 and the appellants could only be held entitled to exercise their right after the failure of those respondents to comply with the terms of the decree in their favour. [133 E G] Ram Swarup vs Munshi and Others, ; ; referred to.

The second respondent, who is the predecessor in inter est of the first respondent, had on. 26th September, 1946 leased out the land in dispute to the appellant at the first instance for a period Of 10 years. The lease however provid ed to the lessee/appellants option of extension at enhanced rent, twice for successive periods of 5 years, and a third option of extension for a further maximum period of one year. The appellants are stated to have exercised their option of extension for two successive periods of five years, hot failed to exercise the option of extension for one year thereafter. On that ground the first respondent instituted a suit for ejectment khas, possession and mesne profits. The appellants, as defendants, contested the malt stating, inter alia, that they did not exercise the option for renewal after the expiry of the original tern of 10 years as they became thika tenants from 28th February, 1949 i.e. the date of commencement of the Calcutta Thika Tenancy Act, 1949 as admitted by the second respondent in two judi cial proceedings before the Controller under the Calcutta Thika Tenancy Act, 1949. It was further stated that they never paid any enhanced rent; and that the first respond ent 's claim for the differential rent was rejected in the first respondent 's suit, and ultimately the special leave petition filed in the Supreme Court in that matter was also dismissed. 402 The suit for ejectment in the present suit was decreed by the Trial Court. The Appellate Court, while dismissing the appellants appeal, held that (1) the lease was for a period of 20 years and not for a period of less than 12 years, and hence sub section 5(b) of Section 2 of the Act had no application; and (2) the respondent were not barred by waiver, estoppel, res judicata or principles analogous thereto because of the earlier judicial proceedings filed by the second respondent as there could be no question of giving a status under the Act when in the facts of the case such a status was not available. The High Court dismissed the appellants ' second appeal. Before this Court it was urged on behalf of the appel lants that (1) there could be no controversy about the appellants ' status of thika tenants in view of the fact that the lease was at the first instance for 10 years only and its first and subsequent extensions were contingent on the appellants regular payment of rents, rates and taxes and enhancement of rent, which contingency did not happen as they did not pay any enhanced rent, but simply were holding over; (2) the second respondent admitted the Thika Tenants status of the appellants in the earlier proceedings before the Controller and were therefore estopped from questioning that status. On the other hand, it was urged on behalf of the re spondent that the lease having clearly been for a period of 20 years, the appellants have rightly been held not to be thika tenants under the Act; and that there could be no estoppel against a statute. Dismissing the appeal, it was, HELD: (1) Every contract is to be construed with refer ence to its object and the whole of its terms. The best interpretation is made from the context. The whole context must be considered to ascertain the intention of the par ties. It is an accepted principle of construction that the sense and meaning of the parties in any particular part of instrument may be collected 'ex antecedentibus et consequen tibus '; every part of it my be brought into action in order to collect from the whole one uniform and consistent sense, if that is possible. [409E G] N.E. Railway vs Hastings, (267), referred to. (2) In the construction of a written instrument, it is legitimate and in order to ascertain the true meaning of the words used and, if that be doubtful, it is legitimate to have regard to the circumstances sur 403 rounding their creation and the subject matter to which it was designed and intended they should apply, [410A B] (3) It is pertinent to note that the word used is 'exte nsion ' and not 'renewal '. To extend means to enlarge, ex pand, lengthen, prolong, to carry out further than its original limit. Extension ordinarily implies the continued existence of something to be extended. The distinction between 'extension ' and 'renewal ' is chiefly that in the case of renewal, a new lease is required, while in the case of extension the same lease continues in force during addi tional period by the performance of the stipulated act. In other words, the word 'extension ' when used in its proper and usual sense in connection with a lease means a prolonga tion of the lease. [411C E] (4) Construction of this stipulation in the lease in the above manner will also be consistent when the lease is taken as a whole. The purposes of the lease were not expected to last for only 10 years as the Schedule specifically men tioned the lease as "for a stipulated period of twenty years." [411E] Kanai Lal vs Paramnidhi, ; ; Mahadeolal Kanodia vs Administrator General of West Bengal, ; ; Annapuma vs Tincowrie Dutt, ; ; Shaf fiuddin & Ors. vs G.C. Banarjee, and Sheikh Gufan vs S.K. Ganguli, ; distinguished. (5) No particular order from the previous judicial proceedings conferring the status of thika tenants on the appellants has been shown. The special leave petition was dismissed by the Supreme Court "without going into the question whether the Thika Tenancy Act was applicable or not. " Hence, no status could be said to have been deter mined. [413D F] (6) The essential element of waiver is that there must be a voluntary and intentional relinquishment of a known right or such conduct as warrants the inference of the relinquishment of such right. It means forsaking the asser tion of a right at the proper opportunity. [413F G] (7) Waiver is distinct from estoppel in that in waiver the essential element is actual intent to abandon or surren der the right, while in estoppel such intent is immaterial. The necessary condition is the detriment of the other party by the conduct of the one estopped. An estoppel may result though the party estopped did not intend to lose any exist 404 ing right. Thus voluntary choice is the essence of waiver for which there must have existed an opportunity for a choice between the relinquishment and the conferment of a right in question. Nothing of the kind could be proved in this case to estopp the first respondent, who had filed the suit at the proper opportunity after the land was trans ferred to him. [413G H; 414A B] Shanti Devi vs A.K. Banerjee, , referred to.

In 1958, the Government of West Bengal, being of the view that the appellant company which enjoyed a monopoly in the supply of gas in Calcutta was negligent in looking after the interest of the consumers appointed a Committee to enquire into the unsatisfactory condition of supply of gas in Calcutta and to suggest remedial measures, including valuation of the Undertaking for the purpose of taking it over. The Committee reported that the distribution system was in a bad state of disrepair and that the maintenance system was in a very poor state. It recommended that the distribution system should be taken over immediately under the management of the Government to ensure and maintain supply of gas to consumers in Calcutta. On the basis of this recommendation, the oriental Gas Company (West Bengal Act XV of 1960) was passed by the State Legislature. Section 3 of the Act provided for the taking over for a limited period of the management and control and subsequent acquisition of the Undertaking of the Company Section 7 provided for the acquisition of the Undertaking of the Company at any time within a period of five years. Section 8(1)(b) provided for payment of compensation for the acquisition of the Undertaking of the Company, by the method of cost less depreciation or the method of capitalisation whichever was less. Section 9(2) provided that the compensation should be paid in bonds carrying interest at 3% p.a. from the date of issue and payable in 20 equal annual instalments. The Act was amended in 1968. The amended Act provided for the determination of compensation on the basis of full market value of the Undertaking and payment of compensation in the shape of bonds carrying interest from the date of enactment of the 1968 Act. In 1970 the Act was again amended. It provided for the determination of compensation by the method of capitalisation and payment of compensation in bonds carrying interest from the date of acquisition. Aggrieved by the method of determination of compensation the appellant filed a writ petition under article 32 of the Constitution questioning the vires of section 8(1)(b) and section 9(2) of the Act. The petitioner contended that (1) the principle of capitalising net profit as the sole factor for determining compensation payable for the acquisition of a public utility undertaking was not a relevant principle because a public utility concern was under an obligation to provide services to the community irrespective of whether its activities resulted in profit or loss; (2) the choice of the period of five years immediately preceding the take over of the management and control of the company for the purpose of calculating the average annual income was arbitrary; (3) at the time when the Undertaking was 618 acquired in 1962 the gilt edged securities were fetching 6% p.a. and therefore a higher multiplier than eight should have been provided and (4) the method of payment of compensation in the shape of bonds payable in twenty years at 3% interest had the effect of reducing the compensation to less than half of what was determined. Dismissing the petition, ^ HELD: (1) (a) The principles specified by the law for determination of compensation are beyond the pale of challenge, if they are relevant to the determination of compensation and are recognised principles applicable in the determination of compensation for property compulsorily acquired and if the principles are appropriate in determining the value of the class of property sought to be acquired. The science of valuation of property recognised several principals or methods for determining the value to be paid as compensation to the owner for loss of his property. If an appropriate method or principle for determination of compensation was applied, the fact that by the application of another principle which was also appropriate a different value was reached, would not justify the court in entertaining the contention that out of the two appropriate methods, one more generous to the owner should have been applied by the Legislature. If several principles were appropriate and one was selected for determination of the value of the property to be acquired, selection of that principle to the exclusion of other principles was not open to challenge since the selection to be left to the wisdom of the Parliament. [633 F H] R. C. Cooper vs Union of India, ; followed. Case law discussed. (b) It is well established that tangible and intangible property of a public utility undertaking may not necessarily be valued separately and it is a sound principle to treat them as indivisible aqud value the undertaking as an integrated whole. The authorities also treat capitalisation of net profit as one of the recognised principles of valuatior; of Public Utility Undertakings, though it may not be the best in the sense that it may not yield that result which is most advantageous to the owner of the undertaking. Any purchaser will put himself the question what profit does the undertaking make ? and how much should he invest to get the return. He may pay more if the prospects of better income in the future are bright and if the plant, machinery and buildings are in an excellent condition. He may pay less if the future is not so bright and if the plant, machinery and buildings are in a poor state and require replacement and repair. He may pay more if the undertaking is possessed of substantial, unencumbered properties. He may pay less if the lease of land on which the factory is located is about to expire. Thus the price may vary depending on various factors but the basic consideration is bound to be the profit yielding capacity of the undertaking. [639 E, G H] In the instant case there is nothing in the writ petition to indicate that lands were purchased by way of investment and not for the purpose of gas works or that the lands were capable of being sold independently of the Undertaking. The petitioner 's assertions are not borne out by any statement to that ecect in the petition. Therefore, there would be no justification now to allow the petitioner to amend the petition filed in 1971. Had there been 619 any substance in this assertion the petitioner would have mentioned it prominently in the petition itself. It would not have taken it so many years to discover a circumstance claimed to be so very vital. The case of the petitioner right through had been that the principle of capitalisation of income was irrelevant. [640 C E] (2)(a). There is no force in the charge of arbitrariness. There is nothing wrong with the choice of the period of five years preceding the take over for the purpose of calculating the average annual income. [640 F G] (b) If the legislature wanted to be unfair to the company, the previous year 's profit could have been taken as criterion on the ground that the value to be ascertained was the value on the date of take over and not somo hypotheticol anterior date, or instead of taking the average of the period of the proceeding five years the legislature could well have taken the average of the preceding three years. If either of these courses had been adopted compensation would be much less. Instead, the legislature fairly adopted a five year period for calculating the average annual income. It may be that in the historical part the undertaking was making much profit It may be that in the past there were lean years. Neither a specially fat nor a specially lean period from the past could properly be taken into account as that would be. irrelevant. The legislature was concerned with the value of the undertaking on or about the date of acquisition. It, therefore, very properly chose the period of five years immediately preceding The take over. [640 H; 641 A B] Appleton Water Co. vs Railroad Commission, 154 Wis. 121, 148, , referred to. Eminent Domain by Alfred Jahr, Valuation by Bright, Principles and Practice of Rating Valuation by Roger Emeny and Hector M. Wilks referred to. (3) There is equally no force in the argument that the legislature should have specified a higher multiplier than 'eight ' in fixing the compensation. If the legislature thought that a. return of 12% in the case of large industrial undertaking such as the petitioner 's was reasonable and on that basis adopted the multiplier 'eight ', it is not for this Court to sit in judgment over that decision and attempt to determine a more appropriate multiplier. The use of the term 'normal cases ' used in Cooper 's case where this Court pointed out that capitalisation of the net annual value of the property at a rate equal in normal cases to the return from gilt edged securities was an important method of determination of compensation, showed that it was not intended to lay down any invariable rule that whenever a method of capitalisation of net profits was adopted, return from gilt edged securities was to be the basis. That should depend on a variety of circumstances such as the nature of the property, the normal return which could be expected on like investment, the state of the capital market and several such factors. [641 G H; 642 A]

FACTS three civil appeals, stemming from three revision petitions to the high court of orissa under the orissa estates abolition act, 1951. the high court, after deciding various issues, remanded the cases to the compensation officer under the act, after over-ruling most of the contentions pressed before it by the appellant. shri achutananda purohit, appellant, was the intermediary in respect of vast forests and other lands comprised in the estate of jujumura in the district of sambalpur. the appellant has received around rs. 3,00,000/- but much more, according to him, is due. ARGUMENT the argument is that for certain reasons the appellant could not derive actual income from the forests taken over by the state from him and therefore there was no income-tax payable on any agricultural income from these forests. the contention is that therefore in arriving at the next income the deduction of income-tax is not permissible. ISSUE the estate vested in the state on april 1, 1960 by force of the act and the crucial question consequentially turns on the quantum of compensation awardable under chapter v of the orissa estates abolition act, 1951. the meat of the matter, the primary question agitated in the appeal, lopping off the fringe issues of lesser import, consists in the statutory methodology and functionaries prescribed by the act for quantifying the compensation and the compliance therewith by the statutory machinery in the case of the appellant. ANALYSIS the compensation officer is charged with fixing the quantum in the prescribed manner. a compensation assessment roll containing the gross asset and net income of each estate, together with the compensation payable in respect of such estate, has to be prepared by him. the dynamic rule of law, with a social mission, makes a meaningful distinction between rights steeped in the old system and compensation for deprivation of those interests, on the one hand, and the ordinary commercial transactions or regulation of rights untinged by social transformation urges, on the other. this gives rationality to the seeming disparity. moreover, the high court has rightly pointed out that the validity of s. 37(3) of the act which fixes a small rate of interest on the compensation amount has been upheld by the supreme court in gajapati narayan's case. for the purposes of the law, the rupee of long ago is the same as the rupee of today, although for the purposes of the market place and cost-of living, the housewife's answer may be different. art. 31(3) read with art. 31(2) bars any challenge to the amount of compensation on acquisition by the state subject to compliance with the prescriptions in the said sub-articles, on the ground that the amount so fixed or determined is not adequate. presidential assent has been accorded to this state act and so the ban operates. moreover, art. 31a repels the applicability of arts. 14, 19 and 31 to the acquisition by the state of any estate or of any rights therein etc. in the case of forests it is the assumed income and not the actual income that forms the basis of calculation of compensation. on the other hand, statutory compensation is provided for on the formula of assumed income in the previous year. similarly, an assumed income- tax also has to be worked out and deducted. the statutory scheme of compensation for forest lands consists of machinery for assessment of the net income which is multiplied on a sliding scale and the method of challenge to the determination by the aggrieved owner of state. so the first step is for the government to appoint forest officers from out of d.f.os. in the forest department, for the purposes of the act. those officers ascertain the income from the forest concerned and the figure so fixed is subject to the approval of the c.c.f. (chief conservator of forests). the power to approve implies the power to disapprove or modify but not to report or arrive at an income de hors the forest officer's report altogether. indeed, there was a fundamental difference in the basis adopted by the forest officer and the chief conservator in the matter of assessing the income of the forests in question. this was wrong and contrary to s. 26. it is astonishing that anyone should urge, as the appellant did, that the date of vesting is the last date by which the calculation of compensation should have been made and since that had not been done, the compensation officer had become functus officio in awarding compensation. in this context, it is perhaps not irrelevant to remember that the appellant, a freedom-fighter, is an 83-year-old man and, at this stage of his life, the state should show ommiseration not merely in quickly disposing of the proceedings but also in not being cantankerous in awarding and disbursing the balance compensation. STATUTE s. 24 of the orissa estates abolition act, 1951 stipulates that the compensation shall be determined for the estate as a whole and not separately for each of the shares therein. s. 26 has great relevance as it lays down the method of arriving at the gross asset and s. 27 has like significance as it focuses on the manner in which the net income from an estate shall be computed by deducting certain items from the gross asset of the estate. s. 28 states how the amount of compensation is to be determined and the methodology of payment. there are a few other s.s in chapter vi which deal with payment of compensation. the act also provides for appeal, second appeal and revision, the last being to the high court and the earlier ones being to the collector and a board constituted under s. 22. the rule-making power is vested in the government under s. 47 and there is a routine 'removal of difficulties' clause contained in s. 50. the policy of the law of agrarian reform postulates the extinguishment of ancient privileges and cornering of land resources, and the socioeconomic yardstick is different from what applies to ordinary purchases of real estate and this is manifest in the special provisions contained in art. 31a and art. 31b of the constitution.

Appeal No. 405 of 1957. Appeal from the judgment and order dated May 15, 1956, of the Calcutta High Court in I.T.R. No. 20 of 1953. section Mitra, B. Das and section N. Mukherjee, for appellants Nos. 2 to 41. A. N. Kripal and D. Gupta, for the respondent. November 23. The Judgment of the Court was delivered by HIDAYATULLAH, J. The point involved in this appeal is a very short one; but it requires a long narration of facts to reach it. The appeal is against the judgment and order of the High Court of Calcutta dated May 15, 1956, arising out of an Income tax Reference. By the Calcutta Municipal Act VI of 1863, there was established a Corporation under the name of "The Justices of the Peace for the Town of Calcutta". By a notification issued on November 2, 1864, one square mile of land forming part of the Panchannagram Estate was acquired by the Government of Bengal at the instance of the Justices. Section CXII of the Municipal Act provided that the Justices might "agree with the owners of any land for the absolute purchase thereof. . for any other purpose whatever connected with the conservancy of the Town". Under section CXIII, it was provided that if there was any hindrance to acquisition by private treaty, the Government of Bengal upon the representation of the Justices would compulsorily acquire the land and vest 600 such land in the Justices on their paying compensation awarded to the proprietor. The action which was taken by the notification was under section CXIII of the Municipal Act, and the acquisition was under Act VI of 1857, an Act for the acquisition of land for public purposes. The Panchannagram Estate was permanently settled under Regulation 1 of 1793. After the acquisition, the proprietor of Panchannagram Estate was granted abatement of land revenue assessed on the Estate to the extent of Rs. 386 7 1. This represented the proportionate land revenue on the land acquired. In August, 1865, the Justices were required to pay Rs. 54,685 2 10 as compensation payable to the proprietor and to other persons holding interest in the land. Another piece of land which is described as an open level sewer, was also acquired about the same time, and separate compensation was paid for it. With the amount of conveyance charges, the total compensation thus paid by the Justices was Rs. 57,965 8 10. On October 27,1865, the Government called upon the Justices to pay a further sum of Rs. 7,728 13 8. This order has not been produced in the case; but from other correspondence, it is easy to see that the amount represented an amount capitalized at 20 years ' purchase of land revenue attributed to the area acquired, which, as has been stated above, came to Rs. 386 7 1. This payment was made on or about January 12, 1866. Similarly, another amount was paid in July of the same year for redemption of the land revenue in respect of the strip of land for the open sewer. On December 5, 1870, a conveyance was executed by the Secretary of State in favour of the Justices of the Peace. It was there stated, inter alia: "Whereas the Honourable the Lieutenant Governor of Bengal hath thought fit that the said land so acquired as aforesaid would be vested in the said Justices of the Peace for the Town of Calcutta a Corporation created by and authorised to hold land under the said Act No. VI of 1863 of the Council of the Lieutenant Governor of Bengal to the end and intent 601 that the said land may be held by the said Justices for a public purpose, namely, for the conservancy of the Town. . and subject in every way to the same ' Act but free and discharged from all payment of land revenue, land tax and all and every tax or imposition in the nature of revenue derivable from land payable to Government in respect thereof; NOW THIS IN DENTURE WITNESSETH. .to hold the saidpieces of land, hereditaments and premises intended to be conveyed with the appurtenances except as aforesaid unto the said Justices of the Peace for the Town of Calcutta and their successors for ever free and clear and for ever discharged from all Government land revenue whatever or any payment or charge in the nature thereof to the end and intent that the said land may be used for a public purpose namely for the conservancy of the town upon the trusts and subject to the powers, provisions, terms and conditions contained in the said Act No. VI of 1863 of the Council of the Lieutenant Governor of Bengal and to the rules heretofore passed or hereafter to be passed by the Government of Bengal under the the said last mentioned Act;". On January 23, 1880, a temporary lease of the land known as the 'Square Mile ' was granted by the Justices of the Peace to the predecessors in title of the appellant (assessee), Srish Chandra Sen who has, since the filing of the appeal, died, leaving behind 40 legal representatives who have been shown in the cause title of the appeal. The lease was renewed for further periods, and the rent was also progressively increased. The conservancy arrangements for which the land 'was held were carried out, but, the lessee had the right to carry on cultivation with the aid of sewage. The assessee derived from this land various kinds of income, some being purely agricultural and some, non agricultural. For the assessment year 1942 43, the total agricultural income was computed at Rs. 99,987 9 6, and non agricultural income, at Rs. 12,503 8 0. Agricultural income tax was charged by the State of Bengal under the Agricultural Income 602 tax Act, on the agricultural income less expenses. For the assessment years, 1943 44, 1944 45, 1945 46 and 1946 47, the assessments were made along similar lines. In 1947, the Income tax Officer reassessed the income for the assessment year, 1942 43 after reopening the assessment under section 34 of the Income tax Act on the ground that the so called agricultural income had escaped assessment to income tax under the Indian Income tax Act. Assessments for the other years, 1943 44, 1944 45, 1945 46 and 1946 47 were also reopened, and the income in those years wag also similarly reassessed. The assessee appealed to the Appellate Assistant Commissioner against all these orders of the Income tax Officer, but his appeals failed. Against the orders of the Appellate Assistant Commissioner, appeals were filed before the Income tax Appellate Tribunal (Calcutta Bench). The Tribunal dealt with the assessment for 1942 43 separately, and allowed the appeal as regards assessment for that year. It held that the reassessment was improper under section 34 of the Income tax Act, because the Income tax Officer had not proceeded on any definite information but in the course of a "roving enquiry". The Tribunal also held that the income was exempt from taxation to income tax under section 4(3)(viii) of the Act, inasmuch as this income was derived from land used for agricultural purposes, which continued to be assessed to land revenue. In the appeals arising out of assessments for the subsequent years, a common order was passed by the Tribunal, remanding the appeals to the Appellate Assistant Commissioner for a rehearing. The Tribunal stated that the appellants had filed a number of documents to establish that land revenue was assessed on the land which, the Department contended, proved the contrary. The Tribunal felt that the matter should be reconsidered by the Appellate Assistant Commissioner, and hence remanded the cases. The Appellate Assistant Commissioner in the rehearing held that the land in question continued subject to land revenue, and that the lump sum payment was merely payment of revenue in advance. He accordingly allowed the appeals, and ordered exclusion of the income 603 from the assessments for the four years in question. On appeal by the Department, the Tribunal changed its opinion, and came to the conclusion that the ' payment of a lump sum was not a payment in advance of the land revenue due from year to year but was land revenue capitalised. It referred to the deed by which the proprietorship in the land was ves ted in the Corporation by the Secretary of State, and stated that by the document and the capitalisation of land revenue, the demand for land revenue was extinguished for ever. It accordingly allowed the appeals, and restored the orders of assessment made by the Income tax Officer. The assessee next moved the Tribunal for a reference setting out a number of questions which, he contended, arose out of the Tribunal 's order. The Tribunal referred the following question of law for the opinion of the High Court: "Whether on the facts and in the circumstances of this case the Tribunal 's conclusion that the land was not assessed to land revenue within the meaning of section 2(1)(a) of the Indian Income tax Act is justified?" The reference was heard by Chakravarti, C. J., and Sarkar, J., (as he then was). In an elaborate judgment, the learned Chief Justice upheld the conclusions of the Tribunal, and answered the question in the affirmative. Sarkar, J., in an equally elaborate order expressed his doubts about the correctness of the Chief Justice 's reasons, but declined to disagree with him. The question that arises in this case, as we have stated in the opening of this judgment, is a very short one. It is an admitted fact that by payment of ' a lump sum the liability to pay land revenue was redeemed and no land revenue was de manded or was ever demandable from the Justices or their assigns in perpetuity. The contention of the assessee is that this redemption saved the Justices from the liability for payment but did not affect the assessability of the land to revenue under Regulation I of 1793. Unless, it is contended,. there was a cancellation of the assessment, a,% is to be found in the 604 Land Tax and Tithe Redemption Acts in England, the liability must be deemed% to continue and land would still be assessed to land revenue for purposes of section 2(1)(a) of the Indian Income tax Act. That section reads as follows: "2(1) 'Agricultural income ' means (a) any rent or revenue derived from land which is used for agricultural purposes, and is either assessed to land revenue in (the taxable territories) or subject to a local rate assessed and collected by Officers of (the Government) as such". It is not denied that both the conditions, namely, "used for agricultural purposes" and "is either assessed to land revenue or subject to a local rate. . . have to co exist. It is admitted by the Department that there is no question of subjection to a local rate assessed and collected, in this case. The income derived from the land was from its use for agricultural purposes, and the first condition is thus satisfied. The dispute centres round the point whether the land .can be said to be assessed to land revenue, in spite of the lump sum payment in 1865. In the High Court, the matter was examined from three different points of view. The first was the effect of acquisition of the land by Government upon the continued assessability of the land to land revenue. The learned Chief Justice held that by the acquisition the assessment ceased to subsist. The second was the effect of the redemption of land revenue by the Justices by a lump sum payment. The learned Chief Justice was of opinion that it had the effect of cancelling the assessment. The last was the effect of the grant free from land revenue, about which the learned Chief Justice was of opinion that it freed the land from assessment to land revenue. Sarkar, J., agreed as to the first, but expressed doubts about the second and third propositions. According to the learned Judge, the acceptance of a lump sum payment in lieu of recurring annual payments was more a matter of agreement than a cancellation of assessment to land revenue. The matter has been argued before us from the 605 argument about the interpretation to be placed on the, conveyance by the Secretary of State which, according to him, only freed the Justices from 'payment ' of the assessed land revenue but did not cancel the assessment. No Act of Legislature bearing upon the power of Government to accept a Iump sum payment in lieu of the annual demands for land revenue has been brought to our notice. Counsel admitted that they were unable to find any such legislative provision. We have thus to proceed, as did the High Court, without having before us the authority of a legislative enactment. The only materials to which reference was made are: an extract from the explanatory notes in the Revenue Roll of the Touzi which shows that an abatement of land revenue pro tanto was granted to the proprietor of Panchannagram Estate, and a despatch from the Secretary of State for India (Lord Stanley) No. 2 (Revenue) dated December 31, 1858 recommending redemption of land revenue by an immediate payment of a sum of equivalent value, together with a Resolution of Government (Home Department No. 3264 (Rev) dated October 17, 1861) on permission to redeem the existing land revenue by the immediate payment of one sum equal in value to the revenue redeemed. By the resolution, it was provided that such redemption would be limited to 10 per cent of the total revenue in the Collectorate and the price to be paid was to be fixed at 20 years ' purchase of the existing assessment. It may be mentioned that in Despatch No. 14 dated July 9, 1862, the Secretary of State for India (Sir Charles Wood) did not agree with the earlier policy, but did not cancel it. It may thus be assumed that what was done was under the authority of the Crown, which was then paramount, which paramountcy included the prerogative to free land from the demand of land revenue with or without conditions. We have, therefore, to examine three things: the effect of acquisition on the continuance of the assessment to land revenue, the effect of redemption by a down payment on the same, 77 606 and the effect of the grant, free from land revenue, to the Justices. The acquistion was under Act VI of 1857. That Act provided in B. XXVI as follows: "When any land taken under this Act forms part of an estate paying revenue to Government, the award shall specify the net rent of the land including the Government Revenue, and the computed value of such rent: and it shall be at the discretion of the Revenue authorities either to pay over the whole of such value to the owner of the estate on the condition of his continuing to pay the jumma thereof without abatement; or to determine what proportion of the net rent shall be allowed as a remission of revenue, in which case a deduction shall be made from the said value proportionate to the value of such remission. " This provision only saved the Estate assessed to land revenue from liability to pay land revenue proportionately falling upon the land acquired compulsorily, subject to a like proportionate reduction in the amount of compensation payable to the proprietor of the estate, but the provision cannot be stretched to mean that the liability of the land actually acquired, to land revenue in the hands of grantees from the Government also ceased. Be that as it may, it is hardly necessary to view the present case from this angle at all, because, whether the land acquired continued to be subject to an assessment or must be deemed to be reassessed as a separate estate, the result would be the same if Government demand still subsisted on it, as, in fact, it did. There could have been no redemption of the liability by a down payment if no land revenue could have been demanded. The fact that the recurring liability was redeemed by a lump sum payment itself shows that in the view of Government as well as of the Justices, the 'Square Mile ' was still subject to the recurring demand and was thus still assessed to land revenue. It is, therefore, not profitable to investigate the effect of acquisition on the continued liability of the land to land revenue between the time there was acquisition and the vesting of the land in the Justices. For the above reason, we need not examine at 607 length the case in Lord Colchester vs Kewnoy where the acquisition by the Crown was held not to make, the area acquired immune from land tax, because the burden of the tax would then have fallen upon the remaining land situated in the unit from which it was acquired and on which unit a quota of the land tax was chargeable. Such a position does not arise here, because the Panchannagram Estate was given abatement and a lump sum was paid to free the land acquired from the liability to land revenue. Similarly, the decision of this Court in The Collector of Bombay vs Nusserwanji Rattanji Mistri and Others (2), where on the acquisition of some Foras lands held under Foras Land Act (Bombay Act VI of 1851) the Foras tenure was declared to have come to an end and on the same lands being resold by Government as freehold, they were declared not to be subject to assessment to which they were previously subject, is not very helpful. There do not appear to be any rules prior to 1875, which were framed under the Land Acquisition Act of 1870 (Act X of 1870) and which are to be found in the Calcutta Gazette of July 7, 1875, p. 818. If there were, they have not been brought to our notice. But a practice similar to the rules seems to have obtained under section XXVI of the Act of 1857. That Act also did not contain any provision for making rules, as are to be found in the subsequent Acts for compulsory acquisition of land. In the absence of any statutory law or rules, we must take the facts to be that after acquisition the Panchannagram Estate was given abatement of land revenue, and the demand for land revenue was transferred to the land acquired and granted to the Justices. At that stage, the liability to assessment remained, and it was that liability which was redeemed by a down payment. We next consider the effect of redemption. Learned counsel for the appellant contends that redemption in this connection means that by a single payment, the liability for periodical payments is saved but the assessment on the land remains uncancelled. He has cited Wharton 's Law Lexicon to show the meaning of (1) (2) ; 608 the word "redemption", which is "commutation or the substitution of one lump payment for a succession of annual ones: e.g. See the Land Tax and the Tithe Redemption Acts and many other statutes". Redemption is the act of redeeming which in its ordinary meaning is equal to bringing off a charge or obligation by payment. To what extent this redemption freed the land or its holder from the obligation depends not so much upon what the obligation was before redemption as what remained of that obligation after it. Here, the payment itself was meant to be "an immediate payment of one sum equal in value to the revenue redeemed" (vide the Resolution of Government dated October 17, 1861). By the down payment, the entire land revenue to be recovered from that land was redeemed. The payment was equal to the capitalised value of the land revenue. When such a payment took place, it cannot be said that the assessment for land revenue remained. The land was freed from that assessment as completely as if there was no assessment. Thenceforward, the land would be classed as revenue free, in fact and in law. In The Land Law of Bengal (Tagore Law Lectures, 1895) p. 81 section C. Mitra described these revenue free lands as follows: "There is another class of revenue free lands which comes within these rules laid down in the Registration and Tenancy Acts, namely, lands of which Government has, in consideration of the payment of a capitalised sum, granted proprietary title free in perpetuity from any demand of land revenue. " That this is what had happened here is quite apparent from the conveyance by the Secretary of State vesting the land in the Justices. It is significant that there is no mention of the payment of Rs. 7,728 13 8, nor of the assessability of the lands to land revenue. On the other hand, the deed of conveyance merely reaffirmed the position, which existed before by stating: ". to hold the said pieces of land, hereditaments and premises intended to be conveyed with the appurtenances except as aforesaid unto the said Justices of the Peace for the Town of Calcutta and their successors for ever free and clear and for ever discharged 609 from all Government land revenue whatever or any payment or charge in the nature thereof. " There can be no doubt that the land revenue was for ever extinguished and the land became free from land revenue, assessment in perpetuity. It cannot thereafter be said that the land was still assessed to land revenue. Mr. Mitra made a great effort to construe the operative part quoted above with the aid of the recital in the deed, where it was stated: ". but free and discharged from all payment of land revenue, land tax and all and every tax or imposition in the nature of revenue derivable from land payable to Government. He drew attention to the word 'payment ', and contended that what was saved was payment of land revenue. He argued that in case of ambiguity it was permissible to construe the operative portion of a deed in the light of the recitals, and cited Halsbury 's Laws of England, 3rd Edn., Vol. XI, p. 421, para. 680, Gwyn vs Neath Canal Co. (1) and Orr vs Mitchell (2). If there was any ambiguity in the operative portion of the deed, we may have taken the aid of the recitals. But there is no ambiguity in the deed. The history of redemption is a matter of record, and it is plain that Government was accepting a down payment and freeing land from land revenue. This is precisely what was done, and the result of the down payment is set out with great clarity in the deed itself, and it is that there was no land revenue assessed on or demandable from that land. In fact, no demand or payment or charge in the nature of land revenue could ever be made on it. In view of this, it is, in our judgment, quite satisfactorily established that this land was not assessed to land revenue and the income from it did not fall within section 2(1)(a) of the Income tax Act. The answer given by the High Court was thus correct. In the result, the appeal fails, and will be dismissed with costs. (1868) L R. Appeal dismissed (2) , 254.

By a notification dated November 2, 1864, a piece of land forming part of the Panchannagram Estate which was permanently settled under Regulation 1 of 1793, was acquired by the Government of Bengal at the instance of the justices of the Peace for the Town of Calcutta, which was a corporation established under the provisions of the Calcutta Municipal Act, 1863, and the justices were required to pay the compensation payable to the proprietor of the Estate. After the acquisition, the proprietor of the Estate was granted abatement of land revenue assessed on the Estate to the extent of Rs. 386 7 1, being the proportionate land revenue on the land acquired. On October 27, i865, the Government called upon the justices to pay a sum of Rs. 7,728 13 8, which represented the amount capitalised at 20 years ' purchase of land revenue attributed to the area acquired. On December 5, i870, the Secretary of State executed in favour of the justices of the Peace a conveyance of the land acquired, which stated, inter alia, that it was "ever free and clear and for ever discharged from all Government land revenue whatever or any payment or charge in the nature thereof to the end and intent that the said land may be used for a public purpose, namely, for the conservancy of the town." On January 23, 1880, a lease of the land was granted by the Justices to the predecessors in title of the appellant, under which the lessee had the right to carry on cultivation with the aid of sewage. Before the income tax authorities the appellant claimed that the agricultural income derived by him from the land was not liable to income tax, but the claim was rejected on the ground that on the payment of a lump sum in 1865 the liability to pay land revenue was redeemed and no land revenue was demanded thereafter; consequently, the income derived from the land was not agricultural income within the meaning of section 2(1) of the Indian Income tax Act, 1922, and was not, therefore, exempt from tax. The appellant 's contention was that the redemption only saved the justices from liability for payment but did not affect the assessability of the land to revenue under Regulation 1 of 1793. 599 Held, that by the down payment of a lump sum in 1865 the entire land revenue to be recovered from the land was redeemed and the land became free from land revenue assessment in perpetuity, as completely as if there was no assessment. Thereafter, the land could not be said to be assessed to land revenue within the meaning of section 2(1) of the Indian Income tax Act, 1922, and, consequently, the income derived therefrom could not be considered to be agricultural income under that section. The Collector of Bombay vs Nusserwanji Rattanji Mistri and others; , , distinguished.

In pursuance of a Housing Scheme the Tamil Nadu Housing Board, Madras had allotted residential plots over the land acquired under the Land Acquisition Act, to different groups of applicants including the low income group on terms and conditions stipulated in the lease deed Exh. B 3 sometime in the year 1963. After a lapse of more than a decade of the allotment, fresh demands were made from the allottees in 1975. Objecting to the same, the respondent herein filed a suit for self and on behalf of all the allottees of low income group settled in the Colony named Ashok Nagar, pray ing for a permanent injunction restraining the Board from enforcing the demand. The defendant Board questioned the very maintainability of the suit in a representative capacity and also pleaded that it was entitled to finally determine the correct prices for the plots after taking into account the final award of the compensation for acquired land and until then the prices were tentative. The trial court negatived the objection to the maintainability of the suit but dismissed it on merits. The first appellate court confirmed the decree. On second appeal, the High Court reversed the finding on merits. The High Court held that it was open to the Board to determine within a reasonable time what portion of the demand included the excess on account of compensation awarded by the courts for acquisition of the land and realize the same after serving fresh demand notices. But since the impugned demand included both the excess amount of compensation as also the additional developmental charges injunction was granted in regard to the entire demand as the two amounts were not separately mentioned. Dismissing the appeal of the Board, this Court, HELD: The provisions of Order 1 of Rule 8 have been included in the Code in the public interest so as to avoid multiplicity of litigation. The condition necessary for application of the provisions is that the 273 persons on whose behalf the suit is being brought must have the same interest. In other words either the interest must be common or they must have a common grievance which they seek to get redressed. [276C D] The Court, while considering whether leave under the Rule should be granted or not, should examine whether there is sufficient community of interest to justify the adoption of the procedure provided under the Rule. [276E] Persons who may be represented in a suit under Order I, Rule 8 need not have the same cause of action. [277F]

The respondents acquired appellant 's land under the Land Acquisition Act. The Land Acquisition officer awarded compensation at the rate of Rs. 3000/ per acre. In a reference under section 18, the Additional District Judge enhanced the compensation to Rs. 800/ per katha (1/32 of an acre). On appeal by the State, the High Court reduced the compensation to Rs. 475/ per katha. In an appeal by certificate the appellant contended that the High Court was in error in reducing the rate of compensation. Dismissing the appeal, ^ HELD: (1) The Additional District Judge wrongly excluded certain sale transactions on the ground that the plots in those transactions were at some distance from the acquired land. The High Court rightly held that the said transactions could not be excluded altogether from consideration. The High Court also took into account 3 other sale transactions which were relied upon by the appellant. The High Court rightly excluded from consideration certain sale deeds executed by the appellant. These transactions related to small plots of land situated on road site and were entered into after the land in dispute had been notified for acquisition. [586E H, 587C D] (2) Market value under section 23 means the price that a willing purchaser would pay to a willing seller for property having due regard to its existing condition with all its existing advantages and its potential possibilities when laid out in the most advantageous manner excluding any advantages due to the carrying out of the scheme for which the property is compulsorily acquired. In considering market value the disinclination of the vendor to part with his land and the urgent necessity of the purchaser to buy should be disregarded. [587E F] (3) There is an element of guess work inherent in most cases involving determination of the market value of the acquired land. But, this in the very nature of things cannot be helped. The essential thing is to keep in view the relevant factors prescribed by the Act. The finding of the High Court is based upon consideration of the evidence adduced in the case and there are no grounds to interfere with that finding.[587F G]

The appellant, a working journalist who was appointed on November, 1961 as a Staff Correspondent in the Calcutta Office of the respondent company while working as such at Calcutta, applied on 29 April, 1975 to the Government of West Bengal under sub section (1) of section 17 of the Working Jour nalists and Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955 for recovery of the unpaid portion of his wages relating to the period April 1968 to February 1973. While the conciliation proceedings were on, he was promoted and transferred to Pune on 16 February, 1976. The Conciliation Officer reported the fail ure of the proceedings before him on 16 November, 1976 and the Government of West Bengal made a reference under sub section (2) of section 17 of the Act to the First Labour Court, West Bengal on 23 August, 1977 for the adjudication of the dis pute between the parties. The preliminary objection raised by the respondent company that the Government of West Bengal was not competent to make the reference was rejected by the Labour Court. The respondent company 's writ petition chal lenging 'the order of the Labour Court was allowed by a Single Judge whose decision was affirmed in appeal by the Division Bench of the High Court. Allowing the appeal by special leave and dismissing the writ petition of the respondent company, this Court. HELD: (i) Sub section (1) ors. 17 of the Act requires that an application by the newspaper employee complaining that an amount due to him has remained unpaid by the employer should be made to the State Government. Which is the State Govern ment to which such application lies is 476 indicated by r: 36 of the Rules made under the Act and that rule provides that an application under section 17 of the Act shall be made to the Government of the State where the central office or the branch office of the newspaper estab lishment in which the newspaper employee is employed is situated. It is the location of the central office or the branch office in which the newspaper employee is employed which determines which State Government it will be. The rule works in favour of the convenience of the newspaper employ ee. [478C E] (ii) Sub section (2) of section 17 provides that if any question arises as to the amount due under the Act to a newspaper employee from his employer, the State Government may refer the question to any Labour Court, constituted by it under the or under any corresponding law relating to investigation and settlement of industrial disputes in force in the State. If a question arises as to the amount due, it is a question which arises on the appli cation made by the newspaper employee, and the application having been made before the appropriate State Government, it is that State Government which will call for an adjudication of the dispute by referring the question to a Labour Court. The State Government before whom the application for recov ery is made is the. State Government which will refer the question as to the amount due to a Labour Court. [478F G; 479C D] In this case, the appellant was employed at the Calcutta branch of the respondent company. He made the application to the Labour Department of the Government of West Bengal for recovery of the unpaid portion of his wages. When the ques tion arose as to the amount due to the appellant, the Gov ernment of West Bengal made the reference for adjudication to the First Labour Court, West Bengal. Upon the construc tion of sub section (2) of section 17 as indicated at (ii) above, it is beyond dispute that the Government of West Bengal is competent to make the reference. The High Court erred in holding that the reference was without jurisdiction and that it was the State of Maharashtra which was competent to make the reference. [479E G]

V, the father of the appellants had a brother R who died childless leaving behind him his widow, N. After R 's death a series of litigation started between V & N. V filed a suit in 1913 against R. for waste committed by her husband 's estate and was appointed a receiver in that suit. In that suit, he got a decree, V as receiver filed 3 suits on the foot of 3 mortgages in favour of R. In execution of the decrees, 3 valuable properties were purchased. These three properties are the subject matter of the present appeal. V died in 1947 and N in 1951 after executing a will bequeathing in favour of her brother S all her properties. S filed the suit out of which this appeal arises, for pos session of the properties bequeathed to him under the will and for mesne profits. The Sub judge held that the said properties became accretions to the main estate of R and therefore, the plaintiff was entitled only to an account of the income from these properties till the death of V. On appeal, the High Court allowed the appeal in part. Before this Court four points were raised by the appellants : (I) The High Court committed an err or in not hearing the whole appeal but confining the hearing merely to the points on which the finding was called for from the lower court. (2) a portion of the properties which was lost to the estate due to N 's negligence of not paying the land revenue, should be debited against her share in them. (3) the cost incurred by V in the suit and in the execution proceedings should have been taken into account in allocating the properties between the appellants and the respondents and (4) that the widow N, bad treated the properties as accretion to the husband 's estate and therefore, the appellants are entitled to the whole of the property. Allowing the appeal, HELD : (1) When a finding is called for on the basis of certain issues framed by the Appellate Court, the appeal is not disposed of either in whole or in part. Therefore the parties cannot be barred from arguing the whole appeal after the findings are received from the Court of first instance. [597 E) Gopi Nath Shukul vs Sal Narain Shukul, A.I.R. 1923 Allahabad 384, referred to. (2) A Hindu widow is entitled to the full beneficial enjoyment of the estate. So long as she is not guilty of wilful waste, she is answerable to no one. In her lifetime, the reversionary right is a mere possibility or spes successionis. It cannot be predicted who would be the nearest reversioner at the time of her death. It is, there , fore, impossible to contend that for any loss to the estate due to the negligence on the part of the widow, he should be compensated from out of the widow 's separate properties. He is entitled only to the property left on the date of the death of the widow. [599 C; FG] (3) The income received by V and the amounts spent for the suit and the execution proceeding were taken into account at the time of settlement of accounts and it was open to V to realise the excess amount from the estate of R. It is not now open to the appellants to claim that these amounts should be separated from the amount of the decree and should be added to the amount of principal and interest accrued during the lifetime of R. [600 A C] (4) From the evidence, it is clear that the widow did not show any intention to treat the income from, the husband 's estate as an accretion to that estate. [601D] Akkanna vs Venkayya, I.L.R. , referred to. The appeal was sent back to High Court for hearing afresh.

A suit (No. 1262/53) Challenging the notification under Section 4 of the Land Acquisition Act dated 10 10 1952 issued by the former Government of Bombay and later another notification under Section 6 of the Act dated 14 8 1953 (issued during the pendency of the suit), notifying that the final plots Nos. 41. 42 and 43 were required for public purpose viz. State Transport was dismissed by the Trial Court on 28 1 1959. The first and the second appeals having failed, the respondents came up to this Court. This Court in its decision inter partes, Valji Bhai 's case struck down Section 6 notification on the ground that the acquisition being for the benefit of a Corporation, though for a public purpose was bad beeause no part of the compensation was to come out of the public revenue and the provisions of Part VII of the Act had not been complied with. After the bifurcation of the erstwhile State of Bombay, the land acquisition proceedings came within the cognizance of Gujarat State. The State by its letter dated 22 8 1966 decided to contribute towards compensation a sum of Re. 1/ which was subsequently raised to Rs. 500/ . The Government felt that as long time has elapsed since the earlier report under Section 5A was submitted by the Collector, a fresh enquiry should be made. Accordingly the Additional Special Land Acquisition Officer issued a notice dated 1 8 1966 intimating to the respondents that if they so desired they might submit their further objections on or before 16 8 1966. Complying with this notice, the respondents submitted further objections on 31 8 1966 and they were also given a personal hearing. After examining the enquiry report submitted by the enquiry officer the Government of Gujarat issued a notification under Section 6 on 10 10 1967. The respondents questioned the validity and legality of this notification in the writ petition filed by them on 14 2 1968 on the only ground that it was issued more than 15 years after the date of Section 4 notification. The High Court was of the opinion that if the power to make a declaration under Section 906 6 is exercised after an unreasonable delay from the date on which notification under Section 4 is issued such exercise of power would be invalid and it accordingly struck down the notification under Section 6 of the Act. Hence the two appeals one by the State of Gujarat and the other by the Gujarat State Road Transport Corporation. Allowing the appeals by certificate, the Court ^ HELD: 1. The impugned section 6 notification was issued within the prescribed period introduced by the 1967 Amendment Act and, therefore could not be struck down on the only ground that the power to issue second section 6 notification was exercised after an unreasonable and unexplained delay. Section 6 notification, dated 10th october 1967, therefore is valid and legal.[918G H, 919A] 2. A combined reading of the provisions contained in sub section (2) of Section 4 with the one contained in the proviso to sub section (1) of Section 6 introduced by the Land Acquisition (Amendment and Validation) Act, (Central Act 13 of 1967) with effect from 20 1 1967 would make it clear that the Government would be precluded from making a declaration under section 6 after the expiry of a period of three years from the date of issue of a notification under Section 4 which may be issued after the Amendment Act came into force. And in respect of those section 4 notifications which were issued prior to the commencement of the Ordinance i.e. 20 1 1967, any notification which is required to be issued under section 6 must be made within a period of two years whereafter as a necessary corollary all section 4 notifications issued prior to 20th January 1967 would stand exhausted and would not provide either a source of reservoir for issuing section 6 notification. Consequently the mischief sought to be set at naught by the High Court by reading by necessary implication in the scheme of sections 4, 5A, and 6 the concept of exercise of statutory power within a reasonable time has been statutorily remedied. The apprehensions of the High Court that if not checkmated by implying that such statutory power must be exercised within a reasonable time to curb arbitrary exercise of power to the detriment of a citizen have been taken note of by the legislature and fully met. Absence of any decided case on the subject of which High Court took note could not permit an inference as has been done by the High Court that in the absence of a decided case the legislature would not remedy the possible mischief. Legislature often does take note of a possible abuse of power by the executive and proceed to nip it in the bud by appropriate legislation and that has been done in this case. There is now no more possibility of a gap of more than three years from the date on which section 4 notification is issued, otherwise it would be invalid as being beyond the prescribed period. [916 G H, 917 A D] In the instant case, the notifications under section 4 was prior to the commeneement of the ordinance. Therefore, the provision contained in sub section (2) of section 4 of the 1967 Amendment Act would be directly attracted. The Government could, therefore, make a declaration within a period of two years from 20th January 1967. The Government has in fact issued the impugned notification under section 6 on 10th October 1967 i.e. within the period prescribed by the Statute. [917 E F] 907 3.When a period is prescuibed for exercise of power it manifests the legislative intention that the authority exercising the power within the prescribed time could not at least be accused of inaction or dithering and, therefore, such exercise of power could not be said to be bad or invalid on the only ground that there was unreasonable delay in the exercise of the power. The very prescription of time inheres a belief that the nature and quantum of power and the manner in which it is to be exercised would consume at least that much time which the statute prescribes as reasonable and, therefore, exercise of power within the time could not be negatived on the only ground of unreasonable delay. [917H, 918 A B] Therefore, in this case, there was no unreasonable delay in exercise of power and hence the exercise was neither bad nor invalid. [918B] 4. Once the legislature stepped in and prescribed a sort of limitation within which power to issue notification under section 6 could be exercised, it was not necessary to go in search of a further fetter on the power of the Government by raising the implication. [918F G] In this case, the High Court by implication read a fetter on the power of the Government to issue section 6 notification within a reasonable time after the issue of section 4 notification after observing that there was no express provision that such power ought to be exercised within a reasonable time. In raising this impliccation the High Court took into account the postulate that every statutory power must be exercised reasonably and a reasonable exercise of power implies its exercise within a reasonable time. Coupled with it two other factors were taken into consideration such as the effect of issuing a section 4 notification on the rights and obligations of the owner of the land whose land is proposed to be acquured; the right of the Government to unilaterally cancel section 4 notification in the event of fall in prices; history of legislation; and delayed issue of section 6 notification would deny adequate compensation to the owner. But by the time the High Court examined this matter the legislature had already introduced a provision by which the power to issue section 6 notification was to be exercised within the prescribed period of time. At that stage there hardly arose a question of a search of the fetter on the power of the Government ignoring to some extent the express statutory provision. [918C F] 5. In the case of death of a party to a proceeding who is joined in his capacity as Karta of an undivided Hnndu family, if the undivided Hindu family continues to be in existence the succeeding Karta can be substituted for the deceased Karta of the family and that would be sufficient compliance with Order XXII Rule 4 of C.P.C. [911D E] In the insant case an application made under Order XXII Rules 10 C.P.C. made after the prescribed period of limitation and in order to avoid seeking condonation of delay for setting aside abatement is not correct. [911E] [The Court, however, overruled the objection on this ground since the L.rs. have already been substituted].

The appellant State issued a notification under section 4 of the West Bengal Estates Acquisition Act, 1953 covering the land comprised in the tea garden of the respondent company. The Revenue Officer issued notices to the respondent company initiating proceedings for assessment of rent. The Company objected stating that it was not an intermediary within the meaning of the Act and since its tea estate comprised of free hold land the Revenue Officer had no jurisdiction to assess the rent under Section 42(2) of the Act. The Revenue Officer rejected the contention and fixed the rent at Rs.2,375.94 per year. On revision preferred by the State, the Revenue Officer determined the rent at Rs.8,765.24 per year. The Company preferred appeals before the Tribunal. The appeals were dismissed in default and the restoration applications were also rejected. Thereafter, the Company preferred applications before the High Court under Section 115 CPC read with Article 227 of the Constitution for restoration of the two appeals, and obtained stay of the operation of the Revenue Officer 's order. During the pendency of the cases, the Additional Deputy Commissioner informed the respondent that inspite of the repeated reminders the company had not executed the long term lease for 30 years on prepayment of the requisite number of instalments or rent and cess. The respondent company replied pointing out that the High Court had granted the stay order and therefore the matter stood stayed till the disposal of the said cases. Thereafter, the Collector served upon the Company, a notice under section 106 of the Transfer of Property Act, 880 1882 determining the tenancy of the company In respect of the tea garden on the expiry of the specified date. The company was required to hand over the vacant and peaceful possession of the tea garden. In reply to the said notice, the company stated that in view of the stay order granted by the High Court no further proceedings be taken. Thereafter the Collector took over the possession of the tea garden. The applications before the High Court were still pending. However, aggrieved by the order of the Collector taking over its tea garden, the Respondent preferred a Writ Petition before the High Court Allowing the writ petition, the High Court directed the appellant State Government and other authorities to deliver the possession of the tea garden to the Company within a month. Aggrieved by the High Court 's order, the State as also the West Bengal Tea Development Corporation to whom the possession of the tea garden is transferred by the State, preferred appeals, before this Court. Disposing of the appeals, this Court, HELD:1. The Revenue Officer had initially determined the rent at the rate of Rs.2,371.94 per year, but the same was not accepted by the Government and on a representation made by the State Government, the Revenue Officer had refixed the rent at Rs.8,769.24 per year by order dated 22.8.1968. The Company had challenged the rent refixed at Rs. 8.769.24 and the High Court had stayed the order of the Revenue Officer fixing the rent at the rate of Rs.8,769.24. In view of these circumstances, it was necessary on the part of the Collector to have passed an order of summary settlement as contemplated under Form I Schedule F of the West Bengal Estates Acquisition Rules, 1954. The High Court was, therefore, right in holding that the Collector had no jurisdiction to terminate the tenancy on the ground of non payment of rent for not executing a lease deed inasmuch as the Collector had not mentioned in the notice terminating the tenancy under Section 106 of the Transfer of Property Act, that he was prepared to accept the rent at the rate of Rs. 2,375.94 per year as determined initially by the Revenue Officer. [886 F H; 887 A,B] 2.In order to do complete justice between the parties, it is proper that the respondent Company should be given the prosession of the tea garden provided the Company pays the entire arrears of rent from 27.7.1965to 21.4.1981, the date when the Company was dispossessed, 881 calculated at the rate of Rs. 8,769.24 per year after adjusting any amount already paid, within three months. There would be no necessity for the Collector to make any order of summary settlement and a long term lease should be executed as contemplated under sub section (3) of Section 6 of the West Bengal Estates Acquisition Act, 1953. As soon as the arrears of rent are paid by the Company and a lease deed is executed, the Company should be handed over the possession of the tea garden. In case any increase in the amount of rent is permissible under the law due to lapse of time, the State Government would be free to take the same into consideration while granting the long term lease. [887 B D]

In these two appeals the same questions of law arise and the facts in C.A. No. 166 of 1962 are similar to those in C.A. 167 of 1962 which are stated below. The appellant in C.A. No. 167 of 1962 is the owner of certain lands situated in the city of Kanpur. The land is occupied by a Mill and godowns and no part of the land is waste land or arable land. In 1932 the U. P. Government sanctioned by a notification a Scheme (Scheme No. XX) of the improvement Trust, Kanpur. This Trust has been replaced by the Development Board, Kanpur, by reason of the Kanpur Urban Area Development Act, 1945. 426 In 1955 the Housing Department of the Government of U.P, sponsored a scheme for building industrial tenements. Part of the scheme concerned the locality in which the land in dispute is situated. In 1956 a notification was issued under section 4 of the Land Acquisition Act, 1894, by the Governor of U.P. to the effect that the plots in dispute were required for the construction of tenements tinder the subsidized industrial.housing scheme of the U.P. Government as well as for general improvement and street scheme No. XX of the Board. This was followed by a notification under section 6 of the Land Acquisition Act stating that the case being one of urgency the Governor was pleased under sub sections (1) and (I A) of section 17 of that Act to direct that the Collector of Kanpur, though no award under section II had been given, might on the expiration of the notice mentioned vs 9(1) take possession of land mentioned in the schedule. Subsequently a notice under section 9 was issued which stated that possession of the land will be taken within 15 days. The appellant thereupon filed a writ petition under article 226 of the Constitution in the High Court. Two main points were raised in the petition. Firstly, it was contended that as the acquisition was for the purpose of Scheme No. XX of the Board action had to be taken in accordance with section 114 of the Kanpur Act and the schedule thereto and as no action had been so taken the proceedings for acquisition were bad. In the second place, it was urged that it was not open to the Governor to issue the notification under section 6 of the Land Acquisition Act without first taking action under section 5A thereof. The High Court rejected both these contentions and in the result dismissed the writ petition. The present appeal was filed with a certificate issued by the High Court. In the appeal before this Court the same questions which were agitated before the High Court were raised. Held it is only when the Board proceeds to acquire land by virtue of its powers under section 71 that section 114 comes into play and the proceedings for acquisition have to take place under the Land Acquisition Act as modified by section 114 read with the schedule. But where the acquisition is, as in the present case, by the Government under the Land Acquisition Act, for public purposes though that purpose may be the purpose of the Board, the Kanpur Act has no application at all and the Government proceeds to acquire under the provisions of the Land Acquisition Act alone. From the scheme of the Act it is clear that compliance with the provisions of s.5 A is necessary before a notification 427 can be issued under section 6. Even where the Government makes a direction under section 17(1) it is not necessary that it should also make a direction under section 17(4). If the Government makes a direction only under section 17(1) the procedure under section 5 A would stil have to be followed before a notification under section 6 is issued. It is only when the Government also makes a declaration under section 17(4) that it becomes necessary to take action under section 5 A and make a report thereunder. Under the Land Acquisition Act an order under section 17(1) or section 17(4) can only be passed with respect to waste or arable land and it cannot be passed with respect to land which is not waste or arable land on which buildings stand. just as section 17(1) and section 17(4) are independent of each other, section 17(1.A) and section 17(4) are independent of each other and an order under section 17 (I A) would not necessarily mean that an order under section 17(4) must be passed. The right to file objections under section 5 A is a substantial right when a person 's property is being threatened with acquisition and that right cannot be taken away as if by a side wind because section 17(1 A) mentions section 17(1). Section 17(1 A) mentions section 17(1) merely to indicate the circumstances and the conditions under which possession can be taken. It was not open to the State Government to say in the notification under section 4 that proceedings under section 5 A will not take place. This part of the notification under section 4 is beyond the powers of the State Government and in consequence the notification under section 6 also, as it was issued without taking action under section 5 A, must fail.

minal Appeal No. 118 of 1959. Appeal by special leave from the judgment and order dated July 2, 1957, of the Calcutta High Court in Criminal Appeal No. 101 of 1956 arising out of the judgment and order dated January 16, 1956, of the Second Court of the Municipal Magistrate, Calcutta, in case No. 208B of 1955. C. B. Aggarwala, B. B. Tawakley and B. P. Maheshwari, for the appellant. Nalin Chandra Bannerjee, Sunil K. Basu, section N. Mukherjee for P. K. Bose, for the respondent No. 2. 1960. November 24. The Judgment of the Court was delivered by RAGHUBAR DAYAL, J. This is an appeal by special leave against the 'Order of the Calcutta High Court affirming the conviction of the appellants Messrs. Madan Mohan Damma Mal Ltd., and Om Prokash Manglik, its Manager, under section 462 of the Calcutta Municipal Act, 1951 (W. B. XXXIII of 1951) hereinafter called the Act. The facts leading to this appeal are that Messrs. Madan Mohan Damma Mal Ltd., (hereinafter called appellant No. 1) sent a consignment of mustard oil, about 499 maunds in weight, from Firozabad, the place of manufacture, to itself, at Calcutta, on December 25, 1954, in tank wagon No. 75612. This wagon was placed at the Pathuriaghat siding at Calcutta at 666 about 8.45 a.m., on January 3, 1955. Dr. Nityananda Bagui, Food Inspector of the Calcutta Corporation, accompanied by certain police officers, went to that siding and took three samples of mustard oil contained in this wagon, after arranging with Om Prokash Manglik, appellant No. 2, who was found near the wagon, the purchase of 12 ounces of oil for annas eight. He took the sample of oil in three phials. They were properly sealed. One of them was given to appel lant No. 2. The other two were kept by Dr. Bagui. He sent one of them to the Public Analyst for examination, the same day. Ashit Ranjan Sen, the Public Analyst, examined the oil contained in that phial on January 3, 1955, but could not come to any positive opinion about its purity. Dr. Bagui, however, seized the tank wagon that evening, sealed it with the Corporation 's seal and left it in the custody of appellant No. 2. The oil in the tank was allowed to be removed to the godown of the appellants on January 6, 1955. The lock of the godown was then sealed with the seal of the Corporation. Mr. Sen reported on January 4, 1955, that the oil was adulterated. He sent a detailed report about the result of the examination on January 24, 1955. On receipt of the report about the mustard oil being adulterated, Dr. Bagui filed a complaint against the appellants on February 4, 1955, with respect to their. selling and keeping for sale mustard oil, a sample of which was found on analysis to be mustard oil which was adulterated with groundnut oil. During the course of the trial, the trial Court, on an application on behalf of the appellants, ordered the despatch of the third sample phial of the oil in the custody of the Corporation 's Health Officer, to the Director of Health Services, Government of West Bengal, for analysis and report. This sample was analysed by Dulal Chandra Dey, Court Witness No. 1, and found to be adulterated with groundnut oil. The report of the Analyst was, however, sent to the Court under the signature of Dr. section K. Chatterjee, D. W. 2, Deputy Director of Health Services, Government of West Bengal. 667 The appellants appear to have sent the sample of oil in their possession to Om Prakash, Oil Expert to the U.P. Government, who reported on July 27, 1955, that the sample 'conforms to Agmark Specification for Mustard Oil and is considered to be free from adulterants such as sesame, groundnut and linseed oil '. This report, however, has not been proved. The Deputy Commissioner of Police, Enforcement Branch, Calcutta, sent a sample of mustard oil on January 10, 1955, to the Public Analyst, Food & Water, West Bengal Public Health Laboratory. Sri section N. Mitra, D. W. 7, examined this sample and reported, on the basis of its saponification value to be 173.3, and iodine value to be 105, that the sample approximated to the standards of genuine mustard oil. This report does not establish that the sample was of pure mustard oil. Sri Mitra 's reply to the query from the Deputy Commissioner of Police for clarification, makes this very clear. It is: "But, unless conclusive evidence of the presence of a foreign oil, corroborated in some instances by the figures of the usual oil contents, is obtained, the sample is not and cannot be declared adulterated. In the present case the sample of mustard oil has already been examined exhaustively and has been certified as `approximating to standards ' but not as genuine. The legal implication of the expression is that the sample will have the benefit of doubt. " Further, there is no good evidence on the record to establish that the sample sent to Sri Mitra was a sample from the appellants ' tank wagon. Dr. Bagui does not depose about the police people taking a sample of oil. He was not questioned about the police taking any sample of the oil. There seems to be no good reason for the police taking a sample of oil for the purpose of analysis and finding out whether the mustard oil was pure or not. The case put to Dr. Bagui during his cross examination, on behalf of the appellants, appears to have been that he himself had taken four samples of the mustard oil in question and that one of those samples was sent to the Enforcement Branch. Dr. Bagui denied that he had taken 668 four samples of the mustard oil, His statement is fully corroborated by the statement of Kalidas Ganguli, Sub Inspector, Calcutta Enforcement Branch, Police Department, who had accompanied Dr. Bagui on the occasion. He stated that the Corporation Food Inspector took three samples and the police took the one ,,sample which was sealed with the Corporation seal. We are not satisfied that the police actually took one sample of the oil and had it sealed with the Corporation seal as deposed to by Kalidas Ganguli. The Courts below found on the evidence that the mustard oil in the appellants ' tank wagon was adulterated with groundnut oil, that the appellants were in possession of that oil and had stored that oil for sale, in view of the presumption arising under subs. (4) of section 462 of the Act, and which had not been rebutted on behalf of the appellants. Learned counsel for the appellants has questioned the correctness of these findings. We have considered the evidence in connection with the analysis of the samples of mustard oil by the Chemists. Ashit Ranjan Sen, P.W. 2, Public Analyst, who examined the first sample sent by Dr. Bagui on January 3 4, 1955, found it adulterated, on the basis of the data that the B. R. Index at 40 degree C was 60.4 and the Bellier 's test for groundnut oil was positive inasmuch as it gave turbidity at 28 degree C. Court Witness No. 1, Dulal Chand Dey, who actually analysed the sample sent by the Court, also found it adulterated, on the basis of his obtaining the saponification value to be 175.5, iodine value to be 106degree 8 and the appearance of turbidity at 27 degree C. He also found indication of the presence of a small amount of linseed oil. The correctness of his opinion on these data is admitted by Sri Mitra, D.W. 7. In these circumstances, the finding of the Courts below that the mustard oil in the appellant 's tank wagon was adulterated is correct. It is not established that the sample of mustard oil sent to Sri Mitra by the Deputy Commissioner of the Enforcement Branch contained mustard oil from this tank wagon. The opinion of Sri Mitra about the nature of that sample therefore does not go against the opinion 669 of Sri Sen and Sri Dey that the mustard oil analysed by them was adulterated with groundnut oil. The other contention for the appellants is that they were not in possession of the oil when the sample of mustard oil was taken by Dr. Bagui and that therefore no presumption under sub section (4) of section 462 of the Act can be raised against them for holding that the oil was stored for sale. It appears from the judgment of the High Court under appeal that it was not disputed at the hearing before it that the appellants were in possession of the mustard oil whose sample had been taken. On the evidence on the record we are of opinion that they were in possession of the mustard oil. The consignment of oil was from the manufacturing firm, appellant No. 1, to itself at Calcutta. Its manager, appellant No. 2, took delivery of the wagon from the railway authorities on January 3, 1955. There is no direct evidence to the effect that such delivery was taken prior to Dr. Bagui 's taking sample of the mustard oil. But the circumstances, in our opinion, conclusively establish that appellant No. 2 had taken delivery of the wagon prior to Dr. Bagui 's visit and taking samples of oil from the wagon. Appellant No. 2 is not expected to and could not have got the wagon opened for 'the purpose of taking samples of oil, if he had not taken delivery of the wagon from the railway authorities. The railway authorities themselves would have seen to it that nobody tampers with the contents of the wagon in its charge. Appellant No. 2 must have therefore paid the freight for the wagon prior to Dr. Bagui 's visit and thus obtained delivery of the wagon. It was thereafter that he got control over the wagon and was in a position to take out oil from it or to permit anyone else to take out oil. We therefore hold that the appellants were in possession of the oil in the tank wagon when Dr. Bagui took samples of the oil from it. The main contention, however, for the appellants is that the presumption that the mustard oil was stored for sale by the appellants, under sub section (4) of section 462 of the Act, is rebuttable and has been fully rebutted in view of certain arrangements between the 83 670 U.P. Oil Millers Association and the Deputy Commissioner of Police, Enforcement Branch, and the letter of the appellants to the Secretary of the Association (Exhibit R) on January 3, 1955. We have considered the various documents which have been referred to in support of the arrangement between the Association stand the Deputy Commissioner, Enforcement Branch, but do not find therein anything which would restrain legally the appellants from selling the oil even if it is found to be adulterated. The proceedings of the meeting of the U. P. Oil Millers Association held on June 9, 1954, and attended by the Deputy Commissioner and Assistant Commissioner of the Enforcement Branch show that no such agreement has been arrived at. Even the suggestion of the Deputy Commissioner that all the members of the Association should write to their respective mills that all the quantity of oil which would be imported should at first be passed and then made delivery of, was not fully accepted, the members simply stating that they always and invariably imported pure mustard oil. It was, however, decided that the samples of oil be taken from the next morning, i.e., June 10, 1954. We however find that in November 1954 the U. P. Oil Millers Association wrote to appellant No. I that according to the decision of the Deputy Commissioner of Police, Enforcement Branch, every application to draw sample and test it should be accompanied by a certificate signed by the Chemist or the Manager or the Proprietor of the Mills to the effect that the mustard oil in the tank wagon was pure mustard oil free from Argemoni, linseed or any other adulteration, and that in February 1955 and April 1955, the Deputy Commissioner of Police, Enforcement Branch had to remind the U. P. Oil Millers Association that it should advise all its members that whenever they indent any mustard oil from outside Bengal, they would see that the railway receipts be accompanied by a clear certificate of examination from the Chemist of the factory who examined the same. Such directions from the Deputy Commissioner of Police, Enforcement Branch, do not appear to have 671 had any great effect, as the consignment of oil received by the appellants was without any such certificate. Mahendra Kumar Gupta, D.W. 1, Chemist of the appellants ' mill, deposed however that he had taken the sample of the oil sent in that wagon and found it to be genuine mustard oil, free from any adulteration. Any such certificate about the purity of the mustard oil sent is not proved to have accompanied the railway receipt and to have been shown or made over to Dr. Bagui, or to the Police Officers who had accompanied him at the time. Letter Exhibit R was sent on behalf of appellant No. I to the Secretary of the U. P. Oil Millers Association at 10 a.m., on January 3, 1955. The letter said: "Please arrange for sample and test through the proper authorities concerned, so that we may take the delivery of oil only if it is found pure on analysis." Any such statement can hardly be sufficient to rebut the presumption that the oil which was consigned by appellant No. I to itself at Calcutta was stored for sale. The letter itself does not say that the oil will not be sold. It simply says that they may take the delivery of the oil only if it is found pure on analysis. What would be done to the oil if it is found to be impure, is not stated. The Association was not in any arrangement with the Corporation which had the sole authority to take action with respect to the adulterat ed mustard oil. The Enforcement Branch of the Police had nothing to do with it. In the circumstances, all the so called arrangement with the Enforcement Branch of the Police and the consequent letters, similar to letter Exhibit R, seem to be a subtle device to make things difficult for the proper authorities responsible to see that mustard oil fit for sale be pure. It is obvious in this case itself, how this sort of arrangement has provided an occasion for the coming into existence of the alleged fourth sample of mustard oil from the appellants ' tank wagon and the non committal report about its purity. We are therefore of opinion that this letter Exhibit R, or the arrangement which led to such communication, does not establish 672 that the mustard oil in the wagon which will be otherwise presumed to be stored for sale by the appellants, was not stored for sale. We are therefore of opinion that the conviction of the appellants of the offence under section 462 of the Act is correct. The appeal therefore stands dismissed. Appeal dismissed.

The first appellant No. 1 sent a consignment of mustard oil in a tank wagon from Firozabad, U. P. to itself at Calcutta where it took delivery of the wagon from the railway authorities. The Food Inspector took samples of the oil from the wagon which on analysis were found to be adulterated. The appellants were prosecuted under section 462 of the Calcutta Municipal Act, 951 for storing adulterated mustard oil for sale. The 665 appellants contended that the presumption under sub section (4) of section 462 that the mustard oil was stored for sale was rebutted in view of certain arrangements between the U. P. Oil Millers Association and the Deputy Commissioner of Police and of a letter written by the appellants to the Association asking that a sample may be taken and tested so that the appellants "may take the delivery of oil only if it is found pure on analysis. " Held, that this was not sufficient to rebut the presumption '. that the oil was stored for sale. The letter did not say that the oil would not be sold; it was not stated as to what would be done if the oil was found to be impure. There was no arrangement between the Association and the Corporation which was the sole authority to take action. The arrangement and the letter were a device to make detection difficult.

The appellant was convicted of selling adulterated butter under sections 406 and 407 read with section 488 of the Calcutta Municipal Act as extended to the Municipality of Howrah on a complaint filed by the Sanitary Inspector on January 2, 954 which was signed in token of sanction by the Health Officer of the said municipality. The appellant contended that the trial was vitiated for want of a valid sanction because at the relevant time the Health Officer of the municipality did not have any power to sanction the prosecution. Under the Act the power to institute 740 a complaint vested in the Commissioners but they could delegate the power to the Chairman and the Chairman could also by a general or special order in writing re delegate the power to the Vice Chairman or to any municipal officer. The question of the delegation of their power by the Commissioners was not specifically raised, but it was urged that the Chairman had by certain subsequent orders revoked the delegation in favour of the Health Officer. The first order passed by the Chairman on February 6, 1948, delegated to the Vice Chairman all his powers, duties and functions in respect of seven departments including the Health Department. The second order was passed on December 20,1949, by which the Chairman delegated his powers and functions to the Health Officer to order prosecution and to sign prosecution sheets in respect of cases concerning the Health and Conservancy Departments. The third order was made on April 7, 1951, on the eve of the new election, and stated: "Till the election of Executives by the New Board I delegate all my powers and functions except those that are delegated to the Vice Chairman to the respective officers of departments". After the election, the new Chairman passed an order on July 4, 1951, delegating all his powers, duties and functions in respect of six departments including the Health Department to the Vice Chairman. The last order was passed on December 12, 1952, which said: "I hereby revoke my order dated the 4th July 1951, so far as it relates to the Health Department which shall henceforth be direct under my charge until further orders. This will take effect from 15th December, 1952". The appellant urged that the third order modified the second and placed a time limit on it and that the delegation lapsed on the expiry of the time. The respondent contended that the third order did not affect the second and that in any case the Health Officer could file the complaint as a private citizen. Held, (per section K. Das and A. K. Sarkar, jj.) that the Health Officer was not empowered as the duly delegated authority to institute criminal proceedings against the appellant on the date on which he made the complaint. The third order made by the Chairman on April 7, 1951, modified the second order by making the delegation thereunder in favour of the Health Officer effective only till the election of the new Executive. The object of the third order was to leave the new Chairman free to pass his own orders of delegation and not to fetter his discretion in any way. The orders passed by the new Chairman did not delegate the power to the Health Officer. Held, further, that a complaint under the Calcutta Municipal Act, 1923, as applied to Municipality of Howrah, can only be filed by the authorities mentioned therein and not by an ordinary citizen. Section 537 of the Act provides that the Commissioners may institute, defend or withdraw from legal proceedings under the Act; under section 12 the Commissioners, can delegate their functions to the Chairman, and the Chairman can in his turn delegate the same to the Vice Chairman or to any municipal 741 officer. The machinery provided in the Act must be followed in enforcing its provisions, and it is against the tenor and scheme of the Act to hold that section 537 is merely enabling in nature. Nazir Ahmed vs King Emperor, (1936) L.R. 63 I.A. 372. referred to. Sisir Kumar Mitter vs Corporation of Calcutta. 631, explained. Keshabdeo Kedia vs P. Banerjee, Sanitary Inspector, Howrah Municipality. and State vs Manilal Jethalal A.I.R ,referred to. Cole vs Coulten,2 Ellis & Ellis 695, Buckler vs Wilson, , The Queen vs Stewart, (1896) 1 Q.B.D. 300 and Giebler vs Manning, , held inapplicable. The Queen vs Cubitt. , relied on. Per Hidayatullah, 1. The sanction given by the Health Officer was valid as the delegation of authority, to him by the order of December 20, 1949, was not taken away by subsequent orders. The order of December 20, 1949, which specially conferred the power to order prosecution to sign prosecution sheets was a special order and was unaffected by the general order of April 7, 1951. The later order put a time limit only on delegations made under that order and not on orders made before.

The respondent Board realised terminal tax on goods experted by the appellants. In suits filed by the appellants for refund of the amounts which they claimed were collected without authority of law, the respondent Board pleaded that the levy was in accordance with law and that the suits where barred by limitation. The trial court decreed the suits and on appeal the District Judge affirmed the trial Court 's decrees. In second appeal the High Court held that the levy was illegal. The High Court, however, allowed the appeals in respect of those amounts which were found to be within limitation under section 179(2) of the Act and dismissed the others. On the question whether the levy could be said to be a thing done or purported to be done under the Act. Allowing the appeal, ^ HELD: The suits did not fall within the purview of section 179 of the Act and were not barred by limitation. [172 D] 1. (a) It is well established that if levy of a tax is prohibited by an Act and is not in pursuance of it, it could not be said to be purported to be done in pursuance of the execution or intended execution of the Act. [172 B] Poona City Municipal Corporation vs Dattatraya Nagesh Deodhar, ; followed. (b) The terminal tax could not be imposed under any of The provisions of the Act. The High Court was right in holding that the amounts ` paid by the appellants by way of terminal tax were recoverable by the suits. [173 F G 174 Al 2. The Bikaner State Municipal Act, 1923 (which was the predecessor of the present Act) authorised the levy of terminal tax and the Board accordingly levied the tax until January 26, 1950. With the coming into force 12 SCI/78 170 of the Constitution, by virtue of article 277 it was permissible for the Board to continue to levy the terminal tax until provision to the contrary was made by Parliament by law. But with effect from December 22, 1951 the Bikaner Act was repealed and the present Act was brought into force. the repeal, however, did not affect the validity of those taxes which had already been imposed and which could be "deemed` ' to have been imposed under the Act. But the provisions of the Act the clear that the terminal tax in question could not be imposed thereunder. The levy could not, therefore, be saved by cl. (b) of the proviso to section 2. on the other hand it is clear that the State Legislature had decided to discontinue the levy by excluding it from the purview of the saving clauses. The further levy of the tax, therefore, became illegal and it was not permissible to continue it any longer under article 277 which merely gave the authority concerned the option to continue to levy if it so desired. [173A, F G]

Dismissing the appeal by special leave, the Court: ^ HELD: Though a direction by the Magistrate to the accused to give his specimen writing when the case is still under investigation would surely be in the interests of the administration of justice, Section 73 of the Evidence Act does not enable the Magistrate to give such a direction when the case is still under investigation. [1068G H] The second paragraph of Section 73 enables the Court to direct any person present in Court to give specimen writings "for the purpose of enabling the Court to compare" such writings with writings alleged to have been written by such person. The clear implication of the words "for the purpose of enabling the Court to compare" is that there is some proceeding before the Court in which or as a consequence of which it might be necessary for the Court to compare such writings. The direction is to be given for the purpose of 'enabling the Court to compare ' and not for the purpose of enabling the investigating or other agency 'to compare '. If the case is still under investigation there is no present proceeding before the Court in which or as a consequence of which it might be necessary to compare the writings. The language of Section 73 does not permit a Court to give a direction to the accused to give specimen writings for anticipated necessity for comparison in a proceeding which may later be instituted in the Court. [1069D F] (ii) Section 73 of the Evidence Act makes no distinction between a Civil Court and a Criminal Court. It would not be open to a person to seek the assistance of the Civil Court for a direction to some other person to give sample writing under section 73 of the Evidence Act on the plea that it would help him to decide whether to institute a civil suit in which the question would be whether certain alleged writings are those of the other person or not. That being the position, it should not make any difference if the investigating agency seeks the assistance of the court under section 73 of the Evidence Act on the plea that a case might be instituted before the Court where it would be necessary to compare the writings. [1069G H] State (Delhi Admn.) vs Pali Ram, ; and State of Bombay vs Kathi Kalu Oghad, ; ; distinguished. State of Bombay vs Kathi Kalu Oghad, ; ; T. Subbaiah vs section K. D. Ramaswamy Nadar, AIR 1970 Mad. 85; Farid Ahmed vs The State, AIR 1960 Cal. 32; Priti Ranjan Ghosh and others vs The State, 77 C.W.N. 1068 865; Dharamvir Singh vs State, & Haryana); Brij Bhushan Raghunandan Pd. vs The State, AIR 1957 M.P. 106; and Srikant Rout vs State of Orissa, 1972 (2) Cuttack Weekly Reporter 1332; approved. Gulzar Khan and Ors. vs State, AIR 1962 Patna 255 and B. Rami Reddy and Ors. vs State of A.P., ; over ruled. [The Court suggested that suitable legislation may be made on the analogy of section 5 of the Identification of Prisoners Act, to provide for the investiture of Magistrates with the power to issue directions to any person, including an accused person, to give specimen signatures and writings.]

Section 6 of the Taxes on Entry of Goods into Calcutta Metropulitan Area Act, 1970 provides for imposition of levy and collection of taxes on the entry of every specified goods into Calcutta Metropolitan Area (for consump tion, use or sale therein) from any place outside that area at such rate not exceeding the rates specified in the corresponding entry in Column 3 of the Schedule as the State Government may by notification specify. CIasa specifies articles liable to tax grouped under the caption of food and drink. Item 4(t) specifies "nuts excluding beetal nuts" as one of the items on which the rate of entry tax has been specifically mentioned therein. Under the said Class l in item No.4(u) "oilman stores (except edible oils)" has been men tioned and in Class 3 under heading (b), item No. 22 refers to oil seeds of inedible oils as one of the specified items for imposition of tax. The respondents who are licensed dealers under the West Bengal Edible Oil Seed Dealers Licensing Order, 1963 challenged the imposi tion of entry tax on groundnuts imported into Calcutta Metropolitan Area for the purpose of manufacture of groundnut oil under the provi sions of the Taxes on Entry of Goods into Calcutta Metropolitan Area Act, 1970 on the ground that such importation of groundnuts as oil seeds is not subject to any levy under the provisions of the said Entry Tax Act in as much as there is no specific provision for levy on groundnuts as oil seeds for manufac turing edible oil. The respondents prayed for a mandate directing the appellants not to impose any entry tax on the ground that they are edible nuts failing under specific entry 01 edibles provided in the Schedule to the said Act, and with a further prayer for refund of the taxes already imposed and collected by the 622 respondents. A learned Single Judge of the Calcutta High Court issued a writ of mandamus as prayed for. The State appeal against the judgment and order was dismissed and the judgment and order of the learned Single Judge was affirmed. Hence the appeal by special leave. Allowing the appeals, the Court, HELD: 1. On a plain reading of the provi sions of the Taxes on Entry of Goods into Calcutta Metropolitan Area Act, 1970, it is clear and evident that groundnuts which answer the description of nuts is excisable to entry tax under the said Act. Once the goods answer the description of the item exigible to tax, under Item 4(t) the importer of such goods cannot escape liability depending on the use to which he puts. No question of speculating about intention of the legislature arises when "nuts" are in term specified as goods which are exigible to tax and "groundnuts" fall under the description of "nuts". That ground nuts are nuts is not disputed nor disputable that it is not so. Groundnuts are "nuts" whether the same are consumed as they are or whether they are crushed for extracting oil they do not cease to be nuts. [626E H; 627A B] 2. The legislative intent to tax nuts being very clear there is no room for consid ering whether groundnut is also oil seed used for manufacturing edible oil, "why" it is imported and whether it is exempt from entry tax on that account. Undoubtedly, nuts include groundnut also. Though the 1970 Act was re placed by the Taxes on Entry of Goods into Calcutta Metropolitan Area, 1972 making iden tical provisions for the imposition of entry tax on specified goods entering into Calcutta Metropolitan Area, West Bengal Act XIX of 1974 specifically mentioned in SI.No.4 item No. (u) for the words "nuts excluding betel nuts" the words "nuts including groundnuts, cashewnuts and walnuts but excluding betel nuts" shall be, and shall be deemed always to have been substituted. [627B G] 3. The words "nuts including groundnuts, cashewnuts and Walnuts but excluding betel nuts" has been substituted retrospectively for the words "nuts excluding betel nuts" in item No. 4(u). This amendment is clarificatory in nature and makes explicit what was implicit out of abundant caution, and clearly puts an end to all controversies as to whether ground nuts imported into Calcutta Metropolitan Area from outside is liable to imposition of entry tax. It makes patently clear that groundnuts as one of the "nuts" was always subject to the imposition of entry tax under the said Entry Tax Act. Therefore, the contention that groundnut imported into Calcutta Metropolitan 623 Area for the purpose of manufacture of ground nut oil which is one of the edible oils and which is exempted from the imposition of levy of entry tax cannot be sustained any longer in view of the express provisions of the Act. [627G H; 628A B] Avadh Sugar Mills Ltd. vs Sales Tax Offi cer & Anr., [1973] (Vol. 31) STC 469 (SC), distinguished.

The appellants are two different trade unions of Barauni Refinery of the respondent, Indian Oil Corporation Limited (IOCL). The IOCL is comprised essentially of two divisions: (1) Marketing Division, and (2) Refinery and Pipe Lines Division. The age of superannuation of the staff in the Marketing Division was 60 years whereas for the Refinery and Pipe Lines Division it was fixed at 58 years under Clause 20 of the Standing Orders concerning Barauni Refinery. In December 1981, 14 recognised Unions representing the employees of the IOCL working in different refineries and pipe lines divisions submitted a charter of demands. By clause 18 of this charter the superannuation age was sought to be enhanced to 60 years. A similar charter of demands was separately submitted by the Barauni Telshodhak Mazdoor Union. As a result of discussions a general settlement was mutually arrived at by and between the parties on May 24, 1983. Subsequently, a separate Memorandum of Settlement dated 4th August, 1983 concerning Barauni Refinery was signed by the parties under sections 12(3) and 18(3) of the in conciliation proceedings. Both the general settlement and the special settlement concerning Barauni Refinery were to remain in force till 30th April, 1986. Despite the specific demand made in the two charters of demand for the upward revision of the age of superannuation, no specific provision was made in that behalf either in the general settlement or in the special settlement. On the contrary, clause 19 of both the settle ments provided that the 283 terms and conditions of service which were not changed under the settlements shah remain unchanged and operative during the period of settlement, further, clause 21 did not permit raising of any demand throwing an additional burden on the corporation during that period. Later, the Petroleum and Chemical Mazdoor Union served notice on the Regional Labour Commissioner (Central) under section 10(2) of the Industrial Employment (Standing Orders) Act, 1948 for modification of clause 20 of the Certified Standing Orders of Barauni Refinery for raising the age of superannuation from 58 years to 60 years. This demand was based on the averment that the nature of work performed by the workmen in the Refinery and Pipe Lines Division and their payscales were identical to the staff members of the Marketing Division. The Regional Labour Commissioner allowed the application for modification of clause 20 of the Certified Standing Orders. The Appellate Authority dismissed the appeal of the Corporation, but at the same time directed a slight modifi cation in clause 20 of the Standing Orders. The IOCL preferred a writ petition in the High Court for quashing the orders of the Regional Labour Commissioner as well as the Appellate Authority. On the other hand, the Union, feeling aggrieved by the order of the Appellate Authority, preferred a writ petition against that order. The High Court inter alia held that the settlement arrived at in the conciliation proceedings was binding on the workmen, and as clause 19 of the settlement kept the service conditions which were not changed in tact and clause 21 of the settlement did not permit raising of any demand throwing an additional burden on the Corporation, it was not permissible to modify the certified Standing Orders by an amendment, as that would alter the service conditions and increase the financial burden on the management. Dismissing the appeals by the two trade unions this Court, HELD: (1) The Industrial Employment (Standing Orders) Act, 1948 was enacted to define with sufficient precision the conditions of employment for workers employed in indus trial establishments and to make the same known to them. [289B] (2) According to sub sections (1) and (3) of section 18 of the , settlements are divided into two categories, namely, (i) those arrived at outside the conciliation proceedings and (ii) 284 those arrived at in the course of conciliation proceedings. A settlement which belongs to the first category has limited application in that it merely binds the parties to the agreement but the settlement belonging to the second catego ry has extended application since it is binding on all parties to the industrial dispute. [292A B] (3) A settlement arrived in the course of conciliation proceedings with a recognised majority union will be binding on all workmen of the establishment, even those who belong to the minority union which had objected to the same. To that extent it departs from the ordinary law of contract. [292C] (4) The object is to uphold the sanctity of settlement reached with the active assistance of the Conciliation Officer and to discourage an individual employee or a minor ity union from scuttling the settlement. There is an under lying assumption that a settlement reached with the help of the Conciliation Officer must be fair and reasonable and can, therefore, safely be made binding not only on the workmen belonging to the union signing the settlement but also on others. The High Court was, therefore, right in coming to the conclusion that the settlement dated 4th August, 1983 was binding on all the workmen of the Barauni Refinery including the members of Petroleum and Chemical Mazdoor Union. [292D E] (5) The age of retirement prescribed by clause 20 of the Certified Standing Orders was undoubtedly a condition of service which was kept in tact by clause 19 of the settle ment. [292G] (6) During the operation of the settlement it was not open to the workmen to demand a change in clause 20 of the certified Standing Orders because any upward revision of the age of superannuation would come in conflict with clauses 19 and 21 of the settlement. [293E F]

The petitioner appellant carrying on the business of exporting frozen meat of buffaloes, sheep and goat, sought to establish an abattoir, meat processing plant and a cold storage in a riots prone area near Bombay. The site was situated on the bank of a river whose water is used for purposes of drinking and washing, besides religious usage, by the inhabitants of the surrounding villages. The Sarpanch of the Group Gram Panchayat granted no objection certifi cate. The District Collector granted permission to use the land for non agricultural purposes for the said plant under s.44 of the Maharashtra Land Revenue Code, 1966 on April 5, 1982. At this stage the villagers raised objections to the setting up of the plant and made a representation to the Revenue Minister alleging that construction of the abattoir and discharge of effluent from the abattoir into the river would pollute the river water which was used for drinking purposes. The Government issued a show cause notice to the appellants on October 7, 1983 under s.2S7 of the Code for ,cancellation of the order of the District Collector. The Minister heard the revision and by his order dated November 25, 1983 set aside the order of the District Collector. Aggrieved by the said order the appellants fried a petition in the High Court under articles 226 and 227 of the Constitution for quashing the decision of the Government cancelling the permission. The High Court upheld the order of the Government but directed it to pay compensation for the cost incurred in setting up the project up to October 7, 1983, being the date when show cause notice was issued. 893 The petitioners appealed to this Court by special leave against upholding of the impugned order while the State preferred the appeal ' by special leave against the direction for payment of the compensation. Dismissing the cross appeals this Court confirmed the judgment of the High Court upholding the order of the Gover ment. It also held the appellants entitled to compensation in lieu of costs incurred on the project and interest on the compensation amount for the period subsequent to October, 7, 1983. Pronouncing the reasons, the Court, HELD: The High Court has examined the scope of ss.44 and 257 of the Maharashtra Land Revenue Code, 1966 in detail and after considering all the facts and circumstances came to the conclusion that the Government had the power to revise even suo moto orders passed by the Collector and found that the grounds on the basis of which the Government acted existed and, therefore, the action on the part of the Gov ernment was bona fide and in public interest, although it did not act diligently, but still in public interest the High Court maintained the order passed by the Government with the direction to compensate the persons concerned. The view taken by the High Court appears to he correct. There is no reason to interfere with it. [879D F]

The appellant (holder of an inam in Madhya Pradesh) served a notice an his tenant, the respondent, terminating to tenancy on the ground that he wanted the land for personal cultivation and filed a suit for ejectment. The trial court decreed the suit. During the pendency of the appeal in the District Court, article 32 of 1954 was enacted, and pursuant to its provisions the hearing of the appeal was stayed. After the Madhya Pradesh Land Revenue Code came into force in 1959, the District Court held that by virtue of section 185 of that Code the respondent acquired the rights, of an occupancy tenant and dismissed the suit. The High Court confirmed the judgment of the District Court. In appeal to this Court, it was contended that : (i) the rights of an occupancy tenant arise in favour of a personl under section 185(1) (i) (a) only if there was between him and the landlord a subsisting tenancy at the date when the Code came into force and since under the law in force before the commencement of the Code, the respondent had ceased to be a tenant because of the notice terminating the contract of tenancy the respondent was not invested with the rights of an occupany tenant; and (ii) bi virtue of sections 261 and 262(2), the operation of section 185 is expressly excluded when a person, against whom ejectment proceedings have been instituted prior to the commencement of the Code in enforcement of a right then acquired, claims the status of an occupancy tenant. HELD : (i) The respondent acquired the right of an occupancy tenant under the Code, because the expression "tenant" in section 185 (1) (ii) (a) includes a person whose tenancy was terminated before the commencement of the Code. The definition of the expression "tenant" in the Code postulates a subsisting tenancy, but the position of a tenant prior to the date on which the Code was brought into force is not dealt with in the definition. In the context in which the expression "tenant" occurs in section 185(1), that definition could not be intended to apply in deter ining the conditions which invest a holder of land with the status of an occupancy tenant at the commencement of, the Code. Therefore having regard to the object of the enactment the expression should be ascribed the meaning it 'has in Act 32 of 1954. Under sections 3 & 4 of that Act a person who was inducted into the land as a tenant and who continued 'to hold the land at the commencement of the Act was entitled to protection against eviction and continue as tenant, notwithstanding that under the law in force prior to the commencement of the Act. the contractual relationship of landlord and tenant was determined. [432 D; 432 14 433 C] 428 There is no reason to think that the Legislature sought to make a A distinction between tenants of Inam land in section 185 (1) (ii) (a) and ryotwari sub lessees of other lands in section 185(1)(ii)(b). Therefore, if the expression "ryotwari sub lessee ' in section 185(1)(ii)(b) includes a sub lessee whose tenaure was terminated before the commencement of the Code, a tenant of inam land, whose tenancy has been terminated would also be included in the protection, provided at some time prior to the date on which the Code was brought into force, he was in possession of the land as a tenant, and he continued to hold the land till the date of the commencement of the Code. [434 E H] (ii) The provisions of the Code appeal to tenants in proceedings for ejectment pending at the commencement of the Code. The proviso to section 261 protects a right which had been acquired under a law repeated by the Code and the right could be enforced as if the code had not been passed. But the right to evict a tenant was governed by the general law of landlord and tenant and was not acquired under any repealed law. The proviso had no operation and a legal proceeding pending at the date of the commencement of the Code will be disposed of according to the law enacted in the Code. Therefore, the tenant could not ' be evicted otherwise than in the manner and for reasons mentioned in a. 193 of the Code but, personal requirement for cultivation of land is not a ground on which a claim for ejectment could be maintained. [435 G436 A] Section 262(2) is only procedural it provides that a civil court will continue to have jurisdiction to dispose of a civil suit pending before it at the commencement of the Code, Which, if it had been instituted after the Code was passed would have been tried by a revenue court; and in the disposal of such a suit, the civil court will be governed by the procedural law applicable there to prior to the commencement of the Code. It does not nullify the statutory conferment of occupancy right upon persons in the position of tenants against whom proceedings were taken at the date when the Code was brought into force. [436 B D]

Appeal No.110 of 1957. Appeal by special leave from the judgment and order dated February 25, 1955, of the former Bombay High Court in I.T.R. No. 57/X of 1954. N. A. Palkhivala and I. N. Shroff, for the Appellant. A. N. Kripal and D. Gupta, for the Respondent. November 24. The Judgment of the Court was delivered by KAPUR, J. This is an appeal by special leave against the judgment and order of the High Court of Bombay answering the question submitted to it. against the assessee firm who is the appellant before 653 us, the respondent being the Commissioner of Income tax. The appeal relates to the assessment year 1949 50, the accounting year ended on July 25, 1948. The appellant is a firm doing the business of importing dates from abroad and selling them in India. During the accounting year the appellant imported dates from Iraq. At the relevant time the import of dates by steamers was prohibited by two notifications dated December 12, 1946, and June 4, 1947, but they were permitted to be brought by country craft. Goods which had been ordered by the appellant were received partly by steamer and partly by country craft. Consignments, which were imported by steamer and were valued at Rs. 5 lacs were confiscated by the Customs Authorities under section 167, item 8 of the Sea Customs Act but under section 183 of that Act the, appellant was given an option to pay fines aggregating Rs. 1,63,950 which sum on appeal was reduced to Rs. 82,250. This sum was paid and the dates were released. On the sale of the goods certain profits accrued out of which it sought to deduct Rs. 82,250 paid as penalty on ordinary principles of commercial accounting. The Income tax Officer disallowed this claim which was also disallowed by the Appellate Assistant Commissioner. On appeal to the Income tax Appellate Tribunal this sum was held to be allowable by a majority of two to one. At the instance of the respondent the Tribunal referred the following question to the High Court for its opinion: "Whether on the facts and in the circumstances of the case, the payment of Rs. 82,250 is an allowable expenditure under Section 10(2) (xv) of the Indian Income tax Act?" The High Court held that the above amount of Rs. 82,250 could not be said to have been paid for salvaging the goods but was paid as a penalty incurred in consequence of an illegal, act on the part of the appellant and was therefore not an allowable item under section 10(2)(xv) of the Income tax Act. Against this judgment the appellant firm has come in appeal to this Court by special leave. 83 654 any contract of hire purchase was contemplated, cannot be applied simpliciter, because such a contract has in it not only the element of bailment but also the element of sale. At common law the term 'hire purchase ' properly applies only to contracts of hire conferring an option to purchase, but it is often used to describe contracts which are in reality agreements to purchase chattels by instalments, subject to a condition that the property in them is not to pass until all instalments have been paid. The distinction between these two types of hire purchase contracts is, however, a most important one, because under the latter type of contract there is a binding obligation on the hirer to buy and the hirer can therefore pass a good title to a purchaser or pledgee dealing with him in good faith and without notice of the rights of the true owner, whereas in the case of a contract which merely confers an option to purchase there is no binding obligation on the hirer to buy, and a purchaser or pledgee can obtain no better title than the hirer had, except in the case of a sale in market overt, the contract not being an agreement to buy within the Factors Act, 1889, or the Sale of Goods Act, 1893." The observations quoted above are based mostly on two leading cases which have come to be regarded as the locus classicus upon the subject, namely Lee vs Butler (1) in which the transaction was described by Lord Esher, M.R., as "Hire and Purchase Agreements" and Helby vs Matthews (2) in which the House of Lords distinguished the former case on the ground that in that case there was a binding contract to buy and not merely an option to buy, without any obligation to buy. Both these cases were decided in terms of Factors Act of 1889 (52 & 53 Viet. c. 45, section 9). Both the kinds of agreements exemplified by the two leading cases aforesaid would now be included in the definition of 'hire purchase ' as contained in section 21 of the Hire Purchase Act, 1938 (1 & 2 Geo., 6, c. 53): " 'Hire purchase agreement ' means an agreement for the bailment of goods under which the bailee (1) (2) (1895] A.C. 471. 655 may buy the goods or under which the property in the goods will or may pass to the bailee, and where, by virtue of two or more agreements, none of which by itself constitutes a hire purchase agreement, there is a bailment of goods and either the bailee may buy the goods, or the property therein will or may pass to the bailee, the agreements shall be treated for the purposes of this Act as a single agreement made at the time when the last of the agreements was made. " It is clear that under the Law, as it now stands, which has now been crystallised into the section of the Hire Purchase Act, quoted above, the transaction partakes of the nature of a contract or bailment with an element of sale, as aforesaid, added to it. 'in such an agreement, the hirer may not be bound to purchase the thing hired;. he may or may not be. But in either case, if there is an obligation to buy, or an option to buy, the goods delivered to the hirer by the owner on the terms that the hirer, on payment of a premium as also of a number of instalments, shall enjoy the use of the goods, which ultimately may become his property, the transaction amounts to one of hire purchase, even though the title to the goods has remained with the owner and shall not pass to the hirer until a certain event has happened, namely, that all the stipulated instalments have been paid, or that the hirer has exercised his option to finalise the purchase on payment of a sum, nominal or otherwise. But it has been contended on behalf of the petitioners that there is no binding agreement to purchase the goods and that title is retained by the owner not as a security for payment of the price but absolutely. According to third term of the agreement, on the hirer duly performing and observing the terms of the agreement, with particular reference to the payment of the monthly instalments, "the hiring shall come to an end and the vehicle shall, at the option of the hirer, become his absolute property; but until such payments as aforesaid have been made, the vehicle shall remain the property of the owners. The hirer shall also have the option of purchasing the vehicle at any 656 belonging to him may be, the name and residence of the said person and the amount of penalty or increased rate of duty unrecovered; and such Magistrate shall thereupon proceed to enforce payment of the said amount in like manner as if such penalty or increased rate had been a fine inflicted by himself. " These sections show the punishments provided for the breach of the prohibitions in regard to importation or exportation of goods under sections 18 and 19; the power of the Customs Authorities to give an option to pay in lieu of confiscation and how the penalties are to be imposed. Therefore when the appellants incurred the liability they did so as a penalty for an infraction of the law; but it cannot be said that the money which they had to pay was not paid as a penalty and in fact under section 167(8) it was a penalty. In support of his argument counsel for the appellant firm referred to Maqbool Hussain etc. vs The State of Bombay etc. (1) and to the following passage at p. 742 where Bhagwati, J., said: "Confiscation is no doubt one of the penalties which the Customs Authorities can impose but that is more in the nature of proceedings in rem than proceedings in personam, the object being to confiscate the offending goods which have been dealt with contrary to the provisions of the law and in respect of the confiscation also an option is given to the owner of the goods to pay in lieu of confiscation such fine as the officer thinks fit. All this is for the enforcement of the levy of and safeguarding the recovery of the sea customs duties. " Similar observations were made by section K. Das, J., in Shewpujanrai Indrasanrai Ltd. vs The Collector of Customs & Ors. (2) where it was said that a distinction must be drawn between an action in rem and proceeding in personam and that confiscation of the goods is a proceeding in rem and the penalties are enforced against the goods whether the offender is known or not. The view taken by this Court in the other two cases cited by counsel for the appellants, i.e., Leo Roy (1) ; (2) ; , 836. 657 Frey vs The Superintendent, District Jail, Amritsar (1) and Thomas Dana vs The State of Punjab (2) is the same. In Dana case (2) Subba Rao, J., said at p. 298: "If the authority concerned makes an order of confiscation it is only a proceeding in rem and the penalty is enforced against the goods. On the other hand, if it imposes a penalty against the person concerned, it is a proceeding against the person and he is punished for committing the offence. It follows that in the case of confiscation there is no prosecution against the person or imposition of a penalty on him." In Maqbool Hussain 's case (3) the question for decision was whether after proceedings had been taken under the Sea Customs Act an accused person could be prosecuted and could or could not rely upon the plea of double jeopardy, it was held that he could not. In Shewpujanrai 's case (4) the contention raised was that after proceedings had been taken under the Foreign Exchange Regulation Act it was not open to the Customs Authorities to take any action under the Sea Customs Act. The other two cases were similar to Maqbool Hussain 's case (3). The contention now raised before us is quite different. What is to be decided in the present case is whether the penalty which was paid by the appellant firm was an allowable deduction within section 10(2)(xv) of the Income tax Act which provides: section 10(2)(xv) "any expenditure (not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purpose of such business, profession or vocation. " The words "for the purpose of such business" have been construed in Inland Revenue vs Anglo Brewing Co. Ltd. (5) to mean "for the purpose of keeping the trade going and of making it pay". The essential condition of allowance is that the expenditure should have been laid out or expended wholly and exclusively for the purpose of such business. (1) ; (2) [1959] Supp. I S.C.R. 274, 298. (3) ; (4) ; , 836. (5) , 813. 658 In deciding this case, reference to decisions in some English cases will be fruitful. In Commissioners of Inland Revenue vs Warnes & Co. (1), the assessee who carried on the business of oil exporters were sued for a penalty on an information exhibited by the Attorney General under the Sea Customs Consolidation Act for breach of orders and proclamations. The matter was settled by consent on the assessee agreeing to pay a mitigated penalty of pound 2,000. All imputations on the moral culpability of the assessees were withdrawn. The provisions of the Act under which this information was lodged and penalty paid was similar to the provisions of the Indian Sea Customs Act. This amount was held not to be a proper deduction because in order to be within the provision similar to section 10(2) (xv) of the Indian Act the loss had to be something within commercial contemplation and in the nature of a commercial loss. Rowlatt, J., relying on the observation of Lord Loreburn, L. C., in Strong & Co. vs Woodifield (2) said at p. 452: "but it seems to me that a penal liability of this kind cannot be regarded as a loss connected with or arising out of a trade. I think that a loss connected with or arising out of a trade must, at any rate, amount to something in the nature of a loss which is contemplable and in the nature of a commercial loss. I do not intend that to be an exhaustive definition, but I do not think it is possible to say that when a fine which is what the penalty in the present case amounted to has been inflicted upon a trading body, it can be said that that is a "loss connected, with or arising out of" the trade within the meaning of this rule. " This statement of the law was approved in the Commissioners of Inland Revenue vs Alexander Von Glehn & Co. Ltd. (3) where also in similar circumstances by consent of the assessee penalty of pound 3,000 was paid and the penalty plus the costs were claimed as deduction in arriving at the profits. The Special Commissioners had found that the penalty and costs were incurred by the assessee in the course of carrying on (1) (2) ; (3) [1920] .2 K.B. 553. 659 their trade and so incidental thereto and were admissible deductions. Rowlatt, J., on a reference held it to be a non deductible item. This judgment was affirmed on appeal by the Court of Appeal. Lord Sterndale, M. R., was of the opinion that it was immaterial whether technically the proceedings were criminal or not. The money that was paid was paid as a penalty and it did not matter if in the information it was called a forfeiture. It was argued by the assessee in that case that no moral obliquity was attributed to them and that it did not matter whether the expense was incurred in consequence of an infraction of the law or whether it was a penalty for doing an illegal act. At p. 565 Lord Sterndale said: "Now what is the position here? This business could perfectly well be carried on without any infraction of the law. This penalty was imposed because of an infraction of the law, and that does not seem to me to be, any more than the expense which had to be paid in Strong & Co. vs Woodifield (1) appeared to Lord Davey to be, a disbursement or expense which was laid out or expended for the purpose of such trade. ." Warrington L.J. said at p.569: "It is a sum which the persons conducting the trade have had to pay because in conducting it they have so acted as to render themselves liable to this penalty. It is not a commercial loss, and I think when the Act speaks of a loss connected with or arising out of such trade it means a commercial loss, connected with or arising out of the trade. " In Strong & Co. vs Woodifield (1) a brewing company owned a licensed house in which they carried on the business of inn keepers. They incurred a liability to pay damages on account of injuries caused to a visitor, by the falling in of a chimney. This sum was held not to be allowable as a deduction in computing the profits ' Lord Loreburn, L. C., in his speech said no sum could be deducted unless it be money wholly and exclusively laid out or expended for the purpose of such (1) ; 660 trade and that only such losses could be deducted as were connected with it in the sense that they were really incidental to the trade itself and they could not be deducted if they were mainly incidental to some other vocation or fell on the trader in some character other than that of a trader. Lord Davey observed:"I think the disbursements permitted are such as are made for that purpose. It is not enough that the disbursement is made in the course of, or arise out of, or is connected with the trade or is made out of the profits of the trade. It must be made for the purpose of earning profits. " The following passage from Lord Sterndale 's judgment at p. 566 in Von Glehn 's case (1) from which we have already quoted shows the effect of incurring a penalty as a result of a breach of the law: "During the course of the trading this company committed a breach of the law. As I say, it has been agreed that they did not intend to do anything wrong in the sense that they were willingly and knowingly sending these goods to an enemy destination; but they committed a breach of the law, and for that breach of the law, they were fined. That, as it seems to me, was not a loss connected with the business, but was a fine imposed upon the company personally, so far as a company can be considered to be a person, for a breach of the law which it had committed. It is perhaps a little difficult to put the distinction into very exact language, but there seems to me to be a difference between a commercial loss in trading and a penalty imposed upon a person or a company for a breach of the law which they have committed in that trading. For that reason I think that both the decision of Rowlatt, J., in this case, and his former decision in Inland Revenue Commissioners vs Warnes & Co. (2) which he followed were right, and that this appeal should be dismissed with costs." In Spofforth and Prince vs Glider (3) the assessee was a firm of chartered accountants, who claimed a deduction for certain legal costs paid in connection with a (1) [1920) 2 K.B. 55.3. (2) (3) 661 successful defence of one of the partners in a Police Court. The assessee firm also sought legal advice in regard to matters connected with some proceedings. Summons were issued against the assessee firm but were eventually dismissed. The assessee contended that the whole of the costs incurred in connection with the proceedings were "wholly and exclusively" laid out or expended for the appellant 's profession and were therefore allowable deductions. The Special Commissioner had held against the assessee which was upheld by the Court. The test laid down by Lord Davey in Strong & Co. vs Woodifield (1) was applied and applying that test it was held that except the expenses for obtaining legal advice the other expenses were not admissible. In Farrie vs Hall (2) F, a sugar broker was sued in the High Court for libel and the Court held that F had acted maliciously and that the defence of privilege could not prevail and awarded damages against him. F sought to claim the amount of damages as an allowable deduction contending that it was an expenditure laid out wholly and exclusively for the purposes of his trade or was a loss connected with or arising out of the trade. Relying on the cases above mentioned this amount was disallowed because it fell on the assessee in his character of a calumniator of a rival sugar broker and it was only remotely connected with his trade as a sugar broker. Therefore it was not laid out exclusively and wholly for the purpose of his business. We were also referred to the observations of Danckwerts, J. in Newson vs Robertson (3) where it was said that if the expenditure is incurred by the tax payer for more than one purpose including the commercial purposes in the sense that it is incurred for the purposes of earning profits of the trade and also some outside purpose then the expenses cannot be claimed at all as not being wholly and exclusively laid out or expended for the purpose of the trade. In that case expenses claimed by a Barrister for (1) ; (2) (3) , 459. 84 662 travelling between his house and his chambers were disallowed because his object and purpose in travelling was mixed and not wholly and exclusively for the purpose of the profession. Coming now to Indian cases; In Mask & Co. vs Commissioner of Income tax, Madras (1) the assessee in breach of his contract sold crackers at a lower rate and a decree was passed against him for damages for breach of contract which he claimed as an allowable deduction. It was held that as the assessee had disregarded the undertaking given and his conduct was palpably dishonest it did not constitute an allowable expenditure. Sir Lionel Leach, C. J., after referring to Warne 's case (2) and Von Glehn 's case (3) held that the amount did not constitute an expenditure falling within section 10(2)(xii). The Madras High Court in Senthikumara Nadar & Sons vs Commissioner of Income tax, Madras (4) held that payments of penalty for an in. fraction of the law fell outside the scope of permissible deductions under section 10(2)(xv). In that case the assessee had to pay liquidated damages which was akin to penalty incurred for an act opposed to public policy a policy underlying the Coffee Market Expansion Act, 1942, and which was left to the Coffee Board to enforce. Reference was also made during the course of arguments to Commissioner of Income tax vs Hirjee (1). In that case the assessee was prosecuted under the Hoarding and Profiteering Ordinance but was finally acquitted and claimed the amount spent in defending himself under section 10(2)(xv) in his assessment. It was held that the distinction between the legal expenses on a successful and unsuccessful defence was not sound and that the deductibility of such expenses under section 10(2)(xv) must depend on the nature and purpose of the legal proceedings in relation to the business whose profits are in computation and are unaffected by the final outcome of the proceedings. A review of these cases shows that expenses which (1) (3) (2) (4) (5) ; 663 are permitted as deductions are such as are made for the purpose of carrying on the business, i.e., to enable a person to carry on and earn profit in that business. It is not enough that the disbursements are made in the course of or arise out of or are concerned with or made out of the profits of the business but they must also be for the purpose of earning the profits of the business. As was pointed out in Von Glehn 's case (1) an expenditure is not deductible unless it is a commercial loss in trade and a penalty imposed for breach of the law during the course of trade cannot be described as such. If a sum is paid by an assessee conducting his business, because in conducting it he has acted in a manner, which has rendered him liable to penalty it cannot be claimed as a deductible expense. It must be a commercial loss and in its nature must be con templable as such. Such penalties which are incurred by an assessee in proceedings launched against him for an infraction of the law cannot be called commercial losses incurred by an assessee in carrying on his business. Infraction of the law is not a normal incident of business and therefore only such disbursements can be deducted as are really incidental to the business itself. They cannot be deducted if they fall on the assessee in some character other than that of a trader. Therefore where a penalty is incurred for the contravention of any specific statutory provision, it cannot be said to be a commercial loss falling on the assessee as a trader the test being that the expenses which are for the purpose of enabling a person to carry on trade for making profits in the business are permitted but not if they are merely connected with the business. It was argued that unless the penalty is of a nature which is personal to the assessee and if it is merely ordered against the goods imported it is an allowable deduction. That, in our opinion, is an erroneous distinction because disbursement is deductible only if it falls within section 10(2)(xv) of the Income tax Act and no such deduction can be made unless it falls within the test laid down in the cases discussed above and it can be said to be expenditure wholly and exclusively laid for the purpose of the business. Can it be said (1) 664 that a penalty paid for an infraction of the law, even though it may involve no personal liability in the sense of a fine imposed for an offence committed, is wholly and exclusively laid for the business in the sense as those words are used in the cases that have been discussed above. In our opinion, no expense which is paid by way of penalty for a breach of the law can be said to be an amount wholly and exclusively laid for the purpose of the business. The distinction sought to be drawn between a personal liability and a liability of the kind now before us is not sustainable because anything done which is an infraction of the law and is visited with a penalty cannot on grounds of public policy be said to be a commercial expense for the purpose of a business or a disbursement made for the purposes of earning the profits of such business. In our opinion the High Court rightly held that the amount claimed was not deductible and we therefore dismiss this appeal with costs. Appeal dismissed.

The appellant firm imported dates from abroad partly by steamer and partly by country craft. At the relevant time import of dates by steamers had been prohibited by Government (1) [1945] 1 3 I.T.R. Supp. (2) ; 652 notification, and the consignments which were imported by steamer were, therefore, confiscated by the customs authorities under section 167, item 8, of the Sea Customs Act, i878, but under section 183 of the Act the appellant was given an option to pay Rs. 82,250 as penalty in lieu of confiscation. The appellant paid the amount and got the dates released. Before the Income tax authorities it claimed to deduct the amount paid as penalty as an allowable expenditure under section 1O(2)(XV) of the Indian Income tax Act, 1922, but the claim was rejected. It was contended that the order of confiscation was against the stock in trade and not against the person of the appellant firm and as the amount paid was expended for the release of the stock in trade, it was an allowable expenditure. Held, that the amount paid by the appellant by way of penalty for a breach of the law could not be considered to be an expenditure laid out wholly and exclusively for the purpose of the business and was not an allowable deduction under section 1O(2) (xv) of the Indian Income tax Act, 1922. Expenses which are permitted as deductions are such as are made in order to enable a person to carry on and earn profit in the business. It is not enough that the disbursements are made in the course of or arise out of or are concerned with or made out of the profits of the business but they must also be for the purpose of earning the profits of the business. An expenditure is not deductible unless it is a commercial loss in trade and a penalty imposed for breach of the law during the course of trade cannot on grounds of public policy be said to be a commercial expense for the purpose of a business or disbursement made for the purpose of earning the profits of such business. Case law reviewed.

The respondent company purchased certain machinery for Rs. 89,000 and sold it for the same value, but in the books of account the written down value of the machinery was shown in the year of account as Rs. 73,392. The Income Tax Officer in computing the assessable income of the company added the difference, i.e. Rs. 15,608, between the actual value and the written down value to the profit of the company. The Income Tax Officer also passed an order under section 23A of the Income Tax Act, and directed that the undistributed portion of the assessable income, shall be deemed to have been distributed amongst the shareholders as dividend. Appeals against the order of the Income tax Officer proved unsuccessful and the Appellate Tribunal referred the following question to the High Court under section 66(1): "Whether the sum of Rs. 15,608 should have been included in the assessee company 's "profit" for the purpose of deter mining whether the payment of a larger dividend than that declared by it would be unreasonable. " The High Court answered the question in the negative. On appeal by special leave, Held, that the view taken by the High Court was correct. 494 By the fiction in section 10(2)(Vii) second proviso, read with s.2(6C), what is really not income is, for the purpose of computation of assessable income, made taxable income: but on that account, it does not become commercial profit, and if it is not commercial profit, it is not liable to be taken into account in assessing whether in view of the smallness of profits a larger dividend would be unreasonable. "Smallness of profit" should not be equated with "smallness of assessable income" but should be determined in accordance with commercial principles. Sir Kasturchand Ltd. vs Commissioner of Income tax, Bombay City, (1949) XVII I.T.R. 493, Ezra Proprietary Estates Ltd. vs Commissioner of Income tax, West Bengal, (1950) XVIII I.T.R. 762 and Commissioner of Income tax Bombay City vs F. L. Smith & Co. (Bombay) Ltd., (1959) XXXV I.T.R. 183, referred to.

The appellant imported 1,65,000 pieces Chinese silver dollars from Tibet through Sikkim State under two Reserve Bank import licences. As there were two licences the dollars were divided into two lots. One lot bore the mark 'H.D. ' and the other 'H.N. ' The appellant made two applications hearing Nos. 32 and 34 to the Officer in charge, Land Customs Station, for the grant of permits for passing the goods across the frontier. Application No. 32 related to the lot marked 'H.N. ' and the application No. 34 related to the lot marked 'H.D. ' On May 16, 1957 the two consignments arrived at the land customs station, Kalimpong and were examined and appraised by the land customs officer in charge of the station. On the duty being paid, the officer endorsed the applications certifying that the duty was paid and permitting the import of the goods. 'The consignments there were then delivered at Siliguri to the carriers for carriage by air to Dum Dum. On May 17, 1957 one consignment together with application No. 34 was sent by plane from the Sonapur airstrip and on the same date reached Dum Dum and was delivered to the appellant at Calcutta. On May 18, 1957 the Range Officer, Matidhar seized the second consignment bearing the marks 'H.D. ' together with application No. 32 when they were about to be despatched from the Sonapur airstrip. The seizure was made under section 5(3) of the Land Customs Act on the ground that the mark on the consignment was 'H.D. 'whereas the accompanying import application No. 32 related to the consignment marked 'H.N. ' The Collector of Land Customs, Calcutta after hearing the appellant held that offences under section 5(3) and section 7(1) of the , and section 167(8) read with of the had been committed by the appellant. He directed confiscation of the goods under those sections read with section 23A of the Foreign Exchange Regulation Act, 1947. Departmental remedies having failed the appellant filed a writ petition in the High Court. Appeal in this Court was filed by the appellant with certificate. The questions that came up for consideration were inter alia: (i) whether the seizure and confiscation. of the goods was authorised by section 5(3) of the , and (ii) whether the finding that the appellant had committed offences under that section and other provisions of law was perverse and liable to be quashed. HELD: (i) Section 5(3) of the . by itself does not require that all imported goods must always at all times, and at all places be accompanied by a permit. After the permit the goods become a part and parcel of the mass of other like goods in India. There is no duty 534 to keep the permit with the consignment for aH times and at all places. Nor is the importer under a duty to keep the consignment in his hands. He can sell portions of it to different buyers and obviously he could not give the permit to every consumer. [540 G H] Before March 29, 1968 when the Central Board of Revenue framed the Chinese Silver Dollars (Import) Rules, there was no provision in the Act or Rules in force which required the appellants to keep the permits at Sonapur airstrip with the dollars seized on that date. Section 5(3) was not infrinrged when the carriers did not produce the permit concerning the goods at the Sonapur airstrip on May 18, 1957, and the goods could not be confiscated under section 5(3). [541 C] (ii) Nor were the goods liable to confiscation under section 7(1) of the . There was no evidence to show that the seized dollars were not covered by licences. On the materials on record the conclusion was irresistible that due to the inadvertence of the carriers the permits were inter changed and that application No. 34 was sent with 'H.N. ' consignment and application No. 32 was kept with 'H.D. ' consignment. No inference of smuggling could be drawn from the fact that 'H.D. ' consignment was found with application No. 32. In the circumstances the finding that the appellant had smuggled the goods and was guilty of an offence under section 7(1) of the must be characterised as perverse. [541 D E; 542 B C] (iii) It was also not proved that the appellant committed any offence ' under sections 8(1) and 23A of the Foreign Exchange Regulations Act read with sections 19 and 167(8) of the . Although the offence under these sections may be proved by circumstantial evidence in the present case there was no evidence direct or circumstantial to prove the offence. [542 D] Issardas Daulat Ram vs Union of India, [1962] Supp.1 S.C.R. 358, referred to. (iv) Having regard to the facts on the record no tribunal could reasonably come to the conclusion that the dollars were liable to confiscation if they properly understood the relevant enactments. In the circumstances the order of the Collector confiscating the goods was liable to be quashed by a writ of certiorari. [542 F] Regina vs Medical Appeal Tribunal, ; , 582, applied.

The Industrial Tribunal, Ahmedabad, on a dispute referred to it under section 10(2) of the took up for consideration four demands for basic wages and adjustment, dearness allowance, gratuity and retrospectivity of the demands of the workmen. The Tribunal gave its award on 30th of November 1971 which was published on 20th January, 1972 in the Maharashtra Government Gazette. The appellant company, feeling aggrieved by the award, filed in the Supreme Court a petition for special leave to appeal under Article 136 of the Constitution. Pursuant to a notice, the respondent workmen put in appearance and filed a counter affidavit. After some arguments the appellant Company at its request was permitted to withdraw the leave petition as per the order of the Court dated 21st of August, 1972 which reads: "Upon hearing counsel the Court allowed the special leave petition to be withdrawn". Four days thereafter the company filed a petition under Article 226 of the Constitution before the High Court challenging the award. The petition was virtually based on the same facts and grounds as were taken in the special leave petition before the Supreme Court. The learned single Judge who heard the petition determined the circumstances on the basis of the respective affidavits filed by the parties in which the company unconditionally withdrew its special leave petition and in view of those circumstances equated the withdrawal of the leave petition with the dismissal of the same. Relying on Vasant Vithal Palse and Ors. vs The Indian Hume Pipe Co. Ltd. and Anr. , a decision of that court, the learned Judge dismissed the writ petition in limine. A Letters Patent Appeal against the said order of dismissal also met the same fate. However, a petition under Article 133 of the Constitution for a certificate of fitness to appeal to the Supreme Court was accepted by the said Division Bench and a certificate was granted and hence the appeal. Allowing the appeal, the Court ^ HELD: 1. Permission to withdraw a special leave petition cannot be equated with an order of dismissal. If a non speaking order of dismissal cannot operate as res judicata for entertaining a fresh writ petition on the same facts and grounds taken in the special leave petition, an order permitting the withdrawal of the writ petition for the same reason cannot so operate. [219B,222C D] 214 Workmen of Cochin Port Trust vs Board of Trustees of Cochin Port Trust and Anr., ; , followed. Punjab Beverages Pvt. Ltd. vs Suresh Chand and Anr. , ; ; Hoshnak Singh vs Union of India and Ors., ; ; Daryao and Ors. vs The State of U.P. and Ors., ; , discussed. Vasant Vithal Palse and Ors, v The Indian Hume Pipe Co. Ltd. and Anr. , ; Management of Western India Match Co. Ltd., Madras vs The Industrial Tribunul, Madras and Anr. A.I.R. 1958 Mad. 398, distinguished. The order of a court has to be read as it is. If the Supreme Court intended to dismiss the petition at the threshold. it could have said so explicitly. In the absence of any indication in the order itself, it will not be proper to enter into the arena of conjecture and to come to a conclusion on the basis of extraneous evidence that the Supreme Court intended to reject the leave petition. If the Order of the Supreme Court is read as it is there is not the slightest doubt that the Supreme Court had allowed the company to withdraw the leave petition, in the instant case. The approach of the High Court in having perused the affidavits filed by the parties to know the circumstances under which the leave petition was withdrawn is not correct. [217 C D]

These two appeals were preferred against the decision of the Nagpur High Court in an appeal under 'section 19(1)(f) of the Defence of India Act, 1939, modifying an award of compensation made 1178 under section 19(i)(b) of that Act in respect of certain premises requisitioned by the Government under 75(A) of the Rules framed under the Act. Both the parties applied for and obtained leave to appeal to the Federal Court under sections 109 and 110 of the Code of Civil Procedure. A preliminary objection was taken on behalf of the Government that the decision of the High Court was an award and not a judgment, decree or order within the meaning of sections 109 and 110 of the Code and as such no appeal lay therefrom : Held, that the objection must prevail and both the appeals stand dismissed. There could be no doubt that an appeal to the High Court under section 19(1)(f) Of the Defence of India Act from an award made under section 19(i)(b) of that Act was essentially an arbitration proceeding and as such the decision in such appeal cold not be a judgment, decree or order either under the Code of civil procedure or under Cl. 29 Of the Letters patent of the Nagpur High Court. Kollegal Silk Filatures Ltd. vs province, of Madyas, I. I,. R. , approved. There is a well recognised distinction between a decision given by the Court in a case which it 'hears on merits and one given by it in a proceeding for the filing of an award. The former is a judgment, decree or order of the Court appellable under the general law while, the latter is an adjudication of a private individual with the sanction of the Court stamped on it and where it does not exceed the terms of the reference, it is final and not appealable. There can be no difference in law between an arbitaration by agreement of parties and one under a statute. A referrence to arbitration under a statute to a court may be to it either as a court or as an arbitrator. If it is to it as a court, the decision is a judgment, decree or order appealable under the ordinary law unless the statute provides otherwise, while in the latter case the Court functions as a persona designata and its decision is air award not appealable under the ordinary law but only under the statute and to the extent provided by it. An appeal being essentially a continuation of the original proceedings, what *as at its inception an arbitration proceeding must retain its character as an arbitration proceeding even where the statute provides for an appeal, Rangoon Botatung Company vs The Collecter , Rangoon (1912) L.R. 39 I.A. 197 .The special officer sales the building sites Dassabhai Beznoji, Bom 506 the special officer sales the Building sites vs Dassabhai Bozanji Motiwala Manavikram Tirumalpad vs the Collector of the Nilagrie, Mad 943 and secretary of state for India in council vs Hindustan Co operative Insurance society Limited ,(1931) L.R. 58 I. A 259 relied on. National Telephone Company Limited vs Postmaster General, , explained.

The respondent assessee filed voluntary income tax returns for some assessment years after the date prescribed by Sub s.(l)of.139 of the Income Tax Act, 1961. The Income Tax officer treated the assessee as being in default and imposed penalties under cl. (a) of Sub s.(1) of s.271 of the Act. In appeal before the Appellate Assistant Commissioner of Income Tax the assessee contended that since interest had been levied under cl.(iii) of the Proviso to Sub section (1) of s.l39, no question arose of imposing a penalty. The Appellate Assistant Commissioner rejected the contention. In second appeal the Income Tax Appellate Tribunal held that as the Income Tax officer had levied interest upto the date of the filing of the returns, it must be presumed that the Income Tax officer had extended the time for filing the returns after satisfying himself that it was a case for extension of time. The Appellate Tribunal allowed the appeals and canceled the penalties. On a reference being made. the High Court held that the Appellate Tribunal was justified in relying upon the presumption. Hence these appeals by the Revenue. The Revenue contended that there was 216 no material to warrant the finding that an application had made by the assessee A for extension of time and that upon such application the Income Tax officer extended the time. The Revenue urged that the imposition of interest does not warrant the assumption that an application for extension of time was made by the assessee and allowed by the Income Tax officer. Dismissing the appeals, ^ HELD: It cannot be disputed that the Income Tax officer could extend the date for furnishing the return in respect of each assessment year. It was open to him to do so under the statute, and he was entitled to charge interest only on the basis that the extended period fell beyond September 30 or December 31, as the case may be. In the ordinary course of things, the Income Tax officer could have extended the date only upon being satisfied that there a was good reason for doing so, and that would have been on grounds pleaded by the assessee. We consider that in the circumstances of this case a presumption could validly be raised that all that was done. No attempt was made by the Revenue to show that the Income Tax officer acted arbitrarily and contrary to the procedure envisaged by the statute. The Appellate Tribunal considered the matter carefully and found circumstances on the record in favour of raising the presumption. The High Court approved of the approach adopted by the Appellate Tribunal and did not find it contrary to law. We do not see any reason to differ from the opinion expressed by the High Court. [221E G] Additional Commissioner of Income Tax, Gujarat vs Santosh Industries, , M. Nagappa and others vs Income Tax officer, Central Circle l, Bangalore and others, , Poorna Biscuit Factory vs Commissioner of Income Tax, A.P., , Commissioner of Income Tax, Orissa v Gangaram Chopolia, [1976]103 I.T.R. 613, Metal India Products vs Commissioner of Income Tax, Lucknow, [1978] 113 1.T.R. 830 and Commissioner of Income Tax, Punjab vs Kula Valley Transport Co. P. Ltd., not applicable. Penalty under cl (a) of Sub s (1) of s.271 of the Income Tax Act is attracted if the Income Tax officer is satisfied that the assessee as, without reasonable cause, failed to furnish the returns "within the time allowed '. , The time allowed for furnishing a voluntary return is the time specified in Sub s.(l) of s.139. The proviso so that sub section empowers the Income Tax officer to extend the date for furnishing the return. When the Income Tax officer extends the date, he does so in the exercise of authority conferred by the statute, and the additional time available to the assessee consequent upon such extension is, for all relevant purposes, of the same character and as effective as the statutory period specially enacted by Parliament. For the purpose of furnishing a return it constitutes an integral part of the time allowed for furnishing a return. Therefore, where the Income Tax officer extends the date, then all the time upto that date is the time allowed for furnishing the return. The additional period consequent upon such extension falls within the expression "the time allowed" in cl.(a) of Sub s.(l) of s.271. That being so, the conclusion must follow that the penalty provision does not come into play at all. [223C G] 217

The assessee in these appeals is an Hindu Undivided Family The assessment years in question are ranged from 1942 43 to 1953 54. The assessee filed its returns for these years in time. The assessee 's account books showed considerable cash credits in the name of some relations of the second respondent, the Karta of the H.U.F. The I.T.O. went into the genuineness of these cash credit entries. The contention of the assessee was substantially accepted either by the Appellate Assistant Commissioner or by the Revenue Appellate Tribunal. With regard to the, assessment for the assessment years 1943 44 to 1949 50, the final assessment was made in pursuance of an agreement or settlement arrived between the assessee and the Deputy Director of Inspection (Investiga tion). Long after the assessments in question were finalised, the I.T.O. issued notices to the appellants under section 34(1) (a) of the Indian Income Tax Act 1922, seeking to reopen the assessments already finalised. The assessee challenged the validity of these notices of the I.T.O. The High Court allowed the writ petitions and quashed the impugned notices. The assessee alleged that there was no relevant material before the I.T.O. before he issued the notices under s 31(a) on the basis of which he could have reason to believe that any income had escaped assessment. In the writ petitions, the assessee called upon the I.T.O. to produce the report made by him to the Central Board of Revenue, as well as the order of the Central Board of Revenue thereon. Despite this prayer, neither the Union of India, nor the I.T.O produced the report made by the I.T.O. to the Central Board of Revenue under s.34(1)(a) nor the order of the Central Board of Revenue. Dismissing the appeal, HELD : (i) Before an I.T.O. can issue a statutory notice under s.34(1)(a), he must have reason to believe that by reason of omission ,or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for the years in question, income, profits or gains chargeable to Income Tax have escaped assessment during those years. Further, before doing so, he must have recorded his reasons for acting under section 34(1) (a) and the Central Board of Revenue must have been satisfied on those reasons that it is a fit case for the issue of the notice. The recording of the reasons in support of the belief formed by the I.T.O. and the satisfaction of the Central Board of Revenue on the basis of the reasons recorded by the I.T.O. that it is a fit case for issue of notice under section 34(1) (a) are extremely important circumstances to find out whether the I.T.O. has jurisdiction to proceed under s.34(1)(a). [104D] 103 Calcutta Discount Co. Ltd. vs I.T.O. Company District 1 Calcutta and Others, ; Chhugamal Rajpat vs section P. Chalia & Ors. 79 I.T.P 603; Sheonath Singh vs Appellate Assistant Commissioner of Income Tax, Central, Calcutta & Ors., referred to. (ii)In the present case, an affidavit was filed before the Court stating that the relevant records could not be traced from the file of the Central Board of Revenue. Assuming that the concerned records were missing from the file of the Central Board of Revenue, the copy of the report made by the I.T.O. and the Order received by him, must have been in the file of the I.T.O. and reason was given for not producing those records. These circumstances give rise to an adverse inference that the records in question were not produced because they did not assist the department 's case. Under the circumstances, it is not possible to come to the conclusion that the facts necessary to confer jurisdiction on the I.T.O. to proceed under s.34(1)(a) had been established. There is nothing to show on record that there was any relevant material before the I.T.O. before he issued the notices under s.34(1) (a). [105F]

To avoid the decision of this Court in A. B. Abdul Khadir vs The State of Kerala, , wherein rules framed for the issue of licences and payment of fee for storage of tobacco were 'held to be invalid, the appellant State promulgated Ordinance I of 1963 which was later replaced by Luxury Tax on Tobacco (Validation) Act 9 of 1964. Consequently the appellant State made a demand on the respondent to repay the amount which had been refunded to the respondent in accordance with the aforesaid judgment. Thereupon, the respondent filed a writ petition in the High Court. The High Court relying upon the decision of this Court in Kalvani Stores vs State of Orissa, [1966] 1 S.C.R. 865, held that in the absence of any production of tobacco inside the appellant State it was not competent for the State Legislature to impose a tax on tobacco imported from outside the State and therefore, the provisions of the Act (9 of 1964) violated the guarantee contained in articles 301 and 304 of the Constitution. HELD: The High Court had not correctly appreciated the import of the decision in Kalyani Stores ' case. The decision was based on the assumption that the notifications therein enhancing duty on foreign liquor infringed the guarantee under article 301 and may be saved if it fell within the exceptions contained in Art 304 of the Constitution. As no liquor was produced or manufactured within the State the protection of article 304 was not available. This Court did not intend to lay down the proposition that the imposition of a duty or tax in every case would be tantamount per se to an infringement of article 301. Only such restrictions or impediments which directly and immediately impede the free flow of trade, commerce and intercourse fall within the prohibition imposed by article 301. A tax may in certain cases directly and immediately restrict or hamper the flow of trade, but every imposition of tax does not do so. Every case must be judged on its own facts and in its own setting of time and circumstance. In the present case the High Court had not gone into the question whether the provisions of the Act and the notifications constituted such restrictions or impediments as directly and immediately hamper the free 701 flow of trade, commerce and intercourse, and, therefore, fell within the prohibition. imposed under article 301 of the Constitution. Unless the High Court first comes to the finding whether or not there is the infringement of the guarantee under article 301 of the Constitution the further question as to whether the statute is saved under article 304(b) does not arise and the principle laid down in Kalyani Stores ' case cannot be invoked. This case, therefore must go back to the High Court. [709 E 710 E] Atiabari Tea Ca., Ltd. vs The State of Assam, ; , Automobile Transport (Rajasthan) Ltd. vs The State of Rajasthan, [1963] 1 S.C.R. 491, Andhra Sugars Ltd. vs State of Andhra Pradesh; , and State o/Madras vs K. Nataraja Mudaliar; , , referred to.

Appeal No.110 of 1957. Appeal by special leave from the judgment and order dated February 25, 1955, of the former Bombay High Court in I.T.R. No. 57/X of 1954. N. A. Palkhivala and I. N. Shroff, for the Appellant. A. N. Kripal and D. Gupta, for the Respondent. November 24. The Judgment of the Court was delivered by KAPUR, J. This is an appeal by special leave against the judgment and order of the High Court of Bombay answering the question submitted to it. against the assessee firm who is the appellant before 653 us, the respondent being the Commissioner of Income tax. The appeal relates to the assessment year 1949 50, the accounting year ended on July 25, 1948. The appellant is a firm doing the business of importing dates from abroad and selling them in India. During the accounting year the appellant imported dates from Iraq. At the relevant time the import of dates by steamers was prohibited by two notifications dated December 12, 1946, and June 4, 1947, but they were permitted to be brought by country craft. Goods which had been ordered by the appellant were received partly by steamer and partly by country craft. Consignments, which were imported by steamer and were valued at Rs. 5 lacs were confiscated by the Customs Authorities under section 167, item 8 of the Sea Customs Act but under section 183 of that Act the, appellant was given an option to pay fines aggregating Rs. 1,63,950 which sum on appeal was reduced to Rs. 82,250. This sum was paid and the dates were released. On the sale of the goods certain profits accrued out of which it sought to deduct Rs. 82,250 paid as penalty on ordinary principles of commercial accounting. The Income tax Officer disallowed this claim which was also disallowed by the Appellate Assistant Commissioner. On appeal to the Income tax Appellate Tribunal this sum was held to be allowable by a majority of two to one. At the instance of the respondent the Tribunal referred the following question to the High Court for its opinion: "Whether on the facts and in the circumstances of the case, the payment of Rs. 82,250 is an allowable expenditure under Section 10(2) (xv) of the Indian Income tax Act?" The High Court held that the above amount of Rs. 82,250 could not be said to have been paid for salvaging the goods but was paid as a penalty incurred in consequence of an illegal, act on the part of the appellant and was therefore not an allowable item under section 10(2)(xv) of the Income tax Act. Against this judgment the appellant firm has come in appeal to this Court by special leave. 83 654 any contract of hire purchase was contemplated, cannot be applied simpliciter, because such a contract has in it not only the element of bailment but also the element of sale. At common law the term 'hire purchase ' properly applies only to contracts of hire conferring an option to purchase, but it is often used to describe contracts which are in reality agreements to purchase chattels by instalments, subject to a condition that the property in them is not to pass until all instalments have been paid. The distinction between these two types of hire purchase contracts is, however, a most important one, because under the latter type of contract there is a binding obligation on the hirer to buy and the hirer can therefore pass a good title to a purchaser or pledgee dealing with him in good faith and without notice of the rights of the true owner, whereas in the case of a contract which merely confers an option to purchase there is no binding obligation on the hirer to buy, and a purchaser or pledgee can obtain no better title than the hirer had, except in the case of a sale in market overt, the contract not being an agreement to buy within the Factors Act, 1889, or the Sale of Goods Act, 1893." The observations quoted above are based mostly on two leading cases which have come to be regarded as the locus classicus upon the subject, namely Lee vs Butler (1) in which the transaction was described by Lord Esher, M.R., as "Hire and Purchase Agreements" and Helby vs Matthews (2) in which the House of Lords distinguished the former case on the ground that in that case there was a binding contract to buy and not merely an option to buy, without any obligation to buy. Both these cases were decided in terms of Factors Act of 1889 (52 & 53 Viet. c. 45, section 9). Both the kinds of agreements exemplified by the two leading cases aforesaid would now be included in the definition of 'hire purchase ' as contained in section 21 of the Hire Purchase Act, 1938 (1 & 2 Geo., 6, c. 53): " 'Hire purchase agreement ' means an agreement for the bailment of goods under which the bailee (1) (2) (1895] A.C. 471. 655 may buy the goods or under which the property in the goods will or may pass to the bailee, and where, by virtue of two or more agreements, none of which by itself constitutes a hire purchase agreement, there is a bailment of goods and either the bailee may buy the goods, or the property therein will or may pass to the bailee, the agreements shall be treated for the purposes of this Act as a single agreement made at the time when the last of the agreements was made. " It is clear that under the Law, as it now stands, which has now been crystallised into the section of the Hire Purchase Act, quoted above, the transaction partakes of the nature of a contract or bailment with an element of sale, as aforesaid, added to it. 'in such an agreement, the hirer may not be bound to purchase the thing hired;. he may or may not be. But in either case, if there is an obligation to buy, or an option to buy, the goods delivered to the hirer by the owner on the terms that the hirer, on payment of a premium as also of a number of instalments, shall enjoy the use of the goods, which ultimately may become his property, the transaction amounts to one of hire purchase, even though the title to the goods has remained with the owner and shall not pass to the hirer until a certain event has happened, namely, that all the stipulated instalments have been paid, or that the hirer has exercised his option to finalise the purchase on payment of a sum, nominal or otherwise. But it has been contended on behalf of the petitioners that there is no binding agreement to purchase the goods and that title is retained by the owner not as a security for payment of the price but absolutely. According to third term of the agreement, on the hirer duly performing and observing the terms of the agreement, with particular reference to the payment of the monthly instalments, "the hiring shall come to an end and the vehicle shall, at the option of the hirer, become his absolute property; but until such payments as aforesaid have been made, the vehicle shall remain the property of the owners. The hirer shall also have the option of purchasing the vehicle at any 656 belonging to him may be, the name and residence of the said person and the amount of penalty or increased rate of duty unrecovered; and such Magistrate shall thereupon proceed to enforce payment of the said amount in like manner as if such penalty or increased rate had been a fine inflicted by himself. " These sections show the punishments provided for the breach of the prohibitions in regard to importation or exportation of goods under sections 18 and 19; the power of the Customs Authorities to give an option to pay in lieu of confiscation and how the penalties are to be imposed. Therefore when the appellants incurred the liability they did so as a penalty for an infraction of the law; but it cannot be said that the money which they had to pay was not paid as a penalty and in fact under section 167(8) it was a penalty. In support of his argument counsel for the appellant firm referred to Maqbool Hussain etc. vs The State of Bombay etc. (1) and to the following passage at p. 742 where Bhagwati, J., said: "Confiscation is no doubt one of the penalties which the Customs Authorities can impose but that is more in the nature of proceedings in rem than proceedings in personam, the object being to confiscate the offending goods which have been dealt with contrary to the provisions of the law and in respect of the confiscation also an option is given to the owner of the goods to pay in lieu of confiscation such fine as the officer thinks fit. All this is for the enforcement of the levy of and safeguarding the recovery of the sea customs duties. " Similar observations were made by section K. Das, J., in Shewpujanrai Indrasanrai Ltd. vs The Collector of Customs & Ors. (2) where it was said that a distinction must be drawn between an action in rem and proceeding in personam and that confiscation of the goods is a proceeding in rem and the penalties are enforced against the goods whether the offender is known or not. The view taken by this Court in the other two cases cited by counsel for the appellants, i.e., Leo Roy (1) ; (2) ; , 836. 657 Frey vs The Superintendent, District Jail, Amritsar (1) and Thomas Dana vs The State of Punjab (2) is the same. In Dana case (2) Subba Rao, J., said at p. 298: "If the authority concerned makes an order of confiscation it is only a proceeding in rem and the penalty is enforced against the goods. On the other hand, if it imposes a penalty against the person concerned, it is a proceeding against the person and he is punished for committing the offence. It follows that in the case of confiscation there is no prosecution against the person or imposition of a penalty on him." In Maqbool Hussain 's case (3) the question for decision was whether after proceedings had been taken under the Sea Customs Act an accused person could be prosecuted and could or could not rely upon the plea of double jeopardy, it was held that he could not. In Shewpujanrai 's case (4) the contention raised was that after proceedings had been taken under the Foreign Exchange Regulation Act it was not open to the Customs Authorities to take any action under the Sea Customs Act. The other two cases were similar to Maqbool Hussain 's case (3). The contention now raised before us is quite different. What is to be decided in the present case is whether the penalty which was paid by the appellant firm was an allowable deduction within section 10(2)(xv) of the Income tax Act which provides: section 10(2)(xv) "any expenditure (not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purpose of such business, profession or vocation. " The words "for the purpose of such business" have been construed in Inland Revenue vs Anglo Brewing Co. Ltd. (5) to mean "for the purpose of keeping the trade going and of making it pay". The essential condition of allowance is that the expenditure should have been laid out or expended wholly and exclusively for the purpose of such business. (1) ; (2) [1959] Supp. I S.C.R. 274, 298. (3) ; (4) ; , 836. (5) , 813. 658 In deciding this case, reference to decisions in some English cases will be fruitful. In Commissioners of Inland Revenue vs Warnes & Co. (1), the assessee who carried on the business of oil exporters were sued for a penalty on an information exhibited by the Attorney General under the Sea Customs Consolidation Act for breach of orders and proclamations. The matter was settled by consent on the assessee agreeing to pay a mitigated penalty of pound 2,000. All imputations on the moral culpability of the assessees were withdrawn. The provisions of the Act under which this information was lodged and penalty paid was similar to the provisions of the Indian Sea Customs Act. This amount was held not to be a proper deduction because in order to be within the provision similar to section 10(2) (xv) of the Indian Act the loss had to be something within commercial contemplation and in the nature of a commercial loss. Rowlatt, J., relying on the observation of Lord Loreburn, L. C., in Strong & Co. vs Woodifield (2) said at p. 452: "but it seems to me that a penal liability of this kind cannot be regarded as a loss connected with or arising out of a trade. I think that a loss connected with or arising out of a trade must, at any rate, amount to something in the nature of a loss which is contemplable and in the nature of a commercial loss. I do not intend that to be an exhaustive definition, but I do not think it is possible to say that when a fine which is what the penalty in the present case amounted to has been inflicted upon a trading body, it can be said that that is a "loss connected, with or arising out of" the trade within the meaning of this rule. " This statement of the law was approved in the Commissioners of Inland Revenue vs Alexander Von Glehn & Co. Ltd. (3) where also in similar circumstances by consent of the assessee penalty of pound 3,000 was paid and the penalty plus the costs were claimed as deduction in arriving at the profits. The Special Commissioners had found that the penalty and costs were incurred by the assessee in the course of carrying on (1) (2) ; (3) [1920] .2 K.B. 553. 659 their trade and so incidental thereto and were admissible deductions. Rowlatt, J., on a reference held it to be a non deductible item. This judgment was affirmed on appeal by the Court of Appeal. Lord Sterndale, M. R., was of the opinion that it was immaterial whether technically the proceedings were criminal or not. The money that was paid was paid as a penalty and it did not matter if in the information it was called a forfeiture. It was argued by the assessee in that case that no moral obliquity was attributed to them and that it did not matter whether the expense was incurred in consequence of an infraction of the law or whether it was a penalty for doing an illegal act. At p. 565 Lord Sterndale said: "Now what is the position here? This business could perfectly well be carried on without any infraction of the law. This penalty was imposed because of an infraction of the law, and that does not seem to me to be, any more than the expense which had to be paid in Strong & Co. vs Woodifield (1) appeared to Lord Davey to be, a disbursement or expense which was laid out or expended for the purpose of such trade. ." Warrington L.J. said at p.569: "It is a sum which the persons conducting the trade have had to pay because in conducting it they have so acted as to render themselves liable to this penalty. It is not a commercial loss, and I think when the Act speaks of a loss connected with or arising out of such trade it means a commercial loss, connected with or arising out of the trade. " In Strong & Co. vs Woodifield (1) a brewing company owned a licensed house in which they carried on the business of inn keepers. They incurred a liability to pay damages on account of injuries caused to a visitor, by the falling in of a chimney. This sum was held not to be allowable as a deduction in computing the profits ' Lord Loreburn, L. C., in his speech said no sum could be deducted unless it be money wholly and exclusively laid out or expended for the purpose of such (1) ; 660 trade and that only such losses could be deducted as were connected with it in the sense that they were really incidental to the trade itself and they could not be deducted if they were mainly incidental to some other vocation or fell on the trader in some character other than that of a trader. Lord Davey observed:"I think the disbursements permitted are such as are made for that purpose. It is not enough that the disbursement is made in the course of, or arise out of, or is connected with the trade or is made out of the profits of the trade. It must be made for the purpose of earning profits. " The following passage from Lord Sterndale 's judgment at p. 566 in Von Glehn 's case (1) from which we have already quoted shows the effect of incurring a penalty as a result of a breach of the law: "During the course of the trading this company committed a breach of the law. As I say, it has been agreed that they did not intend to do anything wrong in the sense that they were willingly and knowingly sending these goods to an enemy destination; but they committed a breach of the law, and for that breach of the law, they were fined. That, as it seems to me, was not a loss connected with the business, but was a fine imposed upon the company personally, so far as a company can be considered to be a person, for a breach of the law which it had committed. It is perhaps a little difficult to put the distinction into very exact language, but there seems to me to be a difference between a commercial loss in trading and a penalty imposed upon a person or a company for a breach of the law which they have committed in that trading. For that reason I think that both the decision of Rowlatt, J., in this case, and his former decision in Inland Revenue Commissioners vs Warnes & Co. (2) which he followed were right, and that this appeal should be dismissed with costs." In Spofforth and Prince vs Glider (3) the assessee was a firm of chartered accountants, who claimed a deduction for certain legal costs paid in connection with a (1) [1920) 2 K.B. 55.3. (2) (3) 661 successful defence of one of the partners in a Police Court. The assessee firm also sought legal advice in regard to matters connected with some proceedings. Summons were issued against the assessee firm but were eventually dismissed. The assessee contended that the whole of the costs incurred in connection with the proceedings were "wholly and exclusively" laid out or expended for the appellant 's profession and were therefore allowable deductions. The Special Commissioner had held against the assessee which was upheld by the Court. The test laid down by Lord Davey in Strong & Co. vs Woodifield (1) was applied and applying that test it was held that except the expenses for obtaining legal advice the other expenses were not admissible. In Farrie vs Hall (2) F, a sugar broker was sued in the High Court for libel and the Court held that F had acted maliciously and that the defence of privilege could not prevail and awarded damages against him. F sought to claim the amount of damages as an allowable deduction contending that it was an expenditure laid out wholly and exclusively for the purposes of his trade or was a loss connected with or arising out of the trade. Relying on the cases above mentioned this amount was disallowed because it fell on the assessee in his character of a calumniator of a rival sugar broker and it was only remotely connected with his trade as a sugar broker. Therefore it was not laid out exclusively and wholly for the purpose of his business. We were also referred to the observations of Danckwerts, J. in Newson vs Robertson (3) where it was said that if the expenditure is incurred by the tax payer for more than one purpose including the commercial purposes in the sense that it is incurred for the purposes of earning profits of the trade and also some outside purpose then the expenses cannot be claimed at all as not being wholly and exclusively laid out or expended for the purpose of the trade. In that case expenses claimed by a Barrister for (1) ; (2) (3) , 459. 84 662 travelling between his house and his chambers were disallowed because his object and purpose in travelling was mixed and not wholly and exclusively for the purpose of the profession. Coming now to Indian cases; In Mask & Co. vs Commissioner of Income tax, Madras (1) the assessee in breach of his contract sold crackers at a lower rate and a decree was passed against him for damages for breach of contract which he claimed as an allowable deduction. It was held that as the assessee had disregarded the undertaking given and his conduct was palpably dishonest it did not constitute an allowable expenditure. Sir Lionel Leach, C. J., after referring to Warne 's case (2) and Von Glehn 's case (3) held that the amount did not constitute an expenditure falling within section 10(2)(xii). The Madras High Court in Senthikumara Nadar & Sons vs Commissioner of Income tax, Madras (4) held that payments of penalty for an in. fraction of the law fell outside the scope of permissible deductions under section 10(2)(xv). In that case the assessee had to pay liquidated damages which was akin to penalty incurred for an act opposed to public policy a policy underlying the Coffee Market Expansion Act, 1942, and which was left to the Coffee Board to enforce. Reference was also made during the course of arguments to Commissioner of Income tax vs Hirjee (1). In that case the assessee was prosecuted under the Hoarding and Profiteering Ordinance but was finally acquitted and claimed the amount spent in defending himself under section 10(2)(xv) in his assessment. It was held that the distinction between the legal expenses on a successful and unsuccessful defence was not sound and that the deductibility of such expenses under section 10(2)(xv) must depend on the nature and purpose of the legal proceedings in relation to the business whose profits are in computation and are unaffected by the final outcome of the proceedings. A review of these cases shows that expenses which (1) (3) (2) (4) (5) ; 663 are permitted as deductions are such as are made for the purpose of carrying on the business, i.e., to enable a person to carry on and earn profit in that business. It is not enough that the disbursements are made in the course of or arise out of or are concerned with or made out of the profits of the business but they must also be for the purpose of earning the profits of the business. As was pointed out in Von Glehn 's case (1) an expenditure is not deductible unless it is a commercial loss in trade and a penalty imposed for breach of the law during the course of trade cannot be described as such. If a sum is paid by an assessee conducting his business, because in conducting it he has acted in a manner, which has rendered him liable to penalty it cannot be claimed as a deductible expense. It must be a commercial loss and in its nature must be con templable as such. Such penalties which are incurred by an assessee in proceedings launched against him for an infraction of the law cannot be called commercial losses incurred by an assessee in carrying on his business. Infraction of the law is not a normal incident of business and therefore only such disbursements can be deducted as are really incidental to the business itself. They cannot be deducted if they fall on the assessee in some character other than that of a trader. Therefore where a penalty is incurred for the contravention of any specific statutory provision, it cannot be said to be a commercial loss falling on the assessee as a trader the test being that the expenses which are for the purpose of enabling a person to carry on trade for making profits in the business are permitted but not if they are merely connected with the business. It was argued that unless the penalty is of a nature which is personal to the assessee and if it is merely ordered against the goods imported it is an allowable deduction. That, in our opinion, is an erroneous distinction because disbursement is deductible only if it falls within section 10(2)(xv) of the Income tax Act and no such deduction can be made unless it falls within the test laid down in the cases discussed above and it can be said to be expenditure wholly and exclusively laid for the purpose of the business. Can it be said (1) 664 that a penalty paid for an infraction of the law, even though it may involve no personal liability in the sense of a fine imposed for an offence committed, is wholly and exclusively laid for the business in the sense as those words are used in the cases that have been discussed above. In our opinion, no expense which is paid by way of penalty for a breach of the law can be said to be an amount wholly and exclusively laid for the purpose of the business. The distinction sought to be drawn between a personal liability and a liability of the kind now before us is not sustainable because anything done which is an infraction of the law and is visited with a penalty cannot on grounds of public policy be said to be a commercial expense for the purpose of a business or a disbursement made for the purposes of earning the profits of such business. In our opinion the High Court rightly held that the amount claimed was not deductible and we therefore dismiss this appeal with costs. Appeal dismissed.

The appellant firm imported dates from abroad partly by steamer and partly by country craft. At the relevant time import of dates by steamers had been prohibited by Government (1) [1945] 1 3 I.T.R. Supp. (2) ; 652 notification, and the consignments which were imported by steamer were, therefore, confiscated by the customs authorities under section 167, item 8, of the Sea Customs Act, i878, but under section 183 of the Act the appellant was given an option to pay Rs. 82,250 as penalty in lieu of confiscation. The appellant paid the amount and got the dates released. Before the Income tax authorities it claimed to deduct the amount paid as penalty as an allowable expenditure under section 1O(2)(XV) of the Indian Income tax Act, 1922, but the claim was rejected. It was contended that the order of confiscation was against the stock in trade and not against the person of the appellant firm and as the amount paid was expended for the release of the stock in trade, it was an allowable expenditure. Held, that the amount paid by the appellant by way of penalty for a breach of the law could not be considered to be an expenditure laid out wholly and exclusively for the purpose of the business and was not an allowable deduction under section 1O(2) (xv) of the Indian Income tax Act, 1922. Expenses which are permitted as deductions are such as are made in order to enable a person to carry on and earn profit in the business. It is not enough that the disbursements are made in the course of or arise out of or are concerned with or made out of the profits of the business but they must also be for the purpose of earning the profits of the business. An expenditure is not deductible unless it is a commercial loss in trade and a penalty imposed for breach of the law during the course of trade cannot on grounds of public policy be said to be a commercial expense for the purpose of a business or disbursement made for the purpose of earning the profits of such business. Case law reviewed.

The Income tax Officer issued a notice to the assessee under section 34 on the ground that two items of the assessee 's income, namely forest income and interest income, were not included in the original assessment for the year 1942 43. In response the assessee filed a return fully disclosing his interest income but raised the plea that his forest income was not taxable. The, Income tax Officer however, assessed both items to tax. On appeal, the Appellate Tribunal in its order dated April 25, 1961, although dealing only with the forest income and holding that the Income tax Officer had no jurisdiction to initiate proceedings under section 34 in respect of such income, by inadvertence or by mistake, set aside the entire order of reassessment both in respect of forest income, as well as the interest income. The Department did not take any steps to rectify the mistake under section 35 or to have the question of illegality referred to the High Court. Having allowed the order of the Tribunal to become final, the Income tax Officer initiated fresh proceedings under section 34 in respect of the interest income and made a revised assessment order which included this income. The Appellate Tribunal confirmed the assessment but the High Court, on a reference to it under section 66(1), took the view that fresh proceedings under section 24 could not be taken for the reason, inter alia, that the Tribunal 's order dated April 25, 1949 had become final. HELD : The Tribunal had committed a mistake in setting aside the reassessment order in respect of interest income also, but the income tax Officer did not resort to the obvious remedy of having the mistake rectified as provided for under section 35 and allowed the Tribunal 's order dated April 25, 1949 to become final. He could not in the circumstances, reopen the assessment by initiating proceedings under section 34, as otherwise there would be an unrestricted power of review in the hands of the Income tax Officer to go behind the findings of a hierarchy of Tribunals and Courts. [995 E F; 996 F H] C.I.T. Bombay and Aden vs Khemchand Ramdas, (1938)6 I.T.R. 414 and C.I.T. West Punjab vs The Tribune Trust, Lahore, (1948)16 I.T.R. 214, referred to. R. K. Das & Co. vs C.I.T., West Bengal, (1956)30 I.T.R. 439 and C.I.T., Bihar & Orissa vs Maharaja Pratapsingh Bahadur of Gidhaur, distinguished.

The appellant company was carrying on business in Bombay as commission agents. In the course of assessment proceedings for the year 1954 55, the Income tax Officer noticed from the ssee 's boo s of account that the assessee had business connections with certain nonresident parties and found that the transactions disclosed that through the assessee those non resident parties were receiving income, profits and gains. He considered that section 43 of the Indian Income tax Act, 1922, was applicable to the assessee and issued on March 27, 1957, a notice under section 34 of the Act for assessment of the assessee as an agent of the said non resident parties. The assessee pleaded, inter alia, that the proceedings intiated by the Income tax Officer under section 34 were barred since the notice issued by him was after the expiry of one year from the end of the assessment year 1954 55, but the Income tax Officer rejected the contention relying on the amendment made to the proviso to section 34(l)(b)(iii) by the Finance Act, 1956, under which the period of one year was changed to two years. The amendment was given retrospective operation upto April 1, 1956, but since the power to issue a notice under the unamended Act had come to an end on March 31, 1956, the question was whether the Income tax Officer could issue a notice of assessment to a person as an agent of a non resident party under the amended provision when the period prescribed for such a notice had before the amended Act came into force expired. HELD:The proceedings initiated by the Income tax Officer by the notice dated March 27, 1957, were barred; the authority of the Incometax Officer under the Indian Income tax Act before it was amended by the Finance Act of 1956 having come to an end, the amending provision would not entitle him to commence a proceeding even though at the date when he issued the notice it was within the period provided by the amendment. Notwithstanding the fact that there was no determinable point of time between the expiry of the time provided under the old Act and the commencement of the Amendment Act, in the absence of an express provision or clear implication, the legislature could not be said to have intended to attribute to the Amending provision a greater retros pectivity than was expressly mentioned.

The appellant company made a claim under section 5 of the Income tax (Double Taxation Relief) (Indian States) Rules, 1939, for refund of the income tax paid by it in an Indian State. The claim was rejected by the Income tax Officer as time barred. The Commissioner of Income tax and the Central Board of Revenue refused to interfere and the appellant sought no further legal remedy against their orders. Subsequently on certain tax demands being made by the Income tax Officer, the appellant made representation that the amounts in respect of which application had earlier been made under r. 5 should be set off against the demand as provided by section 49E of the Indian Income tax Act, 1922. The Income tax authorities having rejected this claim also, the appellant went to the High Court under article 226 of the Constitution. The High Court held that the expression found to be due" in section 49E clearly meant that there must be, prior to the claim of set off, an adjudication whereunder an amount is found due by way of refund to the person claiming set off. Since there was no such adjudication in the appellant 's favour, the writ petition was dismissed. However a certificate of fitness under article 133(1) (c) was granted to the appellant. HELD : (i) It is not necessary that there should be a prior adjudication before a claim can be allowed under section 49E. There is nothing to debar the Income tax Officer from determining the question whether a refund is due or not when an application is made to him under section 49E. The words "is found" do not necessarily lead to the conclusion that there must be a prior adjudication. [419 D E] (ii) The set off under section 49E must however be "in lieu of payment ' which expression connotes that payment is outstanding i.e. there is a subsisting obligation on the Income tax Officer to pay. If a claim to refund is barred by a final order, it cannot be said that there is a subsisting obligation to make the payment. [419 F G] Stubbs vs Director of Public Prosecutions , relied on. (iii) In the present case the orders of the Commissioner and the Central Board of Revenue rejecting the appellant 's claim under r. 5 of the Indian State Rules had become final. They were not challenged even in the petition under article 226. There was thus no subsisting obligation on the part of the Income tax Officer to make payment to the appellant, and the claim of the appellant under section 49E must therefore, fail. [419 G H]

Respondent No. 1 imported consignments of wool material and claimed that the imported goods were wool waste and hence not liable to customs duty. The goods were examined by an Expert Committee, who appalled that the goods were other than wool waste. Based on the Committee 's opinion, the Additional Collector or Customs, after notice, examined the whole case, charged the respondent with the violation of the Import Control Regulations and held that the goods were not wool waste but processed woollen products other than wool tops/raw wool. The Appellate Tribunal allowed the respondent 's appeal. Dismissing the appeal it was, HELD: (1) When no statutory definition is provided in respect of an item in the or the Central Excises Act. the trade understanding, meaning thereby the understanding in the opinion of those who deal with the goods in question, is the safest guide. [374B] Union of India vs Delhi Cloth & General Mills, [I963] Supp 1 SCR 586; South Bihar Sugar Mills Ltd. vs Union of India, ; ; Dunlop India Ltd. vs Union of India, ; ; In re, Colgate Palmolive (India) Pvt. Ltd., [l979] ELT 567; Commissioner of sales tax, U.P. vs S.N. Bros, Kanpur; , and His Majesty The King vs Planters Nut and Chocolate Co. Ltd. [1951] CLR (Ex) 122, referred to. PG NO 370 PG NO 371 [2] The expression "wool waste" is not defined in the relevant Act or in the notification. This expression is not an expression of article It may be understood, as in not of financial measures where the expressions are not defined, not in a technical or on any preconceived basis but on the basis of trade understanding of those who deal with those goods. [376D E] [3] Whether a particular item and the particular goods in this case are wool wastes or not is primarily and essentially a question of fact The decision on such a question of fact must be arrived at without ignoring the material and relevant facts and bearing in mind the correct legal principles. Judge by these yardsticks, the finding of the Tribunal in this case is unassailable. [376F] {4) If a fact finding authority comes to a conclusion within the parameters, honestly and bona fide, the fact that another authority be it the Supreme Court or the High Court may have a different perspective of that question is no ground to interfere with that finding in an appeal from such a finding under Section l30E of the Act though in relation to the rate of duty of customs or to the value of goods for purposes of assessment, the amplitude of appeal is unlimited. But because the jurisdiction is unlimited, there is inherent limitation imposed in such appeals. [376G H; 377B]

In computing the total earned income of the appellant company for the calendar year 1959, the Income Tax Officer disallowed a claim for deduction of Rs. 80,255 in respect of liability for payment of tax under the Wealth Tax Act, 27 of 1957 incurred by the company. The order of the Income Tax Officer was confirmed in appeal by the Appellate Assistant Commissioner, the Tribunal and, on a reference, by the High Court. It was contended by the appellant company that since the company held the assets on which tax was levied for the purpose of its business and profits were earned by the use of those assets, tax paid in respect of those assets was expenditure laid out wholly and exclusively for the purpose of the business and on that account was a permissible allowance under section 10(2)(xv) of the Income tax Act, 1922, HELD:The amount of tax paid on the net wealth of an assesses under Wealth Tax Act is not a permissible deduction under section 10(2) (xv) of the Income tax Act, for tax is imposed under the Wealth Tax Act on the owner of the assets and not on any commercial activity. The charge of tax is the same, whether the asset are part of or used in the trading organization of the owner or are merely owned by him. [326 G H] For expenditure to be regarded as being for the purpose of the assessee 's business within the meaning of section 10 (2) (xv), the nature of the expenditure of outgoing must be adjudged in the light of accepted commercial practice and trading principles. The expenditure must be incidental to the business and must be necessitated or justified by commercial expediency. It must be directly and intimately connected with the business and be laid out by the tax payer in his character as a trader. To be a permissible deduction, there must be a direct and intimate connection between the expenditure and the business i.e. between the expenditure and the character of the assessee as a trader, and not as owner of assets, even if they are assets of the business. [326 F] Case law discussed.

The appellant assessee a company manufactured cement which was sold partly in the State of Rajasthan and partly outside the State. The sales tax returns relating to the sales were filed by the assessee under the Rajasthan Sales Tax Act, 1954 and under the before the Assessing Authority for the period August 1, 1973 to July 31, 1974 i.e. for the assessment year 1974 75. In those returns the assessee did not include in the taxable turnover the freight charges paid in respect of the goods sold under the bonafide impression that freight charges were not to be so includible in the taxable turnover in view of certain decisions rendered by the High Courts and the Supreme Court. The Supreme Court on August 29, 1978 In Sugar Mills Limited vs State of Rajasthan and others held that freight charges formed part of the sale price and were includible in the taxable turn over of an assessee and that sales tax was payable thereon. Coming to know of the aforesaid decision the assessee prepared and filed the revised returns in respect of the assessment year 1974 75 before the Commercial Tax officer on October 20, 1978 including freight charges in the turn over and also deposited along with the revised returns, challans showing payment of the balance of the tax payable under the State Act as well as under the Central Act. The assessing authority passed two orders of assessment one under section 10(3) of the State Act and the other under section 9 of the Central Act. The former order of assessment levied a penalty of Rs. 53,353 under section 7AA of the State Act on account of the delay in depositing the sales tax payable in respect of the amount of freight charges and also levied interest of Rs. 85910/under section 11B of the State Act. In the latter order of assessment a penalty of Rs. 1,34,205/ was levied under section 7AA of the State Act read with section 9(2) of the Central Act for the delay in depositing the tax payable in respect of the freight charges, and interest of Rs. 2,07,174/ was levied under section 11 of the State Act read with section 9(2) of the Central Act, 564 In the appeals to this Court on the question whether: (A) the Assessing Authority was right in imposing penalty on the assessee under the two assessment orders for not depositing the tax in respect of the amount of freight at the time of filing of the original returns under the State Act and the Central Act, and (B) the assessee was liable under section 11B of the State Act to pay interest on the tax in respect of the amount of freight for the period between the date of filing of the original return and the date when such tax was actually paid while filing the revised return. ^ HELD: [By The Court] (A) The levy of penalties for not including the freight charges in the taxable turnover in the original returns and for not paying the tax in respect of such freight charges is unsustainable and the two orders of assessment in so far as they levy penalty are liable to be quashed and set aside. [571 B, 589 B] Cement Marketing Company of India Limited vs Commissioner of Sales Tax Indore ; referred to. [per Bhagwati J. dissenting] B(1) So long as the assessee pays the amount of tax which according to him is due on the basis of the return filed by him, there would be no default on his part in complying with the obligation under sub section (2) of section 7 and there would be no liability on him to pay interest under section 11B clause (a), because he would have paid the amount of tax quantified by him through the process of self assessment. The actual amount of tax payable by the assessee would be determined only when it is assessed by the Assessing Authority under section 10 and that would not be payable until the expiration of the period specified in the notice of demand or thirty days from the date of service of such notice, as the case may be. [584 D E] (2) Since the assessee deposited the amounts of tax which according to him were due on the basis of the returns actually filed by him and the returns were accompanied by receipts showing deposit of such amounts of tax, there was no default on the part of the assessee in paying the amounts of tax payable under sub section (2) of section 7 within the actual period allowed and in the circumstances no interest was payable by the assessee under section 11B clause (a). [586 F G] State of Rajasthan vs Ghasi Lal ; relied on. When the assessment, is made and the tax payable by an assessee is determined, the tax so determined does not become payable until after a notice of demand is served by the Assessing Authority under section 11 sub section (2) read with Rule 31 of the Rajasthan Sales Tax Rules 1955. The assessee is allowed time to make payment up to the date specified in the notice of demand and if no such date is specified, then within thirty days from the date of service of the notice. So long the assessee pays up the amount of the tax assessed within the time specified in the notice of demand or within thirty days from the date of service of the notice, as the case may be, he would not be in default and hence 565 section 11B clause (b) provides that the assessee would be liable to pay interest on the tax assessed only if the amount of such tax is not paid within the period specified in the notice of demand or in the absence of such specification, within thirty days from the date Of service of such notice and then too, the liability to pay interest would commence not from the date of the assessment, but from the day commencing after the end of the said period, that is, the period specified in the notice of demand or thirty days from the date of service of such notice, as the case may be. Thus even after the assessment is made and the tax payable by an assessee is determined, the assessee is not liable to pay interest on the amount of such tax until after the period specified in the notice of demand or in the absence such specification, thirty days From the date of service of such notice, have expired. [574 D H] 4. The language used in sub section (2) of section 7 is "full amount of tax due on the basis of return". The "return" is the return Sled by the assessee under sub section (1) of section 7. When sub section (1) of section 7 requires an assessee to file a return, the return filed must be correct and proper. If the return is not correct and proper, the Assessing Authority may not give credence to the return and may refuse to assess the tax on the basis of the return and if the Assessing Authority finds that the assessee has concealed any particulars from the return furnished by him or has deliberately furnished inadequate particulars in the return the Assessing Authority may levy penalty on the assessee under section 16, sub section (1) clause (e) and the assessee may also be liable to be punished for an offence under Section 16, sub section (3) clause (d) for making a false statement in the return. Whether the return filed be correct or not, the tax payable by the assessee under sub section (2) of section 7 would be the full amount of tax due on the basis of the return. The return actually filed by the assessee must be looked into in order to see what is the full amount of tax duo on the basis of such return. It is not the assessed tax nor is it the tax due on the basis of a return which ought to have been filed by the assessee but it is the tax due according to the return actually filed that is payable under sub section (2) of section 7. This provision is really in the nature of self assessment and what it requires is that whatever be the amount of tax due on the basis of self assessment must be paid up along with the filing of the return which constitutes self assessment. The plain words of sub section (2) of section 7 cannot be tortured to mean full amount of tax due on the basis of return which ought to have been filed but which has not been filed. [576 B F] 5. The legislature could never have intended that the assessee should be liable on pain of imposition of penalty, to deposit an amount which is yet to be ascertained through assessment. How would the assessee know in advance what view the Assessing Authority would take in regard to the taxability of any particular category of sales or the rate of tax applicable to them and deposit the amount of tax on that basis ? Even in regard to the liability to pay interest, it does not stand to reason that the legislature should have subjected the assessee to such liability for non payment of an amount of which the liability for payment is still to be ascertained. [577 F G] 6. The tax payable under sub section (2) of section 7 dealt with in clause (a) of section 11B cannot, be equated with the amount of the tax assessed forming the subject matter of clause (b) of section 11B and hence it must 566 be tax due on the basis of the return actually filed by the assessee and not on the basis of a correct and proper return which ought to have been filed by him. [578 G H] 7. The scheme of taxation envisaged in the State Act clearly shows that it is only when the assessment is made and the period specified in the notice of demand or in the absence of such specification, thirty days from the date of service of such notice expires, that the amount of tax as assessed becomes payable by the assessee and its payment can be enforced by the Revenue. What becomes payable by the assessee under sub section (2) of section 7 is merely the tax due on the basis of the return actually filed by the assessee that is, on the basis of self assessment. [579 F G] 8. On a true construction of the provisions of the State Act tax becomes due from the assessee and is payable by him only when it is ascertained by the Assessing Authority under section 10 or by the assessee under section 7(2). Till then there is only the liability of the assessee to be assessed to tax and no tax can be said to be payable by the assessee. The tax payable is ascertained when the assessment is made by the Assessing Authority under section 10 or when the assessee himself quantifies it through the process of self assessment under subsection (2) of section 7. These two amounts of tax may and in quite a number of cases would be different because one is ascertained by the Assessing Authority through the process of assessment and that is why sub section (4) of section 7 provides that every deposit of tax made under sub section (2) shall be deemed to be provisional subject to necessary adjustments in pursuance of final assessment of tax made under section 10. This provision clearly contemplates that the tax payable under sub section (2) of section 7 may be different from the tax assessed under section 10 and it cannot, therefore, obviously be the tax due on the basis of a correct and proper return but must be the tax due on the basis of the return actually filed. [580 D G] 9(i) it is clear from the language of subsection (2) of section 7 that it is only on the filing of the return that the liability to pay the tax due on the basis of the return arises. If no return is filed within the prescribed time, it would undoubtedly constitute a default attracting penalty under section 16, sub section (1) clause (n) but there would be no liability on the assessee to pay interest on the amount of the tax, because the liability to pay the tax due on the basis of the return under sub section (2) of section 7 can arise only when the return is filed There is no liability on the assessee to pay any amount by way of tax until the return is filed or the assessment is made. [581 H 582 B] (ii) It can neither be held that section 7 sub section (2) is attracted even when no return has been filed. It is clear that until the assessee files a return or assessment is made, no tax is payable by the assessee, because till then there is only a liability to be assessed to tax. The conclusion that a registered dealer who does not file any return at all as required by sub section (1) of section 7 would still be liable to pay the amount of tax and if he does not pay the same before the due date for filing the return, he would be liable to pay interest under section 11(b) clause (a) cannot be accepted. This would be contrary to the decision of this Court in State of Rajasthan vs Ghasi Lal [ ; [582 C F] 567 [per A.P. Sen and Venkataramiah, JJ] B(1). The statutory liability under section 11B arises wherever there is default in payment of the tax within the period allowed by law irrespective of any doubt which an assessee may be entertaining about the liability to pay the tax. [604 D E] State of Rajasthan vs Ghasi Lal ; distinguished. Tax, interest and penalty are three different concepts. Tax becomes payable by an assessee by virtue of the charging provision in a taxing statute. Penalty ordinarily becomes payable when it is found that an assessee has willfully violated any of the provisions of the taxing statute. Interest is ordinarily claimed from an assessee who has withheld payment of any tax payable by him and it is always calculated at the prescribed rate on the basis of the actual amount of tax withheld and the extent of delay in paying it. It may not be wrong to say that such interest is compensatory In character and not penal. [594 D F] 3. Registered dealers can be classified into the following different classes: (1) A registered dealer who files his return showing a higher taxable turnover than the actual turnover which is ultimately found to be taxable at the time of regular assessment and who pays tax under section 7(2) of the Act on the basis of the return. (2) A registered dealer who files a true and proper return and pays tax on the basis of such return within the time allowed. A registered dealer who does not file any return at all as required by section 7(1) and pays no tax under section 7(2) of the Act. A registered dealer who files a true return but does not pay the full amount of tax as required by section 7(2), and; (5) A registered dealer who files a return but wrongly claims either the whole or any part of the turnover as not taxable and pays under section 7(2) of the Act that amount of tax, which according to him is payable, on the basis of the return. In the case of a registered dealer falling under class (1) no question of payment of interest would arise as the amount of tax paid by him at the time of filing the return is much more than what is actually due and payable by him under the Act. The extra tax paid by him becomes refundable after the regular assessment is completed in view of section 7(4) of the Act. In the case of a registered dealer falling under clause (2) also no question of payment of interest arises as there is no shortfall in payment of the tax. [594 F 595D] 4. A fair reading of section 11 of the Act suggests that the Act expects that all assessees who are liable to pay sales tax should file a true return within the period prescribed under sub section (1) of section 7 and should produce a treasury receipt or a receipt of any bank authorised to receive money on behalf of the State Government showing that full amount of tax due from them has been paid. [595 H 596 A ] 5. It is settled law that a distinction has to be made by court while interpreting the provisions of a taxing statute between charging provisions which impose the charge to tax and machinery provisions which provide the machinery for the quantification of the tax and the levying and collection of the tax so imposed. While charging provisions are construed strictly, machinery sections are not generally subject to a rigorous construction. The courts are 568 expected to construe the machinery sections in such a manner that a charge to tax is not defeated. [596 C D] India United Mills Ltd. vs Commissioner of Excess Profits Tax, Bombay ; , Gursahai Saigal vs Commissioner of Income tax Punjab ; Commissioner of Income tax vs Mahaliram Ramjidas, A.I.R. and Whitney vs Commissioners of Inland Revenue , referred to. If the words 'on the basis of return ' occurring in sub section (2) of section 7 of the Act are construed as on The basis of a true and proper return which ought to have been filed under sub section (1) of section 7 then all the three classes of persons viz (i) those who have not filed any return at all and who are later on found to be liable to be assessed, (ii) those who have filed a true return but have not deposited the full amount of tax which they are liable to pay and (iii) those who filed a return making a wrong claim that either the whole or any part of the turnover is not taxable and who are subsequently found to have made a wrong claim, would be placed in the same position and they would all be liable to pay interest on the amount of tax which they are liable to pay but have not paid as required by sub section (2) of section 7 of the Act. This view is in conformity with the legislative intention in enacting section 11B of the Act [599 A C] 7. In cases to which section 7(2) of the Act applies interest has to be paid on the tax payable but which has not been paid from the last date on which the return has to be filed for the assessment year in question and in cases to which sub section (2A) is applicable, from the last date on which the advance tax has to be paid. The amount of interest has however to be calculated after the actual amount of tax payable is assessed and necessary adjustments are made. [609 B C] 8. Either by delaying the filing of the return or not filing it all or by filing a return wrongly claiming that a certain part of the turnover is not taxable or by not disclosing a part of the taxable turnover in the return an assessee cannot escape the liability to pay interest under section 11B on the amount of tax with held, as a consequence of his own action or inaction, from the last date on which it had to be paid as per sub section (2) or sub section (2A) of section 7, as the case may be, read with the Rules. An assessee cannot contend that interest does not accrue under section 11B on the tax payable by him where the time to file the return has elapsed until the actually files a return admitting the liability to pay such talc or until assessment is made. [604 B D]

The appellant made a gift in 1951 of certain ordinary and preference shares in a company to. his wife and on the date of transfer the value of the shares was Rs. 69,730. After the company had converted the preference shares into ordinary shares the appellant 's wife sold most of the shares held by her for Pa. 1,54,800, resulting in a capital gain of Rs. 70,860 as computed under section 12B of the Income Tax Act. She deposited the entire amount realised from the sale of shares with a firm and thereby earned an interest of Rs. 9,288 per year. In the appellant 's assessment for 1957 58, the Income Tax Officer included the amount of Rs. 70,860 on the view that the gain resulting from the sale of the shares was the income of the appellant 's wife which arose directly or indirectly from assets transferred by him within the meaning of section 16 (3)(a)(iii) of the Income Tax Act, 1922. Similarly, in the appellant 's assessment for the year 1958 59 ' and 19591 60, the interest amount of Rs. 9,288 was also included as income within the meaning of section 16 (3) (a) (iii). In appeals made against the three assessment orders, while the Appellate Assistant Commissioner dismissed the appeal in respect of the assessment year 1957 58 be partly allowed the other two appeals taking the view that only that part of the interest which was attributable to the monetary value of the shares at the time of the gift was liable to be included in the appellant 's total income under section 16 (3)(a)(iii); since the monetary value of the shares gifted to the wife at the time when the gift was made was. only Rs. 69,730. the interest attributable to it worked, out at Rs. 4,138 and only this amount could be included in the appellant 's income. The Appellate. Tribunal dismissed the appellant 's further appeal and also allowed cross appeals filed by the Department. The High Court. upon a reference. held that the sum of Rs. 70,860 was properly included in the appellant 's income, in 1957 58 but that the interest amount in excess of Rs. 4.138 was not liable to be included in his income for 1958 59 and 1959 60. In the appeal to this Court the only question for consideration was whether the amount of Rs. 70.860 was the appellant 's income under section 16 (3)(a)(iii). It was contended on his behalf (i) that what comes within the ambit of section 16(3.)(a)(iii) is the income from the transferred assets.which is different from the profits or gains arising from the sale of the transferred assets. or in other words "the capital gains" from the transferred assets; and (ii) that section 16(3)(a)(iii) was enacted in 1937 when the word 'income ' did not include 'capital gains ' and income from the property was understood to be income falling under that head in section 6 of Act. HELD: The High Court had rightly decided that the amount. of Rs. 70,860 was properly included in the assessees income under section 16 (3) (a) (iii). 361 (i) There is no logical distinction between income arising from the asset transferred to the wife and arising from the sale of the assets so transferred. The profits or gains which arise from the sale of the asset would arise or spring from the asset, although the operation by which the profits or gain is made to arise out of the asset is the operation of sale. [364 G H] (ii) Although at the time when section 16(3)(a)(iii) was enacted the definition of 'income ' did not include 'capital gains ', capital gains having been brought within the meaning of 'income ' in section 2(6C), the expression 'income ' as used in section 16(3)(a)(iii) must be construed according to the amended definition of the word and would, therefore, include capital gains. There is nothing in the context or language of section 16(3)(a)(iii) of the Act to suggest that capital gains are excluded from its scope and there is no reason why a restricted interpretation should be given to the provisions of section 16(3) (a) (iii). [365 C E]

Appeal No. 358 of 1958. 645 Appeal by special leave from the judgment and order dated 8th March, 1956, of the former Bombay High Court in I.T.R. No. 55 of 1955. A. N. Kripal and D. Gupta, for the appellant. N. A. Palkhivala and B. P. Maheshwari, for the respondents. November 24. The Judgment of the Court was delivered by KAPUR, J. This is an appeal by special leave against the judgment and order of the High Court of Bombay in Income tax Reference No. 55 of 1955, in which two questions of law were stated for opinion and both were answered in favour of the assessee and against the Commissioner of Income tax who is the appellant before us and the assessee is the respondent. The facts of this case are these: The respondent is a registered firm carrying on business as commission agents in Bombay. For purposes of its business it borrowed money from time to time from Banks on joint promissory notes executed by it and by others with joint and several liability. On September 26, 1949, the respondent borrowed Rs. 1,00,000 from the Bank of India on a pronote executed jointly with one Kishorilal. Out of this amount a sum of Rs. 50,000 was taken by the respondent for purposes of its business and the rest by Kishorilal. Kishorilal however failed to meet his liability and became a bankrupt. The respondent had therefore to pay the Bank the whole amount, i.e., Rs. 1,00,000 with interest. Out of the amount taken by Kishorilal the respondent received in the accounting year, from the Official Assignee, a sum of Rs. 18,805 and claimed the balance, i.e., Rs. 31,740 as deduction. The accounting year was from August 26, 1949 to July 17, 1950, the assessment year being 1951 52. This claim was disallowed both by the Income tax Officer as well as the Appellate Assistant Commissioner. On Appeal to the Income tax Appellate Tribunal this sum was allowed ,as an allowable deduction under section 10(2)(xv) of the Income tax Act and as business loss. 82 646 At the instance of the Commissioner a case was stated to the High Court of Bombay by the Income tax Appellate Tribunal. In the statement of the case which was agreed to by both parties the Tribunal said: "For the purpose of his business, he borrows from time to time money on joint and several liability from banks. The Commercial practice is to borrow money from banks on joint and several liability. An illustration will explain what we mean. A and B require Rs. 50,000 each. They find that the Bank would not advance Rs. 50,000 to each on his individual security. They however, find that the Bank would be prepared to advance Rupees one lach on their joint and several liability. They take Rupees one lac on joint and several liability and then divide the money equally between themselves. " It also found that the Banks advanced monies to some constituents on their personal security also but they had to pay a higher rate of interest than when the money was borrowed on joint and several responsibility; that Rs. 1,00,000 borrowed from the Bank was in accordance with the commercial practice of Bombay. On these facts the following two questions of law were referred to the High Court: "(1) Whether the assessee 's claim is sustainable under section 10(2)(xv) of the Act? (2) Whether the assessee 's claim that the loss was a business loss and, therefore, allowable as a deduction in computing the profits of the assessee 's business is sustainable under law?" Both these questions were answered in favour of the respondent and against the appellant. Counsel for the Commissioner challenged the findings of the Tribunal in regard to the existence of commercial practice in Bombay but this ground of attack is not available to him because not only did the Tribunal give this finding in its Order, but in the agreed statement of the case also this finding was repeated as is shown by the passage quoted above. The High Court also has proceeded on the basis of this commercial practice. In the judgment under appeal the learned Chief Justice said: 647 "The finding of the Tribunal is clear and explicit that what the assessee was doing was not something out of the ordinary, but in borrowing this money on joint and several liability he was following a practice which was established as a commercial practice. Therefore, the transaction was clearly in the course of the business and incidental to the business and it is this transaction which resulted in a loss to the assesses, he having to pay the liability of the surety. " Therefore this appeal has to be decided on the basis that a commercial practice of financing business by borrowing money on joint and several liability was established. It was argued on behalf of the appellant that this court in Madan Gopal Bagla vs Commissioner of Income Tax, West Bengal (1) had decided against the allowability of such losses. But the facts of that case when carefully scrutinised are distinguishable and the decision does not support the contentions of the appellant. No doubt certain features of that case and the present one are similar but they differ in essential features. In that case the assessee was a timber merchant who obtained a loan of Rs. 1 lac from the Bank of India on the joint security of himself and one Mamraj, which the assessee paid off. Mamraj also obtained a loan of Rs. I lac on the joint security of himself and the assessee. Mamraj became an insolvent and the assessee had to pay the whole of the amount borrowed with interest thereon. The assessee there received a certain amount of money by way of dividends from the Receiver and the balance he wrote off as bad debt in the assessment year and claimed it as an allowable deduction under section 10. The High Court there held that the debt could not be said to be a debt in respect of the business of the assessee as he was not carrying on the business of standing surety for other persons nor was he a money lender, he being simply a timber merchant; that it had not been established nor was it alleged that he was in the habit of standing surety for other persons "along with them for purposes of securing loans for their use and benefit" and even if money (1) ; 648 had been so borrowed and there had been a loss the loss would have been a capital loss and not a business loss to the assessee. This statement of the law was approved by this Court but there mutuality, as an essential ingredient of the custom established, was found to be lacking as is shown by the following passage from the judgment of the court. "The custom stated before the Appellate Assistant Commissioner was that persons carrying on business in Bombay used to borrow monies on joint security from the Banks in order to facilitate getting financial assistance from the Banks and that too at lower rates of interest. A businessman could procure financial assistance from the Banks on his own, but he would in that case have to pay a higher rate of interest. He would have to pay a lower rate of interest if he could procure as surety another business man, who would be approved by the Bank. This, however, did not mean that mutual accommodation by businessmen was necessarily an ingredient part of that custom. A could procure B, C or D to join him as surety in order to achieve this objective, but it did not necessarily follow that if A wanted to procure B, C or D to thus join him as surety he could only do so if he in his own turn joined B, C or D as surety in the loans which B, C or D procured in their turns from the Banks for financing their respective businesses. Unless that factor was established, the mere procurement by A of B, C or D as surety would not be sufficient to establish the custom sought to be relied upon by the appellant so as to make the transaction of his having joined Mumraj Rambhagat as surety in the loan procured by Mumraj Rambhagat from Imperial Bank of India, a transaction in the course of carrying on his own timber business and to make the loss in the transaction a trading loss or a bad debt of the timber business of the appellant. " Continuing at page 558 it was observed: "There were thus elements of mutuality and the essential ingredient in the carrying on of the money lending business, which were elements of the custom 649 proved in that case, both of which are wanting in the present case before us." Mr. Palkhivala for the respondent rightly argued that Madan Gopal Bagla 's case (1) was decided against the assessee because the custom of persons standing surety for each other for borrowing money and the element of mutuality which was an essential ingredient in the case of Commissioner of Income Tax, Madras vs section A. section Ramaswamy Chettiar (2) was not proved. In the latter case it was established that there was a well recognised custom amongst Chettiars of raising funds for their business of money lenders by the execution of joint pronotes and that if a loss was sustained by one of the executants having to pay the whole on account of inability of the other it was a deductible loss. The appellant also relied on a judgment of the Madras High Court in Commissioner of Income Tax vs section R. Subramanya Pillai (3). In that case the assessee was a book seller who from time to time jointly with another person borrowed money out of which he employed a portion in his business. One of such amounts borrowed was Rs. 16,200 out of which the assessee took Rs. 10,450 for his business needs and the other debtor took the balance. The latter became insolvent and the assessee had to pay the whole of the money borrowed and claimed it as allowable deduction under section 10(2)(xi) or section 10(2)(xv) of the Act or as business loss and it was hold that he was not entitled, because the loss sustained by the assessee was too remote from the business of book selling carried on by him and was not sufficiently connected with the trade and therefore fell outside the range of those amounts which could properly be brought into profit and loss account of the business. The decision in Commissioner of Income Tax vs section A. section Ramaswamy Chettiar (2) was there distinguished on the ground that the decision must be confined to its own peculiar facts and did not apply to business as the one in Subramanya Pillai 's Case (3). The following passage from (1) ; , (2) (3) 650 the judgment of Viswanatha Sastri, J., in that case is relevant: "But there the business was one of money lending and the Court found that according to the wellknown and well recognised mercantile custom of Nattukottai bankers, they were in the habit of raising 'funds which formed the stock in trade of their money lending business by the execution of joint promissory notes in favour of bankers. That was apparently the usual technique of obtaining credit adopted by the Nattukottai Chetti community money lenders. In the context this Court held that where a Nattukottai Chetti money lender paid off in their entirety the debts jointly due by him and another as a result of the latter 's inability to pay, the loss sustained as a result of this transaction was a loss of the moneylending business itself and therefore a deductible item in computing profits. " In the instant case it has been found that there was a well recognised commercial practice in Bombay of carrying on business by borrowing money from Banks on joint and several liability. It was also found that by so doing the borrower could borrow money at a lower rate of interest than he otherwise would have paid; that the respondent had, in accordance with the commercial practice, borrowed the money, the whole of which he had to return because the joint promisor Kishori Lal had become bankrupt; mutuality was also held proved. It cannot be said that the essential feature of the case now before us is in principle different from that of the Commissioner of Income tax vs Ramaswamy Chettiar (1). In both cases the finding is that there is mutuality and custom of borrowing money on joint pronotes for the carrying on of business. In our opinion in the circumstances proved in the present case, and on the facts established and on the findings given, the respondent was rightly held to be entitled to deduct the loss which was suffered by him in the transaction in dispute. Counsel for the assessee drew our attention to a (1) 651 Privy Council judgment Montreal Coke and Manufacturing Co. vs Minister of National Revenue (1) but that, case can have no application to the facts of the present case because it was found there as a fact that the assessees 's financial arrangements were quite distinct from the activities by which they earned their income and expenditure incurred in relation to the financing ' of their business was not expenditure in the earning of their income within the statute. It was then contended that the loss of the respondent was a 0capital loss and for this again reliance was placed on the judgment of this Court in Madan Gopal Bagla 's case (2 ) and particularly on the observation at page 559 where Bhagwati, J., quoted with approval the observations of the High Court in the judgment but as we have pointed out the facts of that case are distinguishable and what was said there has no application to the facts and circumstances proved in the present case. In our view the judgment of the High Court is right and we therefore dismiss this appeal with costs. Appeal dismissed.

For the purposes of its business the respondent borrowed a certain sum of money from the Bank of India on a pronote executed jointly by him and one Kishorilal in accordance with a commercial practice of carrying on business by borrowing money from Banks on joint and several liability. The money was divided half and half between the respondent and Kishorilal but Kishorilal failed to pay off his liability as he became a bankrupt and the respondent had to pay the whole amount to the Bank. The respondent, however, received from the Official Assignee a part of the sum taken by the Kishorilal leaving a balance still unpaid. The respondent 's claim to deduct this unpaid balance under section 10(2)(XV) of the Income tax Act was refused by the Income tax Officer and the Appellate Assistant Commissioner but was allowed by the Income tax Appellate Tribunal on appeal. On a reference made at the instance of the appellant the High Court decided the question in favour of the respondent assessee. On appeal by the appellant by special leave, Held, that the view taken by the High Court was correct. On the finding that there was a well establised Commercial practice of financing business by borrowing money on joint and several liability and by so doing the respondent could borrow at a lower rate of interest, and that there was mutuality between the borrowers for standing surety for each other for loans taken for business purposes, the respondent assessee in computing his business profits was entitled to deduct the loss suffered by him in paying the sum not paid by his co borrower. Commissioner of Income tax vs Ramaswami Chettiar, , applied. Madan Gopal Bagla vs Commissioner of Income tax, West Bengal, ; , Commissioner or Income tax vs section R. Subramanya Pillai, distinguished. Montreal Coke and Manufacturing Co. vs Minister of National Revenue, [1945] 13 I.T.R. Supp. 1, not applicable.

The appellant an owner of a mango grove has been deriving income by was of fruits and fallen trees. In the year 1939 40 he claimed this income to be agricultural income and therefore immune to income tax. The Assessing Authorities negatived the claim of the appellant. The High Court in the year 1963 held the income to be agricultural income and therefore exempt from income tax. The State did not challenge the decision of the High Court. The appellant did not challenge the orders of the Assessing Authorities for the subsequent years i.e. 1940 to 1962 in the hope that if ultimately the High Court upheld his contention for one year the Tax Authorities would give effect to that holding for all the years. The appellant thereafter approached the Central Board of Revenue for refund of the tax paid by the appellant in respect of the subsequent years. The Central Board rejected the petition in 1968. The appellant moved the High Court under article 226. The High Court refused to interfere both on the ground of delay as well as on the ground that the assessment orders for the relevant years had become final, the assessee not having taken advantage of his remedy provided for in the statute. The High Court. however, made an observation that if so advised the appellant might file appeals under section 30 of the Income Tax Act, 1922 and pray for condonation of delay under section 30(2) of the said Act. appeal by Special leave to this Court, it was contended by the appellant. (1) Since various assessment orders were void the State was bound to refund what had been illegally levied. (2) The Central Board should have exercised its power to give appropriate directions for refund. (3) Regardless of statutory remedies and rules of limitation, the High l; Court had power under article 226 to quash the illegal orders and to prevent unjust enrichment by the State. The respondents contended: (1) The appellant is guilty of laches. High Court has rightly exercised its discretion. This Court may not interfere with it (2) The assessment orders have become final (3) The Central Board of Direct Taxes has no statutory duty to grant refund even in cases where orders of assessment, though illegal, have been allowed to become final by. wilful default of the assessee. Dismissing the appeal. ^ HELD: (1) The imposition of tax on agricultural income is beyond the legislative competence of Parliament and altogether outside the jurisdiction of the Income Tax officer. It may well be contended that the impost is ultra vires. its powers, and therefore, a nullity. We need not consider this aspect especially since the writ petition itself is bad for unexplained delay. [54C E] 50 (2) The writ jurisdiction is not measured by statutory finality to orders regardless of their illegality. If the levy is illegal the constitutional remedy goes into action. However, article 226 is not blanket power regardless of temporal and discretionary restraint. of a party is inexplicably and unduly delayed due to laches the court may ordinarily deny redress. If the High Court has exercised its discretion to refuse the redress, this court declines to disturb such exercise unless the ground is too untellable. The High Court I in refusing relief on ground of laches did not exercise its discretion arbitrarily or improperly. [55B. D E] (3) It is doubtful if the Central Board can exercise any judicial power and direct refund. Even so, it is always open to the state where the justice of the ease warrants reconsideration of the levy of a tax illegally imposed, to view the situation from an equitable standpoint and direct refund wholly or in part. In this case a liberal approach may well be justified The Appellate Authority if moved under section 30(2) will give due regard to the happenings in between exercising its power of condonation of delay in filing appeals and no observations made in this judgment or in the High Court judgment shall be taken into account to the prejudice of the appellant while considering the condonation of delay by the appropriate authority. [55G 56C]

The respondents filed a suit against the petitioner in 1954 for the possession of certain property and for mesne profits and obtained decree in their favour. The petitioner 's appeal to the High Court was dismissed in April 1959 and a petition for special leave to appeal to this Court was granted in June, 1959. Thereafter, the 7th respondent died in November 1959. The petitioner filed the present applications in October 1964 for bringing on record the legal representatives of the 7th respondent and for condonation of delay on various grounds. It was also contended on behalf of the petitioner that in view of the fact that after the preliminary decree for mesne profits had been passed, the respondents/plaintiffs brought the heirs and legal representatives of the deceased 7th respondent on record in the final decree proceedings within the time prescribed, and as the legal representatives were brought on record at one stage of the suit on the basis of the rule laid down by the Privy Council in Brij Inder Singh vs Kanshi Ram, 44 I.A. 218, no question of abatement would arise in respect of the appeal; that the final decree proceedings are a stage in the suit and the appeal is another stage in the suit and, therefore, the bringing on record of the legal representatives in one stage of the suit will enure for all stages of the suit. HELD: (i) On the facts of the case there were no sufficient grounds for condoning the delay in bringing the legal representatives of the 7th respondent on the record. (ii) The order bringing the legal representatives of the respondent on record in the final decree proceedings cannot enure for the benefit of the appeal filed against the preliminary decree. The appeal therefore abated so far as the 7th respondent was concerned. [217D] An order bringing the legal representatives of a deceased party on the record passed at the stage of an interlocutory application in a suit, or passed while an appeal is pending where the suit is subsequently remanded to the trial court or if passed while an appeal is pending against an interlocutory order in passed while an appeal the subsequent stages of the suit ' in all that suit, would enure for made at one stage of the suit be it the suit these. cases the order is final appeal against the interlocutory order or final order in the suit, for here the appeal is only a continuation of the suit. But the same legal position cannot be invoked where an order is made in a suit subsequent to the filing of an appeal at an earlier stage. Such an order cannot be Projected,backwards into the appeal that has already been filed so as to become an order in that appeal [216F 217D] Brij Inder Singh vs Kanshi Ram, 44 I.A. 218 distinguished. Shankarnaraina Saralaya vs Laxmi Hengsu, A.I.R. 1931 referred to. N)3S.C.I. 1 212

In Appeal No. 1347(N) 1977 by special leave against the interlocutory orders dated 21 4 1977 of the Company Judge of the Calcutta High Court in the company petition No. 85/75, filed by the respondents sections 397/398 of the Companies Act, '1956, complaining of oppression by majority and praying for certain reliefs against the appellants and also the orders dated 25 4 1977 of the Division Bench against that order, this Court made an order on 31 5 1977, in terms of an agreement reached between the par ties. By one such term the company was directed to purchase 1300 shares held by the respondents petitioners. The price of the shares was to be determined by Messrs. Price Water House and Peet, Chartered Accountants and Auditors, as on the date of the filing of the petition sections 397 398, on the basis of the existing as also contingent and anticipated debts, liabilities, claims, payments and receipts of the ' company. The Chartered Accountants were to determine the value of the shares after examining accounts and calling for necessary explanations and after giving opportunity to both the groups to be heard in the matter and the determination of the value by the Chartered Accountants was to be final and binding and not open to any challenge by either side on any ground whatsoever. After such determination of the value the company has to purchase the shares, and, on such purchase, the share capital of the company was to stand reduced protanto. The order made it ;fear that if the value of the shares is more than Rs. 65/ per share, the company will have to pay the balance, and, if it is less than Rs. 65/ per share, the respondents who have to sell the shares, will have to refund the difference between. the price of the shares calculated at the rate of Rs. 65/ per share and the rate determined by the Chartered Accountants and Auditors within four weeks from the date of determination. After the appeal was thus disposed of, the interveners, claiming to be the creditors of the company to the extent of 40 lakhs, in their petition dated 22 8 1977 requested the Court (i) to permit them to be heard and (ii) to postpone the purchase of shares by the company until such time as the company adopts proceedings in a competent court by following the procedure laid down by the , particularly in Sections 100 to 104 for reduction of the share capital. In the alternative they prayed for safeguarding their interests by modifying the Court 's order dated 31 5 1977. Rejecting the petition to interfere with its order dated 31 5 1977, the Court, after hearing the interveners, HELD : (i) Section 77 envisages that, on the purchase by a company of its own shares, reduction of its share capital may be effected and sanctioned in either of two different modes : (i) according to the procedure prescribed in Sections 100 to 104; or (ii) under section 402, depending upon the circumstances in which reduction becomes necessary. [427E F] (ii) Section 77 of the prohibits the company from buying its own shares unless the consequent reduction of capital is effected and sanctioned in pursuance of Sections 100 to 104 or Section 402. It places an embargo on the company purchasing its own shares so as to become its own member, but the embrago is lifted, if the company reduces its share capital protanto. [427E] 423 (iii) Section 77 leaves no room for doubt that reduction of share capital may have to be brought about in two different situations by two different modes. Undoubtedly, where the company has passed a resolution for reduction of its share capital and has submitted it to the Court for confirmation, the procedure prescribed by Sections 100 to 104 will have to be followed, if they are attracted. On the other hand, where the Court, while disposing of a petition under Ss. 397 and 398, gives a direction to the company to purchase shares of its own members, consequent reduction of the share capital is bound to ensue, and, before making such a direction it is not always necessary to give notice of the consequent reduction of the share capital to the creditors of the company. No such requirement is laid down by the Act. The two procedures ultimately bringing about reduction of the share capital are distinct and separate and stand apart from each other; and one or the other may be resorted to according to the situation. That is the clearest effect of the disjunctive 'or ' in section 77. [428H, 429AB] (iv) Where the reduction of share capital is necessitated by directions given by the Court in it petition under sections 397 and 398, the procedure prescribed in Sections 100 to 104 is not required to be followed in order to make the direction effective. [428G] (v) It would not be correct to say that, whenever it becomes necessary to reduce the capital of a company, the reduction can be brought about only by following the procedure prescribed in Ss. 100 to 104. Sections 100 to 104 specifically prescribe the procedure for reduction of share capital where the Articles of the company permit and the company adopts a special resolution which can only become effective on the Court according sanction to it. Reduction of share capital may also take pursuant to a direction of the Court requiring the company to purchase the shares of a group of members while granting relief u/s 402. Both the procedures, by which reduction of capital of a company may be effected, are. distinct and separate and stand apart from each other. [427F H] (vi) The scheme of Ss. 397 to 406 is to constitute a code by itself for granting relief to oppressed minority shareholders and for granting appropriate relief, a power of widest amplitude, inter alia, lifting the ban on company purchasing its share under Court 's direction, is conferred on the Court. When the Court exercises this power by directing a purchase of its shares by the company, it would necessarily involve reduction of the capital of the company. Such a power of the Court is not subject to a resolution to be adopted by the members of the company which, when passed with, statutory majority, has to be submitted to Court for confirmation. No canon of construction would permit such an interpretation in which the statutory power of the Court for its exercise depends upon the vote of the members of the company. [428C E] (vii) If reduction of share capital can only be brought about by resorting to the procedure prescribed in Ss. 100 to 104, it would cause inordinate delay and the very purpose of granting relief against oppression would stand self defeated. [428E F] (viii) When minority shareholders complain of oppression by majority and seek relief against oppression from the Court under Ss. 397 and 398 and the Court, in a petition of this nature, considers it fair and just to direct the com pany to purchase the shares of the minority shareholders to relieve oppression, if the procedure prescribed by Ss. 100 to 104 is required to be followed, the resolution will have to be first adopted by the members of the company, but that would be well nigh impossible because the very majority against whom relief is sought would be able to veto it at the threshold and the power conferred on the Court would be frustrated. That could never have been the intention of the Legislature. [428F H] (ix) The object_behind prescribing this procedure requiring, in special circumstances as contemplated in Section 101(3), the court to give notice to the creditors is that the members of the company may not unilaterally act to the detriment of the creditors behind their back. If such a procedure were not prescribed, the Court might, unaware of all the facts, be persuaded by the members to confirm the resolution and that might cause, serious prejudice to the creditors. But such a situation would not be likely to arise in a petition 424 under Ss. 397 and 398. In such a petition the Court would be in a better position to have all the relevant facts and circumstances before it and it would be the Court which would decide whether to direct purchase of shares of the members by the company. Before giving such a direction, the Court Would certainly, keep in view all the relevant facts and circumstances, including the interest of the creditors. Even if the petition is being disposed ' of on a compromise between the parties, yet the Court, before sanctioning the compromise, would certainly satisfy itself that the direction proposed to be given by it pursuant to the consent terms, would not adversely affect or jeopardise the interest of the creditors. Therefore, it cannot be said that merely because section 402 does not envisage consent of the creditors before the Court gives direction for reduction of share capital consequent upon purchase of shares of some of the members by the company. there is no safeguard for the creditors. [430EH] In the instant case, there is no scope for apprehension on behalf of the interveners that the reduction of share capital to be effected under the Court 's direction, without reference or notice to creditors, would adversly affect their interests because : (1) As per the order of the Court dated 31st May, 1977 while ascertaining the break up value of the shares on the date of filing the petition under Sections 397 and 398, the Chartered Accountants and Auditors will have to take into account the assets of the company as also the existing, contingent and anticipated debts, liabilities, claims, and demands etc., as revealed in the accounts of the company for the last five years, which would indisputably include the claims made by the interveners in the two suits filed by them to the extent to which they appear genuine and well founded and. (ii) the order of the Court did not fix any minimum price at which the shares shall be purchased by the company. [431A C, D] (x) A right to notice by reason of any rule of natural justice, which a party may establish, must depend for its existence upon proof of an interest which is bound to be injured by not hearing the party claiming to be entitled to a notice and to be heard before an order is passed. If the duty to give notice and to hear a party is not mandatory, the actual order passed on a matter must be shown to have injuriously affected the interest of the party which was to be given no notice, of the matter. [431G] In the instant case, after hearing the intervener , it was found that no interest of theirs has been injured by not hearing them before the order was passed. The order passed by this Court on 31st May, 1977, is not vitiated on the ground of non issue of notices to them under the inherent powers of the Court under Rule 9 of the Company (Court) Rules, 1959, even though there was no statutory duty to hear them. [431H. 432A] (xi) Undoubtedly, when a petition is made to the Court under Ss. 397 and 398, it is obligatory upon the Court to give notice u/s 400 of the petition to the Central Government and it would be open to the Central Government to make a representation and if any such representation is made, the Court would have to take it into consideration before passing the final order in the proceeding. But Section 400 does not envisage a fresh notice to be issued at the appellate stage. [432C D] (The Court directed to expedite the suit Nos. 729/74 and 933/76 filed by the interveners in the Bombay High Court and dispose off within a period of six months).

This appeal raised a short question as to the interpretation of sub section (4)(a) of section 4 of the Bombay Rents, Hotel and Lodging House Rates (Control) Act, 1947 ("the Bombay Rent Act"). The appellants were the sub tenants of the respondent No. 1 Firm in respect of the premises called Gala No. 4 in a godown. Respondent No. 1 Firm were the tenants of the said godown, having taken a lease of the building from the Bombay Port Trust. The appellants were in occupation of the said Gala under written agreements executed from time to time for one year each. The last such agreement expired on 19th October, 1971. The respondent No. 1 Firm served a notice on the appellants on 13th January, 1972 to hand over possession of the said gala on the ground that the period of lease had expired. By notice dated February 3, 1972, the respondent No. 1 Firm terminated the tenancy of appellants and then filed a suit in the City Civil Court against the appellants to recover possession of the premises in dispute inter alia on the ground that the period of lease had expired. The appellants took up the contention that they were not liable to be evicted as they were entitled to protection under the provisions of the Bombay Rent Act. The City Civil Court decreed the suit. On appeal by the appellants, the High Court (Single Judge,) holding that the notice of termination of tenancy dated 3rd February, 1972, was a valid notice and the provisions of the Bombay Rent Act did not apply to the premises in question, upheld the decree of eviction passed by the City Civil Court. Letters Patent appeal against this judgment was dismissed by a Division Bench of the High Court. The appellants then moved this Court for relief by special leave. Dismissing the appeal, the Court, 907 ^ HELD: The only submission made by the appellants before the Court was that the said premises, viz, Gala No. 4, were entitled to the protection of the provisions of the Bombay Rent Act and the respondent No. 1 Firm was not entitled to a decree for eviction as no grounds for eviction under the Act had been made out. [910G] The question raised was whether the protection of the sub section (4)(a) of section 4 of the Bombay Rent Act was available to the sub lessee in a building leased by the lessee from the Government or a local authority or put up by a lessee of the land belonging to the Government or a local authority but not under any building lease or pursuant to any obligation imposed on the lessee to put up a building. In this case, the entire building in which the premises in question, namely, Gala No. 4 were situated, belonged to the Bombay Port Trust. It was nowhere contended at any stage by the appellants that the building in which the said premises were situated was put up by the respondent No. 1 Firm. The Court was, therefore, not directly concerned with the position of a sub lessee in a building put up by a lessee of the land taken from the Government or a local authority without being under any obligation to do so. [913D F] A plain reading of sub section (1) of section 4 of the Bombay Rent Act makes it clear that the provisions of the Bombay Rent Act are not applicable to premises belonging to the Government or a local authority. Sub section (4)(a) only takes out from the scope of the exemption conferred by section 4(1) "a building erected on any land held by any person from the Government or a local authority under an agreement, lease, licence or other grant, although having regard to the provisions of such agreement, lease, licence or grant the building so erected may belong or continue to belong to the Government or the local authority, as the case may be". If this provision were to be as including any building put up or erected on land held by any person from the Government or a local authority, the result would be that such protection would be available even against the Government or a local authority and the provision of sub section (1) of section 4 may be rendered largely nugatory. The provisions of sub section (4)(a) were never intended to take away the immunity conferred upon the premises belonging to the Government or a local authority, and if the provisions of section 4(4)(a) were to be construed as urged by the appellants, this immunity would be rendered practically nugatory. A plain reading of the provisions of sub section (4)(a) in the context clearly shows that there is no intention therein to take a building put up by the Government or a local authority from the scope of the exemption conferred by sub section (1) of section 908 4. The language of sub section (4)(a) and sub section (1) of section 4 of the Bombay Rent Act, read together, suggests that it was only in respect of a building put up by the lessee on the Government land or the land belonging to a local authority under a building agreement that the sub lessees were taken out of the exemption contained in sub section (1) of section 4 and allowed the benefit of the provisions of the Bombay Rent Act. It was significant that the exemption granted under the earlier part of sub section (1) of section 4 is in respect of the premises and not in respect of the relationship. In order to confer the protection of the provisions of the Bombay Rent Act on the sub lessees occupying the premises in any building erected on the government land or the land belonging to a local authority irrespective of the question who has put up the building as against the lessees of the land but without affecting the immunity conferred on the government or local authorities as contemplated by sub section (1) of section 4 of the Bombay Rent Act, the Court would have to practically rewrite the provisions of section 4, and it was not open to the Court to do that. The argument of the appellants, therefore, could not be accepted. The learned Judge of the High Court was right in coming to the conclusion that the premises in question were not entitled to the benefit of the provisions of the Bombay Rent Act. [914A H;915A] The decision of this Court in Kanji Manji vs The Trustees of the Port of Bombay, [1962] Suppl. 3 S.C.R. 461 cited by the appellants was of no assistance to the case before the Court, and the decision of this Court in Maneklal and Sons vs Trustees of Port of Bombay and Others, cited by the appellants, far from supporting the submission of the appellants, militated against it. [916D] There was no merit in the appeal and it must fail. Taking the facts and circumstances of the case into consideration, the Court directed that the appellants would not be evicted from the premises in question until December 31, 1988. [916E] The Court observed that if the intention of the legislature was that the protection should be given to the sub lessee against the lessee in a building taken on lease by the lessee from the government or a local authority, it was for the legislature concerned to make appropriate amendments in the Bombay Rent Act and it was not open for the Court to re write the provisions of sub section (4)(a) of section 4 of the Bombay Rent Act on the ground of any such intention as suggested by Dr. Chitale counsel for the appellants. [916F] 909 Bhatia Co operative Housing Society Ltd. vs D.C. Patel, ; Kanji Manji vs The Trustees of the Port of Bombay, [1962] Suppl. 3 S.C.R. 461; Maneklal and Sons vs Trustees of Port of Bombay and Others, and Ram Bhagwandas vs Municipal Corporation of the City of Bombay, , referred to.

The appellant was appointed as Store Keeper cum Accountant in one of the branches of the Madhya Pradesh Khadi and Village Industries Board, a body corporate constituted under the M.P. Khadi and Village Industries Act, 1959. His services were terminated by an Order dated 23.9.1964 after giving one month 's notice. The termination Was challenged before the Labour Court as amounting to retrenchment because it hat been passed without complying with provisions of the M.P. Industrial Relations Act, 1960, the charge sheet that was given to him on 27.4.1964 was based on false and baseless grounds and no enquiry was held prior to removal. The appellant claimed reinstatement with full wages. The Respondent Board contested the application contending that the Board was not an industry and that neither the M.P. Industrial Relations Act, 1960 nor the applied to it. The Labour Court held that the termination of the services of the appellant amounted to retrenchment, set aside the Order of termination and directed reinstatement with half salary from the date of the Order till reinstatement. The Board preferred a revision. The Industrial Court affirm ed the order of the Labour Court and dismissed the revision petition. 642 The Board filed a petition under article 225 and 227. The High Court allowed the writ petition, quashed the order of the Industrial Court and remitted the case to it to decide the facts afresh. The Industrial Court after taking fresh evidence, again held in favour of the appellant, reaffirming its previous decision to reinstate the appellant. The Board again moved the High Court, which set aside the orders of the Industrial Court and the Labour Court on the ground that they acted without jurisdiction. The appellant appealed to this Court by certificate which was resisted by the Board on two grounds: (i) that it is not an industry within the meaning of the Act and (ii) that it does not employ more than 100 persons. Allowing the appeal of the appellant employee, ^ HELD: 1. The order passed by the High Court is set aside and that of the Labour Court and the Industrial Court are restored. [651 B C] 2. The M.P. Industrial Relations Act, 1960 is a separate Act in the State of Madhya Pradesh to regulate the relations of employees in certain matters and makes provisions for settlement of Industrial disputes. Any concern, to become an industry, has to satisfy the definitions of "industry" and "undertaking" as contained in sections 2(19) and 2(33) thereof. Such concerns have to satisfy yet another condition to attract the provisions of the said Act which relates to the number of the employees the concern employs. Notification No. 9952 XVI dated 31st December, 1960 issued under sub 8. (3) of 8. 1 of the Act, makes the provisions of the Act applicable only to an undertaking in the industries specified in the Schedule wherein the number of the employees on any date during Twelve months preceeding or on the date of the notification or any day thereafter was or is more than one hundred. In the instant case, the evidence on record admits of no doubt that the Board employed more than 100 persons. [645 A H; 646 A 4; 647 C] 3. One of the functions of the Board under 8. 14 of the M.P. Khadi and Village Industries Act 1959 is "to support, encourage, assist and carry on Khadi and Village Industries and in the matters incidental to such trade or business". The evidence shows that the Board supplies raw wool to Co operative Societies, so 643 that the Societies can engage themselves in useful work. The Society after weaving raw wool, convert them into spun blankets and supply them to the Board. The blankets so spun are not the properties of the Societies. They have to be given back to the Board. The blankets so supplied from various centres to the Board, have necessarily to be sold in the open market. This act of sale would clearly come within the definition of the word 'trade ' or 'business ' as contemplated in Section 2(19) of the Act. m e conclusion is, therefore, irresistible that the Board engages itself in the business of selling blankets. It has, therefore, to be held that the Board is an 'industry ' within the meaning of the Act. [650 B D; 651 A B]

The respondent was a firm carrying on business in different lines. It was assessed to income tax under section 23(4) of the Income tax Act, 1922 for the assessment year 1949 50 on the ground that notices issued under section 22(2) and (4) had not been complied with. Later on, that assessment 412 was cancelled. However, before the cancellation, it was found that an interest income of Rs. 88,737 in the shape of U.P. Encumbered Estates Act Bonds received by the respondent from third parties had escaped assessment as the assessee failed to disclose the same. The Income tax Officer issued a notice for the assessment year 1949 50 on the ground that a sum of Rs. 88,737 had escaped assessment in the said assessment year. After the cancellation of the assessment made under section 23(4), the Income tax officer, ignoring the notice issued by him under section 34(1)(a), included that amount in the fresh assessment made by him for the year 1949 50.The respondent appealed to the Appellate Assistant Commissioner who ordered the deletion of the sum of Rs. 88,737 from the assessment for the year 1949 50 and directed the same to be included in the assesment for the year ending 1948 49. Pursuant to the direction given, the Income tax Officer served a notice on the respondent under section 34(1). Against that notice the assessee filed a writ petition in the High Court for quashing the above mentioned proceeding on the ground that these were initiated beyond the time prescribed by a. 34. The High Court accepted the petition and quashed the notice on the ground that it was issued by the appellant beyond the ordinary period of limitation It also overruled the contention of the appellant that no period of limitation governed the notice in as much as the second proviso to section 34(3) was attracted to the facts of the case. The only direction which the Appellate Assistant Commissioner could give was one which was covered by section 31 of the Act and as the appeal before him was confined to a particular assessment year, the direction must necessarily be limited to a matter falling within that year. if the direction be treated as based on a finding recorded by Appellate Assistant Commissioner, that finding would have to be disregarded when applying the proviso. The appellant came to this Court by special leave. Held: (per B. P. Sinha, C.J., K. Subba Rao and N. Rajagopala Ayyangar JJ.). The proviso to sub section (3) of section 34 of the Indian Incometax Act, 1922 does not save the time limit prescribed under sub section (1) of section 34 in respect of an escaped assessment of a year other than that which is the subject matter of appeal or revision as the case may be and hence the notice under section 34(1)(a) issued in the present case was clearly barred by time. The jurisdiction of the High Court or the Supreme Court under section 66 or section 66(b) is a limited one and is confined only to the questions referred to them. Moreover, the questions referred by Tribunal cannot exceed its jurisdiction. Therefore the assessment or reassessment made under the said sections or Pursuant to the orders or directions made thereunder must necessarily relate to the assessment of the year under review, revision or appeal as the case may be. 'Me proviso to sub section (3) of section 34 does not confer any fresh power upon the Income tax Officer to make assessment in respect of the escaped incomes without any time limit. It only lifts the ban of limitation in respect of certain assessments made under certain provisions of the Act and the lifting of the ban cannot be so construed as to increase the jurisdiction of the tribunal Under the 413 relevant sections. The lifting of the ban was only to give effect to the orders that may be made by the appellate, revisional or reviewing Tribunal within the scope of its jurisdiction. If the intention was to remove the period of limitation in respect of any assessment against any person, the proviso would not have been added as proviso to sub section (3) which deals with completion of an assessment but would have been added to sub section (1) of section 34. The word 'finding ' covers only the material questions which arise in a particular case for decision by the authority hearing the. case or the appeal which, being necessary for passing the final order or giving the final decision in the appeal, has been the subject of controversy between the interested parties or on which the parties concerned have been given a hearing. The expression 'direction ' refers to a direction which the appellate or revisional authority is empowered to give under the law. The expression "any person" must be confined to a person intimately connected with the assessment of the year under appeal or revision. Held: per Raghubar Dayal and J. R. Mudholkar JJ. (dissenting): That the notice was not in contravention of the provisions of section 34 and hence could not be quashed on that ground. When an appeal is before an appellate authority, the whole matter is at large before it and there fore when a specific case is put before it by an assessee, it has both the power as well as the duty to give its finding thereon. The ground given by an assessee for claiming a reduction or annulment of assessment may be that the income upon which he had been assessed was not earned in the accounting period of the year to which the assessment pertained but in respect of a specified earlier or later year. The appellate authority is entitled to go into the whole question and come to a finding one way or the other. The finding of a tribunal is its conclusion on a point agitated before it and for a conclusion to amount to a finding, it is not necessary that it should be the final and ultimate conclusion. The contention of respondent that the second proviso to a. 34(3) enabling a notice to issue only to assessee in respect of escaped income without limit of time on the ground that the appellate authority has made a finding or direction in the proceeding before it makes a discrimination against such assessee because it does not lift the bar of limitation with regard to other assessees similarly situated but with regard to whom no finding has been made or direction given by appellate authority, was rejected. It was held that prima facie, there was a reasonable basis for the classification. The ground on which classification was made had a rational relationship with the object which was intended to be achieved by law, ie., to detect and bring to assessment the escaped income. Commissioner of Income tax vs section M. Chitnavis, (1932) L.R. 59 I.A. 290, Sir Kikabhai Premchand vs Commissioner of Income tax (Central), Bombay, pt. Hazart Lal vs Income tax Officer, Kanpur. Lakshman Prakash vs Commissioner of Income 414 tax, U.P., , A. section Khader Ismail vs Income tax Officer, Salem, (1963)48 I.T.R. 16, Simrathmul vs Additional Income tax Officer, Ootachamund, (1959)36 I.T.R. 41, Brindaban Chandra Basak vs Incometax Officer, , K. C. Thomas, First Income tax Officer. Bombay vs Vasant Hira Lal Shah , Prashar & Anr. V. Sasantsen Dwarkadas 49 I.T.R. (S.C.) 1, Kamlapat Hotilal vs Income tax Officer, , Hiralal Amrit Lal Shah vs K. C. Thomas, Income tax Officer, Bombay, , General Construction and Supply Co. vs Income tax Officer (8th) C Ward, Bombay, , Suraj Mal Mohata & Co. vs A. V. Visvanatha Sastri ; , A. Thangal Kunju Mudaliar vs M. Venkatachalam Potti & Anr. ; and Palaji vs Income tax Officer, Special Investigation Circle ; , referred to.

The Income tax Officer found that the respondents ' books of accounts were unreliable and after assessing income for Fasli year 1357, corresponding to the year 1946 47, issued notice to the respondents on December 22, 1949, under section 40 of the Hyderabad Income tax Act to show cause why penalty should not be levied in addition to the tax and by an order dated October 31, 1951, directed payment of the said penalty. The State of Hyderabad merged with the Indian Union during the pendency of the proceedings before the Income tax Officer and by section 13 of the Finance Act, 1950, the Hyderabad Income tax Act ceased to have effect from April 1, 1950, but the operation of that Act in respect of levy, assessment and collection of income tax and super tax in respect of periods prior thereto for which liability to income tax could not be imposed under the Indian Income tax Act, was saved. The question was whether (a) the Income tax Officer had power on October 31, 1951, to impose a penalty under section 40(1) of the Hyderabad Income tax Act and (b) whether the assessee had a right to appeal against the order of the Income tax Officer imposing penalty and whether the Appellate Assistant Commissioner had jurisdiction to hear appeals or whether his order was a nullity. Held, that the power of the Income tax Officer to impose a penalty under section 40(1) of the Hyderabad Income tax Act in respect of the year preceding the date of the repeal of the Hyderabad Income tax Act was not lost because by section 13 of the Finance Act, 1950,,for the operation by the Hyderabad Income tax Act in respect of levy, assessment and collection of income tax and super tax in respect of periods prior to April, 1951, for which liability to income tax could not be imposed under the Indian Income tax Act, was saved and so the proceedings for imposing the penalty could be continued after the enactment of section 13(1) of the Indian Finance Act, 1950. Held, that the appeal against the order of the Income tax Officer on the ground that he was not competent to pass the order did lie to the Appellate Assistant Commissioner, whose jurisdiction was not made conditional upon the competence of the 924 Income tax Officer to pass the. orders made appealable; as a court of appeal he had jurisdiction to determine the soundness of the conclusions of the Income tax Officer both on the question of fact and law and even as to his jurisdiction to pass the order appealed from, and his order was not a nullity.

Appeal No. 285 of 1959. Appeal by Special Leave from the Judgment and Decree dated the 13th July, 1956, of the Patna High Court in M. J. C. No. 404 of 1954. M. C. Setalvad, Attorney General for India and section P. Varma, for the Appellants. A. V. Viswanatha Sastri, Suresh Aggarwala and D. P. Singh, for the Respondent. 1960. November 21. The Judgment of the Court was delivered by 524 SINHA, C.J. This appeal, by special leave, is directed against the judgment and order of the High Court of Patna dated July 13, 1956 disposing of a reference under section 25(1) of the Bihar Sales Tax Act, 1947, which hereinafter will be referred to as the Act, made by the Board of Revenue, Bihar. The facts of this case have never been in dispute and may shortly be stated as follows. The appellant is a Corporation incorporated under the Damodar Valley Corporation Act (XIV of 1948) and will hereinafter be referred to as the Corporation. It is a multipurpose Corporation, one of its objects being the construction of a number of dams in Bihar and Bengal with a view to controlling floods and utilising the stored water for purposes of generation of electricity. One of such dams is the Konar Dam in the district of Hazaribagh in Bihar. For the construction of the aforesaid Dam the Corporation entered into an agreement with Messrs Hind Construction Ltd. and Messrs Patel Engineering Co. Ltd. on May 24, 1950, and appointed them contractors for the aforesaid purpose. They will hereinafter be referred to as the Contractors. As a result of a change in the design of the Dam, it became necessary to enter into a supplementary agreement and on March 10, 1951, cl. 8 of Part II of the original agreement was amended and a fresh cl. 8 was substituted. Under the new cl. 8 of the agreement, as amended, the Corporation agreed to make available to the contractors such equipment as was necessary and suitable for the construction aforesaid. The Contractors are charged the actual price paid by the Corporation for the equipment and machinery thus made available, inclusive of freight and customs duty, if any, as also the cost of transport, but excluding sales tax. The equipment thus supplied by the Corporation to the Contractors was classified into two groups, Group A and Group B, as detailed in Schedule No. 2. The machinery in Group A was to be taken over from the Contractors by the Corporation, after the completion of the work at their "residual value" which was to be calculated in the manner set out in the agreement. The machinery in Group B was to become the 525 property of the Contractors after its full price had been paid by them. No more need be said about the machinery in Group B, because there is no dispute about that group, the Contractors having accepted the position that Group B machinery had been sold to them. The controversy now remaining between the parties relates to the machinery in Group A. On August 12, 1952, the Superintendent of Sales Tax, Hazaribagh, assessed the Corporation under section 13(5) of the Act for the period April, 1950 to March, 1952. It is not necessary to set out the details of the tax demand, because the amount is not in controversy. What was contended before the authorities below and in this Court was that the transaction in question did not amount to a "sale" within the meaning of the Act. The Superintendent rejected the contention raised on behalf of the Corporation that it was not liable to pay the tax in respect of the machinery sup plied to the Contractors. The Corporation went up in appeal to the Deputy Commissioner of Sales Tax against the said order of assessment. By his order dated May 5, 1953, the Deputy Commissioner rejected the contention of the appellant as to its liability under the Act, but made certain amendments in the assessment which are not material to the points in controversy before us. The Deputy Commissioner repelling the Corporation 's contentions based on the Act, held inter alia that the supply of equipment in Group A of the agreement aforesaid amounted to a sale and was not a hire ; that the condition in the agreement for the "taking over" of the equipment on conditions laid down in the agreement was in its essence a condition of repurchase and that the Corporation was a "dealer" within the meaning of the Act. The Corporation moved the Board of Revenue, Bihar, in its revisional jurisdiction under section 24 of the Act. The Board of Revenue by its resolution dated October 1, 1953, rejected the revisional application and upheld the order of the authorities below. Thereafter, the Corporation made an application to the Board of Revenue under section 25 of the Act for a reference to refer the following 67 526 questions to the High Court at Patna, namely, (a) whether the assessment under section 13(5) of the Act is maintainable, (b) whether, in the facts and circumstances of the case, it can be held that the property in the goods included in Schedule A did pass to the Contractors and the transaction amounted to a sale, and (c) whether the terms of the agreement amount to sale transactions with the Contractors and taking over by the Corporation amounts to repurchase. This application was made on December 22, 1953, but when the application for making a reference to the High Court came up for hearing before the Board of Revenue on May 20, 1954, and after the parties had been heard, counsel for the Corporation sought leave of the Board to withdraw questions (a) and (c) from the proposed reference and the Board passed the following order: "Leave is sought by the learned advocate for the petitioner to drop questions (a) and (c) from the reference. The leave is granted. There remains only question (b) for reference to the High Court. . " Thus only question (b) set out above was referred to the High Court for its decision. After hearing the parties, a Division Bench of the High Court, Ramaswami, C. J. and Raj Kishore Prasad, J., heard the reference and come to the conclusion by its judgment dated July 13, 1956, that the reference should be answered in the affirmative, namely, that the transaction in question amounted to a sale within the meaning of section 2(g) of the Act. Thereupon the Corporation made an application headed as under article 132(1) of the Constitution and prayed that the High Court "be pleased to grant leave to appeal to the Supreme Court of India and grant the necessary certificate that this case is otherwise a fit case for appeal to the Supreme Court. . " Apart from raising the ground of attack dealt with by the High Court on the reference as aforesaid, the Corporation at the time of the hearing of the applica tion appears to have raised other questions as would appear from the following extract from the judgment and order of the High Court dated January 31, 1957 : 527 "It was conceded by learned counsel for the petitioner that the case does not fulfill the requirements of Article 133(1) of the Constitution; but the argument is that leave may be granted under Article 132 of the Constitution as there is a substantial question of law with regard to the interpretation of the Constitution involved in this case. We are unable to accept this argument as correct. It is not possible for us to hold that there is any substantial question of law as to the interpretation of the Constitution involved in this case. The question at issue was purely a matter of construction of section 2(g) of the Bihar Sales Tax Act and that question was decided by this Court in favour of the State of Bihar and against the petitioner. It is argued now on behalf of the petitioner that the provisions of section 2(g) of the Bihar Sales Tax Act are ultra vires of the Constitution, but no such question was dealt with or decided by the High Court in the reference. We do not, therefore, consider that this case satisfies the requirements of article 132(1) of the Constitution and the petitioner is not entitled to grant of a certificate for leave to appeal to the Supreme Court under this Article. The application is accordingly dismissed. " Having failed to obtain the necessary certificate from the High Court, the Corporation moved this Court and obtained special leave to appeal under article 136 of the Constitution. The leave was granted on March 31, 1958. Though the scope of the decision of the High Court under section 25 of the Act on a reference made to it is limited, the Corporation has raised certain additional points of controversy, which did not form part of the decision of the High Court. Apart from the question whether the transaction in question amounted to a sale within the meaning of the Act, the statement of the case on behalf of the appellant raises the following additional grounds of attack, namely, (1) that the Corporation is not a dealer within the meaning of the Act, (2) that the proviso to section 2(g) of the Act is ultra vires the Bihar Legislature and (3) that the Act itself is ultra vires the Bihar Legislature by reason of the 528 legislation being beyond the scope of entry 48 in List II of Schedule 7 of the Government of India Act, 1935. Hence, a preliminary objection was raised on behalf of the respondent that the additional grounds of attack were not open to the Corporation in this Court. It is, therefore, necessary first to determine whether the additional grounds of attack set out above are open to the Corporation. In our opinion, those additional grounds are not open. They were never raised at any stage of the proceedings before the authorities below, or in the High Court. This Court is sitting in appeal over the decision of the High Court under section 25 of the Act. The High Court in coming to its conclusion was acting only in an advisory capacity. It is well settled that the High Court acting in its advisory capacity under the taxing statute cannot go beyond the questions referred to it, or on a reference called by it. The scope of the appeal to this Court, even by special leave, cannot be extended beyond the scope of the controversy that could have been legally raised before the High Court. It is manifest that the High Court could not have expressed its opinion on any matter other than the question actually before it as a result of the reference made by the Board of Revenue. The preliminary objection must, therefore, be allowed and the appeal limited to the question whether the transaction in question in this case amounted to a sale within the meaning of the Act. It is manifest that this controversy between the parties has to be resolved with reference to the terms of the contract itself. Clause 8 of the agreement as amended is a very complex one as will presently appear from the following extracts, being the relevant portions of that clause : "The Corporation may hire or make available such of its equipment as is suitable for construction for the use of the Contractor. The actual prices paid by the Corporation for the equipment thus made available, inclusive of freight, insurance and custom duties, if any, and the cost of its transport to site but excluding such tax as sales tax whether local, municipal, State or Central, shall be charged to the 529 Contractor and the equipment shall remain the property of the Corporation until the full prices thereof have been realised from the Contractor. Equipment lent for the Contractor 's use, if any, shall be charged to him on terms of hiring to be mutually agreed upon; such terms will cover interest on capital cost and the depreciation of the equipment. The Corporation will supply to the Contractor the machinery mentioned in Schedule No. 2, Group A and Group B below." Then follows a description seriatim of the many items of machinery in Group A with the number of such machinery and the approximate cost thereof. In this Group A, there are fourteen items of which it is only necessary to mention the first one, that is to say, four excavators with accessories approximately valued at Rs. 12,46,390; and No. 14, two excavators of another model, approximately costing Rs. 3,35,000. The total approximate cost of the machinery in Group A is estimated to be Rs. 42,63,305. Then follow the descriptions of machinery in Group B, the approximate cost of which is Rs. 21,84,148. Then follow certain conditions in respect of equipments included in Group A, in these words: "The Corporation will take over from the Contractor item 1 and 14 on the completion of the work at a residual value calculated on the basis of the actual number of hours worked assuming the total life to be 30,000 hours and assuming that the machinery will be properly looked after during the period of its operation. The remaining items of this group will be taken over by the Corporation at their residual value taking into account the actual number of hours worked and the standard life of such machinery for which Schedule F. as last relished, ? of the U. section Bureau of Industrial Revenue, on the probable useful life and depreciation rates allowable for Income Tax purpose (vide Engineering News Record dated March 17, 1949) will serve as a basis, provided that the machinery shall be properly looked after by the Contractor during the period of its operation. Provided further that such residual value of the machinery shall be assessed 530 jointly by representatives of the Corporation and of the Contractor and that in case of difference of opinion between the two parties the matter shall be settled through arbitration by a third party to be agreed to both by the Corporation and the Contractor. The items included in this group will be taken over by the Corporation from the Contractor either on the completion of the work or at an earlier date if the Contractor so wishes, provided that in the latter case the equipments will be taken over by the Corporation only when they are declared surplus at Konar and such declaration is duly certified by the Consulting Engineer, within a period of 15 days of such declaration being received by the Corporation. In respect of the machinery which shall have been delivered to the Contractor on or before the 31st of December 1950, their cost shall be recovered from the Contractor in eighteen equal instalments beginning with January 1951 and in respect of the remaining items included in this group of machinery, their cost will be recovered from the Contractor in eighteen equal instalments beginning with July 1951, provided that these remaining items shall have been delivered to the Contractor prior to the last specified date. Provided (a) that the total actual price for these equipments which has been provisionally estimated at Rs. 42,63,305 will be chargeable to the Contractor as per first para of clause 1 above. (b) that after approximately two thirds of total cost or an amount of Rs. 28,43,000 (Rupees twenty eight lakhs forty three thousand) approximately has been recovered from the Contractor on account of these equipments the Corporation will consider the date or dates when it could take over the equipments still under use by the Contractor, assess the, extent to which they have already been depreciated and thereby arrive at, their residual value; and (c) that the recovery or refund of the amount payable by or to the Contractor on account of these equipments will be decided only if the Corporation is fully satisfied that their residual life at the time of 531 their being finally handed over to the Corporation shall under no circumstances fall below one third of their respective standard life as agreed upon by the Corporation and the Contractor." Then follow terms and conditions in respect of Group 'B ' which are not relevant to our purpose. Thereafter, the following conditions appear: "In respect of equipments whether in Group A or B made available by the Corporation to the Contractor. The following conditions shall apply to all equipments, i.e., those included in Group A and B above and others, if any (a) The Contractor shall continuously maintain proper machine cards separately in respect of each item of equipment, clearly showing therein, day by day, the number of actual hours the machine has worked together with the dates and other relevant particulars. (b) The Contractor shall maintain all such equipments in good running condition and shall regularly and efficiently give service to all plant and machinery, as may be required by the Corporation 's Chief Engineer who shall have the right to inspect, either personally or through his authorised representatives all such plant and equipment and the machine cards maintained in respect thereof at mutually convenient hours. (c) No item of equipment made available by the Corporation on loan or hire shall at any time be removed from the work site under any circumstances until the full cost thereof has been recovered from the Contractor by the Corporation and thereafter only if in the opinion of the Consulting Engineer the removal of such item or items is not likely to impede the satisfactory prosecution of the work. Similarly no item of equipment or material belonging to the Contractor but towards the cost of which money has been advanced by the Corporation shall at any time be removed from the work site under any circumstances until the amount of money so advanced has been recovered from the Contractor by 532 the Corporation and thereafter if in the opinion of the Consulting Engineer the removal of such item or items is not likely to impede the satisfactory prosecution of the work. (d) The Corporation shall supply to the Contractor whatever spares have been procured or ordered for the equipment already supplied or to be supplied by the Corporation to the Contractor under the terms of this Agreement and that thereafter the replenishment of the stock of spares shall be entirely the responsibility of the Contractor who shall therefore take active steps in time to procure fresh spares so as to maintain a sufficient reserve. The spares to be supplied by the Corporation will be issued to the Contractor by the Executive Engineer, Konar as and when required by the Contractor against indent accompanied by a certificate that the spares previously issued to him have been actually used up on the machines for which they were intended. (e) Whenever spares are issued to the Contractor in accordance with this provision, their actual prices inclusive of freight, insurance and customs but excluding storage and handling charges shall be debited against him and recovered from his next fortnightly bill. (f) In order to enable the Contractor to take active steps for planning the procurement of additional spares in advance, the Corporation shall forthwith furnish to him a complete list of all the spares which it has procured or ordered for the equipment to be supplied to the Contractor. " The portions quoted above contain the relevant terms and conditions in respect of the transaction in question, so far as it is necessary to know them for the purpose of this case. It will be noticed that the Corporation made available to the Contractors different kinds of machinery and equipment detailed in Group A of the approximate value of Rs. 42,63,000 odd, for which the price paid by the Corporation inclusive of freight, insurance, customs duty etc. has to be charged to them. But the machinery and the equipment so 533 made available to the Contractors were to remain the property of the Corporation until the, full price thereof had been realised from the Contractors. It is also noteworthy that the agreement makes a distinction between the aforesaid part of the agreement and the equipment lent to the contractors in respect of which the contractors had to be charged in terms of hiring, including interest on capital cost and the depreciation of equipment. Thus clearly the agreement between the parties contemplated two kinds of dealings between them, namely (1) the supply of machinery and equipments by the Corporation to the Contractors and (2) loan on hire of other equipment on terms to be mutually agreed between them in respect of the machinery and equipment supplied by the Corporation to the Contractors. There is a further condition that the Corporation will take over from the contractors items 1 and 14, specifically referred to above, and the other items in Group A at their "residual value" calculated on the basis indicated in the paragraph following the description of the machinery and the equipments. But there is a condition added that the "taking over" is dependent upon the condition that the machinery will be properly looked after during the period of its operation. There is an additional condition to the taking over by the Corporation, namely, the work for which they were meant had been completed, or earlier, at the choice of the Contractors, provided that they are declared surplus for the purposes of the construction of the Konar Dam and so certified by the Consulting Engineer. Hence, it is not an unconditional agreement to take over the machinery and equipment as in Group B. The total approximate price of Rs. 42,63,305 is payable by the Contractors in 18 equal instalments. Out of the total cost thus made realisable from the Contractors two thirds, namely, Rs. 28,42,000 approximately, has to be realised in any case. After the two thirds amount aforesaid has been realised from the contractors on account of supply of the equipments by the Corporation, the Corporation had to consider the date or dates of the "taking over" of the equipment after assessing the extent to which it 534 had depreciated as a result of the working on the project in order to arrive at the "residual value" of the same. The refund of the one third of the price or such other sum as may be determined as the "residual value" would depend upon the further condition that the Corporation was fully satisfied that their "residual life" shall, under no circumstances, fall below one third of their respective standard life as agreed upon by the parties. It would, thus, appear that the "taking over" of such of the equipments as were available to be returned was not an unconditional term. The Corporation was bound to take them over only if it was satisfied that their "residual life" was not less than one third of the standard life fixed by the parties. It is clear from the terms and conditions quoted above that there was no right in the contractors to return any of the machinery and equipments at any time they liked, or found it convenient to do so. The conditions which apply to all equipments, whether in Group A or in Group B, are also relevant to determine the nature of the transaction. The contractors are required to "continuously maintain proper machine cards showing certain relevant particulars". It is their duty to maintain the equipments in good running condition and to regularly and effectively service them. No item of machinery and equipment could be removed by the contractors under any circumstances until the full cost thereof had been recovered from them and even then only if the removal of those items of machinery or equipment was not likely to impede the satisfactory progress of the work. Then follows the most important condition that the Contractors themselves shall have to replenish their stock of spare parts of the machinery made available to them by the Corporation. When spare parts are supplied to the Contractors by the Corporation, they shall be liable for the actual price of those parts inclusive of freight, insurance and customs duty. Those substantially are the terms of the contract between the parties and the sole question for determination in this appeal is whether, in respect of the machinery and equipments admittedly supplied by the Corporation to the Contractors, it was a mere 535 contract of hiring, as contended on behalf of the appellant Corporation, or a sale or a hire purchase, as contended on behalf of the respondent State. The law on the subject is not in doubt, but the difficulty arises in applying that law to the facts and circumstances of a particular case on a proper construction of the document evidencing the transaction between the parties. It is well settled that a mere contract of hiring, without more, is a species of the contract of bailment, which does not create a title in the bailee, but the law of hire purchase has undergone consider able development during the last half a century or more and has introduced a number of variations, thus leading to categories, and it becomes a question of some nicety as to which category a particular contract between the parties comes under. Ordinarily, a contract of hire purchase confers no title on the hirer, but a mere option to purchase on fulfillment of certain conditions. But a contract of hire purchase may also provide for the agreement to purchase the thing hired by deferred payments subject to the condition that title to the thing shall not pass until all the instalments have been paid. There may be other variations of a contract of hire purchase depending upon the terms agreed between the parties. When rights in third parties have been created by acts of parties or by operation of law, the question, which does not arise here, may arise as to what exactly were the rights and obligations of the parties to the original contract. It is equally well settled that for the purpose of determining as to which category a particular contract comes under, the court will look at the substance of the agreement and not at the mere words describing the category. One of the tests to determine the question whether a particular agreement is a contract of mere hiring or whether it is a contract of purchase on a system of deferred payments 'of the purchase price is whether there is any binding obligation on the hirer to purchase the goods. Another useful test to determine such a controversy is whether there is a right reserved to the hirer to return the goods at any time during the subsistence of the contract. If there is such a right reserved, then 536 clearly there is no contract of sale, vide Helby vs Matthews and others (1). Applying these two tests to the transaction in the present case, it becomes clear that it was a case of sale of goods with a condition of repurchase on certain conditions depending upon the satisfaction of the Corporation as to whether the "residual life" of the machinery or the equipment was not less than one third of the standard life in accordance with the terms agreed between the parties. It is clear on those terms that there is no right reserved to the contractors to return the goods at any time that they found it convenient or necessary. On the other hand, they were bound to pay two thirds of the total approximate price fixed by the parties in equal instalments. The Contractors were not bound under the terms to return any of the machinery or the equipments, nor was the Corporation bound to take them back unconditionally. The term in the agreement regarding the "taking over" of the machinery or equipments by the Corporation on payment of the "residual value" is wholly inconsistent with a contract of mere hiring and is more consistent with the property in the goods having passed to the Contractors, subject to the payment of all the instalments of the purchase pride. Furthermore, the stipulation that the Contractors themselves will have to supply the spare parts, as and when needed, for replacements of the worn out parts is also consistent with the case of the respondent that title had passed to the contractors and that they were responsible for the upkeep of the machinery and equipments and for depreciation. If it were a mere contract of hiring, the owner of the goods would have continued to be liable for replacements of worn out parts and for depreciation. Applying those tests to the terms of the agreement between the parties, it is clear that the transaction was a sale on deferred payments with an option to repurchase and not a mere contract of hiring, as contended on behalf of the appellant. It must, therefore, be held that the judgment of the High Court is entirely correct and the appeal must be dismissed with costs. Appeal dismissed.

The appellant Corporation was assessed to sales tax under section 13(5) of the Bihar Sales Tax Act, 1947, on the price of machinery and equipment, amounting approximately to Rs. 42,63,305, supplied to two contractor firms on the basis of an agreement which it entered into with them for the construction of a dam. The agreement provided, inter alia, that the price of the machinery and equipment supplied was to be paid by the contractors and until that was done they were to remain the property of the Corporation. It was further agreed that the Corporation would take them over after the completion of the work at their residual value, to be calculated in the manner set out in the agreement, provided that they were properly looked after during the period of operation; and if the contractors so chose earlier, if they were declared surplus and certified as such by the consulting Engineer. The price was to be paid in 18 equal instalments, two thirds of which was realisable in any case, and thereafter the Corporation was to consider the date or dates of taking them over after assessment of the depreciation in order to arrive at the residual value. The Corporation was not bound to take over if the residual life of the equipment fell below one third of the standard life as fixed by the parties. 523 The contractors were to replenish the stock of spare parts supplied to them at their own cost. The appellant 's case was that the transaction represented by the agreement was not a sale within the meaning of the Act. The Sales Tax authorities held against it and the only question that was ultimately referred to the High Court by the Board of Revenue under section 25 of the Act was whether the property in the equipment and machinery passed to the contractors and the transaction amounted to a sale. The High Court answered the question in the affirmative, holding that the transaction was a sale within the meaning of section 2(g) of the Act. The High Court having refused the necessary certificate, the appellant appealed by special leave granted by this court. Held, that the appeal must be confined to the question debated in the High Court. It is well settled that, while functioning in its advisory capacity under a taxing statute, the High Court cannot go beyond the question referred to it or on a reference called by it. That the appeal was by special leave could make no difference and the scope of the controversy could not be extended beyond what could be legally raised before the High Court. The two fold test to determine whether a particular agree ment is a contract of mere hiring or of purchase on deferred payments is (1) whether the hirer is under an obligation to purchase the goods and (2) whether he has the right to return the goods at any time during the subsistence of the contract. What has to be considered in each case is the substance of the agreement and not the words describing its category. Helby vs Matthews and others, , referred to. So judged, there could be no doubt that on the terms of the agreement between the parties the transaction in the instant case was clearly a sale on deferred payments with an option to repurchase and not a mere contract of hiring.

One of the items in dispute referred to the Industrial Tribunal for adjudication, which was the subject matter of this appeal, related to the demand of the Workers ' Union that the appellant company must provide quarters to its employees in terms of the Bihar Government Scheme and undertake immediate construction for that purpose. The case of the Company was that the State and not the employer was primarily responsible for providing quarters to the employees and, in any event, it was not financially possible for the appellant to undertake the task. The Tribunal upheld the Union 's claim and directed the company to start construction of at least 15 quarters, as specified by the Government scheme, within a year. The Labour Appellate Tri bunal, on appeal, held that the Government scheme was binding on the company and upheld the award. The scheme, on which the award was based, was one prepared by the Industrial Housing sub Committee appointed by the Government of Bihar and sanctioned by the Government as recommended by the Bihar Central (Standing) Labour Advisory Board. It imposed on the employers the responsibility for housing industrial labour and provided for financial assistance to the employers by the State Government to the extent Of 50% of 'the capital required, by way of loan repayable in 25 annual instalments, recoverable, on default, from the properties mortgaged for the loan or the assets of the debtor. The scheme prescribed the terms on which the quarters were to be let out to the employees and specified their size. It was contended on behalf of the appellant that, the scheme was not obligatory and could not impose a term of employment for the workmen. For the Union it was argued that the scheme had materially altered the rule, followed by indus trial adjudication in such cases, so far as the State of Bihar was concerned and had imposed a moral obligation on the appellant. Neither the Industrial Tribunal nor the Labour Appellate Tribunal in appeal, took the financial position of the company into consideration where they held that the Scheme did impose a 96 762 moral obligation on the appellant to provide quarters for its employees, which was enforceable in industrial adjudication. Held, that the scheme sanctioned by the Bihar Government was merely of a recommendatory nature and since it had no statutory force it could not provide a basis for the direction made by the award. Its language showed that it was vague and not intended to be acted upon and so it could not have the effect of introducing a term of employment as between the employer and the workmen. Although there could be no doubt that, Industrial Tribunals had generally the power and jurisdiction, apart from any scheme or agreement between the parties, in appropriate cases, to impose new obligations on the employers in the interest of social justice and for securing peace and co operation between the employer and the workmen, the award in appeal could not be justified on the merits under the prevailing condition of the industrial evolution in the country. Western India Automobile Association vs The Industrial Tribunal, Bombay, A.I.R. 1949 F.C. III, The Bharat Bank Ltd., Delhi vs The Employees of the Bharat Bank Ltd., Delhi; , and Rohtas Industries Ltd. vs Brijnandan Pandey; , , referred to. It was the duty of Industrial Tribunals to take into consi deration the interests of national economy and progress and they were entirely right in taking the view, which they had consistently done, that it would be inexpedient in the present financial condition of the industries in the country to impose the additional burden of providing housing facilities on them which should be the primary responsibility of the State. Eastern Plywood Manufacturing Co., Ltd. vs Their Workers, , Mohomad Rai Akbarali Khan vs The Associated Cement Companies Ltd., , SamastipuR Central Sugar Co., Ltd. vs Their Workmen, and M/s. National Carbon Co. (India) Ltd. vs National Carbon Co. Mazdoor Union, Calcutta, [1956] L.A.C. 660, approved.

The appellants who were manufacturers of cigarettes and tobacco in the State of Bihar contested the levy of sales tax on sales effected by them during the financial years 1949 5o and 1950 51 on the ground that as a direct result of every sale effected by them the goods concerned were delivered outside the State of Bihar and were, therefore, exempted from tax liability under article 286(i)(a) of the Constitution. Both the Superintendent of sales tax and the Deputy Commissioner of sales tax, Bihar, overruled the objection of the appellants, and following a previous ruling of the Board of Revenue of Bengal in a case known as the Bengal Timber Case (61 of 1952) held the appellants liable to pay the tax. The appellants paid the tax demanded but filed an application in revision to the Board of Revenue, claiming a constitutional exemption from tax on every sale effected by them as a result of which goods were delivered outside the State of Bihar whether the delivery was for consumption in the State of first delivery or not. The Board passed the following order on the revision petition. " As regards the admitted despatches of the goods outside the State after the 26th January, 1950, when the Constitution came into force, the learned lower court has been guided by the decision of the Board in the Bengal Timber Case (No. 61 of 1952). But this ruling of the Board stands superseded by the subsequent decision of the Supreme Court in the United Motors Case According to the decision of the Supreme Court, no tax could be levied on despatches to the places outside the state after the 26th January, 1950, and on this point the petitions are allowed, and the sales tax officer directed to recalculate the amount of tax payable by the assessee ". The appellants taking the above order to be in their favour claimed refund of the tax already paid by them and the sales tax authorities contested the position and claimed that they were bound to refund the tax only on those sales wherein the goods were delivered outside the State for consumption in the State of first delivery. The department thereafter sought clarification of the above order. The Board refused to clarify or explain its order and passed an order saying that " no further clarification was really required in view of the specific reference to the judgment of the Supreme Court in the United Motors Case ". Thereafter as the authorities still refused to refund the balance of the tax the appellants filed two applications in the High Court for the issue of a writ of mandamus to compel the refund. The High Court held that the Board 's decision that sales in which the goods were delivered outside the State for consumption, not in the State of first delivery but in other States were also exempted from tax, was wrong and that the appellants were not entitled to a writ of mandamus for enforcing a wrong order. On appeal by special leave, Held, that the proper construction of the Board 's orders was that the sales tax officer was directed to decide the relief that 108 should be given to the assessee on the officers ' interpretation of the decision of this Court in the United Motors Case. The Board did not determine the effect of that judgment and did not decide that every sale in which the goods were delivered outside the State of Bihar was exempted from liability to tax. The principle that a subordinate tribunal should not refuse to carry out the directions of a superior tribunal was therefore not applicable to the instant case. Bhopal Sugar Mills vs Commissioner of Income tax, [1961] 1 S.C.R. 474, held inapplicable. The United Motors Case merely decided that sales in which goods were delivered outside the State for consumption in the State of first delivery would fall under the Explanation to article 286(1) of the Constitution and would therefore be exempted from tax liability, but it did not deal with other sales in which the goods thus delivered were for consumption, not in the State of first delivery but in other states. Such sales would on the order of the Board of Revenue which was binding on the appellant be liable to tax in accordance with the previous decision of the Board of Revenue in the Bengal Timber Case. State of Bombay vs United Motors (India) Ltd. and Ors., ; , explained and applied. Board of Revenue of the State in the Bengal Timber Case, 61 of 1952, referred to.

After a preliminary decree was obtained by the appellants (mortgagees of an Estate including both Bakasht lands and other lands), the Bihar Land Reforms Act, 1950 came into force. The appellant filed petition for passing final decree. The Estate mortgaged vested in the State as a result of a notification issued under section 3(1) of the Act, and later a final decree was passed in the mortgage suit. Thereafter the appellants applied under section 14 of the Act and got determined the compensation to which they were entitled under the Act. But yet they filed an execution petition to execute the mortgage decree against the Bakasht land. The respondents resisted that execution by filing an application under section 47, Civil Procedure Code contending that the execution was barred under section 4(d) of the Act. That application was dismissed for default of the respondents. A second application raising, the same ground was filed by the respondents but this, too, was dismissed for their default. A third application raising the same ground was filed by the respondents and in this, the execution court overruled the objection raised by the respondents on the grounds (i) that the objection was barred by the principles of res judicata and (ii) that the bar of section 4(d) pleaded was not tenable. This decision was affirmed in appeal, but reversed in second appeal by the High Court. Dismissing the appeal this Court; HELD : (i) The objection was not barred by the principles of res judicata. Before a plea can be held to be barred by res judicata that plea must have been heard and determined by the court. Only a decision by a court could be res judicata, whether it be statutory under section 11, Civil Procedure Code or constructive as a matter of public policy on which the entire doctrine rests. An execution petition having been dismissed for the default of the decree holder through by the time petition came to be dismissed, the judgment debtor had resisted the execution on one or more grounds, does not bar the further execution of the decree in pursuance of fresh execution petitions filed in accordance with law. Even the dismissal for default of objections raised under section 47, Civil Procedure Code does not operate as res judicata when the same objections are raised again in the course of the execution. [911 B H] Maharaja Radha Parshad Singh vs Lal Sahab Rai & Ors. L.R. 17 I.A. 150, Pulvarthi Venkata Subba Rao vs Velluri Jagannadha Rao & Ors. ; , Lakshmibai Anant Kondkar vs Ravi Bhikaji Kondkar, XXXI B.L.R. 400, Bahir Das Pal & Anr. v, Girish Chandra Pal, A.I.R. 1923 Cal. 287, Bhagwati Prasad Sah vs Radha Kishun Sah & Ors. A.I.R. 1950 Pat. 354, Jethmal & Ors. vs Mst. Sakina, A.I.R. 1961 Rai. 1959 Bishwanath Kundu vs Smt. Subala Dassi, A.I.R. 1962 Cal. 272, referred to. 909 Ramnarain vs Basudeo, I.L.R. XXV Pat. 595, disapproved. (ii)Proceedings under section 4(d). of the Bihar Land Reforms Act, 1950 included execution proceedings and the execution could not be proceeded with. The only remedy open to the appellants was to get compensation under Chapter IV of the Act. [913 G, H] Reading sections 3, 4 and 6 together, it followed that all Estates notified under section 3 vested in the State free of all encumbrances. The quondum proprietors and tenure holders of those Estates lost all interests in those Estates. As proprietors they retained no interest in respect of them whatsoever. But in respect of the lands enumerated in section 6 the State settled on them the rights of raiyats. Though in fact the vesting of the Estates and the deemed settlements of raiyat rights in respect of certain classes of lands included in the Estates took place simultaneously, in law the two must be treated as different transactions; first there was a vesting of the Estates in the State absolutely, free of all encumbrances. 'Men followed the deemed settlement by the State of raiyat 's rights on the quondum proprietors. Therefore in law it would not be correct to say that what vested in the State were only those interests not coming within section 6. [913 C E] Section 4(d) provided that "no suit shall lie in any civil court for the recovery of any money due from such proprietor (proprietor whose estate has vested in the State) or tenure holder the payment of which is secured by a mortgage of, or is a charge on, such estate or tenure and all suits and proceedings for the recovery of any such money which may be pending on the date of vesting shall be dropped". Proceedings in this section undoubtedly included execution proceedings. [1913 F] Ramnarain vs Basudeo I.L.R. XXV Pat. 595, Raj Kishore vs Ram Pratap, ; ; , Rana Sheo Ambar Singh vs Allahabad Bank Ltd., Allahabad, ; and Krishna Prasad & Ors. vs Gauri Kumari Devi, (1962] Supp. 3 S.C.R. 564, referred to. Sidheshwar Prasad Singh vs Ram Saroop Singh, 1963 B.L.J.R. 802, majority view disapproved.

The appellant Board passed a special resolution on September 28, 1956, imposing water tax in Hapur and a notification by the Uttar Pradesh Government was published in the Uttar Pradesh Gazette under section 135(2) of the U.P. Municipalities Act (2 of 1916) notifying the resolution. Fifteen house owners of Hapur who received notices from the appellant Board for the payment of the tax petitioned to the High Court under article 226 ,of the Constitution and asked for a writ or order preventing the appellant Board from realising the tax. The main objections were (a) that the resolution of the appellant Board framing the proposal was not pub lished in a local paper of Hapur published in Hindi and (b) that the rules framed for the imposition of the tax did not accompany the resolution which was affixed on the notice board at the office of the appellant Board in purported compliance with the requirements for publication. The imposition was also challenged on the ground that articles 14 and 19 of the Constitution were violated. A single judge of the High Court held that the tax was illegal inasmuch as the mandatory requirements of the Municipalities Act were not complied with by the appellant Board while imposing the tax and that section 135(3) of the Act (which cures all defects in the imposition of the tax by making the notification of Government conclusive evidence of the legality of the imposition) was ultra vires article 14 of the Constitution because it created a bar against proof and left no remedy to the tax payers thereby making a discrimination between them and other litigants. He further held that the sub section by making Government the sole judge of compliance with the Act conferred judicial power on Government contrary to the intendment of the Constitution. The appellant Board appealed under the Letters Patent. The Divisional Bench upheld the order of the single judge. The case was however certified as fit for appeal under article 133 and the Board appealed to this Court. The contentions raised in appeal were: (i) s.135(3) shuts out all ,enquiry into the procedure by which a tax had been imposed and therefore suffered from excessive delegation of legislative function. (ii) The tax had not been validly imposed a there had been non observance of mandatory provisions; (iii) section 135(3) was discriminatory; and (iv) the sub section was also bad because it conferred judicial functions on the State Government. HELD : Per Gajendragadkar, C.J., Hidayatullah, Shah and Sikri. JJ. (i) The rule of conclusive evidence in s.135(3) does not shut out all enquiry by courts. There are certain matters which cannot be established by a notification under s.135(3). For example no notification can issue unless there is a special resolution under section 134. The special resolu 951 tion is a sine qua non for the notification. Again the notification cannot authorise the imposition of a tax not included in section 128 of the Municipalities Act. Neither the Municipal Board nor the State Government can exercise such power. What the section does is to put beyond question the procedure by which the tax is imposed, that is to say the various steps taken to impose it. A tax not authorised, can never be within the protection afforded to the procedure for imposing taxes. Such a tax may be challenged, not with reference to the manner of imposition but as an illegal impost. [958 A D] (ii) There can be no doubt that some of the provisions of sections 131 to 134 of the Act are mandatory. But all of them are not of the same character. In the present case, as in Raza Buland Sugar Co. Ltd. and in Berar Swadeshi Vanaspati, the provisions not observed were of a directory character and therefore the imposition had the protection of section 135(3). [958 H] Raza Buland Sugar Co. Ltd. vs Municipal Board, Rampur. ; and Berar Swadeshi Vanaspati vs Municipal Committe, Committee Sheogaon & Anr. , relied on. (iii) Mandatory provisions must be fully complied with, and directory provisions should be substantially complied with. In either case the agency for seeing to this compliance is the State Government. It is hardly to be expected that the State Government would not do its duty or that it would allow breaches of the provisions to go unrectified. In cases of minor departure from the letter of the law especially in matters not fundamental, it is for the Government to see whether there has been substantial or reasonable compliance. Once Government condones the departure, the decision of the Government is rightly made final by making the notification conclusive evidence of the compliance with the requirements of the Act. [959 H 960 D] (iv) The power to tax belongs to the State Legislature but is exercised by the local authority under the control of the State Government. It is impossible for the State Legislature to impose taxes in local areas because local conditions and needs must very. The power must be delegated. The taxes however are predetermined and a procedure for consulting the wishes of the people is devised. But the matter is not left entirely in the hands of the Municipal Boards. As the State Legislature cannot supervise the due observance of its laws by the municipal Boards power is given to the State Government to check their actions. The proceedings for the imposition of the tax must come to a conclusion at some stage after which it can be said that the tax has been imposed. That stage is reached, not when the special resolution of the Municipal Board is passed but when the notification by Government is issued. After the notification all enquiry must cease. This is not a case of excessive delegation unless one starts with the notion that the State Government may collude with the Municipal Board to disregard deliberately the provisions for The imposition of the tax. There is no warrant for such a supposition. The provision making the notification conclusive evidence of the proper imposition of the tax is conceived in the best interest of compliance of the provisions by the Board and not to facilitate their breach. [960 F 961 E] Excessive delegation is most often found when the legislature does not perform all the essential legislative functions and leaves them to some other agency. The Legislature here performs all essential functions in the imposition of the tax. The selection of the tax for imposition in a municipal area is by the legislative will expressed in section 128. Neither the Municipal Board, nor the Government can go outside the list of taxes therein included. The procedure for the imposition of the tax is also, laid down 952 by the Legislature for the Municipal Board to follow and the State Government is there to ensure due observance of that procedure. in view of all this there was no excessive delegation or conferral or legislative functions on the appellant Board or the State Government. [961 F 962 C] (v) There are numerous statutes including the Evidence Act, in which a fact is taken to be conclusively proved from the existence of some other fact. The law is full of fictions and irrebuttable presumptions which also involve proof of facts. The tax payers in the Municipality are allowed to object to the proposal for the tax and the rules and to, have their objections considered. They cannot be allowed to keep on agitating. Section 135(3) which only concludes objections against the procedure followed in the imposition of the tax cannot be said to be discriminatory and viola tive of article 14. [962 D H] (vi) The objection that the impugned sub section involves the exercise of judicial functions not open to the legislature is wholly erroneous. The subsection only shuts out further enquiry and makes the notification final. [962 H] Per Wanchoo, J. (dissenting) (i) Section 135(3) bars enquiry by courts into all procedural provisions relating to imposition of taxes and therefore it bars enquiry into any matter covered by section 131 to section 135(1) of the Act. It cannot be read down as barring enquiry only into some procedural provisions i.e. from section 131 to section 133 and not into the other procedural provisions i.e. section 134 and section 135(1). [968 D] Section 135(3) is not a rule of evidence; it is a substantive provision which lays down in effect that once a notification under section 135(2) is issued it will be conclusively presumed that the tax is in accordance with all the procedural provisions with respect to the imposition thereof. [969 E] Ishar Ahmad Khan vs Union of India, [1962] Supp. 3 S.C.R. 235, referred to. The effect of section 135(3) is that the procedural provisions are given the go by in the matter of imposition of tax and as soon as a notification under section 135(2) is shown to the court, the court is helpless, in the matter even though none of the provisions of section 131 to section 135(1) may have been complied with. [969 H] (ii) In the field of local taxation relating to municipal boards and district boards and similar other bodies there are reasons for delegating :fixation of rate to such bodies subject to proper safeguards. This is exactly what has been done under the Act subject to the safeguards contained in sections 131 to section 135(1). If those safeguards are followed the delegation would be proper delegation and could not be challenged as ultra vires on the ground of excessive delegation. But if the legislature after laying down with great care safeguards as to the imposition of tax including its rate makes a blanket provision like section 135(3), which at one stroke does away with all those safeguards and this is what section 135(3) has done in the present case the position that results is that there is delegation of even the essential function of fixing the rate to the subordinate authority without any safeguard. Such a delegation would be excessive delegation and would be ultra vires. [972 D F] (iii) Section 135(3) inasmuch as it makes the delegation contained in sections 128 to 135(2) excessive must be severed from the rest of the sections which are otherwise a proper delegation of legislative authority and should be struck down on the ground of excessive delegation. [973 B] 953

In 1945 one R who was the thekadar of the proprietary rights of a village, sued the appellants and the respondents, other than the first respondent Board of Revenue, for their ejectment under section 171 of the U.P. Tenancy Act. alleging that the appellants had illegally sub let the lands to the respondents. The appellants and the respondents made a on cm denying the alleged 'sub letting and stating that the entries in the village records about the respondents being sub tenants were erroneous. The suit was dismissed in March, 1946, I.e., towards the end of 1353 F on the ground that there was no sub letting and the entries were not correct No attempt was made by anyone to bring the village records in harmony with this decision and the respondents continued to figure as sub tenants in these records. On his attention being drawn to this, the Lekhpal, on his own authority, removed the entries in favour of the respondents from the records for the year ending 1358 F but the entries for the year 1356 F were left undisturbed as it was not within the Lekhpal 's jurisdiction to alter these. After the U.P. Zamindari Abolition and Land Reforms Act came into force in 1952 i.e., at the beginning of 1360 F, on the strength of the Khasra and Khatauni of 1356F, the respondents claimed Adhivasi rights under section 20(b)(i) of the Act and. file six suits praying for the recovery of possession of the lands under 'section 232 of the Act. They lost the suits before the sub Divisional Officer and Additional Commissioner of Varanasi but succeeded in appeals to the Board of Revenue. The appellants thereafter filed writ petitions for quashing the orders of the Board; and the High Court although of the view that the impugmed orders of the Board of Revenue were wrong, held that the Board had jurisdiction to interpret section 20(b) as it thought proper; and as the orders passed by it were final without being subject to any appeal. they could not be quashed by certiorari as being mere errors of law. In appeal to this Court, it was contended, inter alia, on behalf of the appellants that (i) the correctness of the entry in the record of rights of 1356 F could be gone into and was capable of challenge in a court of law exercising jurisdiction under article 226; (ii) in the present case there was an adjudication in March 1946 that the 'respondents were not subtenants; consequently, unless they showed that they had thereafter become sub tenants, the benefit of the entry in their favor in 1356 F could not be availed of by them; (iii) in the Khasra of 1356 F the respondents were only recorded as sub tenants but not as occupants and could not therefore get the benefit of section 20 (b) (i) of the Act. HELD: Dismissing the appeals. The record of rights for the year 1356F had not been corrected afterwards. The court had to go by the entry in the record of rights and 499 no enquiry need be made as to when the respondents became sub tenants after the decision in the suit filed by R. As between the tenant and the sub tenant, the entry in the record of rights in favour of the sub tenant made him the occupant entitled to the adhivasi rights under section 20 of the Act. [5O4 G H] The Upper Ganges Sugar Mills Ltd. vs Khalil ul Rahman and others; , ; Amba Prasad vs Abdul Noor Khan Sukh Ram & Ors. , ; and Nanakchand vs Board of Revenue U.P. ; applied.

K the mortgagee of certain Mokarrari tenures obtained a decree on his mortgage and put it into execution. Pending execution, C the mortgagor having failed to pay the rent of the mortgaged and some other tenures they became liable to be sold for the realisation of the arrears of rent under a certificate issued for the purpose. K whose security was thereby jeopardised paid the arrears and became under section 171 of the Bihar Tenancy Act a mortgagee of the tenures for the amount paid and entitled to possession of them till repayment. K thereafter took possession of the tenures. After C had died in 1941, the respondent claiming to represent his estate as receiver and executor under his will sued the appellant who had succeeded to K 's interest, for redemption of the mortgages on the allegation that K and the appellant had realised from the rents of the tenures in their possession more than what was due. The suit was decreed by the trial court. The appellant appealed to the High Court at Patna. While the appeal was pending there the Bihar Land Reforms Act, 1950, came into force and as a result of a notification issued under it all the tenures became vested in the State of Bihar free from all encumbrances and the proprietors, tenure holders and all other persons ceased to have any interest in them but became entitled to compensation for the divestment. As required by section 14 of the Land Reforms Act, the appellant filed a claim before the officer appointed under the Act in respect of his mortgages on the tenures and such claim was adjudge at a certain sum on notice to C 's representatives which adjudication later became final under section 18. Under the provisions of the Land Reforms Act, the amount so found due became payable out of the compensation awarded to the proprietors and tenureholders. Thereafter the appeal before the High Court came up for hearing. The appellant contended that in view of the provisions of section 35 of the Land Reforms Act a civil court must 120 be deemed to have no jurisdiction to decide any question concerning claims under mortgages of tenures vested in the Government under the Act. The High Court rejected this contention observing that the Act barred a suit by a mortgagee only and not a suit by a mortgagor and confirmed the decree. ^ Held, that though the Act did not expressly bar a suit by a mortgagor for redemption, that was the practical and inevitable effect of it. The mortgage accounts could not be taken over again by the civil court when they had been taken under the Act and the decision in the proceedings under the Act had become final. Held, further, in the proceedings under the Act to ascertain the claim of a creditor, the debtor was entitled to show what had been paid to the creditor or what the creditor had realised from the mortgaged property. Held, also, that after a mortgagor had been divested of the mortgaged property under the Act a redemption decree would be infructuous as the mortgagor would not then be entitled to have it reconveyed to him. Neither would it then be in the power of the mortgagee to convey that property. In fact the mortgagor having been divested of the property and lost his right of redemption. Query Whether if the mortgagee had realised from the profits of the mortgage property more than what was due him on his mortgage, a suit by the mortgagor refund would lie ?

The respondent, a partnership firm of which the second respondent was a partner, carried on business as manufacturers of bidis at various places in the State of Madhya Pradesh. Being unable to secure sufficient tendu leaves locally, the firm took leases for the collection of such leaves in Bihar & Maharashtra. They actually imported tendu leaves under two railway consignments from Bihar. They informed the Divisional Forest Officer about the same and asked permission for transport of the leaves and to utilise them in their factories. By letter, the D.F.O. informed the respondents that the leaves must not be moved for bidi manufacture until permission is given. Respondents obeyed the order; but in spite of that, the Sub divisional Forest Officer seized two quantities of such leaves and filed a complaint alleging contravention of section 5 of Madhya Pradesh Tendu Patta (Vyapar Viniyaman) Adhiniyam, 1964. The respondent filed a petition under article 226 of the Constitution for a writ of certiorari quashing the complaint. The contention of the respondents was that the Act did not prohibit import of tendu leaves from outside nor was there any restriction on a manufacturer to consume the same for the manufacture of bidis or the Rules made under the Act did not regulate the transport of the tendu leaves imported from outside. The State however, contended that transport of tendu leaves whether grown locally or imported from outside was completely prohibited under section 5 of the Act, except by a license holder in terms of a permit issued. S.5(1) provides that no person other than the State Government or an Officer of the State Government etc. shall purchase or transport tendu leaves. Further, the Act did not prohibit import of tendu leaves and so the Act is not violative of articles 31, 301 and 304 of the Constitution and the control of movement of tendu leaves after their import was in no way repugnant to articles 301 and 304 of the Constitution. The State contended that unless the State had the power to check the purchase of tendu leaves from outside the State and to restrict the transport thereof within the State, the monopoly of State trading in tendu leaves would not be effective. The High Court rejected these contentions of the State and hence the appeal. Dismissing the appeal, HELD : (1) All the relevant provisions of the Act and the rules made thereunder show that the legislature intended that everybody growing leaves within the State should offer the same to it to its agents in different units for sale and the State was bound to purchase every single lot of usable tendu leaves. Prima facie trade in tendu leaves could consist of dealing in those leaves, i.e., their purchase and sale but transport 'of the leaves once purchased or sold would not prima facie be an organic or integral part of dealing in those leaves. [842 D] 839 Vrajlal Manilal vs M.P. State ; , followed. (ii) In the present case, the transport of tendu leaves purchased outside but consigned to places within the State to be used for the manufacture of bidis is not integrally connected with the State monopoly as envisaged in the Act. The Act ought not to be construed so as to ban import of tendu leaves from outside the State or restrict their movement once they are within the State unless clear language was used in that behalf. [844 C] Akadasi Padhan vs State of Orissa, [1963] Supp. 2 S.C.R. 691, referred to.

No. 528, of 1959. Appeal from the judgment and order dated September 20, 1957, of the former Bombay High Court in I.T.R. No. 15 of 1957. Hardayal Hardy and D. Gupta, for the appellant. R. J. Kolah, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the respondent. 635 1960. November 24. The Judgment of the Court was delivered by HIDAYATULLAH, J. The Commissioner of Income tax, Bombay City 11, has filed this appeal with a certificate under section 66A(2) of the Income tax Act, against the judgment and order of the High Court of Bombay dated September 20, 1957, in Income tax Reference No. 15 of 1957. The question referred to the High Court for its opinion by the Income tax Appellate Tribunal, Bombay was: "Whether the assessee is entitled to a deduction of Rs. 1,350 and Rs. 18,000 from his total income of the previous year relevant to the assessment years, 1953 54, 1954 55?" The assessee, Sitaldas Tirathdas of Bombay, has many sources of income, chief among them being property, stocks and shares, bank deposits and share in a firm known as Messrs. Sitaldas Tirathdas. He follows the financial year as his accounting year. For the assessment years 1953 54 and 1954 55, his total income was respectively computed at Rs. 50,375 and Rs. 55,160. This computation was not disputed by him, but he sought to deduct therefrom a sum of Rs. 1,350 in the first assessment year and a sum of Rs. 18,000 in the second assessment year on the ground that under a decree he was required to pay these sums as maintenance to his wife, Bai Deviben and his children. The suit was filed in the Bombay High Court (Suit No. 102 of 1951) for maintenance allowance, separate residence and marriage expenses for the daughters and for arrears of maintenance, etc. A decree by consent was passed on March 11, 1953, and maintenance allowance of Rs. 1,500 per month was decreed against him. For the account year ending March 31, 1953 only one payment was made, and deducting Rs. 150 per month as the rent for the flat occupied by his wife and children, the amount paid as maintenance under the decree came to Rs. 1,350. For the second year, the maintenance at Rs. 1,500 per month came to Rs. 18,000 which was claimed as a deduction. 636 No charge on the property was created, and the matter does not fall to be considered under section 9(1)(iv) of the Income tax Act. The assessee, however, claimed this deduction on the strength of a ruling of the Privy Council in Bejoy Singh Dudhuria vs Commissioner of Income tax (1). This contention of the assesses was disallowed by the Income tax Officer, whose decision was affirmed on appeal by the Appellate Assistant Commissioner. On further appeal, the Tribunal observed: "This is a case, pure and simple, where an assessee is compelled to apply a portion of his income for the maintenance of persons whom he is under a personal and legal obligation to maintain. The Income tax Act does not permit of any deduction from the total income in such circumstances. " The Tribunal mentioned in the statement of the case that counsel for the assessee put his contention in the following words: "I claim a deduction of this amount from my total income because my real total income is whatever that is " computed, which I do not dispute, less the maintenance amount paid under the decree. " The assessee appears to have relied also upon a decision of the Lahore High Court in Diwan Kishen Kishore vs Commissioner of Income tax(2). The Tribunal, however, referred the above question for the opinion of the High Court. The High Court followed two earlier decisions of the same Court reported in Seth Motilal Manekchand vs Commissioner of Income tax (3) and Prince Khanderao Gaekwar vs Commissioner of Income tax (4), and held that, as observed in those two cases, the test was the same, even though there was no specific charge upon property so long as there was an obligation upon the assessee to pay, which could be enforeed in a Court of law. In Bejoy Singh Dudhuria 's case (1), there was a charge for maintenance created against the assessee, and the Privy Council had observed that the income must be deemed to have never reached that assessee, (1) (3) (2) (4) 637 having been diverted to the maintenance holders. In the judgment under appeal, it was held that the income to the extent of the decree must be taken to have been diverted to the wife and children, and never became income in the hands of the assessee. The Commissioner of Income tax questions the correctness of this decision and also of the two earlier decisions of the Bombay High Court. We are of opinion that the contention raised by the Department is correct. Before we state the principle on which this and similar cases are to be decided, we may refer to certain rulings, which illustrate the aspects the problem takes. The leading case on the subject is the decision of the Judicial Committee in Bejoy Singh Dudhuria 's case(1). There, the stepmother of the Raja had brought a suit for maintenance and a compromise decree was passed under which the stepmother was to be paid Rs. 1,100 per month, which amount was declared a charge upon the properties in the hands of the Raja, by the Court. The Raja sought to deduct this amount from his assessable income, which was disallowed by the High Court at Calcutta. On appeal to the Privy Council, Lord Macmillan observed as follows: "But their Lordships do not agree with the learned Chief Justice in his rejection of the view that the sums paid by the appellant to his step mother were not 'income ' of the appellant at all. This in their Lordships ' opinion is the true view of the matter. When the Act by Section 3 subjects to charge 'all income ' of an individual, it is what reaches the individual as income which it is intended to charge. In the present case the decree of the court by charging the appellant 's whole resources with a specific payment to his step mother has to that extent diverted his income from him and has directed it to his stepmother; to that extent what he receives for her is not his income. It is not a case of the application by the appellant of part of his income in a particular way, it is rather the allocation of a sum out of his revenue before it becomes income in his hands." (1) 81 638 Another case of the Privy Council may well be seen in this connection. That case is reported in P. C. Mullick vs Commissioner of Income tax, Bengal (1). There, a testator appointed the appellants as executors and directed them to pay Rs. 10,000 out of the income on the occasion of his addya sradh. The executors paid Rs. 5,537 for such expenses, and sought to deduct the amount from the assessable income. The Judicial Committee confirmed the decision of the Calcutta High Court disallowing the deduction, and observed that the payments were made out of the income of the estate coming to the hands of the executors and in pursuance of an obligation imposed upon them by the testator. It observed that it was not a case in which a portion of the income had been diverted by an over riding title from the person who would have received it otherwise, and distinguished the case in Bejoy Singh Dudhuria 's case (2). These cases have been diversely applied in India, but the facts of some of the cases bring out the distinction clearly. In Diwan Kishen Kishore vs Commissioner of Income tax (3), there was an impartible estate governed by the law of primogeniture, and under the custom applicable to the family, an allowance was payable to the junior member. Under an award given by the Deputy Commissioner acting as arbitrator and according to the will of the father of the holder of the estate and the junior member, a sum of Rs. 7,200 per year was payable to the junior member. This amount was sought to be deducted on the ground that it was a necessary and obligatory payment, and that the assessable income must, therefore, be taken to be pro tanto diminished. It was held that the income never became a part of the income of the family or of the eldest member but was a kind of a charge on the estate. The allowance given to the junior member, it was held, in the case of an impartible estate was the separate property of the younger member upon which he could be assessed and the rule that an allowance given by the head of a Hindu coparcenary to its members by way of maintenance was liable to be assessed (1) (2) (3) 639 as the income of the family, had no application. It was also observed that if the estate had been partible and partition could have taken place, the payment to the junior member out of the coparcenary funds would have stood on a different footing. In that case, the payment to the junior member was a kind of a charge which diverted a portion of the income from the assessee to the junior member in such a way that it could not be said that it became the income of the assessee. In Commissioner of Income tax, Bombay vs Makanji Lalji (1), it was stated that in computing the income of a Hindu undivided family monies paid to the widow of a deceased coparcener of the family as maintenance could not be deducted, even though the amount of maintenance had been decreed by the Court and had been made a charge on the properties belonging to the family. This case is open to serious doubt, because it falls within the rule stated in Bejoy Singh Dudhuria 's case (2); and though the High Court distinguished the case of the Judicial Committee, it appears that it was distinguished on a ground not truly relevant, namely, that in Bejoy Singh Dudhuria 's case (2) the AdvocateGeneral had abandoned the plea that the stepmother was still a member of the undivided Hindu family. It was also pointed out that this was a case of assessment as an individual and not an assessment of a Hindu undivided family. In Commissioner of Income tax, Bombay vs D. R. Naik (3), the assessee was the sole surviving member of a Hindu undivided family. There was a decree of Court by which the assessee was entitled to receive properties as a residuary legatee, subject, however, to certain payments of maintenance to widows. The widows continued to be members of the family. It was held that though section 9 of the Income tax Act did not apply, the assessee 's assessable income was only the balance left after payment of the maintenance charges. It appears from the facts of the case, however, that there was a charge for the maintenance (1) (2) (3) 640 upon the properties of the assessee. This case also brings out correctly the principles laid down by the Judicial Committee that if there be an overriding obligation which creates a charge and diverts the income to some one else, a deduction can be made of the amounts so paid. The last case may be contrasted with the case reported in P. C. Mullick and D. C. Aich, In re(1). There, under a will certain payments had to be made to the beneficiaries. These payments were to be made gradually together with certain other annuities. It was held that the payments could only be made out of the income received by the executors and trustees from the property, and the sum was assessable to income tax in the hands of the executors. It was pointed out that under the wilt it was stated that the amounts were to be paid "out of the income of my property", and thus, what had been charged was the income of the assessees, the executors. The case is in line with the decision of the Privy Council in P. C. Mullick vs Commissioner of Income tax, Bengal(2). In Hira Lal, In re,(3) there was a joint Hindu family, and under two awards made by arbitrators which were made into a rule of the Court, certain maintenance allowances were payable to the widows. These payments were also made a charge upon the property. It was held that inasmuch as the payments were obligatory and subject to an overriding charge they must be excluded. Here too, the amount payable to the widows was diverted from the family to them by an overriding obligation in the nature of a charge, and the income could not be said to accrue to the joint Hindu family at all. In Prince Khanderao Gaekwar vs Commissioner of Income tax (4), there was a family trust out of which two grandsons of the settlor had to be paid a portion of the income. It was provided that if their mother lived separately, then the trustees were to pay her Rs. 18,000 per year. The mother lived separately, and two deeds were executed by which the two grandsons agreed to pay Rs. 15,000 per year to the mother, (1) (3) (2) (4) 641 and created a charge on the property. The sons having paid Rs. 6,000 in excess of their obligations, sought to deduct the amount from their assessable income, and it was allowed by the Bombay High Court, observing that though the payment was a voluntary payment, it was subject to a valid and legal charge which could be enforced in a Court of law and the amount was thus deductible under section 9(1)(iv). There is Do distinction between a charge created by a decree of Court and one created by agreement of parties, provided that by that charge the income from property can be said to be diverted so as to bring the matter within section 9(1)(iv) of the Act. The case was one of application of the particular section of the Act and not one of an obligation created by a money decree, whether income accrued or not. The case is, therefore, distinguishable from the present, and we need not consider whether in the special circumstances of that case it was correctly decided. In V. M. Raghavalu Naidu & Sons vs Commissioner of Income tax (1), the assessees were the executors and trustees of a will, who were required to pay maintenance allowances to the mother and widow of the testator. The amount of these allowances was sought to be deducted, but the claim was disallowed. Satyanarayana Rao and Viswanatha Sastri, JJ. distinguished the case from that of the Privy Council in Bejoy Singh Dudhuria (2). Viswanatha Sastri, J. observed that the testator was under a personal obligation under the Hindu law to maintain his wife and mother, and if he had spent a portion of his income on such maintenance, he could not have deducted the amount from his assessable income, and that the position of the executor was no better. Satyanarayana Rao, J. added that the amount was not an allowance which was charged upon the estate by a decree of Court or otherwise and which the testator himself had no right or title to receive. The income which was received by the executors included the amount paid as maintenance, and a portion of it was thus applied in discharging the obligation. (1) (2) 642 The last cited case is again of the Bombay High Court, which seems to have influenced the decision in the instant case. That is reported in Seth Motilal Manekchand vs Commissioner of Income tax(1). In that case, there was a managing agency, which belonged to a Hindu joint family consisting of A, his son B and A 's wife. A partition took place, and it was agreed that the managing agency should be divided, A and B taking a moiety each of the managing agency remuneration but each of them paying A 's wife 2 as. 8 pies out of their respective 8 as. share in the managing agency remuneration. Chagla, C. J. and Tendolkar, J. held that under the deed of partition A and B had really intended that they were to receive only a portion of the managing agency commission and that the amount paid to A 's wife was diverted before it became the income of A and B and could be deducted. The learned Judge observed at p. 741 as follows: "We are inclined to accept the submission of Mr. Kolah that it does constitute a charge, but in our opinion, it is unnecessary to decide this question because this question can only have relevance and significance if we were considering a claim made for deduction under section 9(1)(iv) of the Income tax Act where a claim is made in respect of immovable property where the immovable property is charged or mortgaged to pay a certain amount. It is sufficient for the purpose of this reference if we come to the conclusion that Bhagirathibai had a legal enforceable right against the partner in respect of her 2 annas and 8 pies share and that the partner was under a legal obligation to pay that amount. " These are the cases which have considered the problem from various angles. Some of them appear to have applied the principle correctly and some, not. But we do Dot propose to examine the correctness of the decisions in the light of the facts in them. In our opinion, the true test is whether the amount sought to be deducted, in truth, never reaches the assessee as his income. Obligations, no doubt, there are in every case, but it is the nature of the obligation which is the (1) 643 decisive fact. There is a difference between an amount which a person is obliged to apply out of his income and an amount which by the nature of the obligation cannot be said to be a part of the income of the assessee. Where by the obligation income is diverted before it reaches the assessee, it is deductible; but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequence, in law, does not follow. It is the first kind of payment which can truly be excused and not the second. The second payment is merely an obligation to pay another a portion of one 's own income, which has been received and is since applied. The first is a case in which the income never reaches the assessee, who even if he were to collect it, does so, not as part of his income, but for and on behalf of the person to whom it is payable. In our opinion, the present case is one in which the wife and children of the assessee who continued to be members of the family received a portion of the income of the assessee, after the assessee had received the income as his own. The case is one of application of a portion of the income to discharge an obligation and not a case in which by an overriding charge the assessee became only a collector of another 's income. The matter in the present case would have been different, if such an overriding charge had existed either upon the property or upon its income, which is not the case. In our opinion, the case falls outside the rule in Bejoy Singh Dudhuria 's case and rather falls within the rule stated by the Judicial Committee in P. C. Mullick 's case For these reasons, we hold that the question referred to the High Court ought to have been answered in the negative. We, accordingly, discharge the answer given by the High Court, and the question will be answered in the negative. The appeal is thus allowed with costs here and in the High Court. Appeal allowed.

A consent decree was passed against the assessee awarding maintenance to his wife and children. The decree did not create any charge upon the income of the assessee. The assessee claimed in the assessment of income tax deduction of the amount paid under the decree from his total income. Held, that the assessee was not entitled to the deduction. Where by the obligation income was diverted by an overriding title before it reached the assessee, it was deductible; but where the income was required to be applied to discharge an obligation after such income reached the assessee, it was not deductible. The true test was whether the amount sought to be deducted, in truth, never reached the assessee as his income. In the present case, the wife and children of the assessee received a portion of the income of the assessee, after the assessee had received the income as his own. Bejoy Singh Dudhuria vs Commissioner of Income tax, (1933) I I.T.R. 135, not applicable. P. C. Mullick vs Commissioner of Income tax, Bengal, , applied. Diwan Kishen Kishore vs Commissioner of Income tax, , Seth Motilal Menekchand vs Commissioner of Income tax, , Prince Khanderao Gaekway vs Commissioner of Income tax, , Commissioner of Income tax, Bombay vs Makanji Lalji, , Commissioner of Income tax, Bombay V. D. R. Naik, , D. C. Aich, It; re, , Hira Lal, In re, and V. M. Raghavalu Naidu & Sons vs Commissioner of Income tax, , referred to

The appellant brought a suit for possession of land against respondent Birdhi Lal, under Ss. 180 and 183 of the Rajasthan Tenancy Act, 1955. The Assistant Collector, Baran, dismissed the suit, but the Revenue Appellate Authority allowed his appeal and held that Birdhi Lal was a trespasser. A further appeal by Birdhi Lal was dismissed by the Board of Revenue, Rajasthan. Thereafter, his application made under article 226 was allowed by the High Court. The High Court held Birdhi Lal to be a tenant within the meaning of section 5(43), and not a trespasser as conceived by section 5(44). On appeal by special leave, the appellants contended before this Court that the High Court was not justified in exercising appellate jurisdiction and interfering with the concurrent opinions of the Revenue authorities. It was further contended that even if Birdhi Lal was held to be a tenant. he was liable to be ejected, as the original suit had been framed alternatively under section 180 of the Act. Dismissing the appeal, the court ^ HELD: (1) The material on record does not establish that Birdhi Lal took or retained possession of the land without authority. The essential conditions for holding Birdhi Lal to be a trespasser under section 5(44) were manifestly not satisfied. The High Court was right in rectifying the error of law apparent on the face of the record and quashing the judgments of the Appellate Revenue Authority and the Board of Revenue. [589F H & 590A] (2) The alternative case under section 180 required necessary averments and proof of facts which were absent in the case. The plea therefore, cannot be entertained. [590 C D]

During the pendency of the appeal by the State against an arbitrator 's award made on July 29, 1955 enhancing the original amount of compensation the Government deposited the extra amount, which the assessee was permitted to withdraw on May 9, 1956 on furnishing security. During the assessment proceedings for the relevant assessment year the Income tax Officer brought that amount to tax as the assessee 's business income. The Appellate Tribunal, however, accepted the assessee 's contention that the amount could not be said to have accrued to the assessee as its income during the relevant previous year, and therefore, was not liable to tax in the particular assessment year. The High Court answered the question referred in favour of the assessee and against the Revenue. Dismissing the appeal of the Revenue, this Court, ^ HELD: It is only on the final determination of the amount of compensation that the right to such income in the nature of compensation arises or accrues and till then there is no liability in praesenti in respect of the additional amount of compensation claimed by the owner of the land. [396G] There is a clear distinction between cases where the right to receive payment is in dispute and it is not a question of merely quantifying the amount to be received, and cases where the right to receive payment is admitted and the quantification only of the amount payable is left to be determined in accordance with settled or accepted principles. [396H;397A B] 391 In the instant case, although the award was made by the arbitrator on July 29, 1955 enhancing the amount of compensation payable to the assessee, the entire amount was in dispute in the appeal filed by the Goverment. There was no absolute right to receive the amount at that stage, for if the appeal had been allowed in its entirety the right to payment of the enhanced compensation would have fallen altogether. The sum, therefore, could not be said to have accrued or arisen during the relevant assessment year. [393G; 394A B] E.D. Sassoon & Company Ltd. and others vs Commissioner of Income tax, Bombay City, , Commissioner of Incometax vs Jai Parkash Om Parkash Co. Ltd., , Pope The King Match Factory vs Commissioner of Income tax, , Khan Bahadur Ahmed Alladin & Sons vs Commissioner of Income tax, , Topandas Kundanmal vs Commissioner of Income tax, Gujarat, , Harish Chandra Raj Singh vs The Deputy Land Acquisition Officer & Anr., [1962] 1 SCR 676 and Additional Commissioner of Income tax, Gujarat, vs New Jehangir Vakil Mills Co. Ltd., , referred to. Kedarnath Jute Mfg. Co. Ltd. vs Commissioner of Income Tax (Central), Calcutta, , distinguished.

The assessee company, which derived its income from the manufacture and sale of sugar and confectionery, was as sessed for the years 1958 59 by the Income Tax Officer under the Income Tax Act, 1922 by making additions of Rs.48,500 for cane cost, Rs.67,500 for shortage in cane, and Rs.21,700 for salary of outstation staff. The assessee did not chal lenge the said assessment order. Later in the year 1963 the Income Tax Officer issued notice under section 274 read with section 271 of the Income Tax Act, 1961 in respect of the assessment year 1958 59 for imposing penalty. Before the Inspecting Assistant Commissioner the assessee admitted that these amounts, which were not included in the return by the compa ny, represented income. On finding that there was deliberate understatement of income he imposed a penalty of Rs.70,000. On appeal the Tribunal held that the mere fact that the amounts were agreed to be taken into account by the assessee did not ipsofacto indicate any criminality in its action to conceal any portion of the income, and that the assessee could very well have argued against the additions of the two sums, namely, Rs.67,500 and Rs.21,700. As regards the sum of Rs.48,500 it found that the assessee had agreed to similar addition in the earlier years and so the penalty was war ranted in similar amount for this year and taking into consideration that the sum involved was Rs.48,500, it con sidered that a smaller penalty of Rs.5,000 was imposable. The High Court took the view that the onus of proving concealment was on the Revenue because proceedings for penalty were penal in character, and held that so far as the sum of Rs.48,500 was concerned it was not proved that there was any deliberate concealment, that the Tribunal had not set aside the finding of the Assistant Inspecting Com 693 missioner that the assessee surrendered the amount of Rs.67,500 when it was faced with facts which clearly estab lished concealment, that the assessee in fact had surren dered the amount only after the Income Tax Officer had conclusive evidence in his possession that the amount repre sented its income, that acceptance by the assessee was material to give proper weight to judge the criminality of the action which in its opinion was not given, and that the Tribunal omitted to take into account the fact that the assessee had admitted that the amount of Rs.21,700 repre sented its income. In the appeal by special leave on the question as to how far the High Court in a reference could interfere with a finding of fact and transform the same into a question of law on the ground that there has been non consideration of all relevant facts. Allowing the appeal, HELD: 1.1 In an income tax reference a finding on a question of pure fact could be reviewed by the High Court only on the ground that there was no evidence to support it or that it was perverse. If the High Court found that there was no such evidence, those circumstances would give rise to question of law and could be agitated in a reference. [700G 701A, 702H 703A] 1.2 When a conclusion has been reached on an apprecia tion of a number of facts established by the evidence, whether that is sound or not must be determined not by considering the weight to be attached to each single fact in isolation, but by assessing the cumulative effect of all the facts in their setting as a whole. Where an ultimate finding on an issue is an inference to be drawn from the facts found, on the application of any principles of law, there would be a mixed question of law and fact, and the inference from the facts found in such a case would be a question of law. But where the final determination of the issue equally with the finding or ascertainment of the basic facts did not involve the application of any principle of law, an infer ence from the facts could not be regarded as one of law. The proposition that an inference from. facts is one of law is, therefore, correct in its application to mixed questions of law and fact, but not to pure questions of fact. In the case of pure questions of fact an inference from the facts is as much a question of fact as the evidence of the facts. [701A D] In the instant case, it is not said that the Tribunal had acted on material which was irrelevant to the enquiry or considered material 694 which was partly relevant and partly irrelevant or based its decision partly on conjectures, surmises and suspicions. It took into account all the relevant facts in a proper light in rendering a finding of fact. Therefore, no question of law arises. [703BC, 701DE] Sree Meenakshi Mills Limited vs Commissioner of Income tax, Madras, ; Omar Salay Mohamed Sait vs Com missioner of Income tax, Madras, ; Udhavdas Kewalram vs Commissioner of Income tax Bombay City 1, and Remeshwar Prasad Bagla vs Commissioner of Income tax, U.P., , referred to. 2.1 The High Court was wrong in saying that proper weight had not been given to all the evidence and admissions made by the assessee. The Tribunal had taken into considera tion the fact that the assessee had admitted the additions as its income when faced with non disclosure in assessment proceedings. The time when the assessee admitted the addi tions was also considered. But to admit that there has been excess claim or disallowance is not the same thing as delib erate concealment or furnishing inaccurate particulars. There may he hundred and one reasons for such admissions, i.e., when the assessee realises the true position it does not dispute certain disallowances but that does not absolve the Revenue to prove the mens rea of quasi criminal offence. [703BC, 702AB, 701A, 702BC] 2.2 It is for the Income tax authority to prove that a particular receipt is taxable. If however, the receipt is accepted and certain amount is accepted as taxable, it could be added. But in the instant case, it was not accepted by the assessee that it had deliberately furnished inaccurate particulars or concealed any income. [702EF] 3. The High Court observed that the time of admission was not noted by the Tribunal and this fact had not been properly appreciated by the Tribunal. That is not correct. The Tribunal had made additions during the assessment pro ceedings. In any event that would be appreciation of evi dence in a certain way, unless in such misappreciation which amounted to non appreciation no question of law would arise. Nonappreciation may give rise to the question of law but not mere misappreciation even if there he any from certain angle. Change of perspective in viewing a thing does not transform a question of fact into a question of law. [703CD] The High Court in preferring one view to another view of factual 695 appreciation in the instant case, has therefore, trans gressed the limits of its. jurisdiction under the Income Tax Reference in answering the question of law. [703F]

The assessee respondent was assessed to income tax as a representative assessee of ten non resident companies. The companies were grouped under three heads six in Group A, three in Group B and one in Group C. In regard to the companies under Group A, the assessee had no direct agree ment but had dealings by virtue of its agreement with the exporting company; as regards the three companies under Group B, the assessee had no business connection with them; and so far as the only company under Group C was concerned, the assessee 's stand was that it had an agreement dated December 16, 1948 with the export company, but no liability accrued under the law in respect of the transactions. The Income tax Officer referred specifically to the agreement of 1948 and refuted the stand of the company. He held that the agreement was a clear authority that the non resident had employed the Indian Company for selling its goods in India on commission and that it brings into exist ence a business connection between the two companies. He also held that the Group A companies were connected with the Indian Company through the export company. Appeals were filed by the assessee challenging the assessments before the Appellate Assistant Commissioner. The assessee tried to establish the actual course of dealing between the Indian Company and the ten non residents and contended that no liability under the Act accrued. The Appellate Authority dismissed the contentions of the asses see by holding that the assessee had produced no proof of its assertions and on the contrary had blocked the inquiry. Before the Tribunal, an appeal was filed by the asses see. Along with the grounds, an affidavit dated December 27, 1965 of the Secretary of the assessee was also filed and it was stated therein that there was no 884 obstruction to the proceedings before the Appellate Assist ant Commissioner with regard to the attempted probe by the Appellate Authority and that several documents were made available before the Appellate Authority and were actually placed before him, and in case the Appellate Authority wanted any information or further documents to be produced, the Secretary was prepared to do so. The Tribunal did not deal with the aforesaid affidavit on the ground that it was not necessary for the purpose of determining whether the Indian Company could be appointed agent under Section 163 of the Act. It upheld the assess ments and referred to the High Court the questions whether the non resident companies had business connection with the Indian Company and whether the Indian Company was correctly treated as an agent of the said non resident companies under Section 163 of Income tax Act, 1961. The High ,Court held that the Indian assessee had no business connections with the non resident companies within the meaning of Section 9 of the Act. Dismissing the appeals of the Revenue, this Court, HELD: 1. The High Court was right in holding that the Indian assessee had no business connections with the non resident companies within the meaning of Section 9 of the 1961 Act. Unless the matter comes under Section 163(1)(a) of the Act, there will be no liability for assessment. [893F] 2. Whether a relationship would amount to "business connection" as provided in Section 163(1)(b) of the Income tax Act of 1961 for the purpose of giving rise to the li ability under Section 9(1) of the Act would depend upon a set of facts arising in a particular case. [889F G] 3. The, order of the Appellate Assistant Commissioner shows that the Secretary appeared before him at the hearing on September 3 and 4, 1965 and the appeals were dismissed by order dated September 17, 1965. [890F] 4. Ordinarily, the High Court should have declined to use the assertions in the affidavit for the purpose of recording findings of fact and if, at all, in its opinion the affidavit was to be utilised, the matter should have gone before the Tribunal for a fresh disposal of the ap peals. [892H] 885 5. In the instant case, the High Court relying upon the affidavit of the Secretary of the assessee had found that during the hearing of the appeals before the Appellate Assistant Commissioner, the Secretary had produced certain records to show the manner in which the business had been carried on and the nature of the transactions. The Tribunal obviously fell into an error in brushing aside the affida vit. The facts stated therein had a direct bearing on the point in issue, namely, whether there was any business connection between the assessee and the non resident compa nies. [889G H; 891C D] 6. The assessments relate to a period about a quarter of a century back and by its conduct, the Revenue appears to have waived its right to dispute the facts asserted in the affidavit on one hand by not challenging its admissibility and on the other by not disputing the contents thereof. It would not be appropriate at this stage to put back the matter to the stage of the second appeal before the Tribu nal. [893D El Commissioner of Income Tax, Punjab vs R.D. Aggarwal and Company and another, , referred to.

Assistant Sales Tax Officers serving in connection with the affairs of the former States of Madhya Pradesh and Hyderabad, on the appointed date, were allocated to the new State of Bombay under section 115 of the (Act No. XXXVII) with effect from November 1, 1956. The Assistant Sales Tax officers from the former States of Madhya Pradesh and Hyderabad were superior to the Sales Tax Inspectors in their respective States and the posts of Assistant Sales Tax officer in those States was a promotion post. In the former State of Bombay, there was no similarly constituted cadre of Assistant Sales Tax officers, but there were posts of Sales Tax Inspectors. On November 16,1957, the State Government by its resolution directed that the ASTOs from Madhya Pradesh and Hyderabad should continue in their respective pay scales until such of them were not appointed as STOs Grade III, and Notes 3 and 6 appended to the Resolution provided that for purposes of promotion their inter se seniority be Fixed on the basis of their service as STOs and ASTOs. On February 3, 1960, the State Government substantially modified rule 7 of the Allocated Government Servants (Absorption, Seniority, Pay and Allowances) Rules, 1957 and a new rule 7 was substituted which provided that the seniority of an allocated Government servant in the post or cadre of absorption shall, as on November 1, 1956 be determined by the length of continuous service etc. Since 666 there were no comparable posts of ASTos in the former State of Bombay, the Central Government directed that the ASTos from Madhya Pradesh and Hyderabad should not be equated with the post of STIs but should be continued in an isolated category and their seniority should be fixed above the persons in the next lower grade. The State Government by its resolution dated September 10, 1960 modified Notes 3 and 6 and directed that the seniority as on November 1, 1956 of ASTOs from Madhya Pradesh and Hyderabad be fixed above all persons absorbed as STIs and that the inter se seniority of STOs from Madhya Pradesh and Hyderabad be fixed on the basis of their continuous service as ASTOs, and that the service rendered by the ASTOs from Madhya Pradesh as Excise Inspec tors or Assistant District Excise Officers in the Excise Department be counted as equivalent service. On August 17,1962, the State Government prepared a fresh provisional gradation list of ASTOs and STIs and invited objections. None of the respondents raised any objection. Upto and until August 8, 1960, departmental examinations for promotion to the post of STOs were conducted under the three different sets of rules applicable to the former States of Bombay, Madhya Pradesh and Hyderabad. The Departmental Examination Rules for Sales Tax officers 1954 framed by the former State Government of Bombay were made applicable to the Assistant Sales Tax officers allocated from Madhya Pradesh and Hyderabad from August 8,1960, as the provisions of the Bombay Sales Tax Act, 1959 were extended to the whole of the State, the CP and Berar Sales Tax Act 1947 and the Hyderabad General Sales Tax 1950 having been repealed. The ASTOs from Vidarbha and Marathwada regions of Madhya Pradesh and Hyderabad were called upon to appear at the examinations prescribed from the STOs of the old Bombay region, and some of the ASTOs from Madhya Pradesh and Hyderabad who had been promoted as STos Grade Ill were reverted to the post of ASTOs due to their failure to pass the said examination. The Government by its Resolution dated June 13, 1964 directed that the ex Hyderabad ASTOs even though they had not passed the prescribed depart mental examination should be confirmed on the basis of confidential records, efficiency and seniority: and by its Memorandum dated November 21,1964 order ed that all the ASTOs and STIs who had been allocated from the old M.P. and Hyderabad States should be considered eligible for promotion without passing the STos examination if they are otherwise fit for promotion. On representation made by the ASTos from Madhya Pradesh and Hyderabad, the Government of India, by its letter dated March 9, 1965 to the State Government directed that the Bombay Departmental Examination Rules, 1954, could not be made applicable to the allocated ASTOs from Madhya Pradesh and Hyderabad as it would amount to changing their conditions of service to their disadvantage. It accordingly directed that all the ASTOs from Madhya Pradesh and Hyderabad who were compelled to appear for the said examination and who had failed to pass the same be reinstated as STOs. This directive resulted in Respondents I and 2 who had been promoted to officiate as STO, Grade 111 being reverted as STIs. The State Government in view of this change reviewed the cases of all the ASTOs, and STIs from the three regions and those who were otherwise found 667 suitable were according to their seniority promoted to the post of STO, Gr. III even though they had not passed the STOs examination. On January 6,1966 the State Government published a revised gradation list of ASTOs and STIs and invited objections. Only Respondent 4 filed objections which was considered by the Government and rejected. The writ petition filed by Respondents 1 to S who were STIs in the State of Bombay and had passed the prescribed departmental examination for promotion as STOs Gr. III was allowed by the High Court which struck down the various resolutions and orders passed by the State Government from time to time relating to integration of service under sub section (7) of section 115 of the Act. In the appeals by the State to this Court on the questions whether (I) the State Government could by an executive order without framing a rule under the Proviso to article 303 of the Constitution alter the rules relating to departmental promotion of ASTOs from Madhya Pradesh and Hyderabad which constituted their conditions of service to the prejudice of the STIs of Bombay without the prior approval of the Central Government under the proviso to sub section (7) of section 115 of the Act, and (2) the State Government while integrating the services could unilaterally alter the seniority list of the allocated ASTOs and place the ASTOs from Madhya Pradesh and Hyderabad in an isolated category over the STIs from Bombay while determining their inter se seniority. Allowing the appeal, ^ HELD :1 (i). The matter of equation of posts is purely an administrative function under section 115 of the States Re organisation Act, 1956. Under sub section (5) of section 115 the Central Government is the sole repository of the power to effectuate the integration of services in the new States. It has been left entirely to the Central Government as to how it has to deal with these questions. The Central Government established an Advisory Committee for purposes of assisting in proper consideration of the representations made to it for the work of integration of services, the Central Government could take all manner of assistance from the State Government including the preparation of provisional gradation lists, The Central Government exercises general control in regard to the integration of services, and the ultimate integration was done with the sanction and approval of the Central Government. The provisional gradation lists prepared by the State Government were not, therefore, open to challenge. [679 A E] Union of India and Anr. vs P.K. Roy and Ors. ; referred to. In the instant case, not only had the Central Government laid down the principles for integration but also considered the representation made and passed the final orders thereon. The provisional gradation lists were prepared by the State Government under the direction and with the sanction of the Central Government. The Assistant Sales Tax officers from the former States of Madhya Pradesh and Hyderabad allocated to the new State of Bombay, could not be equated with the Sales Tax Inspectors. In the former State of Bombay, there was no similarly constituted cadre of Assistant Sales Tax officers, but there were 668 posts of Sales Tax Inspectors. The Assistant Sales Tax officers from Madhya Pradesh and Hyderabad were superior to Sales Tax Inspectors in their respective States and the post of Assistant Sales Tax officer in these State was a promotion post. It would have been inequitable and unfair to equate Assistant Sales Tax officers from Madhya Pradesh and Hyderabad with Sales Tax Inspectors from Bombay having regard to the nature of their posts, the powers and responsibilities, and the pay scales drawn by them. In addition, Assistant Sales Tax officers in these States were assessing authorities and they enjoyed statutory powers of their own to assess tax and levy penalties, whereas the Sales Tax Inspectors in Bombay had no such powers to assess tax or levy penalty but had merely to scrutinise returns and generally act in a subordinate capacity to Sales Tax officers. [679 F 680 C] (ii) The principle adopted by the State Government for determining the relative inter se seniority was obviously wrong, being contrary to the principles settled at the Chief Secretaries Conference. The Government of India, on re presentation by the affected Assistant Sales Tax Officers from Madhya Pradesh and Hyderabad in consultation with the Central Advisory Committee, directed that the inter se seniority should be fixed taking into account continuous service in the equated grade only subject to the inter se seniority of the Officers, coming from the several integrating regions. Upon that basis, the State Government by its Resolution dated September 10, 1960 rightly modified Notes 3 and 6 of its 1957 Resolution and directed that the seniority as on November 1, 1956 of ASTOs from Madhya Pradesh and Hyderabad be fixed above the persons in the cadre of STIs and that the inter se seniority of ASTOs from Madhya Pradesh and Hyderabad be fixed on the basis of their continuous service as ASTOS in their respective States. [680 E.G] 2. There was a difference between the Departmental Examination Rules framed by the former State Governments of Bombay, Madhya Pradesh and Hyderabad regulating the appointment of STOs. In the former State of Bombay, eligibility for the promotion of STIs to the post of STO Gr. Ill depended upon their passing the departmental examination for the non gazetted staff of the Sales Tax Department under rule I (b) (ii) of the Recruitment Rules for the STOs Gr. III, i. e. it was condition precedent. In the former States of Madhya Pradesh and Hyderabad there was no such condition attached. Under the Rules for Departmental examination, the ASTOs who were promoted as STOs were required to pass the departmental examination within two or three years from the date of their promotion i.e. it was a condition subsequent. The Departmental Examination Rules framed by the former State Governments of Madhya Pradesh and Hyderabad for promotion to the post of STOs formed part of the conditions of service of ASTOs from Madhya Pradesh and Hyderabad and they could not be altered to their disadvantage without the prior approval of the Central Government under section 115 (7) of the Act. Since no examination admittedly had been held there was no question. Of their reversion as ASTOs. [685 B C; E G; 683 B F; 685F] 3(i) The Resolution dated June 13, 1964 and the Memorandum dated November 24,1964 do not have the status of a rule framed under the Proviso to Article 309 of the Constitution. They merely conveyed the decision of the State Government that the allocated ASTOs from Madhya Pradesh and Hyderabad 669 should be considered eligible for promotion to the post of STO, Gr. III without passing the departmental examination for STOs Gr. The State Government had not by its Resolution or Memorandum brought about a change in the conditions of service by an executive order. All that was done was to rectify a mistake that had been committed in the past in subjecting the ASTOs from Madhya Pradesh and Hyderabad to the Departmental Examination Rules framed by the former State Government of Bombay i.e. to a rule which did not form part of conditions of their service and, therefore, was not applicable to them. There is, therefore, no infirmity in these two documents. [681 F H] (ii) Mere chances of promotion are not conditions of service and the fact that there was reduction in the chances of promotion did not tantamount to a change in the conditions of service. A right to be considered for promotion is a term of service, but mere chances of promotions are not. [683 C] (iii) The State Government 's Resolution dated June 13, 1964 and its Memorandum of November 21, 1964 clarifying that the ASTOs from Madhya Pradesh and Hyderabad were entitled for promotion to the post of STO Gr. III without passing the departmental examination. placed STI from Bombay at a disadvantage. To ensure 'fair and equitable treatment the State Government rightly dispensed with the requirement of passing the departmental examination in the case of STIs from the former State of Bombay. The State Government acted with the best of intentions. It endeavoured to strike a balance between the competing claims to relative seniority. When sub section (5) of section 115 of the Act speaks of 'fair and equitable treatment ', it envisages a decision which is fair and equitable to all. [686 A D]

The appellant assessee was issued a notice under Section 23A of the Income tax Act, 1922. The assessee contested the same. At the same time, it set apart a sum of Rs. 6,52,000 in its books for the year ending 31st March 1956, to meet the contingency that may arise if his plea failed. During the year 1958 59 an amount of Rs. 2,02,000 out of the said amount was transferred to the profit & loss account. 'Me balance amount of Rs. 4,50,000 continued to remain and was shown as a provision set apart to meet the aforesaid contingent liability. The assessee has been contesting the said proceedings. Ultimately it succeeded before the High Court which held that no action could be taken against the assessee under Section 23A. For the assessment year 1963 64 in proceedings under the , the assessee claimed that the said sum of Rs. 4,50,000 was a reserve and should be included in its capital. The Income tax Officer did not agree. Ultimately the matter reached the Tribunal which agreed with the assessee. At the instance of Revenue the question as to whether the sum of Rs. 4,50,000 set apart for contingent liability (taxation) was to be included in the computation of capital of the assessee company under Rule 1 of the Second Schedule of the was referred to the High Court. The High Court having answered the question against the assessee, the, assessee has preferred the present appeal contending that inasmuch as no order levying additional tax under Sec. 23A was made the amount could not be treated as a provision. 109 110 Dismissing the appeals, this Court, HELD : 1.1. Provisions made against anticipated losses and contingencies are charges against profits and, therefore, to be taken into account against gross receipts in the P.&L. accounts and the balance sheet. On the other hand, reserves are appropriations of profits, the assets by which they are represented being retained to form part of the capital employed in the business. [112G] 1.2. In the instant case, the provision made by the assessee in its Books for meeting the anticipated liability of tax (under Section 23A of the Income Tax Act, 1922) was indeed a provision and not a reserve. The assessee Itself called it a provision. It did not call it a reserve nor was the amount set apart or appropriated as a reserve. It is not to suggest that the description given or the Book entries made by the assessee are conclusive, but to emphazise how the assessee understood the said item itself In the circumstances of the case the High Court was right in holding it to be a provision and not a reserve, and so the amount of Rs. 4,50,000 was not to be included in the computation of Capital of the assessee Company. [113E] Metal Box Company of India Limited vs Their Workmen, and Vazir Sultan Tobacco Co.Ltd. vs Commissioner of Income Tax, Andhra Pradesh etc. , , relied on.

At the sale held by the Official Liquidator under the orders of the Bombay High Court, the appellant a public limited company, purchased the "Hirji Textile Mills" minus its goodwill and its workmen who were discharged earlier. The appellant invested some fresh capital in the business, renovated the machinery and employed workmen on fresh contracts which included 70% of the workmen formerly working in that factory and commenced to produce certain never types of things at the factory w.e.f. November 12, 1955, after obtaining a new licence to run it. When by the end of February, 1956 the Regional Provident Fund Commissioner made certain enquiries about the working of the factory in order to enforce the provisions Provident Fund Act against the appellant, the appellant wrote to him stating that The factory was an infant factory having been established on November 12,1955 and the period of three years had not elapsed from that date within the meaning of Section 16(1) (b) of the Act. When the Regional Provident Fund Commissioner was not convinced about its explanation, the appellant first filed a writ petition under Article 226 of the Constitution before High Court of Bombay in Miscellaneous Application No. 76 of 1957 challenging the applicability of the Act to the factory and after withdrawing it, filed Short Cause Suit No. 2088 of 1958 before the City Civil Court at Bombay for a declaration that the Act and the scheme framed thereunder could not be enforced against the factory until the expiry of three years from November 12, 1955 and that the appellant was not liable to make any contributions under the Act. The trial Court dismissed the suit holding, that in view of the several facts established in the case it could not be presumed that a new factory was established by the 517 appellant on November 12, 1955, that the continuity of the old factory had A not been broken and as such the appellant was liable to make contributions under the Act. The judgment of the trial Court was affirmed by the Bombay High Court in Appeal No.406/64. Hence the appeal by special leave. Dismissing the appeal, the Court, ^ HELD: 1.1. Every statute should be construed so as to advance the object with which it is passed and as far as possible, avoiding any construction which would facilitate evasion of the Act. [521 C] 1.2. In consonance with the directions enshrined in Article 43 of the Constitution, Employees ' Provident Fund Scheme is intended to encourage the habit of thrift amongst the employees and to make available to them either at the time of their retirement or earlier, if necessary, substantial amounts for their use from out of the provident fund amount standing to their credit which is made up of the contributions made by the employers as well as the employees concerned. The Act being a beneficent statue and section 16 of the Act being a clause granting exemption to the employer from the liability to make contributions, section 16 should receive a strict construction [521A B, 522A] 2.1. The criterion for earning exemption under section 16(1)(b) of the Act is that a period of three years has not yet elapsed from the date of establishment of the factory in question. It has no reference to the date on which the employer who is liable to make contributions acquired title to the factory which once established may be interrupted on account of factory holidays, strikes, lock outs, temporary breakdown of machinery, periodic repairs to be effected to the machinery in the factory, non availability of raw materials, paucity of finance etc., and also on account of an order of court as in the present case. Interruptions in the running of factory which is governed by the Act brought about by any of these reasons without more cannot be construed as resulting in the factory ceasing to the factory governed by the Act and on its restarting it cannot be said that a new factory is or has been established. On the resumption of the manufacturing work in the factory it would continue to be governed by the Act which does not state that any kind of stoppage in the working of the factory would give rise to a fresh period of exemption. In other words the period of three years should be counted from the date on which the factory was first established and the fact that there had been a change in the owners p makes no difference to the counting of period. [522A D, 524D E] Lakshmi Rattan Engineering Work vs Regional Provident Fund Commissioner, Punjab & Ors. SC, reiterated. Chaganlal Textile Mills Pvt. Ltd. Y.P.A. Bhaskar Misc. Appln. No. 289 of 1956 disposed of on November 5, 1956: M/s. Bharat Board Mills Ltd. vs The Regional Provident Fund Commissioner & Ors. Vegetable Products Ltd. vs Regional Provident Fund Commissioner W. Bengal & Ors. ; Jamnadas Agarwala & Anr. vs The Regional Provident Fund Commissioner West Bengal & Ors. ; 518 Robindra Textile Mills vs Secretary Ministry of Labour Govt. of India New Delhi & Anr A.I.R. 1936 Punjab 55. Hindustan Electric Co. Ltd. vs Regional Provident Fund Commissioner Punjub & Anr. A I.R 1959 Punjab 27 Regional Provident Fund Commissioner Punjab & Anr. v Lakshmi Rattan Engineering Works Ltd M/s. R.L. Sahni & Co vs Union of India represented by the Regional Provident Commissioner Madras & Anr. A.l.R. ; Kunnath Textile vs Regional Provident Fund Commisioner ; The New Ahmedabad v Bansidar Mills Pvt Ltd. Ahmedabad vs Union of India & Ors. A I R. 1968 Gujarat 71; approved. Provident Fund Inspector Trivendrum vs Secretary N.S. section Co operative Society Changanacherry ; Vithaldas Jagnnathdas & Anr. vs The Regional Provident Fund Commissioner Madras & Anr. ; distinguished.

Appeal No. 270 of 1959. Appeal by special leave from the judgment and order dated December 23, 1957, of the Allahabad High Court (Lucknow Bench) at Lucknow in Civil Miscellaneous Application (0. J.) No. 86 of 1954. C. B. Aggarwala, G. C. Mathur and C. P. Lal, for the appellants. Achhru Ram, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the respondent. November, 25. The Judgment of Sarkar, Subba Rao and Mudholkar, JJ., was delivered by Subba Rao, J., and that of Gajendragadkar and Wanchoo, JJ., was delivered by Wanchoo, J. SUBBA RAO, J. This is an appeal by special leave against the judgment and order of the High Court of Judicature at Allahabad, Lucknow Bench, allowing the petition filed by the respondent under article 226 of the Constitution. The facts are in a small compass and may be briefly stated. In the year 1933 the respondent was appointed a constable in U. P. Police Force; on December 1, 1945, he was promoted to the rank of head constable and in May, 1952 he was posted as officer incharge of Police Station, Intiathok, District Gonda. Complaints were received by the District Magistrate, Gonda, to the effect that the respondent was receiving bribes in the discharge of his duties. On September 16, 1952, the District Magistrate, Gonda, directed the Sub Divisional Magistrate to make an enquiry in respect of the 674 said complaints. On November 3,1952, the Sub Divisional Magistrate, after making the necessary enquiries, submitted a report to the District Magistrate recommending the transfer of the respondent to some other station. On November 17, 1952, the District Magistrate sent an endorsement to the Superintendent of Police to the effect that the Sub Divisional Magistrate had found substantial complaints against the integrity of the respondent, that he had also received such complaints and that his general reputation for integrity was not good, but that his transfer should, however, come after sometime and that in the meantime his work might be closely watched. On being called upon by the Superintendent of Police to submit an explanation for his conduct, the respondent submitted his explanation on November 29, 1952. On December 17, 1952, the respondent was forced to go on leave for two months. Before the expiry of his leave, he was reverted to his substantive post of head constable and transferred to Sitapur. On February 17, 1953, he was promoted to the rank of officiating Sub Inspector and posted as Station Officer at Sidholi. On February 27, 1953, the Superintendent of Police made the following endorsement in his character roll: "A strong officer with plenty of push in him and met with a strong opposition in this new charge. Crime control was very good but complaints of corruption were received which could not be substantiated. Integrity certified. " Meanwhile on further complaints, the C.I.D. probed the matter further and on July 26, 1953, the Superintendent of Police, Investigation Branch, C.I.D., reported that the respondent was a habitual bribetaker. On July 28, 1953, he was placed under suspension and on August 18, 1953, he was charged under section 7 of the Police Act with remissness in the discharge of his duty and unfitness for the same inasmuch as while posted as a Station Officer, Police Station, Intiathok, he had been guilty of dishonesty, corruption and misbehaviour in that he had on nine occasions, particulars of which were given in the charge, accepted bribes. it may be mentioned that the magisterial inquiry 675 related to seven of the nine charges alleged against the respondent. The trial was conducted by the, Superintendent of Police and the respondent submitted his explanation on September 12, 1953. The Superintendent of Police, who conducted the trial, examined many witnesses and found that seven out of the nine charges had been established. Thereafter he issued a notice to the respondent calling upon him to show cause why he should not be dismissed from the police force. On February 20, 1954, the respondent sub mitted his explanation and the Superintendent of Police, by his order dated February 22, 1954, dismissed the respondent from service with effect from the said date. The appeal preferred by the respondent to the Deputy Inspector General of Police was dismissed by his order dated June 2, 1954. Thereafter the respondent on August 5, 1954, filed a petition under article 226 of the Constitution before the High Court of Judicature at Allahabad, Lucknow Bench, for quashing the order of dismissal. Before the High Court three points were raised, namely, (1) as the petitioner was officiating. as Sub Inspector of Police at the time of the departmental trial the Suprintendent of Police had no power to dismiss him, since an order in such circumstances could only be made by a police officer senior in rank to a Superintendent; (2) the trial was vitiated by a number of serious irregularities; and (3) the specific acts with which the petitioner was charged were cognizable offences and, therefore, the Superintendent of Police had no jurisdiction to proceed with a departmental trial without complying with the provisions of subparagraph (1) of para. 486 of the Police Regulations. The learned Judges of the High Court held that the respondent was charged with committing cognizable offences and therefore sub paragraph (1) of para. 486 governed the situation and that, as no case, as required by the said sub paragraph, was registered against the respondent in the police station, the order of dismissal was invalid. They further held that the case was not covered by the first proviso to sub paragraph (1) of para. 486, as, in their opinion, the information 676 about the commission of the offences was not in the first instance received by the Magistrate and forwarded to the police for inquiry. In view of that finding they found it unnecessary for them to express any opinion upon other arguments which had been advanced on behalf of the respondent. In the result they issued a writ in the nature of certiorari quashing the impugned orders. Hence the appeal. Mr. C. B. Agarwala, learned counsel appearing for the appellants, raised before us the following points: (1) The Governor exercised his pleasure through the Superintendent of Police, and, as the Police Regulations were only administrative directions, the non compliance therewith would not in any way affect the validity of the order of dismissal. (2) If the order of dismissal was held to have been made under the statutory power conferred upon the Superintendent of Police, the regulations providing for investigation in the first place under chapter XIV of the Criminal Procedure Code were only directory in nature, and inasmuch as no prejudice was caused to the respondent the non compliance with the said regulations would not affect the validity of the order of dismissal. (3) The Superintendent of Police was authorized to follow the alternative procedure prescribed by subparagraph (3) of para. 486 and, therefore, the inquiry held without following the procedure prescribed by rule I was not bad. (4) As the magisterial inquiry was held in regard to practically all the charges, the subject matter of the departmental trial, the case is not covered by the provisions of para. 486 of the Police Regulations. In the case of The State of U. P. vs Babu Ram Upadhya (1) in which we have just delivered the judgment, we have considered the first three point; and for the reasons mentioned therein we reject the first three contentions. The appellants must succeed on the fourth contention. From the facts already narrated, the conduct of the respondent, when he was officer incharge of the Police Station, Intiathok, was the subject matter of (1) Civil Appeal No. 119 of 1950; ; 677 magisterial inquiry. The Sub Divisional Magistrate made inquiry in respect of seven of the charges which were the subject matter of the departmental trial and. submitted a report to the District Magistrate. The District Magistrate, in his turn, made an endorsement on the report and communicated the same to the Superintendent of Police recommending the transfer of the respondent and suggesting that in the meanwhile the work of the respondent might be closely watched. Though the Superintendent of Police gave at first a good certificate to the respondent, in respect of the same a further probe was made through the C.I.D. Thereafter the Superintendent of Police conducted a departmental trial in respect of the aforesaid seven charges and two other new charges of the same nature. The inquiry ended in the dismissal of the respondent. In the circumstances it would be hypertechnical to hold that there was no magisterial inquiry in respect of the matter which was the subject matter of the departmental trial. On the said facts we hold that the departmental inquiry was only a further step in respect of the misconduct of the respondent in regard whereto the magisterial inquiry was held at an earlier stage. If so, the question is whether para. 486 would govern the present inquiry or it would fall out side its scope. The relevant provisions of the Police Regulations read: Paragraph 486: "When the offence alleged against a police officer amounts to an offence only under s: 7 of the Police Act, there can be no magisterial inquiry under the Criminal Procedure Code. In such cases, and in other cases until and unless a magisterial inquiry is ordered, inquiry will be made under the direction of the Superintendent of Police in accordance with the following rules;" Paragraph 489: "A police officer may be departmentally tried under section 7 of the Police Act (1) after he has been tried judicially; (2) after a magisterial inquiry under the Criminal Procedure Code; 86 678 (3) after a police investigation under the Criminal Procedure Code or a departmental enquiry under paragraph 486 III above." A combined reading of these provisions indicates that para. 86 does not apply to a case where a magisterial inquiry is ordered; and that a police officer can be departmentally tried under section 7 of the Police Act after such a magisterial inquiry. In this case the departmental trial was held subsequent to the completion of the magisterial inquiry and therefore it falls within the express terms of para. 489(2). The fact that in the interregnum the police received further complaints or that the C.I.D. made further enquiries do not affect the question, if substantially the subject matter of the magisterial inquiry and the departmental trial is the same. In this case we have held that it was substantially the same and therefore the departmental trial was validly held. We, therefore, set aside the order made by the High Court. As we have pointed out earlier, the High Court, in the view taken by it, did not express its opinion on the other questions raised and argued before it. In the circumstances, we remand the matter to the High Court for disposal in accordance with law. The costs of this appeal will abide the result. WANCHOO, J. We have read the judgment just delivered by our learned brother Subba Rao J. We agree with the order proposed by him. Our reasons for coming to this conclusion are, however, the same which we have given in C.A. 119 of 1959, The State of Uttar Pradesh vs Babu Ram Upadhya. Appeal allowed. Case remanded.

The respondent was posted as officer incharge of a police station when complaints were received by the District Magis trate that the respondent was receiving bribes. The District Magistrate got an enquiry made by the Sub Divisional Magistrate and forwarded the report toghether with his own endorsement to the Superintendent of Police. The respondent was forced to go on 2 months leave and was reverted to his substantive post of Head Constable, but later he was promoted to the rank of officiating Sub Inspector and posted at another police station. Meanwhile on further complaints an investigation was made and it was reported that the respondent was a habitual bribe taker. He was charged under section 7 Police Act for 9 charges of bribery and after departmental trial was dismissed by the Superintendent of Police. He filed a Writ Petition before the High court challenging the order of dismissal inter alia on the ground that the offences charged being cognizable offences the Superintendent of Police had no jurisdiction to hold the departmental trial without first complying with the provisions of para. 486(1) of the U. P. Police Regulations. The High Court accepted this contention and quashed the order of dismissal. 673 Held (per Sarkar, Subba Rao and Mudholkar, JJ.) that the subject matter of the magisterial enquiry and of the depart mental trial was substantially the same and that the depart 'I mental trial was validly held. The fact that there was an interregnum between the magisterial enquiry and the departmental trial did not affect the question. Paragraph 486 did not apply to a case where a magisterial enquiry was ordered and a police officer could be departmentally tried under section 7 Police Act after such magisterial enquiry. Per Gajendragadkar and Wanchoo, JJ. The provisions of para. 486 were merely directory and even if there was non compliance therewith the order of dismissal was not invalidated.

The appellants obtained a decree against the respondent in the court of Sub Judge, Bankura (West Bengal) on December 3, 1949. On March 28, 1950 they applied to the court which passed the decree to transfer the decree with a certificate of non satisfaction of the court at Morgan in the then State of Madhya Bharat. It was ordered accordingly. The Judgment debtors resisted the execute on the ground that the court had no jurisdiction to execute the same as the decree was that of a foreign court and that the same had been passed ex parte. The court accepted that contention and dismissed the execution petition on December 29, 1950. On April , 1951 the Code of Civil Procedure (Amendment) Act 2 of 1951 came into force. By this Act the Code was extended to the former State of Madhya Bharat as well as various other places. Meanwhile the appellants appealed against the order of the Additional District Judge Morena dismissing the execution petition to the High Court of Madhya pradesh. The appeal was allowed. In further appeal this Court 'restored the order of the Addl. District Judge, Morena. Thereafter on February 15, 1963 the appellants filed another execution case before the Bankura Court praying for the transfer of the decree to the Molrena Court for execution. The Bankura Court again ordered the transfer of the decree of the Morena Court. The judgment debtors resisted execute on the flowing grounds : (1) that it was barred by yes judicature in view of the aforesaid decision of this Court; (2) that it was barred by section 48 of the Code of Civil Procedure; (3) that it was barred by limitation and (4) that it was not executable because it was the decree of a foreign court. The Addl. District Judge rejected the objections. The High Court in appeal agreed with the executing court that the execution petition was neiber barred by resjudicata nor was there any bar of limitation but it disagreed with that court and held that the decree was not executable as the court which passed the decree was a foreign court. The decree holders filed the present appeal by special leave. The questions which fell for consideration were : (i) whether the decree under execution was not executable by courts situate in the area comprised in the former State of Madhya Bharat; (ii) whether the decree was barred by section 48 of the Code. HELD:Per Sikri C.J., Mitter, Hyde and Bhargava JJ. (1) (a) On the date when the decree under execution was passed foreign court ' was 8 1 100 SupCII71 816 defined in section 2(5) of the Code as a court situate beyond the limits of British India which had no authority in British India and was not established or continued by the Central Government. After the amendment of the Code of Civil Procedure in 1951. 'foreign court ' under the Code means a court situate outside India and not established or continued by the authority of the Central Government. Whether we take the earlier definition or the present definition the Bankura Court could not be considered as a foreign court within the meaning of that expression in the Code. 'Foreign judgment ' is defined as the 'judgment of a foreign court '. Hence the decree under execution could not be considered as a foreign decree for the purpose of the Code. [820 D G] Accordingly the judgment debtors could not take advantage of the provision in section 13(b) of the Code under which the ex parte decree of a foreign court is not conclusive. Nor could they take advantage of section 13(d). They were served with notice of suit but did not choose to appear before the court. Hence, there was Po basis for the contention that any principle of natural justice has been contravened. Further section 13(d) was not applicable because the judgment in question was not a foreign judgment. [821 D] (b) Under Private International Law a decree passed by a foreign court to whose juri diction a judgment debtor had not submitted is an absolute nullity only if the local legislature had not conferred jurisdiction on the domestic courts over the foreigners either generally or in specified circumstances. Clause (c) of section 20 of the Code provides that subject to the limitations mentioned in the earlier sections of the Code a suit can be instituted in a court within the local limits of whose jurisdiction the cause of action wholly or in part, arises. This provision confers jurisdiction on a court in India over foreigners when the cause of action arises within its jurisdiction. There was not dispute in the present case that the cause of action for the suit which led up to the decree under execution arose within the jurisdict on of the Bankura Court. Hence, it must be held that the suit in question was properly instituted. Accordingly the decree in question was a valid decree though it might not have been executable at one stage in courts in the former Indian States [822 B F] Sardar Gurdyal Singh vs The Rajah of Faridkot, 21 I.A. 171, referred to. (c) A combined reading of sections 2(12), 38, 39 and 40 of the Code shows that a decree can be transferred for execution only to a court to which the Code apple . This is what was ruled by this Court in Hansraj Nathu Ram 's case. But by the date the transfer in the present case was made, the Code had been extended to the whole of India. It followed that the transfer of the decree in question which was not a foreign decree, to the Morena Court, was in accordance with the provisions of the Code. [823 B D] Hansraj Nathu Ram vs Lalii Raja & Sons of Bankura, , applied. Narsingh Rao Shitole vs Shri Shankar Saran & Ors., ; , distinguished. (d) Section 20(1)(b) of the Code of Civil Procedure Amendment Act, 1951 by which the Code was extended to Madhya Bharat and other areas undoubtedly protects the right acquired and privileges accrued under the law repealed by the amending Act. But even by straining the language of the provision it cannot be said that the non executabilitv of the decree within a particular territory can be considered a privilege [824 E F] 817 Nor is it a 'right accrued ' within the meaning of section 20(1) (b) of the Code of Civil Procedure (Amendment) Act, 1950. In the first peace in order to get the benefit of this provision the non executability of the decree must be a right, and secondly it must be a right that had accrued from the provisions of the repealed law. It Was difficult to consider the non executability of the decree in Madhya Bharat as a vested right of the judgment debtors. The non executability in question pertained to the jurisdiction of certain courts and not to the "rights of the judgment debtors. Further the relevant provision of the Code of Civil Proedue in force in Madhya Bharat did not confer the, right claimed by the judgment debtors. All that had happened in view of the extension of +he Code to the whole of India in 1951 was that the decrees which could have been executed only by courts in British India were made ' executable in the whole of India. The change made was one relating to procedure and jury diction. By the extension of the Code to Madhya Bharat, want of jurisdiction on the part of the Morena Court was remedied and that court was now competent to execute the decree [825 A E] Hamilton Gell vs White , Abbot vs Minister for Lands, and G. Ogden Industries Pvt. Ltd. vs Lucas, , applied. (ii)The execution was also not barred, by section 48 of the Cod . For considering the true impact of cl. (b) of sub section 2 of section 48 of the Code provisions of articles 181 and 182 of the Limitation Act, 1908 have also to be taken into consideration. These provisions clearly go to indicate that the period prescribed under section 48(1) of the Code is a period of limitation. This interpretation is strengthened by the subsequent history of the legislation. By the section 48 of the Code is deleted. It , place has not been taken by article 136 of the Limtation Act of 1963 The High Courts also are now unanimous that section 48 of tile (ode is controlled by the provisions of the Limitation Act, 1908. [828 A C] Kandaswami Pillai vs Kamappa Chetty, A I R, , Durg vs Poncham, I.L.R. [1939] All. 647, Sitaram vs Chunnilalsa, I.L.R. , Amarendra vs Manindra, A.I.R. '1955 Cal. 269, Krishna Chandra v Parovatamma, A.I.R. 1953 Orissa 13 and Ramgopal vs Sidram, A.I.R. 1943 Bom. 164 referred to. Per Jaganmohan Reddy, J. (Concurring) No question of 'a vested right or privilege arose to entitle the respondent to challenge execution proceedings in Morena Court. The decree granted by the Bankura Court was executable by the Courts governed by the same Code, by talk Court which passed it or by the Court to which it was transferred. One the Code was made applicable to the whole of India by Amendment Act 11 of 1951 the decree was no longer a foreign decree qua the Morena Court which was a court under the Code to which the Bankura Court could transfer the decree for execution. No doubt in ' Shitole 's case it was observed that section 13 of the Code creates substantive rights and not merely procedural and therefore defenses that were open to the resno dents were not taken away by any constitutional changes, but the ratio of the decision was that the Gwalior Court not being a court that passed the decree after the coming into force of Act 11 of 1951 the Allahabad Court could not execute it. The impediment did not exist now in that the Bankura Court bad transferred the decree to a court under the Code. the plea that section 48 Civil Procedure Code presents a bar of limitation was also not tenable. [831 F H] 818 Kishendas vs Indo Carnatic Bank Ltd. A.I.R. 1958 A.P. 407 Sardar Gurdayal Singh V. Raja of Firidkote, 21 I.A. 171, Rai Rajendra Sardar Maloji Narsingh Rao Shirole vs Shri Shankar Saran, ; and Hansaj Nathuram Y. Lalji Raja

The appellant was appointed as a non official member of the State Sales Tax Appellate Tribunal for a period of two years from 17.7.1958, under sub section(2) of Section 4 of the Mysore Sales Tax Act, 1957. The appointment was extended from time to time and continued upto 8.2.1972. By a letter dated 8.2.1972, the respondent intimated the appellant that he had been granted 52 days Earned Leave as terminal leave from 9th February, 1972. The appellant represented for grant of superannuation pension. This was rejected by the Govern ment on the ground that he was not eligible for pension. The appellant 's writ petition was dismissed by a single Judge of the High Court who held that rule 64 of the Karna taka Sales Tax Rules, 1957 was applicable to him, and that he was not eligible to claim superannuation pension. This was upheld by the Division Bench. In the appeal before this Court, on behalf of the appellant it was contended that as a non official member of the Tribunal, he was a government servant, and as such, like other Government servants, he was entitled to grant of pension in accordance with Mysore Civil Service Rules, that he was retired from service after reaching the age of super annuation, that his appointment was not a contract appoint ment, that he was paid traveling allowance under the Mysore Civil Service Rules, and that Rule 64(6) of Mysore Sales Tax Rules inserted in 1964, and substituted in 1971, not being in existence at the time of his appointment, could not be made applicable to him as to deprive him of the benefit of superannuation pension as provided in the Mysore Civil Service Rules. 208 Dismissing the appeal, this Court, HELD: 1. The terms and conditions of service of the appellant who was appointed as a non official member in the Karnataka Sales Tax Appellate Tribunal under sub section (2) of Section 4 of Karnataka Sales Tax Act, 1957 and was given last extension of the period of service under clause (b) of sub rule (1) of Rule 64 of the Mysore Sales Tax Rules, 1957, will be governed by the Mysore Sales Tax Rules and not by the provisions of Mysore Civil Services Rules. Since sub rule (6) of rule 64 of Mysore Sales Tax Rules was substitut ed in place of original subrule (6) before the appellant retired from service on expiry of his period of service, this rule applies to him, and he is not entitled to get any superannuation pension. [211D E; G] 2.1 Sub rule (2) of Rule 2 of Mysore Civil Service Rules 1957, clearly says that in cases where special provisions have been made by or under any law for the time being in force, the Mysore Service Rules do not apply. Furthermore, Rule 283 of the said Rules states that a superannuation pension is granted to a Government Servant who is compelled by Rule to retire at a particular age. Rule 95 provides that the date of compulsory retirement of a Government servant is the date on which he attains the age of 55 years, and the Government servant may be retained upto 60 years of age with the sanction of Government, but not after the age of 60 years. [212C; E F] 2.2 Rule 64(6).of the Mysore Sales Tax Rules, 1957 clearly says that the non official member of the Sales Tax Tribunal will become ineligible for any pension. Hence,provisions relating to pension as provided in Mysore Civil Service Rules, 1957 will not apply to a non official member. [212D E] 2.3 In the instant case, the appellant was appointed as a member of the Tribunal for a period of two years initial ly, and thereafter his tenure was extended periodically and he left the service as non official member of the Tribunal after he crossed the age of 61 years. There was no specific order that the appellant was due to retire at the age of 55 years. There is no rule for a non official member to retire at a particular age. Moreover, the Government sanctioned certain terms and conditions of his appointment. It is periodical and not upto a maximum age, nor it is a whole time service but a part time one and the appellant was permitted to take up audit of any person, firm, institution etc. on certain restrictions. A Government servant has to render whole time service. Therefore, the Mysore Civil Service Rules, 1957 do not apply to the 209 appellant, and he is not eligible for superannuation pen sion. [212F G; 213C D]

The appellant, an officer of the Forest Department challenged the provisional integrated gradation list of Forest Officers of the former Andhra and Hyderabad States published under the provisions of the States Reorganisation Act, 1947, in his writ petition, contending that (a) the inter se seniority between the appellant and the 6th respondent, both of whom originally belonged to the Andhra Cadre, had been wrongly fixed by showing the 6th respondent as senior to the appellant whereas the appellant was legally entitled to seniority over the 6th respondent, and (b) that respondent nos. 3, 4, 5, 7 and 8 officers allotted to the State of Andhra Pradesh from the Telengana region of the former Hyderabad State, had been erroneously assigned ranks above the appellant in violation of the principles laid down by the Government of India for equation of posts and fixation of inter se seniority. During the pendency of the writ petition the Central Government set right the appellant 's grievance concerning his ranking and seniority in relation to respondents 3, 4, 5, 7 and 8. When the writ petition came up for hearing the appellant pressed only his claim for seniority over the 6th respondent and as the contention was well founded, the learned Single Judge, allowed the writ petition and issued a writ of mandamus directing the Government of India to modify the gradation list by showing the appellant as senior to the 6th respondent. In the appeal to the Division Bench by the 6th respondent, the Division Bench took the view that since the prayer contained in the writ the petition was for the issue of a writ of mandamus directing respondents nos. 1 and 2 to forbear from implementing the provisional gradation list published alongwith the Government Order dated January 27, 1962 and as the appellant had not pressed the prayer for quashing of the list in so far as it related to the officers of Telengana region viz. respondents 3, 4, 5, 7 and 8, the writ petition should have been dismissed on that short ground and the question relating to the inter se seniority between the appellant and the 6th respondent ought not to have been decided. The Division Bench allowed the writ appeal, set aside the order passed by the single Judge and dismissed the writ petition. Allowing the appeal to this Court, 160 ^ HELD: In an action where a party has prayed for a larger relief it is always open to the Court to grant him any smaller relief that he may be found to be entitled to in law and thereby render substantial justice. The Court can take note of changed circumstances and suitably mould the relief to be granted to the party concerned in order to mete out justice. As far as possible the anxiety and endeavour of the Court should be to remedy an in justice when it is brought to its notice rather than deny relief to an aggrieved party on purely technical and narrow procedural grounds. [162 G 163 A] In the instant case the writ petition contained the prayer for the quashing of the gradation list in so far as it related to the inter se ranking of the appellant vis a vis respondents nos. 3 to 8 and the appellant had also sought the issuance of a writ of mandamus directing respondents nos. 1 and 2 to forbear from implementing or acting upon the said gradation list. Subsequent to the institution of the writ petition the Central Government had refixed the ranks of respondents nos. 3, 4, 5, 7 and 8 and placed them below the appellant thereby redressing the grievance of the appellant in so far as it pertained to the ranking of the said respondents. It, therefore, became unnecessary for the appellant to pursue his claim for relief with respect to the ranks assigned to those five respondents. It was under those circumstances that the appellant submitted before the single Judge at the time of final hearing of the writ petition that he was pressing the writ petition only in so far as it related to his claim for seniority over the 6th respondent. This will not operate to preclude him from seeking a lesser relief namely the quashing of the list only in so far as it pertains to the fixation of the inter se seniority between himself and the 6th respondent. [162 B F]

The Appellant was a tenant of the Respondent. The Respondent was in Central Government service and was allotted Government residential accommodation. By a general order, the Government directed that all Government servants who had their own dwelling houses at the place of posting should vacate the Government accommodation allotted to them or in default to pay market rent in respect thereof. The Respondent therefore vacated tho Government accommodation allotted to him and resided in another premise belonging to him which was adjoining the premises let out to the Appellant. The Respondent later filed an application under section 25B of the Delhi Rent Control Act, 1958 on the ground specified in section 14A(1) thereof for possession of the premises occupied by the Appellant which was contested. The Rent Controller after considering the accommodation in the respective occupation of the parties held that it could not be said that the premises occupied by the Respondent constituted reasonably suitable residential accommodation. He further held, that section 14A(1) of the Act did not contain a condition that the Government servant who made an application under section 14A(1) should not be in possession of reasonably suitable alternative accommodation as was the case under clause (e) of the proviso to sub section (1) of section 14, and that even if such a factor were to be taken into consideration it could not be said that the Respondent was in occupation of reasonably suitable alternative accommodation. The Rent Controller therefore passed an order of eviction against the Appellant and directed it not to be executed for a period of two months. This order was confirmed by the High Court in the revision petition filed by the Appellant under section 25B(8). In tho Appeal to this Court tho maintainability of the eviction petition was impugned on behalf of the Appellant on two ground : (1) the Respon 1026 dent was not in occupation of the government accommodation allotted to him on the date when be filed his application, and (2) on the date when he filed his application, the Respondent was already residing in premises belonging to him. Allowing the Appeal, ^ HELD: A. (1) It is not necessary that a person in occupation of residential premises allotted to him by the Central Government or a local authority who is required by or in pursuance of a general or special order made by that Government or authority to vacate such accommodation or, in default, to incur certain obligations, such as payment of market rent, on the ground that he owns in the Union Territory of Delhi a residential accommodation either in his own name or in the name of his wife or dependent child should be in occupation of the accommodation allotted to him on the date when he files an eviction application under section 14A(1) of the Delhi Rent Control Act, 1958 to recover possession of the residential premises which he so owns and which has been let by him. [1038 G H, 1039 A] (2) If such person has, however, other premises which he owns either in his own name or in the name of his wife or dependent child which are available to him for his residential accommodation or into which he has already moved, he cannot maintain an application under section 14A(1) of the Act. [1039 B] (3) Even if the other premises owned by him their in his own name or in the name of his wife or dependent child are reasonably suitable for his accommodation he cannot maintain an application under section 14A(1) but must file an application on the ground specified in clause (e) of the proviso to sub section (1) of section 14 of the Act. [1039 C] B. (1) Though the Statement of Objects and Reasons accompanying a legislative Bill cannot be used to determine the true meaning and effect of the substantive provisions of a statute, it is permissible to refer to the Statement of Objects and Reasons accompanying a Bill for the purpose of understanding the background, the antecedent state of affairs, the surrounding circumstances in relation to the statute, and the evil which the statute sought to remedy. [1033 H; 1034 A] (2) The object underlying section 14A introduced by the Delhi Rent Control (Amendment) Act 1976 is that a person who is compelled to vacate residential accommodation allotted to him on the ground that he owns other residential premises in the Union Territory of Delhi either in his own name or in the name of his wife or dependent child should not be left without a roof over his head or should not be made to incur heavy financial obligation by continuing to reside in the accommodation allotted to him by paying market rent in respect thereof to the Central Government or the local authority, as the case may be. [1035 C D] In the instant case, the Rent Controller was in error in considering the respective needs of the parties and the suitability of accommodation 1027 occupied by the Respondent. The order of the High Court dismissing the revision petition is reversed and the eviction suit filed by respondent in the Court of the Rent Controller is dismissed.

The appellant was at the relevant dates posted as Subordinate Judge at Masulipatam and Amalapuram. Charges were made against him of bribery and serious irregularities in the discharge of official duties, and they were enquired into by one of the judges of the Madras High Court who sent his reports on August 2o, ,953, and November Io, 953. On the basis of the reports the High Court decided on January 25, 1954, that the appellant should be dismissed from service on the charge of bribery and removed from service on the charge of irregularities, and on January 28, 1954, placed him on suspension until further orders. The appellant moved the High Court under article 226 of the Con stitution of India for quashing the order of suspension on the ground (1) that under r. 4(I)(a) of the Andhra Civil Services (Disciplinary Proceedings Tribunal) Rules, 1953, an enquiry into the 415 conduct of a Government servant drawing a monthly salary of Rs. 15o and above could be made only by a Tribunal to be appointed by the Government, and that as the rule came into, effect from October 1, 1953, the order of the Madras High Court dated January 28, 1954, was without jurisdiction, and (2) that the order was repugnant to article 31I of the Constitution of India. The High Court dismissed the application and on appeal against the judgment. Held:(1) that in view of the amendment of r. 4 Of the Andhra Civil Services (Disciplinary Proceedings Tribunal) Rules, 1953, on April II, 955, excluding, with retrospective effect, the jurisdiction of the Tribunal in respect of enquiries into the conduct of the judicial officers, the order of the Madras High Court dated January 28, 1954, was not open to attack. (2)that an order of suspension pending final orders is neither one of dismissal nor of removal of service within article 311 of the Constitution. (3)that under r. 13 of the Madras Civil Services (Classification, Control and Appeal) Rules, the High Court had the power to impose suspension pending enquiry into grave charges under r. 17(e) against the Members of the State judicial Service.

The appellant was appointed on probation as the Principal of the Model Inter College, Thora on August, 28, 1967. His period of probation was extended by one year and thereafter by a letter dated June 30, 1969 addressed to him with a copy of a resolution dated 27th April, 1969 passed by the Managing Committee wherein various allegations were made regarding his conduct, his services were terminated by the respondent. Aggrieved by the said orders of termination of his services, the appellant filed a writ petition No. 4823 of 1970 on the file of the High Court of Allahabad. The said writ petition was allowed on January 23, 1973 and the order of termination was quashed. However, the special Appeal No. 31 of 1973 filed by Respondent was accepted and allowed by the Division Bench. Hence the appeal by special leave of the Court. Allowing the appeal, the Court, ^ HELD: 1. Section 16 of the Uttar Pradesh Intermediate Education Act, (Act II of 1921) provides that every person employed in a recognised institution shall be governed by such conditions of service as may be prescribed by Regulations and that the Regulations inter alia may be made in respect of the period of probation, the conditions of confirmation and the procedure for the imposition of punishment Regulations 35 to 38 relate to the procedure to be followed before imposing the punishment of dismissal or removal from service and they being virtually the same as provided by Article 311(2) of the Constitution, the principles which should govern this instant case should therefore be the same as those underlying Article 311(2). Admittedly here no enquiry was held as provided for in Regulation 35 and 36. Therefore the non compliance with the 753 provisions of Section 16 of the Act and Regulations 35 to 38 vitiates the termination order. [747F G; 759G; 760E] Parshotam Lal Dhingra vs Union of India [1958] S.C.R. 828; Shamsher Singh and Anr vs State of Punjab. ; ; Anoop Jaiswal vs Government of India and Anr. ; ; referred to. If the order of termination carried a stigma it has to fall to the ground unless it is preceded by an enquiry as contemplated by law. A reading of the letter of termination of the service and the resolution which forms part of that letter clearly shows that they bear a mark of disgrace and infamy and the appellant is visited with evil consequences. The order of the Division Bench is therefore unsustainable. [762D E]. [The Court declared that the appellant continues to be in the service of the College with entitlement to all consequential benefits including the salary and allowances as if there was no break in his service.] [762G]

In response to a show cause notice dated March 15, 1957, under section 28(1)(c) of the Income Tax Act, before imposing a penalty for deliberate concealment of its income, the appellant, through its authorised representative, voluntarily agreed to a slum of Rs. 15,000/ being treated as income of Hindu Undivided Family. The Income Tax officer, by his order dated March 20,1958, added a sum of Rs. 68,550/ to the income of the appellant and imposed on it a penalty of Rs. 26,000/ which on appeal was reduced to Rs. 15,000/ . Meanwhile, on March 19, 1957, the appellant filed an application under section 25A of the Act for an order recording partition of joint family property in definite portions from June 22, 1956, claiming that date to be the date of partition. The Income Tax officer, after due enquiries, accepted the disruption of the Hindu Undivided Family as claimed by his order dated March 26, 1962. This led the appellant to contend that, in view of ' the orders dated March 26, 1962, of the Income Tax officer, the imposition of the penalty by him on March 20, 1958 was bad in law and could not be sustained. The Tribunal uphold the contentions of the appellant resulting in a reference under section 66(1) of the Act to the High Court of Allahabad (Lucknow Bench), which reversed the decision or the Tribunal. However, the High Court granted a certificate of fitness for appeal to this Court. Dismissing the appeals the Court, ^ HELD: Sub section (3) of section 25A of the Income Tax Act embodies a legal fiction according to which a Hindu family which has been previously assessed as "undivided" is to be continued to be treated as "undivided" till the passing of the order under sub section (1) of section 25A. So long as no order under section 25(A)(1) 1 of the Act is recorded, the jurisdiction of the Income Tax officer to continue to assess as undivided despite a partition under personal law, a Hindu family which has hitherto been assessed in that status, remain unaffected. [508G H] Additional Income Tax Officer, Quddapah vs A. Thimmayya vs Commissioner of Income Tax, Gujrat , applied. Commissioner of Income Tax vs Sanchar Sah Bhim Sah section A. Raju Chattiar & Ors. vs Collector of Madras & Anr. ; Mahankali Subba Rao Mahankali Nageswara Rao & Anr. v, Commissioner of income Tax. Hyderabad and Commissioner of Income Tax, Punjab vs Mothu Ram Prem Chand , not applicable

No. 528, of 1959. Appeal from the judgment and order dated September 20, 1957, of the former Bombay High Court in I.T.R. No. 15 of 1957. Hardayal Hardy and D. Gupta, for the appellant. R. J. Kolah, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the respondent. 635 1960. November 24. The Judgment of the Court was delivered by HIDAYATULLAH, J. The Commissioner of Income tax, Bombay City 11, has filed this appeal with a certificate under section 66A(2) of the Income tax Act, against the judgment and order of the High Court of Bombay dated September 20, 1957, in Income tax Reference No. 15 of 1957. The question referred to the High Court for its opinion by the Income tax Appellate Tribunal, Bombay was: "Whether the assessee is entitled to a deduction of Rs. 1,350 and Rs. 18,000 from his total income of the previous year relevant to the assessment years, 1953 54, 1954 55?" The assessee, Sitaldas Tirathdas of Bombay, has many sources of income, chief among them being property, stocks and shares, bank deposits and share in a firm known as Messrs. Sitaldas Tirathdas. He follows the financial year as his accounting year. For the assessment years 1953 54 and 1954 55, his total income was respectively computed at Rs. 50,375 and Rs. 55,160. This computation was not disputed by him, but he sought to deduct therefrom a sum of Rs. 1,350 in the first assessment year and a sum of Rs. 18,000 in the second assessment year on the ground that under a decree he was required to pay these sums as maintenance to his wife, Bai Deviben and his children. The suit was filed in the Bombay High Court (Suit No. 102 of 1951) for maintenance allowance, separate residence and marriage expenses for the daughters and for arrears of maintenance, etc. A decree by consent was passed on March 11, 1953, and maintenance allowance of Rs. 1,500 per month was decreed against him. For the account year ending March 31, 1953 only one payment was made, and deducting Rs. 150 per month as the rent for the flat occupied by his wife and children, the amount paid as maintenance under the decree came to Rs. 1,350. For the second year, the maintenance at Rs. 1,500 per month came to Rs. 18,000 which was claimed as a deduction. 636 No charge on the property was created, and the matter does not fall to be considered under section 9(1)(iv) of the Income tax Act. The assessee, however, claimed this deduction on the strength of a ruling of the Privy Council in Bejoy Singh Dudhuria vs Commissioner of Income tax (1). This contention of the assesses was disallowed by the Income tax Officer, whose decision was affirmed on appeal by the Appellate Assistant Commissioner. On further appeal, the Tribunal observed: "This is a case, pure and simple, where an assessee is compelled to apply a portion of his income for the maintenance of persons whom he is under a personal and legal obligation to maintain. The Income tax Act does not permit of any deduction from the total income in such circumstances. " The Tribunal mentioned in the statement of the case that counsel for the assessee put his contention in the following words: "I claim a deduction of this amount from my total income because my real total income is whatever that is " computed, which I do not dispute, less the maintenance amount paid under the decree. " The assessee appears to have relied also upon a decision of the Lahore High Court in Diwan Kishen Kishore vs Commissioner of Income tax(2). The Tribunal, however, referred the above question for the opinion of the High Court. The High Court followed two earlier decisions of the same Court reported in Seth Motilal Manekchand vs Commissioner of Income tax (3) and Prince Khanderao Gaekwar vs Commissioner of Income tax (4), and held that, as observed in those two cases, the test was the same, even though there was no specific charge upon property so long as there was an obligation upon the assessee to pay, which could be enforeed in a Court of law. In Bejoy Singh Dudhuria 's case (1), there was a charge for maintenance created against the assessee, and the Privy Council had observed that the income must be deemed to have never reached that assessee, (1) (3) (2) (4) 637 having been diverted to the maintenance holders. In the judgment under appeal, it was held that the income to the extent of the decree must be taken to have been diverted to the wife and children, and never became income in the hands of the assessee. The Commissioner of Income tax questions the correctness of this decision and also of the two earlier decisions of the Bombay High Court. We are of opinion that the contention raised by the Department is correct. Before we state the principle on which this and similar cases are to be decided, we may refer to certain rulings, which illustrate the aspects the problem takes. The leading case on the subject is the decision of the Judicial Committee in Bejoy Singh Dudhuria 's case(1). There, the stepmother of the Raja had brought a suit for maintenance and a compromise decree was passed under which the stepmother was to be paid Rs. 1,100 per month, which amount was declared a charge upon the properties in the hands of the Raja, by the Court. The Raja sought to deduct this amount from his assessable income, which was disallowed by the High Court at Calcutta. On appeal to the Privy Council, Lord Macmillan observed as follows: "But their Lordships do not agree with the learned Chief Justice in his rejection of the view that the sums paid by the appellant to his step mother were not 'income ' of the appellant at all. This in their Lordships ' opinion is the true view of the matter. When the Act by Section 3 subjects to charge 'all income ' of an individual, it is what reaches the individual as income which it is intended to charge. In the present case the decree of the court by charging the appellant 's whole resources with a specific payment to his step mother has to that extent diverted his income from him and has directed it to his stepmother; to that extent what he receives for her is not his income. It is not a case of the application by the appellant of part of his income in a particular way, it is rather the allocation of a sum out of his revenue before it becomes income in his hands." (1) 81 638 Another case of the Privy Council may well be seen in this connection. That case is reported in P. C. Mullick vs Commissioner of Income tax, Bengal (1). There, a testator appointed the appellants as executors and directed them to pay Rs. 10,000 out of the income on the occasion of his addya sradh. The executors paid Rs. 5,537 for such expenses, and sought to deduct the amount from the assessable income. The Judicial Committee confirmed the decision of the Calcutta High Court disallowing the deduction, and observed that the payments were made out of the income of the estate coming to the hands of the executors and in pursuance of an obligation imposed upon them by the testator. It observed that it was not a case in which a portion of the income had been diverted by an over riding title from the person who would have received it otherwise, and distinguished the case in Bejoy Singh Dudhuria 's case (2). These cases have been diversely applied in India, but the facts of some of the cases bring out the distinction clearly. In Diwan Kishen Kishore vs Commissioner of Income tax (3), there was an impartible estate governed by the law of primogeniture, and under the custom applicable to the family, an allowance was payable to the junior member. Under an award given by the Deputy Commissioner acting as arbitrator and according to the will of the father of the holder of the estate and the junior member, a sum of Rs. 7,200 per year was payable to the junior member. This amount was sought to be deducted on the ground that it was a necessary and obligatory payment, and that the assessable income must, therefore, be taken to be pro tanto diminished. It was held that the income never became a part of the income of the family or of the eldest member but was a kind of a charge on the estate. The allowance given to the junior member, it was held, in the case of an impartible estate was the separate property of the younger member upon which he could be assessed and the rule that an allowance given by the head of a Hindu coparcenary to its members by way of maintenance was liable to be assessed (1) (2) (3) 639 as the income of the family, had no application. It was also observed that if the estate had been partible and partition could have taken place, the payment to the junior member out of the coparcenary funds would have stood on a different footing. In that case, the payment to the junior member was a kind of a charge which diverted a portion of the income from the assessee to the junior member in such a way that it could not be said that it became the income of the assessee. In Commissioner of Income tax, Bombay vs Makanji Lalji (1), it was stated that in computing the income of a Hindu undivided family monies paid to the widow of a deceased coparcener of the family as maintenance could not be deducted, even though the amount of maintenance had been decreed by the Court and had been made a charge on the properties belonging to the family. This case is open to serious doubt, because it falls within the rule stated in Bejoy Singh Dudhuria 's case (2); and though the High Court distinguished the case of the Judicial Committee, it appears that it was distinguished on a ground not truly relevant, namely, that in Bejoy Singh Dudhuria 's case (2) the AdvocateGeneral had abandoned the plea that the stepmother was still a member of the undivided Hindu family. It was also pointed out that this was a case of assessment as an individual and not an assessment of a Hindu undivided family. In Commissioner of Income tax, Bombay vs D. R. Naik (3), the assessee was the sole surviving member of a Hindu undivided family. There was a decree of Court by which the assessee was entitled to receive properties as a residuary legatee, subject, however, to certain payments of maintenance to widows. The widows continued to be members of the family. It was held that though section 9 of the Income tax Act did not apply, the assessee 's assessable income was only the balance left after payment of the maintenance charges. It appears from the facts of the case, however, that there was a charge for the maintenance (1) (2) (3) 640 upon the properties of the assessee. This case also brings out correctly the principles laid down by the Judicial Committee that if there be an overriding obligation which creates a charge and diverts the income to some one else, a deduction can be made of the amounts so paid. The last case may be contrasted with the case reported in P. C. Mullick and D. C. Aich, In re(1). There, under a will certain payments had to be made to the beneficiaries. These payments were to be made gradually together with certain other annuities. It was held that the payments could only be made out of the income received by the executors and trustees from the property, and the sum was assessable to income tax in the hands of the executors. It was pointed out that under the wilt it was stated that the amounts were to be paid "out of the income of my property", and thus, what had been charged was the income of the assessees, the executors. The case is in line with the decision of the Privy Council in P. C. Mullick vs Commissioner of Income tax, Bengal(2). In Hira Lal, In re,(3) there was a joint Hindu family, and under two awards made by arbitrators which were made into a rule of the Court, certain maintenance allowances were payable to the widows. These payments were also made a charge upon the property. It was held that inasmuch as the payments were obligatory and subject to an overriding charge they must be excluded. Here too, the amount payable to the widows was diverted from the family to them by an overriding obligation in the nature of a charge, and the income could not be said to accrue to the joint Hindu family at all. In Prince Khanderao Gaekwar vs Commissioner of Income tax (4), there was a family trust out of which two grandsons of the settlor had to be paid a portion of the income. It was provided that if their mother lived separately, then the trustees were to pay her Rs. 18,000 per year. The mother lived separately, and two deeds were executed by which the two grandsons agreed to pay Rs. 15,000 per year to the mother, (1) (3) (2) (4) 641 and created a charge on the property. The sons having paid Rs. 6,000 in excess of their obligations, sought to deduct the amount from their assessable income, and it was allowed by the Bombay High Court, observing that though the payment was a voluntary payment, it was subject to a valid and legal charge which could be enforced in a Court of law and the amount was thus deductible under section 9(1)(iv). There is Do distinction between a charge created by a decree of Court and one created by agreement of parties, provided that by that charge the income from property can be said to be diverted so as to bring the matter within section 9(1)(iv) of the Act. The case was one of application of the particular section of the Act and not one of an obligation created by a money decree, whether income accrued or not. The case is, therefore, distinguishable from the present, and we need not consider whether in the special circumstances of that case it was correctly decided. In V. M. Raghavalu Naidu & Sons vs Commissioner of Income tax (1), the assessees were the executors and trustees of a will, who were required to pay maintenance allowances to the mother and widow of the testator. The amount of these allowances was sought to be deducted, but the claim was disallowed. Satyanarayana Rao and Viswanatha Sastri, JJ. distinguished the case from that of the Privy Council in Bejoy Singh Dudhuria (2). Viswanatha Sastri, J. observed that the testator was under a personal obligation under the Hindu law to maintain his wife and mother, and if he had spent a portion of his income on such maintenance, he could not have deducted the amount from his assessable income, and that the position of the executor was no better. Satyanarayana Rao, J. added that the amount was not an allowance which was charged upon the estate by a decree of Court or otherwise and which the testator himself had no right or title to receive. The income which was received by the executors included the amount paid as maintenance, and a portion of it was thus applied in discharging the obligation. (1) (2) 642 The last cited case is again of the Bombay High Court, which seems to have influenced the decision in the instant case. That is reported in Seth Motilal Manekchand vs Commissioner of Income tax(1). In that case, there was a managing agency, which belonged to a Hindu joint family consisting of A, his son B and A 's wife. A partition took place, and it was agreed that the managing agency should be divided, A and B taking a moiety each of the managing agency remuneration but each of them paying A 's wife 2 as. 8 pies out of their respective 8 as. share in the managing agency remuneration. Chagla, C. J. and Tendolkar, J. held that under the deed of partition A and B had really intended that they were to receive only a portion of the managing agency commission and that the amount paid to A 's wife was diverted before it became the income of A and B and could be deducted. The learned Judge observed at p. 741 as follows: "We are inclined to accept the submission of Mr. Kolah that it does constitute a charge, but in our opinion, it is unnecessary to decide this question because this question can only have relevance and significance if we were considering a claim made for deduction under section 9(1)(iv) of the Income tax Act where a claim is made in respect of immovable property where the immovable property is charged or mortgaged to pay a certain amount. It is sufficient for the purpose of this reference if we come to the conclusion that Bhagirathibai had a legal enforceable right against the partner in respect of her 2 annas and 8 pies share and that the partner was under a legal obligation to pay that amount. " These are the cases which have considered the problem from various angles. Some of them appear to have applied the principle correctly and some, not. But we do Dot propose to examine the correctness of the decisions in the light of the facts in them. In our opinion, the true test is whether the amount sought to be deducted, in truth, never reaches the assessee as his income. Obligations, no doubt, there are in every case, but it is the nature of the obligation which is the (1) 643 decisive fact. There is a difference between an amount which a person is obliged to apply out of his income and an amount which by the nature of the obligation cannot be said to be a part of the income of the assessee. Where by the obligation income is diverted before it reaches the assessee, it is deductible; but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequence, in law, does not follow. It is the first kind of payment which can truly be excused and not the second. The second payment is merely an obligation to pay another a portion of one 's own income, which has been received and is since applied. The first is a case in which the income never reaches the assessee, who even if he were to collect it, does so, not as part of his income, but for and on behalf of the person to whom it is payable. In our opinion, the present case is one in which the wife and children of the assessee who continued to be members of the family received a portion of the income of the assessee, after the assessee had received the income as his own. The case is one of application of a portion of the income to discharge an obligation and not a case in which by an overriding charge the assessee became only a collector of another 's income. The matter in the present case would have been different, if such an overriding charge had existed either upon the property or upon its income, which is not the case. In our opinion, the case falls outside the rule in Bejoy Singh Dudhuria 's case and rather falls within the rule stated by the Judicial Committee in P. C. Mullick 's case For these reasons, we hold that the question referred to the High Court ought to have been answered in the negative. We, accordingly, discharge the answer given by the High Court, and the question will be answered in the negative. The appeal is thus allowed with costs here and in the High Court. Appeal allowed.

A consent decree was passed against the assessee awarding maintenance to his wife and children. The decree did not create any charge upon the income of the assessee. The assessee claimed in the assessment of income tax deduction of the amount paid under the decree from his total income. Held, that the assessee was not entitled to the deduction. Where by the obligation income was diverted by an overriding title before it reached the assessee, it was deductible; but where the income was required to be applied to discharge an obligation after such income reached the assessee, it was not deductible. The true test was whether the amount sought to be deducted, in truth, never reached the assessee as his income. In the present case, the wife and children of the assessee received a portion of the income of the assessee, after the assessee had received the income as his own. Bejoy Singh Dudhuria vs Commissioner of Income tax, (1933) I I.T.R. 135, not applicable. P. C. Mullick vs Commissioner of Income tax, Bengal, , applied. Diwan Kishen Kishore vs Commissioner of Income tax, , Seth Motilal Menekchand vs Commissioner of Income tax, , Prince Khanderao Gaekway vs Commissioner of Income tax, , Commissioner of Income tax, Bombay vs Makanji Lalji, , Commissioner of Income tax, Bombay V. D. R. Naik, , D. C. Aich, It; re, , Hira Lal, In re, and V. M. Raghavalu Naidu & Sons vs Commissioner of Income tax, , referred to

By a writ petition under Article 226 of the Constitution the respondent challenged the validity of a notice under section 226( 3 ) of the Income tax Act, 1961, in respect of tax due from him for the four assessment years from 1960 61 to 1963 64 and penalty for the assessment year 1962 63. For the assessment year 1961 62 the assessment proceedings against the respondent were taken and concluded under the Income tax Act, 1922, and as a result of an appeal filed by the respondent, the tax liability was reduced by the Appellate Assistant Commissioner. The I.T.O. thereafter issued a notice to the respondent on December 11, 1963, under section 156 of the 1961 Act requiring him to make payment within 35 days. This period expired on January 22, 1964. The impugned notice under section 226(3) was issued much later on April 23, 1965. It was contended on behalf of the respondent that both the assessment order as well as the appellate order having been made under the 1922 Act, the provisions of section 226 of the 1951 'Act were not applicable. As regards the. penalty sought to be recovered under the impugned notice for the assessment year 1962 63 and tax for 1963 64, it was contended by the respondent that as notices of demand had been served on him for payment of the two sums and the time given in the notice was due to expire on May 21, 1965, the impugned notice dated April 23, 1965 issued prior to the expiry of the time given to him was illegally issued; furthermore, the amount of tax must be "due to be paid by the assessee before a notice can be issued under section 225(3)of the 1961 Act. In respect of the assessment for 1960 61, it was contended before the High Court that the I.T.O. did not properly exercise the statutory discretion vested on him in issuing the impugned notice when there was an appeal pending against the order of assessment before the AppeLlate Assistant Commissioner. The High Court allowed the petition and accepted all the respondent 's contentions. It also held that action under section 226 of the 1961 Act was possible only in the case of an assessee who was "in default" and that in the case of an assessment under the 1922 Act, no notice under section 156 of the new Act was possible and there was no way of taking advantage of the provisions for the 'recovery and collection of tax contained in sections 220 to 234 of the new Act. On appeal to this Court, HELD: The impugned notice under s, 226(3) was valid and the writ petition must be dismissed. 30 (i) The Income tax Officer had authority to issue the. notices under section 156 and section 226(3) of the new Act with respect to the liability of the respondent under the old Act. The High Court was therefore in error in holding that the impugned notice was inoperative in regard to the amount to be recovered for the assessment year, 19 '51 62. [37 D] The High Court had wrongly based its opinion on the premise that all recoveries are possible "only when the stage mentioned in section 220(4) was reached, namely, that the assessee had become or deemed to have been an assessee "in default" and the action under section 226 could be taken only when an assessee was in default. The effect of the reasoning adopted by the High Court on this point is that the provisions of section 297(2) of the new Act are nullified and an interpretation of section 226(3 ) of the new Act which leads to such a startling result should be avoided as it is opposed to all sound canons of interpretation. [37 E G] In a case falling within section 297(2)(j) of the new Act, for example in a proceeding for recovery of tax and penalty imposed under the old Act, it not required that all the sections of the new Act relating to recovery and collection should be literally applied but only such of the sections will apply as are appropriate in the particular ease and subject, if necessary, to suitable modifications. In other words, the procedure of the new Act will apply to the cases contemplated by section 297(2)(j) of the new Act routatis mutandis. [37 H 3 8 A] Kalawati Devi Harlalka vs C.I.T. West Bengal, ; referred to. The assessments of tax and penalty for 1962 63 and 1963 64 had been made against the respondent and the demand notices had also been issued under section 156 of the new Act. It was not therefore possible to contend that the amount of tax and penalty were not ',due from the assessee" on April 23, 1965 when the impugned notice under section 226(3) was issued. [38 H, 3,9 B C] Kesoram Industries & Cotton Mills Ltd. vs Commissioner of Wealthtax (Central), Calcutta, ; , referred to. (iii)The finding of the High .Court that the Income tax Officer was not shown to have applied his mind to any of the facts relevant to ' the proper exercise of his discretion in relation to the assessment for the year 1960 61 could not be Upheld as the respondent had. not alleged any specific particulars in his writ petition in support of his case that the I.T.O. had exercised his discretion in an arbitrary manner. [39 F]

Under section 22A(2) of the Saurashtra Ordinance No. 2 of 1948, an appeal lay to a Division Bench of the Saurashtra High Court Tom a judgment of a single Judge of that High Court in the exercise of its appellate jurisdiction, if the Judge certified that the, case was a fit one for appeal. The , merged the Part 'B ' State of Saurashtra into the State of Bombay, abolished the High Court of Saurashtra as from November 1, 1956, and transferred the proceedings pending before the High Court of Saurashtra to the High Court of Bombay. Section 52 of the Act conferred upon the High Court of Bombay, after November 1, 1956, the original, appellate and other jurisdiction which was exercised by the High Court of Saurashtra immediately prior to that date in respect of the territories in the State of Saurashtra. The Saurashtra Ordinance No. 2 of 1948 was repealed with effect from November 1. 1956. by the Saurashtra (Adaptation of Laws on Union Subjects Order, 1957. and the Rules and orders relating to practice and procedure framed by the High Court of Saurashtra were abrogated as from November 1, 1956 by rules of the High Court of Bombay made under section 54 of the State Reorganisation Act. The effect of section 57 of the is that the powers of a Division Bench of the High Court for the new State of Bombay shall be the same as the powers of the Division Bench under the law in force immediately before November 1, 1956, in the State of Bombay. Clause 15 of the Letters Patent of the High Court of Bombay, which was law in force immediately before November 1. 1956, in the State of Bombay, provides that an appeal from the judgment of a single Judge of the Bombay High Court, in a first appeal from a judgment of the Subordinate Court, could be filed without a certificate of the Judge hearing the first appeal. Clause 15 of the Letters Patent of the Bombay High Court applied also to the Gujarat High Court which was established as a result of the Bombay Reoganisation Act. A first appeal against a decree of a subordinate court in Saurashtra, pending in the Saurashtra High Court on November 1, 1956, was transferred to the High Court of Bombay, and disposed of by a single Judge of the Bombay High Court. 'An appeal to the Division Bench under CI. 15 of the Letters Patent of the High Court of Bombay, was transferred to the Gujarat High Court after its establishment, but the Gujarat High Court held that the appeal was incompetent under section 22A of the Saurashtra Ordinance No. 2. of 1948 without a certificate from the single Judge. 435 In appeal to this Court, HELD: (1) It was only in the absence of any provision to the contrary, that a right attached to the action when it was commenced in the subordinate court in Saurashtra that an appeal against the decision of the single Judge of the High Court of Saurashtra in appeal, shall lie only if the single. judge certified that it was a fit case for appeal to a Division Bench. Garikapatti Veerayya vs N. Subbiah Choudhury; , , referred to. [443 A B]. (2) But, from November 1, 1956, the Saurashtra High Court was abolished, the Saurashtra Ordinance No. 2 of 1948 was repealed, and the jurisdiction of the High Court of Saurashtra was conferred upon the Bombay High Court. Therefore, the single Judge of the High Court who heard the first appeal, heard it not as a Judge of the Saurashtra High Court, but as a Judge of the Bombay Court. [443 B C] (3) Section52 of the does not mean that the jurisdiction conferred upon the Bombay High Court in respect of the territories within the State of Saurashtra was to be regulated with reference to the law which was in force on November 1, 1956 in Saurashtra. Therefore, it does not incorporate either expressly or by implication the limitations prescribed by section 22A(2) of the Saurashtra Ordinance into the Letters Patent of the High Court. [443 G H; 444 C D] (4) Since the restriction placed by section 22A of the Ordinance applied only to a judgment of a single Judge of the High Court of Saurashtra and could not apply to a judgment of a single Judge of the Bombay High Court, and could not operate to restrict a right of appeal exercisable under CI. 15 ' of the Letters Patent, the judgment of the single Judge of the Bombay High Court was, under section 57 of the , subject to appeal to a Division Bench without a certificate of the single Judge. [443 D F]

A Hindu undivided family consisting of the father (Karta) and his three sons carried on business. Land was acquired in the name of the Karta and the price was paid out of the books of the family, and a building was constructed on the land. Another building was constructed on another plot of land. On a partial partition of the above Hindu undivided family its business was taken over by a partnership firm consisting of the Karta and the two elder sons and the firm debited a certain sum of money in the building account of the firm for the assessment year 1955 56 and a similar sum in respect of the other property for the assessment year 1956 57. The appellants (assessees) who were members of the partnership firm, filed separate returns in their individual status for the assessment years 1955 56 and 1956 57 claiming that the two properties belonged to the four members of the family in their individual capacity. The Income Tax Officer however regarded the properties as belonging to the partnership firm, and in the assessment proceedings of the firm for the said years, estimated the cost of construction at a higher figure, than the cost disclosed, and made additions accordingly to the returned income of the firm. Allowing the appeals of the partnership firm the Appellate Assistant Commissioner deleted the additions holding that as the money was advanced by the firm and debited to the account of each co owner, the partnership firm was not the owner of the properties and therefore it could not be said to have earned any concealed income. The Income Tax Officer then initiated proceedings under section 147(a) of the I.T. Act 1961 against the individual assessees for the assessment years 1955 56 and 1956 57 and the additions on account of concealed income originally made in the assessments of the partnership firm were divided between the assessees and included in their individual assessment, rejecting the plea of the assessees that there was no case for invoking the said section, as they had already disclosed that they had invested in the properties when filing their original individual returns. On appeal the Appellate Assistant Commissioner though agreeing that there was no default on the part of the assessees to warrant proceedings under section 147(a) and though ordinarily the assessments would be barred by limitation, maintained the assessments on the ground that section 153(3)(ii) of the Act applied. 273 The Income Tax Appellate Tribunal though rejecting the contention that the assessees were not covered by the expression "any person" in section 153(3)(ii), pointed out that the provision could not be availed of by the Income Tax Officer as there was neither any "finding" nor a "direction" on the earlier order of the Appellate Assistant Commissioner in consequence of which, or to give effect to which, the impugned assessment could be said to have been made and that no opportunity had been afforded to the assessees of being heard as was required by Explanation 3 to section 153(3) before that earlier order was made. It held that the Appellate Assistant Commissioner had no jurisdiction to convert the assessments made by the Income Tax Officer under section 147(a) to "assessments passed under section 153(3)(ii)". The High Court on Reference by the Tribunal observed that the finding that the properties did not belong to the partnership firm and therefore the excess amount of the cost of construction could not be regarded as the concealed income of the firm, was necessary for the disposal of the appeals filed by the firm and as a corollary it was held that the buildings belonged to the co owners. This necessitated the "direction" to the Income Tax officer that he was free to assess the excess amount in the hands of the co owners. It held that the Appellate Assistant Commissioner could convert the provisions of section 147(i) into those of section 153(3)(ii) of the Act and that the provisions of section 153(3)(ii) of the Act applied to the case. In the assessee 's appeals to this Court on the question whether section 153(3)(ii) can be invoked. Allowing the appeals, ^ HELD: (1) The provisions of section 153(3)(ii) of the Income Tax Act, 1961 are not applicable to the instant case. [280 C] (2) The expression "finding" and "direction" are limited in meaning. A finding given in an appeal, revision or reference arising out of an assessment must be a finding necessary for the disposal of the particular case, that is to say, in respect of the particular assessee and in relation to the particular assessment year. To be a necessary finding, it must be directly involved in the disposal of the case. [277G] (3) Where the facts show that the income can belong either to A or B and to no one else, a finding that it belongs to B or does not belong to B would be determinative of the issue whether it can be taxed as A 's income. A finding respecting B is intimately involved as a step in the process of reaching the ultimate finding respecting A. If, however, the finding as to A 's liability can be directly arrived at without necessitating a finding in respect of B, then a finding made in respect of B is an incidental finding only. It is not a finding necessary for the disposal of the case pertaining to A. The same principles apply when the question is whether the income under enquiry is taxable in the assessment year under consideration or any other assessment year. [278A B] (4) It is now well settled that the expression "direction" in section 153(3) (ii) of the Act must mean an express direction necessary for the disposal of the case before the authority or court. It must also be a direction which the authority or court is empowered to give while deciding the case before it. [278C] 274 5. (i) Section 153(3) (ii) is not a provision enlarging the jurisdiction of the authority or court. It is a provision which merely raises the bar of limitation for making an assessment order under section 143 or section 144 or section 147. [278D] Income Tax Officer, A Ward, Sitapur vs Murlidhar Bhagwan Das, ; N. Kt. Sivalingam Chettiar vs Commissioner of Income tax, Madras, ; referred to. In the instant case all that has been recorded is the finding that the partner ship firm is not the owner of the properties. The finding proceeds on the basis that the cost has been debited in the accounts of the four co owners. But that does not mean, that the excess over the disclosed cost of construction constitutes the concealed income of the assessees. The finding that the excess represents their individual income requires a proper enquiry and for that purpose an opportunity of being heard is needed to be given to the assessees. That is plainly required by Explanation 3 to section 153(3). The finding contemplated in Explanation 3, is a finding that the amount represents the income of another person. [278H 279B, D] (ii) It is one thing for the partners of a firm to be required to explain the source of a receipt by the firm, it is quite another for them in their individual status to be asked to explain the source of amounts received by them as separate individuals. [279C] (iii) The observation of the Appellate Assistant Commissioner cannot be described as such a finding in relation to the assessee. [279D] (iv) It is also not possible to say that the order of the Appellate Assistant Commissioner contains a direction that the excess should be assessed in the hands of the co owners. The observation that the Income Tax Officer "is free to take action" cannot be described as a "direction". A direction by a statutory authority is in the nature of an order requiring positive compliance. When it is left to the option and direction of the Income Tax Officer whether or not to take action it cannot be described as a direction. [279E F] (v) The order of the Appellate Assistant Commissioner contains neither a 'finding ' nor a 'direction ' within the meaning of section 153(3)(ii) of the Act in consequence of which or to give effect to which the impugned assessment proceedings can be said to have been taken. [279G] Commissioner of Income tax, Andhra Pradesh vs Vadde Pullaiah & Co., ; referred to.

The assessee respondent was assessed to income tax as a representative assessee of ten non resident companies. The companies were grouped under three heads six in Group A, three in Group B and one in Group C. In regard to the companies under Group A, the assessee had no direct agree ment but had dealings by virtue of its agreement with the exporting company; as regards the three companies under Group B, the assessee had no business connection with them; and so far as the only company under Group C was concerned, the assessee 's stand was that it had an agreement dated December 16, 1948 with the export company, but no liability accrued under the law in respect of the transactions. The Income tax Officer referred specifically to the agreement of 1948 and refuted the stand of the company. He held that the agreement was a clear authority that the non resident had employed the Indian Company for selling its goods in India on commission and that it brings into exist ence a business connection between the two companies. He also held that the Group A companies were connected with the Indian Company through the export company. Appeals were filed by the assessee challenging the assessments before the Appellate Assistant Commissioner. The assessee tried to establish the actual course of dealing between the Indian Company and the ten non residents and contended that no liability under the Act accrued. The Appellate Authority dismissed the contentions of the asses see by holding that the assessee had produced no proof of its assertions and on the contrary had blocked the inquiry. Before the Tribunal, an appeal was filed by the asses see. Along with the grounds, an affidavit dated December 27, 1965 of the Secretary of the assessee was also filed and it was stated therein that there was no 884 obstruction to the proceedings before the Appellate Assist ant Commissioner with regard to the attempted probe by the Appellate Authority and that several documents were made available before the Appellate Authority and were actually placed before him, and in case the Appellate Authority wanted any information or further documents to be produced, the Secretary was prepared to do so. The Tribunal did not deal with the aforesaid affidavit on the ground that it was not necessary for the purpose of determining whether the Indian Company could be appointed agent under Section 163 of the Act. It upheld the assess ments and referred to the High Court the questions whether the non resident companies had business connection with the Indian Company and whether the Indian Company was correctly treated as an agent of the said non resident companies under Section 163 of Income tax Act, 1961. The High ,Court held that the Indian assessee had no business connections with the non resident companies within the meaning of Section 9 of the Act. Dismissing the appeals of the Revenue, this Court, HELD: 1. The High Court was right in holding that the Indian assessee had no business connections with the non resident companies within the meaning of Section 9 of the 1961 Act. Unless the matter comes under Section 163(1)(a) of the Act, there will be no liability for assessment. [893F] 2. Whether a relationship would amount to "business connection" as provided in Section 163(1)(b) of the Income tax Act of 1961 for the purpose of giving rise to the li ability under Section 9(1) of the Act would depend upon a set of facts arising in a particular case. [889F G] 3. The, order of the Appellate Assistant Commissioner shows that the Secretary appeared before him at the hearing on September 3 and 4, 1965 and the appeals were dismissed by order dated September 17, 1965. [890F] 4. Ordinarily, the High Court should have declined to use the assertions in the affidavit for the purpose of recording findings of fact and if, at all, in its opinion the affidavit was to be utilised, the matter should have gone before the Tribunal for a fresh disposal of the ap peals. [892H] 885 5. In the instant case, the High Court relying upon the affidavit of the Secretary of the assessee had found that during the hearing of the appeals before the Appellate Assistant Commissioner, the Secretary had produced certain records to show the manner in which the business had been carried on and the nature of the transactions. The Tribunal obviously fell into an error in brushing aside the affida vit. The facts stated therein had a direct bearing on the point in issue, namely, whether there was any business connection between the assessee and the non resident compa nies. [889G H; 891C D] 6. The assessments relate to a period about a quarter of a century back and by its conduct, the Revenue appears to have waived its right to dispute the facts asserted in the affidavit on one hand by not challenging its admissibility and on the other by not disputing the contents thereof. It would not be appropriate at this stage to put back the matter to the stage of the second appeal before the Tribu nal. [893D El Commissioner of Income Tax, Punjab vs R.D. Aggarwal and Company and another, , referred to.

It appears that proceedings under r. 12(5) of the Central Sales Tax (Orissa) Rules 1957 and under sub section (4) of section 12 of the Orissa Sales Tax Act, 1947 were initiated against the petitioners for the assessment year 1980 81 in relation to assessment of tax on sales in the course of inter state trade and commerce under the and inside sales effected during the year in question under the Orissa Sales Tax Act, 1947. Despite repeated opportunities to get themselves ready for the assessment of tax and to produce their account books and other documents, they sought adjournments on the one pretext or another. Eventually the Assistant Sales Tax Officer, Cuttack II circle, Cuttack before whom the assessment proceedings were pending, refused to grant any further adjournment and proceeded to best judgment assessment and treated the gross turnover of Rs. 7,13,94,903.63 p. as returned by the petitioners for purposes of the to be their taxable turnover. Similarly, he treated the gross turnover of Rs. 2,02,07,852.65 p returned by the petitioners as representing inside sales vis a vis the State of Orissa to be their taxable turnover. After allowing adjustment of Rs. 27,88,388.47 p paid by the petitioners, the learned Sales Tax Officer raised a demand for the payment of a sum of Rs. 43,57,101.89 p towards tax on sales in the course of inter State trade and commerce payable under the and after allowing adjustment of Rs. 1,08,480.11 p paid by the petitioners, he raised the demand for payment of a sum of Rs. 13,06, 069.60 p as tax payable under the Orissa Sales Tax Act, 1947. Thus the petitioners were faced with a total demand of Rs. 56,57,171.49 p for the assessment year 1980 81. The petitioners instead of preferring appeals under sub s (1) of section 23 of the Act filed petitions before the High Court under article 226 of the Constitution challenging the validity of the two orders of assessment. The High Court was not satisfied that this was a case of inherent lack of jurisdiction or any violation of principles of natural justice and accordingly held that they were not entitled to invoke the extraordinary jurisdiction of the High Court under article 226 of the Constitution, Dismissing the Petitions, ^ HELD: In the provenance, of tax where the Act provides for a complete machinery which enables an assessee to effectively raise in the courts the question of the validity of an assessment denied an alternative jurisdiction 744 to the High Court to interfere under article 226 of the Constitution. The phrase "made under the Act" describes the provenance of the assessment; it does not relate to its accuracy in point of law. The use of the machinery provided by the Act, not the result of that use, is the test. [748 G H; 749 A] Under the scheme of the Act, there is hierarchy of authorities before which the petitioners can get adequate redress against the wrongful act complained of. They have the right to prefer an appeal before the prescribed authority under sub section (1) of section 23 of the Act. If they are dissatisfied with the decision in the appeal, they can prefer a further appeal to the Tribunal under sub section (3) of section 23 of the Act, and then ask for a case to be stated on a question of law for the opinion of the High Court under section 24 of the Act. The Act provides for a complete machinery to challenge an order of assessment, and the impugned orders of assessment can only be challenged by the mode prescribed by the Act and not by a petition under article 226 of the Constitution. [751 F H] Raleigh Investment Company Limited vs Governor General in Council, 74 IA 50, followed. K.S. Venkataraman & Co. vs State of Madras ; and State of Uttar Pradesh vs Mohammad Nooh ; ; distinguished. The question whether a provision is ultra vires or not cannot obviously be decided by any of the authorities created by the Act and therefore cannot be the subject matter of a reference to the High Court or a subsequent appeal to this Court. No such question arises in a case like the present where the impugned orders of assessment are not challenged on the ground that they are based on a provision which is ultra vires. This is a case in which the entrustment of power to assess is not in dispute and the authority within the limits of his power is a Tribunal of exclusive jurisdiction. The challenge is only to the regularity of the proceedings before the learned Sales Tax Officer as also his authority to treat the gross turnover returned by the petitioners to be the taxable turnover. Investment of authority to tax involves authority to take transactions which in exercise of his authority the taxing officer regards as taxable and not merely authority to tax only those transactions which are, on a true view of the facts and the law, taxable. There is no justification for extending the principles laid down in Raleigh Investment Company 's case or Mohammad Nooh 's case to a case like the present where there is an assessment made by the learned Sales Tax Officer under the Act. [749 E H; 753 A B] The question whether another adjournment should have been granted or not was within the discretion of the learned Sales Tax Officer and is a matter which can properly be raised in an appeal under sub section (1) of section 23 of the Act.[751 D] The rule laid down in Mohammad Nooh 's case which requires the exhaustion of alternative remedies is a rule of convenience and discretion, rather than a rule of law. [751 E] 745 The Act provides for an adequate safeguard against an arbitrary or unjust assessment. The petitioner have a right to prefer an appeal under sub section (1) of section 23 of the Act subject to their payment of an admitted amount of tax as enjoined by the proviso thereto. As regards the disputed amount of tax, they have the remedy of applying for stay of recovery to the Commissioner of Sales Tax under cl. (a) of the second proviso to sub section (1) of section 13 of the Act. It is for the Commissioner to decide whether or not there should be such stay on such terms and conditions as he thinks fit, looking to the nature of the demand raised in the facts and circumstances of the present case. [752 E F; 753B C]

The respondent assessee claimed deductions in his assessments relating to the assessment years 1962 63 to 1964 65 in respect of payments of interest on loans taken from Kalinga Foundation Trust and others and certain dividend transactions relating to the shares of Kalinga Tubes, Ltd. The Income Tax officer issued a letter to the assessee requesting him, inter alia, to produce evidence and prove (i) that the cash credits appearing in his account in the name of Kalinga Foundation Trust were genuine; and (ii) that 39,000 shares of Kalinga Tubes Ltd. standing in the names of shareholders were not really his own investment. After examining the assessee 's evidence and on the basis of documentary evidence and government records and on the basis of local enquiries made, the Income Tax officer came to the conclusion that no trust in the name of Kalinga Foundation Trust really existed and even if it existed, it had no funds of its own and that the name "Kalinga Foundation Trust" was used by the assessee as a camouflage to put through his unaccounted money. Accordingly, all cash credits appearing in the books of accounts of the assessee himself or in the books of other concerns or persons or remittances of actual payments in the name of Trust were treated by the Income Tax officer as moneys coming out of the undisclosed sources of the assessee and accordingly assessed the same as his income from undisclosed sources. All interest and dividend received in the name of the Trust were included by the Income Tax officer in the assessment of the assessee as his own income. The Income Tax officer was also of the opinion that the moneys advanced in the name of the Trust to several persons in connection with the acquisition of 39,000 shares of Kalinga Tubes Ltd. which were 27 issued in 1358 actually belonged to the assessee. Accordingly, the dividend of the said shares was treated as the income of the assessee and the expenses incurred in that connection were allowed as deduction. The persons m whose names the 39,000 shares of Kalinga Tubes Ltd. stood, were treated by the Income tax officer as benamidars of the assessee. Against the orders of assessment, appeals were filed by the assessee before the Appellate Assistant Commissioner who set aside the assessments for the years under consideration and remanded the matters back, to Income tax officer to frame issues and give due opportunity to the assessee to cross examine the witnesses in the light of the observations made m the order. Again, against the order of the Appellate Assistant Commissioner, the appeals were filed. It was argued before the Tribunal on behalf of the appellant assessee; (i) that on the basis of the facts emerging on an examination of assessee 's evidence and facts found on the basis of documentary evidence, the Appellate Assistant Commissioner should have confirmed the assessments; (ii) that local inquiries and oral testimony had been used by the Income tax officer to support the conclusions already arrived at on an examination of assessee 's own evidence and corroborated by documentary evidence and therefore the Appellate Assistant Commissioner should not have set aside the assessment on the ground that the persons who were examined by the Income tax officer should have been allowed to be cross examined by the assessee; (iii) that the gist of the enquiries had been communicated to the assessee to enable him to meet the case against him and it was for the assessee to produce before the Income tax officer the persons who had collected the funds for the Kalinga Foundation Trust as the Income tax officer was not bound by the technical rules of evidence; (iv) that it had collected evidence to prove that these shares were purchased by the assessee benami in the names of the shareholders named; (v) that the assessee had created a private registered Trust in 1949 out of his own properties having the same name as Kalinga Foundation Trust and that a reference to Kalinga Foundation Trust m some of the documents produced by the assessee was to this private trust and not to any public trust of the same name alleged to have been created at a public function. After considering the material, the Tribunal held (a) that the Kalinga Foundation Trust came into existence in 1947 and continued after its registration in 1353 under the same name and style and the fund of the Trust was built up by collection of donation from the public at large; (b) that seven persons who were designed by the Income tax officer as benamidars of the assessee for the purchase of the 28 shares of M/s Kalinga Tubes Ltd, were not benamidars and the money required for the purchase of these shares had been raised by themselves; (c) that the investments made by the Trust in the assessee 's group of industries or with the assessee were from its own resources and funds and such investments were guided by business expediency and prudence; (d) that the Trust was comprised of persons of public repute and the control and management of the trust styled as "Kalinga Foundation Trust" were under the effective control of the Board of Trustees comprised of persons of public reputation and (e) that the income from interest, dividend, or any other usufruct arising out of the investments made by the Trust in the various concerns and the investments of the Trust which were included in the assessments of the assessee in the years under reference should be excluded as appertaining to a separate and distinct entity and therefore directed the Income tax officer to exclude these amounts from the assessments of the assessee in all these three years. The revenue did not accept the findings of the Tribunal as correct. Several questions of law were sought for from the Tribunal to be referred out of the decision of the Tribunal under section 256(1) of the Income Tax Act, 1961. The Tribunal refused to refer these questions. An application was made under section 256(2) of the Act asking for reference on those questions from the High Court. The High Court also rejected the application and refused to call for a statement of case on those questions. Hence these appeals by sepcial leave. Allowing the appeals, ^ HELD: 1. The High Court, in the facts and circumstances of the case, was in error in not directing a reference under section 256(2) of the Act. Therefore, the judgment and order of the High Court, are set aside and the Tribunal is directed to send a statement of case for the three years involved within six months of the date of receipt of this order on the questions mentioned in this judgment. [44 C D] 2. The Supreme Court in several decisions has laid down the following principles with regard to the scope of the jurisdiction of the High Court in directing reference on question of law where the decision rests primarily on appreciation of facts: (i) When the point for determination was a pure question of law, such as construction of a statute or document of title, the decision of the Tribunal was open to reference to the Court. (ii) When the point for determination was a mixed question of law 29 and fact, while the finding of the Tribunal on the facts found was final, its decision as to the legal effect of those findings was a question of law which could be reviewed by the Court. (iii) A finding on a question of fact was open to attack under reference under the relevant Act as erroneous in law when there was no evidence to support it or if it was perverse. (iv) When the findings was one of facts, the fact that it is itself an inference from other basic facts will not alter its character as one of fact. [36 F H; 37A] Sree Meenakshi Mills Limited vs Commissioner of Income Tax, Madras, , Gouri Prasad Bagaria and others vs Commissioner of Income Tax, West Bengal, , I.C.I. (India) Private Ltd. vs Commissioner of Income tax, West Bengal 111, , Commissioner of Income tax (Central), Calcutta vs Daulat Ram Rawatmull, , Commissioner of Income tax, Bihar and Orissa vs S.R. Jain, , relied upon. The question as to whether the donations alleged were given by the assessee were the moneys raised by the Trust as donations from various people or not should be considered in its proper perspective but does not seem to have been done. This is the most material portion and in not appreciating the material portion and discussing the evidence in respect of the same, there was non consideration of a relevant factor on a factual aspect and on this the question is whether the Tribunal 's decision was perverse in the sense that no man instructed properly at law could have acted as the Tribunal did, and secondly whether there was ignoring of all the materials and relevant facts in considering this aspect. There was also evidence on record as to who had collected it to a certain extent, but no evidence on the other aspect. Ignoring of that fact is a vital fact which influences the decision and a conclusion and must be judged in its proper perspective. Therefore, the questions which arise on this aspect are questions of law, and the High Court should have directed the statement of a reference. [41C G] 4. Regarding the ownership of 39,000 shares in Kalinga Tubes Ltd. issued in 1958, this involved determination of two issues: (a) whether the ostensible holders of these 39,000 shares were real owners or benamidars and if they were benamidars, who were the real holders. The Income tax officer was of the view, on facts suggested, that the 30 seven persons were benamidars of the assessee, whether they are so or not and what is the effect of the said fact is another question. But these facts were not properly considered by the Tribunal to come to the conclusion as to whether, 39,000 shares of Kalinga Tubes Ltd. belonged to the assessee and not to the shareholders named. [42 D E; 43 E F]

The appellant used to invest his cash surplus in shares and securities and maintained an account book called Book No. 1 relating thereto. During the period from 1930 to 1941 42 he purchased a large number of shares and securities which by the accounting year 1941 42 were of a value Rs. 1491 lacs. He sold certain shares and securities of the value of several lacs and made certain amount of profit on those sales. In 1940 the appellant borrowed a large amount of money from his brother, the Maharaja of Darbhanga and opened a new account named account No. 2 which contained all entries regarding shares purchased and sold out of the money borrowed from the Maharaja. In the assessment year 1944 45 to 1948 49 the profits made by the (1) ; 288 appellant from purchase and sale of shares amounted to several lacs and the Income tax Officer held those to be liable to income tax as business profits. The Appellate Assistant Commissioner upheld the assessments but excluded the profits for the years 1944 45. On appeal by both the parties the Appellate Tribunal held on the evidence that the appellant was to be regarded as a dealer in shares and securities and therefore the profits were assessable to income tax. The High Court stated the following two questions under section 66(2) of the Income tax Act and answered them in the affirmative: "(1) Whether in the circumstances of the case, there is material to support the finding of the Appellate Tribunal that the assessee was a dealer in shares and securities with respect to each of the account and, therefore, liable to be taxed? (2)Whether having regard to the finding of the Appellate Tribunal in respect of 1941 42 assessment, it was open to the Appellate Tribunal in the present case to hold that the profits and transactions of sale and purchase of shares and securities amounted to profits of business and so liable to be taxed?" On appeal by special leave the appellant contended inter alia, that being a Zamindar the buying and selling of shares was not his normal activity and he did not carry on any such business but his purchases and sales were in the nature of investments of his surplus monies and therefore the excess amounts received by sales were capital receipts being merely surplus and not profits. Held, that on the materials produced and on the facts proved the appellant must be held to have been rightly assessed. The principle applicable to such transactions is that when an owner of an ordinary investment chooses to realise it and obtains a higher price for it than the original price paid by him, the enhanced price is not a profit assessable to income tax, but where as in the present case what is done is not merely a realisation or a change of investment but an act done in what is truly the carrying on of a business the amount recovered as appreciation will be assessable. G.Venkataswami Naidu & Co. vs The Commissioner of Income tax, [1959] Supp. 1 S.C.R. 464, Oriental Investment Company Ltd. vs The Commissioner of Income tax, ; , Raja Bahadur Kamakshya Narain Singh vs Commissioner of Income tax, Bihar and Orissa, (1943) L.R. 70 I.A. 180, discussed. The substantial nature of the transactions, the manner in which the books were maintained, the magnitude of the shares purchased and sold and the ratio between the purchases and sales and the holding justified tile Tribunal to come to the conclusion that the appellant was dealing in shares as business. The High Court could not interfere with those findings and it rightly answered the questions in the affirmative. There is no such thing as res judicata in income tax matters 289 and it was quite open to the Appellate Tribunal to give the finding that it did.

o. 273 of 1951. Appeal under articles 132 (1) and 134 (1)(c) of the Constitution of India from the Judgment and Order dated I3th October, 1950, of the High Court of Judicature at Patna (Shearer, Ramaswami and Sarjoo Prosad JJ.) in Miscellaneous Judicial Case No. 220 of 1949. S.K. Mitra (K. Dayal, with him), for the appellant. Basant Chandra Ghosh and Arun Chandra Mitra for the respondent. May 26. The Court delivered judgment as follows: MAHAJAN J. This appeal has been preferred by the State of Bihar against the judgment of a Special Bench of the High Court of Judicature at Patna allowing the application of the respondent under section 23 of the Indian Press (Emergency Powers)Act, XXIII of 1931. It appears that the petition was argued by both the sides as it was one made under article 926 of the Constitution. The respondent was the keeper at all relevant times of the Bharati Press at Purulia, A pamphlet under 85 656 the heading "Sangram" was printed at the said press and is alleged to have been circulated in the town of Purulia in the district of Manbhum. The Government of Bihar considered that the pamphlet contained objectionable matter of the nature described under section 4 (1) of the Indian Press (Emergency Powers) Act and required the press to furnish security in the sum of Rs. '2,000, under section 3(3) of the Act by the 19th September, 1949. On the 26th September, 1949, the respondent applied to the High Court under section 23 for setting aside the above order. This application was allowed by the majority of the Judges constituting the Bench. Shearer J. was of the view that the application should be dismissed. Several objections were raised to the validity of the order passed by the Bihar Government but it is unnecessary to mention all of them. The two points which were seriously pressed before the High Court were that the leaflet did not contain any words or signs or visible representation of the nature described in section 4 (1) of the Act, and that the provisions of section 4 (1) of the Act were inconsistent with article 19 (1) of the Constitution and as such void under article 13. The High Court reached the conclusion that the pamphlet did come within the mischief of the Act. Sarjoo Prosad J., with whom Ramaswami J. concurred, on a construction of the decisions of this Court in Romesh Thapar vs The State of Madras(1), and Brij Bhushan V. The State of Delhi(2), found, though with some reluctance, that section 4 (1) (a) of the Act was repugnant to the Constitution and therefore void. Mr. Justice Shearer, however, held that the pamphlet was a seditious libel and that there was nothing in the two decisions of the Supreme Court referred to above which compelled the court to hold the provisions of section 4 (1) (a) of the Act to be void. In my opinion, Shearer J. was right in the view that there is nothing in the two decisions of this Court which bears directly or indirectly on the point at issue in the present case and that both Sarjoo Prosad (1) [1950] S.C.R.594. (2) ; 657 and Ramaswami JJ. were in error in holding that these deci sions were conclusive on the question of the invalidity of clauses (a) and (b) of section 4 (1) of the Act. Towards the concluding part of his judgment Sarjoo Prosad J. ob served as follows: "I am compelled to observe that from the above discus sions of the Supreme Court judgments, it follows logically that if a person were to go on inciting murder or other cognisable offences either through the press or by word of mouth, he would be free to do so with impunity inasmuch as he would claim the privilege of exercising his fundamental right of freedom of speech and expression. Any legislation which seeks or would seek to curb this right of the person concerned would not be saved under article 19 (2) of the Constitution and would have to be declared void. This would be so, because such speech or expression on the part of the individual would fall neither under libel nor slander nor defamation nor contempt of court nor any matter which of fends against decency or morality or which undermines the security of or tends to overthrow the State. I cannot with equanimity contemplate such an anomalous situation but the conclusion appears to be unavoidable on the authority of the Supreme Court judgments with which we are bound. I, there fore, wish that my decision on the point would sooner than ever come to be tested by the Supreme Court itself and the position reexamined in the light of the anomalous situation pointed out above. It seems to me that the words used in the Constitution Act should be assigned a wide and liberal connotation even though they occur in a clause which pro vides an exception to the fundamental right vouchsafed under article 19 (1)(a) of the Constitution Act." These observations I speak with great respect disclose a complete lack of understanding of the precise scope of the two decisions of this Court referred to above. Section 3 (3) of the Act under which the notice was issued in the present case enacts as follows: "Whenever it appears to the Provincial Government that any printing press is used for the purpose 658 printing or publishing any newspaper, book or other document containing any words, signs or visible representation of the nature described in section 4,sub section (1), the Provin cial Government may, by notice in writing to the keeper of the press . .order the keeper to deposit with the Magis trate security . " Clause (a) of section 4 (1) deals with words or signs or visible representations which incite to or encourage, or tend to incite to or encourage the commission of any offence of murder or any cognizable of fence involving violence. It is plain that speeches or expressions on the part of an individual which incite to or encourage the commission of violent crimes, such as murder, cannot but be matters which would undermine the security of the State and come within the ambit of a law sanctioned by article. 19(2) of the Constitution. I cannot help observing that the decisions of this Court in Romesh Thapar 's case(1), and in Brij Bhushan 's case(2) have been more than once misapplied and misunderstood and have been construed as laying down the wide proposition that restrictions of the nature imposed by section 4(1)(a) of the Indian Press (Emergency Powers) Act or of similar character are outside the scope of article 19(2) of the Constitution inasmuch as they are conceived generally in the interests of public order. Sarjoo Prosad J. also seems to have fallen into the same error. The question that arose in Romesh Thapar 's case(1) was whether the impugned Act (Madras Maintenance Public Order Act, XXIII of 1949) in so far as it purported by section 9 (1 A) to authorise the Provincial Government "for the purpose of securing the public safety and the mainte nance of public order, to prohibit or regulate the entry.into or the circulation, sale or distribution in the Province of Madras or any part thereof any document or class of documents" was a law relating to any matter which under mined the security of or tended to overthrow the State, and it was observed that whatever ends the impugned Act may have been intended to subserve and whatever (1)[1950] section C.R. 594. (2) [1950] S.C.R. 605. 659 aims its framers may have had in view, its application and scope could not, in the absence of delimiting words in the statute itself, be restricted to those aggravated forms of prejudicial activity which are calculated to endanger the security of the State, nor was there any guarantee that those authorized to exercise the powers under the Act would in using them discriminate between those who act prejudical ly to the security of the State and those who do not. Sec tion 4(1)(a) of the impugned Act, however, is restricted to aggravated forms of prejudicial activity. It deals specifi cally with incitement to violent crimes and does not deal with acts that generally concern themselves with the mainte nance of public order. That being so, the decision in Romesh Thalbar 's case(1) given on the constitutionality of section 9(1 A) of the Madras Maintenance of Public Order Act has no relevancy for deciding the constitutionality of the provi sions of section 4(1)(a) of the Indian Press (Emergency Powers) Act. Towards the concluding portion in Romesh Tha par 's judgment(1) it was observed as follows : "We are therefore of opinion that unless a law restrict ing freedom of speech and expression is directed solely against the undermining of the security of the State or the overthrow of it, such law cannot fall within the reservation under clause (2) of article although the restrictions which it seeks to impose may have been conceived generally in the interests of public order. It follows that section 9(I A) which authorizes imposition of restrictions for the wider purpose of securing public safety or the maintenance of public order falls outside the scope of authorized restric tions under clause (2), and is therefore void and unconsti tutional. " The restrictions imposed by section 4(1)(a) of the Indian Press (Emergency Powers) Act on freedom of speech and expression are solely directed against the undermining of the security of the State or the overthrow of it and are within the ambit of article 19(2) (1) 94. 660 of the Constitution. The deduction that a person would be free to incite to murder or other cognizable offence through the press with impunity drawn from our decision in Romesh Thapar 's case(1) could easily have been avoided as it was avoided by Shearer J. who in very emphatic terms said as follows: " I have read and re read the judgments of the Supreme Court, and I can find nothing in them myself which bear directly on the point at issue, and leads me to think that, in their opinion, a restriction of this kind is no longer permissible. " Be that as it may, the matter is now concluded by the language of the amended article 19(2) made by the Constitu tion (First Amendment) Act which is retrospective in opera tion, and the decision of the High Court on this point cannot be sustained. Basant Chander Ghosh contended that the amendment made in article 19 (2) of the Constitution with retrospective operation was repugnant to article 20 of the Constitution inasmuch as it declared a certain act an offence which was not an offence at the time when the act was committed. This contention is untenable. The respondent is alleged to have violated the provisions of section 4(1)(a) of the Indian Press (Emergency Powers) Act which was a law in force in the year 1949 when the offending pamphlet was published. She has not been convicted of any offence so far and is not being again convicted for the same by reason of the amend ment in article 19(2). Article 20 has no application whatev er to the present case. Article 19(2) empowers a legislature to make laws imposing reasonable restrictions on the funda mental rights conferred under article 19(1) of the Constitu tion. It does not declare any acts which were not offences before as offences with retrospective effect. Moreover, in the year 1949 the respondent was not possessed of any funda mental right which could be said to have been contravened by the amendment. Though, as I have said above, the High Court is in error in the finding that the provisions of section ,4(1)(a) (1) [1950] S.C.R. 594, 661 of the Indian Press (Emergency Powers) Act are repugnant to the Constitution, its judgment has to be maintained as it is also in error in holding that the pamphlet in question fell within the mischief of section4 (1)(a) of the Indian Press (Emergency Powers) Act. The document is written in high flown Bengali language and contains a good deal of demagogic claptrap with some pretence to poetic flourish. It enunciates certain abstract propositions in somewhat involved language and it cannot be followed except with considerable effort. The High Court held that the document offended against the provisions of section 4(1)(a) inasmuch as certain parts of it contemplate a bloody and violent revolution and that the central theme that runs through the whole gamut of the offending pamphlet is that the author is anxious to bring about a bloody revo lution and change completely the present order of things by causing a total annihilation of the persons and the policies of those who according to him are in the opposite camp. Particular reference was made to the following passages in the writing which in the opinion of the learned Judges support that conclusion. The first of these passages is in these words : "Oh thou foolish oppressor, you want to cause abject terror in me with your red eyes and full throated voice do that, I am not afraid . . My pro test is against parochial national politics. "Another passage reads thus : `` Death is my secret love; poison is my drink the flames of fire are my sweet breeze; the wailing of a hundred be reaved childless mothers is just a tune in my flute; the weeping of widows at their widowhood is just a rhythm of my song. " The next passage referred to is in these terms : "I am the cremation ground. I am the bloodthirsty goddess Kali who lives and moves about in the cremation ground. Plague or famine is my great joy . . I am thirsty, I want blood, I want revolution,. 662 I want faith in the struggle. Tear, tear the chain of wrongs; Break thou the proud head of the oppressor. " Reference was also made to a passage in which the writer desires that his cries should be heard by people far and near, that his call should be hearkened far far away across the hills, the jungles, across the rivers and rivulets and all those who hear should come forward to join the ranks in destroying the oppressor and in which he claims that he is the messenger of death, that his revolutionary song signals the door of each of the listeners and signals to them to come out if they have life, if they have health, if they have courage to come and dash to pieces those who commit oppression on the mother, and he says that with the blood of those followers let the revolution grow. It winds up with an invocation to the readers in these terms : "If you are true, if you are the gift of God, if you are not a bastard, then come forward with a fearless heart to struggle against the oppressors ' improper conduct, oppres sion and injustice. We should not tolerate wrongful oppres sion. Oh, thou the people with the burning pain of thine heart burn the heart of the oppressive, high handed oppres sor. Let all wrongs, all high handedness, all oppressions, all tyrannies be burnt in the flame. " It seems to me that the learned Judges of the High Court took this writing too seriously. It did not deserve that consideration. It is some kind of patch up work, with no consistency or cohesion between its different parts. Por tions of it are unmeaning nonsense and in other parts it talks of revolution in the abstract. There is no appeal to anybody in particular or for any known or specific cause. No mention is made of any specific kind of oppression or injus tice that is intended to be remedied. The desire is. to change the face of the earth by ending all oppression, tyranny and injustice. Their is no evidence whatsoever for connecting this pamphlet with any agitation or movement at the time it was written in that locality. I have read the writing several times and I think that Mr. Ghosh is 663 right when he says that the pamphlet contains merely empty slogans, carrying no particular meaning except some amount of figurative expression or language borrowed at random from various authors with a touch of poetic flourish about it. Writings of this characters at the present moment and in the present background of our country neither excite nor have the tendency to excite any person from among the class which is likely to read a pamphlet of this nature. They will necessarily be educated people. Such writings leave their readers cold and nobody takes them seriously. People laugh and scoff at such stuff as they have become too familiar with it and such writings have lost all sting. Any non descript person who promises to change the order of things by bloody revolution and assumes the role of a new Messiah is merely the laughing stock of his readers and creates an adverse impression against himself, rather than succeed in stirring up any excitement in the minds of the readers. Rhetoric of this kind might in conceivable circumstances inflame passions as, for example, if addressed to an excited mob, but if such exceptional circumstances exist it was for the State Government to establish the fact. In the absence of any such proof we must assume that the pamphlet would be read by educated persons in the quietness of their homes or in other places where the atmosphere is normal. I would therefore hold, in the words of my brother Bose in Bhagwati Charan Shukla vs Government of C.P. & Berar(1), that though the pamphlet in question uses extravagant language and there is in it the usual crude emotional appeal which is the stock in trade of the demagogue as well as a blundering and ineffective attempt to ape the poets, that is all, and there is nothing more in it. The time is long past when writings of this kind can in normal circumstances excite people to commit crimes of violence or murder or tend to excite any body to commit acts of violence. Again the language employed is full of mysticism and (I) I.L.R. 664 cannot be easily understood and it creates no impression of any kind on any person. In order to determine whether a particular document falls within the ambit section 4(1), the writing has to be considered as a whole and in a fair and free and liberal spirit, not dwelling too much upon isolated passages or upon a strong word here and there, and an endeavour should be made to gather the general effect which the whole composi tion would have on the mind of the public. Expressions which are the stock in trade of political demagogues and have no tendency to excite anybody, and exaggerations in language cannot lead to that result. The learned Government Advocate placed reliance on the decision of Harries C.J. in Badri Narain vs Chief Secretary, Bihar Govermnent(2). The learned Chief Justice therein held that in order to show that cer tain words fall under section 4 (1) (a) it is not necessary to show that the words tend to incite or to encourage the commission of a particular offence or offences and that it is sufficient if they tend to incite to or to encourage the commission of cognizable offences of violence in general. In that case, a poem entitled "Labourers, the mainstay 'of the world" began by emphasising that labourers are the mainstay of the present world and then proceeded to describe their unfortunate and pitiful lot. In a subsequent portion the author stated that though speechless today, when organized, the labourers will be as powerful as millions and this portion of the poem ended with these words: "Why are you helplessly tolerating the exploitation of your masters." The remaining lines were as follows: "Labourers, raise now the cry of revolution. The heavens will tremble, the Universe will shake and the flames of revolution will burst forth from land and water. You who have been the object of exploitation, now dance the fearful dance of destruction on this earth; truly, labourers, only total destruction will (2) A.I.R. 1941 Pat.132 665 create a new world order and that will bring happiness to the whole world. " It is quite clear that here an appeal was made to la bourers inciting and encouraging them to commit acts of violence. The words used certainly tended to achieve that result. They were no empty slogans or abstract propositions. It had one consistent and coherent purpose, i.e., to excite labourers and to bring them into action. Any observation made about this writing can have no apt application for the determination of the present case. The learned Chief Justice in the concluding part of the judgment very pertinently pointed out that a commonsense interpretation must be given to the document complained of, the question to be answered always being, what impression will the documents or words give to a man of ordinary commonsense. My answer to this query in the present case is that the document read at first sight is not intelligible unless it is explained to that man of ordinary commonsense by a learned person and hence it can by itself create no impression of any kind on such a person. After the writing is explained to such a man, he will merely laugh at it and throw it in the waste paper basket without taking it seriously. He will refuse to believe that a person of this kind can create a new world order by appealing to a bloody revolution. As I pointed out in my judgment in Harkrishan Singh vs Emperor(1), the use of such words as appear in this document creates no impression on the mind of any reasonable reader. That case dealt with clause (d) of section 4 (1), but the principle underlying it also applies to the construction of writings which are alleged to fall under section 4 (1) (a). I do not mean to suggest or to lay down as a general propo sition that some of the words used in the pamphlet in ques tion in the context of any other writing would not fall within the mischief of section 4 (1) (a). Certain parts of the pamphlet, if read as isolated passages, may have the tendency to excite people to commit (I) A,I.R, 666 crimes of violence but that is not the effect if the pam phlet is read in its entirety. The result is that I would dismiss the appeal but in the circumstances would make no order as to costs. The State Government has succeeded in its contention that sec tion 4 (1) (a) of the Act is constitutional and that was the real ground on which it came to this Court. PATANJALI SASTRI C.J. I agree with the judgment just delivered by my learned brother Mahajan J. and have nothing to add. MUKHERJEA J. I concur in the judgment delivered by my learned brother Mahajan J. and I would like to say a few words, regarding the publication itself which led to the demand of security by the Government under the provision of the Indian Press (Emergency) Act. The point that requires consideration is, whether the words contained in the impugned publication are of the nature described in section 4 (1) (a) of the Act; or in other words whether they incite to or encourage or tend to incite to or to encourage the commission of any offence of murder or any cognizable offence involving violence. It is well settled that to arrive at a decision on this point, the writing is to be looked at as a whole without laying stress on isolated passages or particular expressions used here and there, and that the court should take into consideration what effect the writing is likely to produce on the minds of the readers for whom the publication is intended. Account should also be taken of the place, circumstances and occa sion of the publication, as a clear appreciation of the background in which the words are used is of very great assistance in enabling the court to view them in their proper perspective. The leaflet in question is entitled "Sangram" or struggle. It is written in high flown Bengali prose with a large mixture of poetic expressions borrowed at random from the writings of some well known 667 poets of Bengal. The object of the writing as far as could be gathered from the document is to give a poetic or ideal istic picture of what is meant and connotated by "struggle"or revolution. The aim and end of "struggle ", as stated in the leaflet, is to wipe outs, "oppression, injus tice or wrong" which is "pervading all over the world from the past to the future"; and it is only after all wrongs, injustice and oppression have perished that a new world could be built up. This seems to be the main or central theme of the composition, clothed, though it is, under much incoherent talk and seemingly meaningless utterances. There is no indication throughout the writing as to what kind of oppression, injustice or wrong the author had in mind. Far from referring to grievances of any specific character, the writer does not even hint at such general causes of discon tent as political inequality, economic exploitation or class warfare which are the subject matter of agitation in many parts of the world. The leaflet does not give indication also of any unpopular measure or act of injustice affecting the minds of the people in the particular area where it was published and within which it was intended to be circu lated. In one part of the document the following words are found to occur: "If mother be true, let no disgrace spread in the name of the mother. If mother tongue be equal to mother, then the said language is your most revered goddess. Do not allow disgrace to spread in her name". It is not the case of the Government and there is no statement or affidavit to that effect, that the passages here have any reference to the language controversy which agitated and probably is still agitating this particular district. In another part of the document the expression "narrow parochial politics" has been used, but here again the Government has not made any attempt to explain, what this expression could, in the particular context, mean or refer to. As no acts of injustice or oppression are actually mentioned in the document, it is difficult to say who the "oppressors" are, whose "proud heads" the author asks his 668 readers to break. It is quite clear that the "oppressor" mentioned here is neither the Government nor the party in power, nor has it any relation to any particular class of persons or a sect or community which might be harassing others and trampling upon their rights. It may be, that to attract the operation of section 4 (1) (a) of the Indian Press Act, the incitement to murder or violence need not be specifically directed against particular individuals or class of persons; but when the whole talk is about injustice or oppression in the abstract, which is stated by the author to be in existence from the beginning of time and when in hyperbolic language a hope is expressed of establishing a better and a cleaner world through struggle, sweat and blood, the words used may not improperly be looked upon as an effusion of poetic fancy which, having no relation to actual facts can have very little potency for doing mis chief. I will now proceed to examine the contents of the pamphlet in detail. The writer begins in an affected poetic vein and de scribes, in language, to which it is difficult to attach any rational meaning, what "struggle" or revolution is. The "struggle" which is personified in the article introduces itself in the following manner: "I am not wealth, nor popular strength, not the people nor fame;. I am not joy nor a brag, nor the timid look of the beloved 's eyes . I am not mother 's affection, nor sister 's love". If these words convey any sense, they can only mean that the struggle or revolution which the writer wants to depict is something different from what we ordinarily associate with our social life and happiness; it is a negation of all natural human feelings and sentiments. The next paragraph says in equal enigmatical language what "Sangram" or "strug gle" actually is. "I am old antiquated history" thus the article proceeds; " I am time eternal, I am the future, the present and the past, in my heart is written the story of the past, the problems of the present and the voice of the 669 future". I do not know whether this is a poetic way of depicting the entire life process which is said to lie through struggle and guide our evolution in this planet. Struggle, according to the author, is coeval with time and eternity. In the next paragraph the writer passes on to say with many repetitions of the word "wrong" that "it is wrong which is pervading all over from the past to the future", and it is this wrong that is to be righted by the struggle. The struggle here is likened for reasons best known to the author to a piece of torn grass in the middle stream of a turbulent river, and to a grain of dust thrown in the face of a cyclone. "It is dishonour, Unhappiness, endless pain. " It is again likened successively to the frown of the be loved, to famine, storm and evil days. The call is sent to everybody to come on "where the sky is cracking and the endless rough and thorny path is shrouded in darkness" and assist in building up a new world. Many of the expressions used here are taken verbatim from the writings of some well known Bengalee authors, though they sound nothing but a rigmarole in the present context. The next paragraph begins with the word "revolution". Struggle is revolution and through struggle and revolution the world is to be built anew. It is then said that "death is my darling and death is the only truth in this world". If one has to die, there is no sense in dying of illness. Let a man choose an honourable death by standing against oppressors. Quite abruptly the author brings in the name of Sri Subhas Chandra Bose in the midst of this talk and asks his readers to listen "far far away across the hills, across the jungle, across the rivers and rivulets the call of Subhas Chandra Bose, the greatest revolutionary leader of the world". The people are asked not to stop until the objective is attained. Again it is said "I am struggle, I am revolution . I am a Hindu, I am a Mussalman, I am a Christian, I am a Jew, I am a Keduin, I am severed from all religions by the fruits of my action in previous births". Without the least attention to any sequence of thought, immediately 670 after this, the imaginary oppressor is addressed by the author as follows: "Oh you foolish oppressor you want to terrify with your red eyes, I fear not." The author, or rather the personified "struggle" which purports to speak, then repeats the well known words of poet Tagore and says that he does not seek salvation through renunciation; he wants that salvation which lies in joy amidst innumerable dangers and difficulties. The idea of finding joy in all that is hated, avoided and dreaded in this world is elaborated in the passages that follow. "Death" it is said "is my secret love, poison is my drink, the flames of fire are my sweet breeze, the cry of childless mothers a tune in my flute and the weeping of widows a rythm of my song". In this vein the author goes on conjuring up all the uncanny and weird things in the world and associat ing them with struggle. "I am not joy, I am the remnant of the dying cries . I am the bloodthirsty goddess Kali who lives and moves about in the cremation ground. I want blood . . Break the proud head of the oppressor. I bathe in flames . . . Thunder is my kiss of affection . . I do not understand myself. I do not know myself. I do not recognise myself still I want revo lution, still I want struggle". The learned Judges of the High Court laid very great stress on these passages which in their opinion constitute a direct incitement to bloody revolution; and that is also the line of argument adopted by Mr. Mitter who appeared before us on behalf of the State. It has been argued by Mr. Ghosh appearing for the respondent that the "struggle" which the author has depicted and which he aims at is a non violent struggle and the blood that is to be shed is the blood of those who are called upon to resist oppression and injustice. On the other hand, it is argued on behalf of the State that the passages quoted above can only mean that it is a bloody and violent revolution which could carry men to their desired end. In my opinion, neither of these contentions furnish to us the proper method of approach to the question which requires 671 decision in the present case. We would have to look at the article as a whole and focus our attention on what can be regarded to be its central theme or purpose. As has been said already, what the writer wants is to draw an ideal picture of "struggle" or revolution quite unconnected with any particular place, or any particular political or social environment. Injustice or oppression exists, according to the author, from the very dawn of time and so also does struggle or revolution. It is an integral part of the world process and is a sort of irrational or blind impulse. This is expressed by saying "I do not understand myself,I do not recognise myself, still I want revolution". In painting death or war, the artist would naturally choose some uncanny associations. The trappings of revolution, as the author paints it, are all the fearful and hideous things in this world. It is linked up with thunder and storm, fire and devastation, cataclysm, famine, danger, destruction and death. It is immaterial so far as this ideal picture is concerned whether the blood that is spoken of is the blood of the oppressor or of the oppressed, and whether the strug gle is violent or pacific. The goddess Kali in the Hindu mythology is the goddess of destruction and death, but she is the benign goddess also whose protecting hands ward off all oppressions, danger and calamity. That is the reason why revolution or struggle is assimilated to this goddess. It cannot be denied that in painting this picture of "strug gle" or revolution the author has used very strong words; but they would not be unnatural if it is only an ideal picture that the author really desired to paint. If howev er, it can be shown that under the cloud of these general enigmatical words something concrete and tangible lies hidden, that the "oppression" and "oppressor" are not imagi nary abstractions but are real things not unknown to the people to whom the article is addressed and there is in fact a grievance agitating the popular mind, no matter whether it is well or ill founded, against which the author desires to inflame public opinion;then even though he uses veiled or covert language, there 672 can be no doubt that the article would come within the purview of section 4 (1) (a) of the Indian Press Act. But the difficulty is that the Government has not made any attempt to establish any of these facts. Without knowing the attendant circumstances and the actual background of the publication, it is not possible for us to ascertain the real intention that lies behind the writing; and absolutely no materials have been placed before us by the Government which might enable us to find out what in reality was the sub stance behind this camouflage of words, if camouflage it actually is. The rest of the article proceeds in the same hyperbol ic and enigmatical style There is repetition ad nauseam of the same stock phrases and expressions. It goes on to say "I am the messenger of death. I am untouchable, I am vague, I am queer, 1 am nightmare, I am robber, I am enemy, I am un known. 1 am not Falgoon with its sweet smelling flowers; I am eternal separation, I am restlessness". I am extremely doubtful whether expressions like these would not, to an ordinary reader, appear to be anything better than the ravings of a mad man. I will cull a few more expressions which occur subsequently and which loftily this impression. "I see struggle on my darling 's face, I see struggle in the honey of flowers. I am storm, I am the Deepak Ragini. I am misfortune. I am cry of distress, I am jealousy, I am evil days. " The concluding portion of the article reads as follows: `` Let me speak the last word: If you are true, if you are gift of God, if you are not a bastard. then come forward with a fearless heart, struggle against the oppressor 's improper conduct, oppression and injustice. We shall not tolerate wrongful oppression. Oh, the people, with the pain of your heart burn: the heart of the oppressive high handed oppressor, let all wrongs, all high handedness, all oppres sions, all tyrannies be burnt in the flame. " 673 There was a good deal of discussion before us as to whether these passages hint at a violent or a non. violent struggle. It may be capable of either interpretation. but as I have said already, that by itself would not afford a decisive solution of the question before us. It is also not much material to consider whether the author wants that "Jealousy and malice" which he has referred to at the end of the article, are to develop and spread or they are to be transformed into innocuous and sweet smelling flowers. This is certainly a matter upon which difference of opinion is possible. After all, we are to see what impres sion the article read as a whole would produce upon ordinary people. An ordinary reader is not expected to seek the assistance of an interpreter in trying to find out the true meaning of the words used. As has been said already, many of the expressions used here have been taken verbatim from the writings of certain noted Bengalee authors. They are stock phrases current in Bengal and amongst the Bengali speaking community elsewhere. If it strikes the reader that what the author wanted was to pass himself off as a noted writer by sheer plagiarism, then whatever else may be said about the article, it certainly does not come within the purview of section 4 (1) (a) of the Press Act. Taking the article as it is, it is nothing but a tissue of high sounding and meaningless words and whether the author wanted to imitate some of the welt known poets of Bengal in attempting to give a poetic description of "strug gle"or revolution or wanted to give himself the pose of a liberator of mankind, out to wipe out the last vestiges of oppression and injustice from the face of the earth, no rational person would take him seriously and would look upon this composition as the vapourings of a deranged brain. If, on the other hand, the whole thing is a clever ruse resorted to with the object of inflaming the popular mind against certain persons or authorities, and although only general and vague words are used, the words have their meaning and significance to those 674 who are acquainted with the actual situation, it was incum bent upon the Government to clear up these matters and present before us the background and the context without which no meaning could be attributed to this species of empty verbiage. As Government did not discharge the duty that lay upon them, I am clearly of opinion that no security order could be passed against the respondent under the provision of section 4 (1) (a) of the Press Emergency Act. DAS J. During the course of the arguments I enter tained some doubt as to the innocence of the meaning and implication of the pamphlet in question, but, in the light of the judgments of my learned brothers Mahajan J. and Mukherjea J., which I have had the advantage of perusing since, I do not feel that I would be justified in dissenting from the construction they have put upon the language used in the pamphlet. I accordingly concur in their conclusion. Bose J. I agree with my brothers Mahajan and Mukher jea. Appeal dismissed.

Section 4 (1) (a)of the Indian Press (Emergency Pow ers) Act (XXIII of 1931) is not unconstitutional as the restrictions imposed on freedom of speech and expression by the said section are solely directed against the undermining of the security of the State or the overthrow of it and are within the ambit of article 19(2) of the Constitution. Romesh Thapar 's case ([1950] 655 S.C.R. 594]) and Brij Bhushan 's case ([1950] S.C.R. 605)do not lay down any wide proposition that restrictions of the nature imposed by section 4 (1) (a) are outside the scope of article 19 (2) as they are conceived generally in the interests of public order. At any rate, the amendment made to article 19 (2) by the Constitution (First Amendment) Act which is retro spective in operation makes the matter clear. In order to determine whether a particular document falls within the ambit of section 4(1) the writing has to be considered as a whole in a fair, free and liberal spirit, not dwelling too much on isolated passages or upon a strong word here and there, and an endeavour should be made to gather the general effect which the whole composition would have on the minds of the public. Expressions which are the stock in trade of political demagogues and have no tenden cy to excite anybody, and exaggerations in language, cannot lead to that result. Rhetoric of this kind might in con ceivable circumstances inflame passions, as for example, if addressed to an excited mob, but if such circumstances exist it is for the Government to establish the fact.

In the writ petition filed before this Court regarding alleged handcuffing of a practising advocate, contrary to law, while he was being taken to the court after he had been arrested on the charge of a criminal offence, it was alleged that the Union Government and the Delhi Administration had not issued necessary instructions to the police authorities with regard to the circumstances in which an accused, arrested in a criminal case, could be handcuffed or fettered in accordance with the judgment of this Court in Prem Kumar Shukla vs Delhi Administration, The question whether this Court can issue a writ for bringing into force section 30 of the , providing the right to every advocate, whose name was entered in the State roll to practice throughout the territories to which the Act extended before the Courts, Tribunals and other authorities or persons referred to in the Scction, in view of section 3(1) of the Act empowering Central Government to decide the dates on which various provisions of the Act, including section 3. should be brought into force, also came up for consideration. On behalf of the respondents, it was submitted that it was for the Union of India to issue necessary instructions regarding handcuffing of an accused to all the State Governments and the Governments of Union Territories in accordance with the judgment in P.K. Shukla 's case, and that this Court had jurisdiction to issue a writ directing the Central Government to consider the question of bringing into force section 30 of the . PG NO 223 PG NO 224 Disposing of the writ petition, HELD: 1.1 It is not open to this Court to issue a writ in the nature of mandamus to the Central Government to bring a statute or a statutory provision into force when according to the said statute the date on which it should be brought into force is left to the discretion of the Central Government. [229D] A. K. Roy, etc. vs Union of India and Another, ; , followed. However, this Court is of the view that this cannot come in the way of this Court issuing a writ in the nature of mandamus to the Central Government to consider whether the time for bringing section 30 of the into force has arrived or not. [229E] 1.2 Every discretionary power vested in the Executive should be exercised in a just, reasonable and fair way. That is the essence of the rule of law. [229F] In the instant case, the Act was passed in 1961 and nearly 27 years have elapsed since it received the assent of the President of India. In several conferences and meetings of lawyers resolutions have been passed in the past requesting the Central Government to bring into force section 30 of the Act. It is not clear whether Central Government has applied its mind at all to the question whether section 30 of the Act should be brought into force. [229F G] Even today there are laws in force in the country which impose restrictions on the fight of an advocate to appear before certain courts, tribunals and authorities. ln many of the cases which come up before the Courts or Tribunals before which advocates cannot appear, as of right, questions of law affecting the rights of individuals arise for consideration and they need the assistance of advocates. We have travelled a long distance from the days when it was considered that the appearance of a lawyer on one side would adversely affect the interests of the parties on the other side. The legal Aid and Advice Boards, which are functioning in different States, can now be approached by people belonging to weaker sections, such as, Scheduled Castes, Scheduled Tribes, women, labourers etc. for legal assistance and for providing the services of competent lawyers to PG NO 225 appear on their behalf before the Courts and Tribunals in which they have cases. In these circumstances prima facie there is no justification for not bringing into force section 30 of the Act. [227D, G H, 228A B] 1.3 Even though the power under section 30 of the is discretionary, this Court is of view that the Central Government should be called upon to consider within a reasonable time the question whether it should exercise the discretion one way or the other having regard to the fact that more than a quarter of century has elapsed from the date on which the Act received the assent of the President of India. [230A] A writ in the nature of mandamus will issue to the Central Government to consider within a period of six months whether section 30 of the Act should be brought into force or not. The Union of India is directed to frame rules or guidelines as regards the circumstances in which handcuffing of the accused should be resorted to in conformity with the judgment of this Court in Prem Shankar Shukla vs Delhi Administration, and to circulate them amongst all the State Governments and the Government of Union Territories within three months.[226E] Prem Shankar Shukla vs Delhi Administration, ; , referred to.

On the allegations that the appellant in the Criminal Appeal along with two other accused were in possession of railway property which they had obtained under forged railway receipts, the Inspector of the Railway Protection Force lodged a complaint against the three accused that they were guilty of offences under section 3(a) of the Railway Property (Unlawful 15 Possession) Act, 1966 and action should be taken against them. In the Complaint it was mentioned that accused 2 and 3 were absconding and annexed to the complaint was (I) a list of prosecution witnesses and (2) a list of documents. The appellant, who was accused I appeared before the Presidency Magistrate who commenced an enquiry and recorded the statements of four witnesses one on March 2, 1973 and of the other three on June 12, 1973. On June 11, 1973 the appellant moved an application before the Magistrate making a grievance that although three witnesses had been examined, no copies of the document were furnished to him. On June 25, 1973 he made a further application requesting for supply of true copies of all the documents in the case to enable him to prepare the defence and that he should be permitted to take photostat copies of the documents. The Magistrate on August 9, 1973 rejected the appellants ' application on the ground that the offence complained of against him was not cognizable and that the provisions of section 251 (a) of the Code of Criminal Procedure were not applicable and consequently, he had no right to obtain copies of the documents concerned. On August 24, 1973 the Magistrate framed a charge under section 3(a) of the Act. The accused pleaded not guilty and again made an application repeating his request for copies of the statements of witnesses recorded by the Inspector R.P.F. This application was also rejected by the Magistrate on September 7, 1973. 176 Feeling aggrieved by the orders passed by the Magistrate on August 9, 1973 and September 7, 1973 the appellant invoked the inherent jurisdiction of the High Court by a petition under section 561A of the Code of Criminal Procedure, 1898 and prayed that the orders be quashed. He challenged the constitutional validity of section 9 of the Act in the petition. The High Court rejected the petition. In the appeal to this Court it was contended on behalf of the appellant (a) relying on Raja Ram Jaiswal vs State of Bihar; , that the expression "Police officer" in section 25 of the Evidence Act must be considered in a wide popular sense, so as to include within its ambit all officers of Government who are in substance invested with the power to investigate certain offences in accordance with the provisions of the Code of Criminal Procedure 1898 irrespective of the fact that they are differently labelled such as Excise officers or Customs officers or members of R.P.F., otherwise the very object of section 25 will be defeated. An Inspector of the R.P.F. making an inquiry under the Railway Property (Unlawful Possession) Act 1966 into an offence under section 3 of that Act, in substance, acts and exercises almost all the powers of a 'Police officer ' making an investigation under the Code of Criminal Procedure and any confessional statement recorded by such Inspector will be hit by section 25 Evidence Act. The case of State of U.P. vs Durga Prasad, ; was not correctly decided and that its ratio needs reconsideration by a larger Bench because it has overlooked the test laid down by the three Judge Bench in Raja Ram Jaiswal 's case. (b) As soon as a person is arrested by an officer of the Force on a suspicion or charge of committing an offence punishable under the 1966 Act, he stands in the character of a "person accused of an offence" and any confessional or incriminating statements recorded by an officer of the Force in the course of an inquiry under section 8(1) of the 1966 Act, cannot be used as evidence in view of the constitutional ban against "compelled testimony" imposed by article 20(3) of the Constitution. On behalf of the respondent it was submitted that: (a) an officer of the R.P.F. while making an inquiry under the 1966 Act cannot be equated with a police officer in charge of a Police Station making an investigation under the Code. The important difference in their powers is, that the R.P.F. Inspector has no power to submit a report or a charge sheet under section 173 of the Code. The decision of this Court in Raja Ram Jaiswal 's case stands on its own peculiar facts and was distinguished in a later decision by a Constitution Bench of this Court in Badku Joti Savant vs State of Mysore, ; The correct test for determining whether or not R.P.F. Officer is a police officer for the purpose of section 25 of the Evidence Act is the one which was consistently applied in State of Punjab vs Barkat Ram ; , & Romesh Chandra Mehta vs West Bengal (b) The conditions necessary for the attraction of the ban in article 20(3) do not exist in the instant case because before the filing of the complaint in the Court, the appellant was not a "person accused of an offence" and that it was nowhere alleged that the confessional or incriminating statements were extorted by the R.P.F. Officer under physical duress, threat, inducement or mental torture. 177 on the questions: (1) whether an officer of the Railway Protection Force making an inquiry under the Railway Property (Unlawful Possession) Act, 1966 in respect of an offence under section 3 of that Act of unlawful possession of the railway property is a police officer for the purpose of section 25 of the Evidence Act and section 162 of the Code of Criminal Procedure 1898 and whether any confession or incriminatory statement recorded by him in the course of an inquiry under section 8 of the Act is inadmissible in evidence, and (2) whether a person arrested by an officer of the Railway Protection Force under section 6 of the Act for the alleged commission of an offence under section 3 of the Act is "person accused of an offence" within the meaning of article 20(3) of the Constitution: ^ HELD: 1. An officer of the R.P.F. conducting an enquiry under section 8(1) of the 1966 Act has not been invested with all the powers of an officer in charge of a police station making an investigation under Chapter XIV of the Code. Particularly, he has no power to initiate prosecution by filing a charge sheet before the Magistrate concerned under section 173 of the Code, which he has been held to be the clinching attribute of an investigating 'police officer '. An officer of the R.P.F. could not therefore be deemed to be a "police officer" within the meaning of section 25 of the Evidence Act, and therefore, any confessional or incriminating statement recorded by him in the course of an inquiry under section 8(1) of the 1966 Act, cannot be excluded from evidence under the said section. [201C E] 2. The term 'police officer ' has not been defined in the Evidence Act The policy behind sections 25 and 26 of Evidence Act is to make a substantive rule of law that confessions whenever and wherever made to the police shall he presumed to have been obtained under the circumstances mentioned in section ' 24 and therefore, inadmissible except so far as is provided in section 27 of that Act. [182F, E] Ariel vs State A.I.R. 1954 S.C. 15, referred to. The primary object of constituting the Railway Protection Force is to secure better "protection and security of the railway property". The restricted power of arrest and search given to the officers or members of the Force is incidental to the efficient discharge of their basic duty to protect and safeguard Railway Property. No general power to investigate all cognizable offence relating to Railway Property, under the Criminal Procedure Code has bee. conferred on any superior officer or member of the Force by the 1957 Act [185F G] 4. The main purpose of passing the 1966 Act was to "invest powers of investigation and prosecution" of offences relating to railway property in the RPF "in the same manner as in the Excise and Customs." Inspite of provision in the Code of Criminal Procedure to the contrary, offences under this Act have been made non cognizable and, as such, cannot be investigated by a police officer under the Code. It follows that the initiation of prosecution for an offence inquired into under this Act can only be on the basis of a complaint by an officer of RPF and not on the report of a police officer under section 173(4) of the Criminal Procedure Code, 1898. [187A, 188B] 5. Section 14 makes clear that the provisions of the Act shall override all other laws. which means that anything in the 1966 Act which is inconsistent 178 with the Code, will prevail and the application of the Code pro tanto will be excluded. The scheme of the 1966 Act, particularly the provisions in sections 5, 8, 9(3), (4) is different from that of the Code. The Code, therefore, cannot proprio vigore apply to an enquiry conducted under section 8(1) of the 1966 Act by an officer of the Force. [189G, 190A] 6. An analysis of clause (3) of article 20 shows three things: Firstly, its protection is available only to a "person accused of any offence". Secondly, the protection is against compulsion "to be a witness". Thirdly, this protection avails "against himself". [202F] 7. Only a person against whom a formal accusation of the commission of an offence has been made can be a person "accused of on offence" within the meaning of article 20(3). Such formal accusation may be specifically made against him in an F.I.R. or a formal complaint or any other formal document or notice served on that person, which ordinarily results in his prosecution in Court. [204F] In the instant case no such formal accusation had been made against the appellant when has statement(s) in question were recorded by the R.P.F. Officer. He did not at that time, stand in the character of a person "accused of an offence" and as such, the protection of Article 20(3) will not be available to him. [203F G] Kathi Raning Rawat vs The State of Saurashtra ; , K. Joseph Augusthi & Ors. vs M. A. Narayanan , Mohamed Destagir vs The State of Madras ; , Bhagwan Das, Crl. 131 132/61 decided on 20 9 63, Bhogilal Shah & Anr vs D. K. Guha & Ors ; , M. P. Sharma vs Satish Chandra ; , Smt. Nandini Satpathy vs P. L Dani & Anr. ; , In re The Special Courts Bill, , Raja Narayanlal Bansilal vs Maneck Phiroz Mistry & Anr. ; , State of Bombay vs Kathi Kalu Oghad & Ors. ; , ref to.

Appellant No. 1 filed a petition challenging the election of the first respondent from the Lambi Assembly Constituency ( 'reserved seat) in the district of Ferozepur, Punjab, at the 1967 general election. It was urged in the petition that the nomination paper of appellant No. 2 had been wrongly rejected by the Returning Officer who had held that appellant No. 2 was a mochi and as such not a member of the chamar caste mentioned in item 9 of the Constitution (Scheduled Castes) Order, 1950 issued under article 341 of the Constitution. It was also urged that the Returning Officer had at first accepted the nomination paper but had subsequently reviewed his own order. The High Court dismissed the petition, whereupon an appeal was filed in this Court. HELD: (i) On the evidence it was not possible to hold that the Returning Officer had after announcing his decision accepting the nomination paper reviewed his own order afterwards. (ii) No ground had been made out for disturbing the conclusion of the trial court on the evidence that appellant No. 2 was a mochi and not a member of the chamar caste. (iii) It was not open to this Court to scrutinise whether a person properly described as a mochi also fell within the caste of chamars and could describe himself as such. The question was one the determination of which lay within the exclusive power of the President under article 341 of the Constitution. [1003 B C] , Basavalingappa v.D. Munichinnappa & Ors. ; and Bhaiya Lal vs Harikrishen Singh & Ors., ; , applied. Article 341 empowered the President to specify not only entire castes races or tribes but also parts or groups within castes, races or tribes which were to be treated as Scheduled Castes in relation to a particular State or Union Territory. So far as chamars and mochis are concerned, a reference to the Constitution (Scheduled Castes) Order, 1950 shows that the President was not of opinion that they were to be considered to belong to the same caste in all the different States. In several States chamars and mochis were put on the same footing but not so in the State of Punjab. Even after the Reorganisation of the Punjab Act, 1966 when the question of specification of Scheduled Castes in the territories created came up for his consideration the President did not take the view that mochis should be classed with chamars in so far as the States of Haryana, Punjab and the Union Territory of Chandigarh were concerned though he directed that in the Union Territories of Delhi and Himachal Pradesh mochis and chamars were to be placed in the same group. [1000 E, H; 1001 A D]

The petitioner challenged the appointment of Respondent No. 1 as Deputy Prime Minister of India on the ground that the oath administered to him as such was not the oath in accordance with the prescription of the Constitution. The petition was contested by Respondent No. 1 and the Union of India. It was contended for the latter that de scribing Respondent No. 1 as Deputy Prime Minister was descriptive and for all purposes he was a Minister, that the form of oath prescribed in the Third Schedule pursuant to the requirement of Article 75(4) of the Constitution is only for a Minister of the Union, and that there was no separate form even for the Prime Minister. It was further submitted that the prescribed oath is susceptible of division into two parts, descriptive and substantial, and as long as the substantial part is properly followed, as in the instant case, a mere mistake or error in the descriptive part would not vitiate the oath. Dismissing the writ petition, HELD: Respondent No. 1 is just a Minister like other Members of the Council of Ministers though he has been described as Deputy Prime Minister. The description of him as Deputy Prime Minister does not confer on him any power of Prime Minister. It cannot, therefore, be said that the oath administered to him as Deputy Prime Minister was not the oath in accordance with the prescription of the Constitution. [3E, 2D]

Some employees belonging to West Bengal Civil Service (Executive) filed a writ petition before the High Court, praying for a direction to the State Government to frame appropriate seniority rules. The High Court passed an inter im order directing the State Government to frame seniority rules and determine the inter se seniority on that basis within one month of the order. On an application moved by the petitioners the same Judge passed an interim order that the seniority rules framed pursuant to the Court 's order would not be given effect to without leave of the Court and without notice to the writ petitioners. On another applica tion moved by the writ petitioners, the same Judge re strained the State Government from taking any further action on the basis of the draft rules of seniority. Later, the Judgment was delivered allowing the writ petition, holding that the draft rules were ultra vires. Aggrieved, the State Government preferred an appeal before a Division Bench. The Division Bench stayed the operation of the judgment and decree passed by the Single Judge. The Division Bench also directed that the State Government may proceed with the final assessment of the seniority rules. Aggrieved against the said order the writ petitioners filed a Special Leave Petition which was dismissed with a request to the High Court to dispose of the pending writ petition expeditiously within two months. The High Court extended the stay till the disposal of the appeal and directed status quo. Against this order, the original respondents in the writ petition filed a Special Leave Petition before this Court. This Court passed an interim order to the effect that the order passed by this Court earlier would hold the field, not with standing any contrary order passed by the High Court. Later, granting special leave, this Court observed 377 that in view of the interim order no further order need be passed. The present application has been filed by the State for clarification of the two orders of this Court in the context of the order dated 15.9.1989 of the High Court. Disposing of the application, this Court. HELD: 1.1 It is the settled principle of law that any order or direction pronounced by this apex Court in exercise of its jurisdiction in any matter pending before it, that order or direction is binding on all courts within the territory of India and should be implemented and executed in all its rigour. [484D] 1.2 From the report sent by the Division Bench of the High Court dated 15th September, 1989 it seems the latter Division Bench extended the 8 weeks stay on the grounds firstly that the Order of this Court dated 29.8.1989 has not prevented the Division Bench from passing such order and secondly that the 8 weeks stay stood vacated w.e.f. 4th September, 1989. But in fact, the Order of the Court dated 29.8.1989 has restored the order of the first Division Bench of the High Court dated 10.7.1989 on the expiry of 8 weeks and that the 8 weeks stay had expired only by 9.9.1989 and not on 4.9.1989. [484E F] 1.3 It is open to the State Government to act in accord ance with the order dated 10.7.1989 of the High Court. The Order of this Court dated 7.9.1989 in SLP No. 10670/89 has clarified the position to the effect that the Order of this Court dated 29.8.1989 shall hold the field notwithstanding the contrary order passed by the Division Bench of the High Court. The "contrary order" mentioned in the order dated 7.9.1989 refers to the order dated 4.9.199. The resultant position is that this Court by the order dated 7.9.1989 has rendered the order of the second Division Bench of the High Court dated 4.9.1989 inoperative and ineffective. Subse quently, SLP No. 10670/89 was disposed of after grant of leave. Thus the matter now stands concluded that from 10.9.1989 onwards the order of the first Division Bench dated 10.7.1989 has become operative and executable and the interim direction given by that order is brought back to life and resuscitated. [484G H; 485A B]

The appellant in this appeal had been assessed to Income Tax which was reduced on appeal but that assessment was set aside by the Income Tax Appellate Tribunal on the ground that the Indian Finance Act of 1939 was not in force during the assessment year in Chota Nagpur. On a reference by the Tribunal the High Court con firmed the setting aside of this assessment. By the promulgation of Bihar Regulation IV of 1942 by the Governor of Bihar (which was assented to by the Governor General) the Indian Finance Act of 1939 was brought into force in Chota Nagpur retrospectively as from the 30th March 1939. On the 8th February 1944 the Income Tax Officer passed an order in pursuance of which a fresh notice was issued under section 34 which resulted in the assessment of the appellant to income tax. The question for determination in this appeal was whether the notice under section 34 was validly issued. Held (i) that for the purposes of section 34 of the Act the income, profits or gains sought to be assessed were chargeable to income tax according to the scheme of the Act and the provisions of sections 3 and 4 of the Act; (ii) that it was a case of chargeable income escaping assessment within the meaning of section 34 and was not a case of mere non assessment of income tax because the earlier assessment proceedings in the present case had in fact been taken but failed to result in a valid assessment owing to some lacuna which was not attributable to the assessing authorities. C.I.T., Bombay vs Sir Mahomed Yusuf Ismail ([1944] , Fazal Dhala vs C.I.T., B. & O. ([1944] 12 I.T.R. 341), Baghavalu Naidu & Sons vs C.I.T., Madras ([1945] , Raja Benoy Kumar Sahas Boy vs C.I.T., West Bengal ([1953] , Chatturam vs C.I.T., Bihar ([1947] F.C.R. 116), Whitney vs Commissioners of Inland Revenue ([1926] A.C. 37), C.I.T. Bombay & Aden vs Khemchand Ramdas ([1938] at 428), Sir Rajendranath Mukherjee vs C.I.T., Bengal ([1934] , Madan Mohan Lal vs C.I.T., Punjab ([1935] , C.I.T., Bombay vs Pirojbai N. Contractor ([1937] , Kunwar 291 Bishwanath Singh vs C.I.T., C.P. ([1942] , Raja Bahadur Kamakshya Narain Singh vs C.I.T. B. & 0. ([1946] and Chatturam vs C.I.T., B. & 0. ([1946] , referred to.

The fact that the High Court, in a reference under section 374 of the Code of Criminal Procedure, has to appraise the evidence for itself and has to arrive at its own independent conclusion would not prevent this Court from interfering with the order of the High Court if the High Court reverses the judgment of the trial court on grounds which are manifestly fallacious and untenable. This Court in an appeal under article 136 of the Constitution does not normally reappraise the evidence and interfere with the assessment of that evidence by the High Court. Where, however, this Court finds that grave injustice has been done by the High Court in interfering with the decision of the trial court on grounds which are plainly untenable and the view taken by the High Court is clearly unreasonable on the evidence on record this Court would not stay its hand. There are, however, certain cardinal rules which have always to be kept in view in appeals against acquittal. Firstly, there is a presumption of innocence in favour of the accused which has to be kept in mind especially when the accused has been acquitted by the Court below , Secondly, if two views of the matter are possible a view favourable to the accused should be taken; thirdly, in case of acquittal by the trial judge the appellate court should take into account the fact that the trial judge had the advantage of looking at the demeanour of witnesses; and fourthly, the accused is entitled to the benefit of doubt. The doubt should, however, be reasonable and should be such as a rational thinking man will reasonably, honestly and conscientiously entertain and not the doubt of a timid mind which fights shy though unwittingly it may be or is afraid of the logical consequences, if that benefit was not, given. To put it differently, it is "not the doubt of a vacillating mind that has not the moral courage to decide but shelters itself in a vain and idle scepticism,,. [69H 70E] Himachal Pradesh Administration vs Shri Om Prakash, Cr. Appeal No. 67 of 1969 decided on December 7, 1971, referred to.

Appeal No. 358 of 1958. 645 Appeal by special leave from the judgment and order dated 8th March, 1956, of the former Bombay High Court in I.T.R. No. 55 of 1955. A. N. Kripal and D. Gupta, for the appellant. N. A. Palkhivala and B. P. Maheshwari, for the respondents. November 24. The Judgment of the Court was delivered by KAPUR, J. This is an appeal by special leave against the judgment and order of the High Court of Bombay in Income tax Reference No. 55 of 1955, in which two questions of law were stated for opinion and both were answered in favour of the assessee and against the Commissioner of Income tax who is the appellant before us and the assessee is the respondent. The facts of this case are these: The respondent is a registered firm carrying on business as commission agents in Bombay. For purposes of its business it borrowed money from time to time from Banks on joint promissory notes executed by it and by others with joint and several liability. On September 26, 1949, the respondent borrowed Rs. 1,00,000 from the Bank of India on a pronote executed jointly with one Kishorilal. Out of this amount a sum of Rs. 50,000 was taken by the respondent for purposes of its business and the rest by Kishorilal. Kishorilal however failed to meet his liability and became a bankrupt. The respondent had therefore to pay the Bank the whole amount, i.e., Rs. 1,00,000 with interest. Out of the amount taken by Kishorilal the respondent received in the accounting year, from the Official Assignee, a sum of Rs. 18,805 and claimed the balance, i.e., Rs. 31,740 as deduction. The accounting year was from August 26, 1949 to July 17, 1950, the assessment year being 1951 52. This claim was disallowed both by the Income tax Officer as well as the Appellate Assistant Commissioner. On Appeal to the Income tax Appellate Tribunal this sum was allowed ,as an allowable deduction under section 10(2)(xv) of the Income tax Act and as business loss. 82 646 At the instance of the Commissioner a case was stated to the High Court of Bombay by the Income tax Appellate Tribunal. In the statement of the case which was agreed to by both parties the Tribunal said: "For the purpose of his business, he borrows from time to time money on joint and several liability from banks. The Commercial practice is to borrow money from banks on joint and several liability. An illustration will explain what we mean. A and B require Rs. 50,000 each. They find that the Bank would not advance Rs. 50,000 to each on his individual security. They however, find that the Bank would be prepared to advance Rupees one lach on their joint and several liability. They take Rupees one lac on joint and several liability and then divide the money equally between themselves. " It also found that the Banks advanced monies to some constituents on their personal security also but they had to pay a higher rate of interest than when the money was borrowed on joint and several responsibility; that Rs. 1,00,000 borrowed from the Bank was in accordance with the commercial practice of Bombay. On these facts the following two questions of law were referred to the High Court: "(1) Whether the assessee 's claim is sustainable under section 10(2)(xv) of the Act? (2) Whether the assessee 's claim that the loss was a business loss and, therefore, allowable as a deduction in computing the profits of the assessee 's business is sustainable under law?" Both these questions were answered in favour of the respondent and against the appellant. Counsel for the Commissioner challenged the findings of the Tribunal in regard to the existence of commercial practice in Bombay but this ground of attack is not available to him because not only did the Tribunal give this finding in its Order, but in the agreed statement of the case also this finding was repeated as is shown by the passage quoted above. The High Court also has proceeded on the basis of this commercial practice. In the judgment under appeal the learned Chief Justice said: 647 "The finding of the Tribunal is clear and explicit that what the assessee was doing was not something out of the ordinary, but in borrowing this money on joint and several liability he was following a practice which was established as a commercial practice. Therefore, the transaction was clearly in the course of the business and incidental to the business and it is this transaction which resulted in a loss to the assesses, he having to pay the liability of the surety. " Therefore this appeal has to be decided on the basis that a commercial practice of financing business by borrowing money on joint and several liability was established. It was argued on behalf of the appellant that this court in Madan Gopal Bagla vs Commissioner of Income Tax, West Bengal (1) had decided against the allowability of such losses. But the facts of that case when carefully scrutinised are distinguishable and the decision does not support the contentions of the appellant. No doubt certain features of that case and the present one are similar but they differ in essential features. In that case the assessee was a timber merchant who obtained a loan of Rs. 1 lac from the Bank of India on the joint security of himself and one Mamraj, which the assessee paid off. Mamraj also obtained a loan of Rs. I lac on the joint security of himself and the assessee. Mamraj became an insolvent and the assessee had to pay the whole of the amount borrowed with interest thereon. The assessee there received a certain amount of money by way of dividends from the Receiver and the balance he wrote off as bad debt in the assessment year and claimed it as an allowable deduction under section 10. The High Court there held that the debt could not be said to be a debt in respect of the business of the assessee as he was not carrying on the business of standing surety for other persons nor was he a money lender, he being simply a timber merchant; that it had not been established nor was it alleged that he was in the habit of standing surety for other persons "along with them for purposes of securing loans for their use and benefit" and even if money (1) ; 648 had been so borrowed and there had been a loss the loss would have been a capital loss and not a business loss to the assessee. This statement of the law was approved by this Court but there mutuality, as an essential ingredient of the custom established, was found to be lacking as is shown by the following passage from the judgment of the court. "The custom stated before the Appellate Assistant Commissioner was that persons carrying on business in Bombay used to borrow monies on joint security from the Banks in order to facilitate getting financial assistance from the Banks and that too at lower rates of interest. A businessman could procure financial assistance from the Banks on his own, but he would in that case have to pay a higher rate of interest. He would have to pay a lower rate of interest if he could procure as surety another business man, who would be approved by the Bank. This, however, did not mean that mutual accommodation by businessmen was necessarily an ingredient part of that custom. A could procure B, C or D to join him as surety in order to achieve this objective, but it did not necessarily follow that if A wanted to procure B, C or D to thus join him as surety he could only do so if he in his own turn joined B, C or D as surety in the loans which B, C or D procured in their turns from the Banks for financing their respective businesses. Unless that factor was established, the mere procurement by A of B, C or D as surety would not be sufficient to establish the custom sought to be relied upon by the appellant so as to make the transaction of his having joined Mumraj Rambhagat as surety in the loan procured by Mumraj Rambhagat from Imperial Bank of India, a transaction in the course of carrying on his own timber business and to make the loss in the transaction a trading loss or a bad debt of the timber business of the appellant. " Continuing at page 558 it was observed: "There were thus elements of mutuality and the essential ingredient in the carrying on of the money lending business, which were elements of the custom 649 proved in that case, both of which are wanting in the present case before us." Mr. Palkhivala for the respondent rightly argued that Madan Gopal Bagla 's case (1) was decided against the assessee because the custom of persons standing surety for each other for borrowing money and the element of mutuality which was an essential ingredient in the case of Commissioner of Income Tax, Madras vs section A. section Ramaswamy Chettiar (2) was not proved. In the latter case it was established that there was a well recognised custom amongst Chettiars of raising funds for their business of money lenders by the execution of joint pronotes and that if a loss was sustained by one of the executants having to pay the whole on account of inability of the other it was a deductible loss. The appellant also relied on a judgment of the Madras High Court in Commissioner of Income Tax vs section R. Subramanya Pillai (3). In that case the assessee was a book seller who from time to time jointly with another person borrowed money out of which he employed a portion in his business. One of such amounts borrowed was Rs. 16,200 out of which the assessee took Rs. 10,450 for his business needs and the other debtor took the balance. The latter became insolvent and the assessee had to pay the whole of the money borrowed and claimed it as allowable deduction under section 10(2)(xi) or section 10(2)(xv) of the Act or as business loss and it was hold that he was not entitled, because the loss sustained by the assessee was too remote from the business of book selling carried on by him and was not sufficiently connected with the trade and therefore fell outside the range of those amounts which could properly be brought into profit and loss account of the business. The decision in Commissioner of Income Tax vs section A. section Ramaswamy Chettiar (2) was there distinguished on the ground that the decision must be confined to its own peculiar facts and did not apply to business as the one in Subramanya Pillai 's Case (3). The following passage from (1) ; , (2) (3) 650 the judgment of Viswanatha Sastri, J., in that case is relevant: "But there the business was one of money lending and the Court found that according to the wellknown and well recognised mercantile custom of Nattukottai bankers, they were in the habit of raising 'funds which formed the stock in trade of their money lending business by the execution of joint promissory notes in favour of bankers. That was apparently the usual technique of obtaining credit adopted by the Nattukottai Chetti community money lenders. In the context this Court held that where a Nattukottai Chetti money lender paid off in their entirety the debts jointly due by him and another as a result of the latter 's inability to pay, the loss sustained as a result of this transaction was a loss of the moneylending business itself and therefore a deductible item in computing profits. " In the instant case it has been found that there was a well recognised commercial practice in Bombay of carrying on business by borrowing money from Banks on joint and several liability. It was also found that by so doing the borrower could borrow money at a lower rate of interest than he otherwise would have paid; that the respondent had, in accordance with the commercial practice, borrowed the money, the whole of which he had to return because the joint promisor Kishori Lal had become bankrupt; mutuality was also held proved. It cannot be said that the essential feature of the case now before us is in principle different from that of the Commissioner of Income tax vs Ramaswamy Chettiar (1). In both cases the finding is that there is mutuality and custom of borrowing money on joint pronotes for the carrying on of business. In our opinion in the circumstances proved in the present case, and on the facts established and on the findings given, the respondent was rightly held to be entitled to deduct the loss which was suffered by him in the transaction in dispute. Counsel for the assessee drew our attention to a (1) 651 Privy Council judgment Montreal Coke and Manufacturing Co. vs Minister of National Revenue (1) but that, case can have no application to the facts of the present case because it was found there as a fact that the assessees 's financial arrangements were quite distinct from the activities by which they earned their income and expenditure incurred in relation to the financing ' of their business was not expenditure in the earning of their income within the statute. It was then contended that the loss of the respondent was a 0capital loss and for this again reliance was placed on the judgment of this Court in Madan Gopal Bagla 's case (2 ) and particularly on the observation at page 559 where Bhagwati, J., quoted with approval the observations of the High Court in the judgment but as we have pointed out the facts of that case are distinguishable and what was said there has no application to the facts and circumstances proved in the present case. In our view the judgment of the High Court is right and we therefore dismiss this appeal with costs. Appeal dismissed.

For the purposes of its business the respondent borrowed a certain sum of money from the Bank of India on a pronote executed jointly by him and one Kishorilal in accordance with a commercial practice of carrying on business by borrowing money from Banks on joint and several liability. The money was divided half and half between the respondent and Kishorilal but Kishorilal failed to pay off his liability as he became a bankrupt and the respondent had to pay the whole amount to the Bank. The respondent, however, received from the Official Assignee a part of the sum taken by the Kishorilal leaving a balance still unpaid. The respondent 's claim to deduct this unpaid balance under section 10(2)(XV) of the Income tax Act was refused by the Income tax Officer and the Appellate Assistant Commissioner but was allowed by the Income tax Appellate Tribunal on appeal. On a reference made at the instance of the appellant the High Court decided the question in favour of the respondent assessee. On appeal by the appellant by special leave, Held, that the view taken by the High Court was correct. On the finding that there was a well establised Commercial practice of financing business by borrowing money on joint and several liability and by so doing the respondent could borrow at a lower rate of interest, and that there was mutuality between the borrowers for standing surety for each other for loans taken for business purposes, the respondent assessee in computing his business profits was entitled to deduct the loss suffered by him in paying the sum not paid by his co borrower. Commissioner of Income tax vs Ramaswami Chettiar, , applied. Madan Gopal Bagla vs Commissioner of Income tax, West Bengal, ; , Commissioner or Income tax vs section R. Subramanya Pillai, distinguished. Montreal Coke and Manufacturing Co. vs Minister of National Revenue, [1945] 13 I.T.R. Supp. 1, not applicable.

In assessment proceedings under the Wealth Tax Act for four assessment years the assessee claimed a deduction in the computation of his net wealth on account of income tax, wealth tax and gift tax liabilities. The Wealth Tax Officer allowed only part of the deductions claimed The appeal of the assessee was dismissed by the Appellate Assistant Commissioner of Wealth Tax. In the second appeal before the Appellate Tribunal, the assessee filed statements showing particulars of the income tax, wealth tax and gift tax liabilities in respect of the different assessment years. The Revenue contended that the income tax liability and the gift tax liability for one of the assessment years [1965 66] had been cancelled by the Appellate Assistant Commissioner in appeals against the assessment orders and those appellate orders of the Appellate Assistant Commissioner having become final in view of the dismissal of the Revenue 's appeals by the Appellate Tribunal, there was no outstanding demand on account of income tax and gift tax for that year and that therefore these two items do not constitute 'debts owed ' by the assessee and so would not qualify for deduction under section 2(m) of the Wealth Tax Act. The Appellate Tribunal following two judgments of this Court [Commissioner of Income Tax vs Keshoram Industries Pvt. Ltd. (1966) 59 I.T.R. 767 and H.H. Setu Parvati Bayi vs Commissioner of Wealth Tax Kerala , held that so long as the liability to pay the tax had arisen before the relevant valuation dates it was immaterial that the assessments were quantified after the valuation of dates, that the question whether a debt was owed by the assessee must be examined with reference to the position obtaining on the valuation date and that nothing happening subsequently could be considered in computing the net wealth. 491 The High Court having refused te call for a reference from the Appellate Tribunal under section 27(3) of the Act the Revenue appealed to this Court. Allowing the appeals in part. ^ HELD: 1. Whether a debt was owed by the assessee on the valuation date would depend on the fact that a liability had already crystallised under the relevant taxing statute on the valuation date. [494 D] 2. An income tax liability crystallises on the last day of the previous year relevant to the assessment year under the Income Tax Act, a wealth tax liability crystallises on the valuation date for the relevant assessment year under the Wealth Tax Act and a gift tax liability crystallises on the last day of the previous year for the relevant assessment year under the Gift Tax Act. [494 E] 3. The quantification of the income tax, wealth tax or gift tax liability is determined by a corresponding assessment order, and even if the assessment order is made after the valuation date relevant to the wealth tax assessment in which the claim to deduction is made, there is a debt owed by the assessee on the valuation date. It is the quantification of the tax liability by the ultimate judicial authority which will determine the amount of the debt owed by the assessee on the valuation date. So long as such ultimate determination indicates the existence of a positive tax liability, it must be held that there is a debt owed by the assessee on the valuation date even though such determination may be subsequent in point of time to the valuation date. If, however, it is found on such ultimate determination that there is no tax liability it cannot be said that merely because originally a tax liability could be envisaged there was a debt owed by the assessee. [495 B E] 4. Section 2(m) (iii) (a) denies deduction of an amount of tax which is outstanding on the valuation date if the assessee contends in appeal, revision or other proceeding that he is not liable to pay the tax. It presupposes that there is a subsisting tax demand and the assessee has challenged its validity. It refers to the initial stage only where an appeal, revision or other proceeding is pending merely. It does not proceed beyond that stage to the point where, in consequence of such appeal, revision or other proceeding, the tax liability has been found to be nil. Once it is determined that the tax liability is nil, it cannot be said that any amount of tax is outstanding. Such a situation does not bring section 2(m) (iii) (a) into operation at all. If upon the ultimate determination it is found that the amount of tax is nil, the assessee is denied the deduction claimed by him not on the ground of section 2(m) (iii) (a) but because the superior authority has found that there is no tax liability whatever. [496 A D] In the instant case, the income tax and the gift tax liabilities for the assessment year 1965 66 subsequently set aside on appeal after the valuation dates, cannot be regarded as debts owed by the assessee on the relevant valuation dates. [495 G] 492 Commissioner of Income Tax vs Keshoram Industries Pvt Ltd. ; ; H.H. Setu Parvati Bayi vs Commissioner of Wealth Tax, Kerala referred to. Late P. Appavoo Pillai vs Commissioner of Wealth Tax Madras reversed.

The appellant had filed a suit in the High Court of Calcutta for a declaration that the properties set out in the schedule belonged to a joint family and that the trust created by the father of the plaintiff/appellant in respect of the said properties was void. Pending the suit, a Receiv er was appointed by Justice A.N. Sen. While making the appointment the learned Judge had passed an order restrain ing the Receiver from selling or ' 'transferring ' ' any of the properties. The property in dispute is a building at Alipore, Calcutta, which comprised of four fiats. Grindlays Bank Ltd., respondent No. 1, had taken all the four flats on lease for 10 years from 1st June, 1958. After the expiry of the period of lease, Grindlays continued to be the tenant. On 1st April, 1978 Grindlays surrendered a portion of the tenancy, namely, two fiats i.e. fiats Nos. 1 and 2, in favour of Tatas. The Receiver let out these two fiats to M/s Tata Finlay Ltd. with effect from February 1979. Questioning the action of the Receiver, an application was filed in the High Court contending that the Receiver had no authority to create 962 any tenancy, that he had virtually created two new tenancies after terminating the original tenancy of Grindlays, and that neither Grindlays nor Tatas was entitled to occupy the premises and they were liable to be evicted summarily. The learned Single Judge was not inclined to order summary eviction as prayed for. An appeal was filed before the Division Bench. The Division Bench inter alia observed that any such relief could be obtained in a suit but the same could not be filed in the High Court inasmuch as the per mises in question was situated outside the Original Side Jurisdiction of the High Court. Before this Court it was contended on behalf of the appellant that (i) the Receiver had only such powers as were expressly granted by the Court; (ii) "transfer" included lease and therefore the Receiver by creating a new lease i.e. tenancy, had violated the injunction order passed by Justice A.N. Sen; (iii) after the expiry of the stipulated period of lease in favour of Grindlays, the tenancy turned to be a monthly tenancy and therefore the entire character of tenancy changed, and the monthly tenancy therefore was a new tenancy; (iv) protection under the West Bengal Premises Tenancy Act could not be extended to the tenant of a Receiv er; (v) the break up of the tenancy affected the integrity of the tenancy inasmuch as by virtue of this break up two new tenancies had come into existence; and (vi) the lease in favour of Grindlays had expired and by creating a monthly tenancy which may even go beyond three years, the Receiver had created a new lease in violation of Chapter 21 Rule 5(a) of the Original Side Rules. In reply, it was contended on behalf of Tatas that a monthly tenancy in respect of the said two flats had been created in their favour and therefore they were entitled to protection under the Tenancy Act. On behalf of Grindlays it was contended that after the expiry of the period of the original lease in 1968, rela tionship between Grindlays and the Trust continued to be of landlord and tenant; that at all material times they re tained the tenancy in respect of flats Nos. 3 and 4, and were governed by the Tenancy Act; that the surrender of flats Nos. 1 and 2 by the Grindlays and their continuation as tenants at reduced rent did not amount to a new lease in respect of flats Nos. 3 and 4, and hence there was no trans fer and no violation of the injunction. Dismissing the appeal as against respondent No. 1 and allowing it against respondent No. 2, this Court, HELD: (1) In the Transfer of Property Act, the word 'trans fer ' is 963 defined with reference to the word 'convey '. Similarly, the term 'transfer ' as used in Section 11 or Section 88 of the Bengal Tenancy Act, included a lease, as a lease is a trans fer of an interest in immovable property. A lease, there fore, comes within the meaning of the word 'transfer ' [968A B] Hari Mohan alias Hari Charan Pal vs Atal Krishana Bose & Ors., XXIII Vol. Indian Cases 925, referred to. (2) Surrender of part of the tenancy did not amount to implied surrender of the entire tenancy. Likewise the mere increase or reduction of rent also would not necessarily import a surrender of an existing lease and the creation of a new tenancy. [972C D] Konijeti Venkayya & Anr. vs Thammana Peda Venkata Subba rao & Anr. AIR 1957 A.P. 619 and N.M. Ponniah Nadar vs Smt. Kamalakshmi Ammal, AIR 1989 S.C. 467, referred to. (3) The Tenancy in favour of Grindlays continued as monthly tenancy for a period exceeding three years. It was an accretion to the old tenancy and not a new tenancy It could not therefore be said that the Receiver had created tenancy for a period exceeding three years in violation of Chapter 21 Rule 5(a) of the Original Side Rules. Merely because there was change in the character of a tenancy, namely that it had become a monthly tenancy, it did not amount to a new tenancy. [972G H] Utility Articles Manufacturing Co. vs Raja Bahadur Motilal Bombay Mills Ltd., , referred to. (4) A clear injuction order was passed by Justice A.N. Sen specifically restraining the Receiver from creating any new tenancy. But the injunction did not apply to the tenancy in favour of Grindlays in respect of fiats Nos. 3 and 4 inasmuch as it was an old tenancy though in a modification form. The Grindlays were therefore entitled to the protec tion under the provisions of the Tenancy Act. [974G H; 975A, C] Damadilal & Ors. vs Parshram & Ors., [1976] Supp. SCR 645 and Biswabani (P) Ltd. vs Santosh Kumar Dutta, ; , referred to. Ashrafi Devi & Anr. vs Satyapal Gupta & Ors., Suit No. 966 58 dated 9th Sept. 1977. Calcutta High Court and Armugha Gounder vs Ardhanari Mudaliar & Ors., , distinguished. 964 (5) In the case of Tatas, it was a new tenancy. Such a lease came within the meaning of 'transfer ' and in view of the injunction order passed by Justice A.N. Sen, creation of such a new tenancy was legally barred. Consequently the Tatas could not claim any protection under the provisions of the Act and were liable to be evicted. [978C] Kanhaiyalal vs Dr. D.R. Banaji, ; at p. 729; Smt. Ashrafi Devi & Anr. vs Satyapal Gupta & Ors., (supra) and Armugha Gounder vs Ardhanari Mudalier, (supra), referred to.

In response to a show cause notice dated March 15, 1957, under section 28(1)(c) of the Income Tax Act, before imposing a penalty for deliberate concealment of its income, the appellant, through its authorised representative, voluntarily agreed to a slum of Rs. 15,000/ being treated as income of Hindu Undivided Family. The Income Tax officer, by his order dated March 20,1958, added a sum of Rs. 68,550/ to the income of the appellant and imposed on it a penalty of Rs. 26,000/ which on appeal was reduced to Rs. 15,000/ . Meanwhile, on March 19, 1957, the appellant filed an application under section 25A of the Act for an order recording partition of joint family property in definite portions from June 22, 1956, claiming that date to be the date of partition. The Income Tax officer, after due enquiries, accepted the disruption of the Hindu Undivided Family as claimed by his order dated March 26, 1962. This led the appellant to contend that, in view of ' the orders dated March 26, 1962, of the Income Tax officer, the imposition of the penalty by him on March 20, 1958 was bad in law and could not be sustained. The Tribunal uphold the contentions of the appellant resulting in a reference under section 66(1) of the Act to the High Court of Allahabad (Lucknow Bench), which reversed the decision or the Tribunal. However, the High Court granted a certificate of fitness for appeal to this Court. Dismissing the appeals the Court, ^ HELD: Sub section (3) of section 25A of the Income Tax Act embodies a legal fiction according to which a Hindu family which has been previously assessed as "undivided" is to be continued to be treated as "undivided" till the passing of the order under sub section (1) of section 25A. So long as no order under section 25(A)(1) 1 of the Act is recorded, the jurisdiction of the Income Tax officer to continue to assess as undivided despite a partition under personal law, a Hindu family which has hitherto been assessed in that status, remain unaffected. [508G H] Additional Income Tax Officer, Quddapah vs A. Thimmayya vs Commissioner of Income Tax, Gujrat , applied. Commissioner of Income Tax vs Sanchar Sah Bhim Sah section A. Raju Chattiar & Ors. vs Collector of Madras & Anr. ; Mahankali Subba Rao Mahankali Nageswara Rao & Anr. v, Commissioner of income Tax. Hyderabad and Commissioner of Income Tax, Punjab vs Mothu Ram Prem Chand , not applicable

These Civil appeals and special leave petitions centred round one point, namely, the validity of the Bombay Motor Vehicles Tax Act, 1958 as amended by Section 3 of the Maharashtra Act XIV of 1987 and Section 6 of the said Act as amended by Maharashtra Act XXXIII of 1987 and the Maharashtra Act IX of 1988. Section 3 of the said Act XIV of 1987 added sub section (IC) to provide for the levy of one time tax at 15 times the annual rate on all motor cycles in the State. The said provisions further provided that in the case of motor cycles owned by a company or other commercial organisation, the one time tax was to be levied at thrice the rate. Section 6 of the said Act XIV of 1987 added sub section (6) to section 9, enabling a registered owner of a motor cycle or tricycle to obtain refund of `Lone_time tax" under certain conditions. Petitions were filed in the High Court by the respondents in the appeals and petitioners in the special leave petitions, challenging the amended provisions of the principal Act. The High Court held that (i) the levy of the one time tax was beyond the legislative competence of the State Legislature and also beyond Entry 57 of List II of the Seventh Schedule, and (ii) the provision for imposition of levy at thrice the rates on the vehicles owned by a firm or company, were neither discriminatory nor arbitrary. The High Court struck down Act XIV of 1987. The appeals by leave were filed by the State and the special leave petitions were fixed by the petitioners in this Court against the decision of the High Court. In the meanwhile, the Maharashtra Legislature enacted Maharashtra Act XXXIII of 1987, which deleted Section 3(4) of the principal Act as amended by the PG NO 482 PG NO 483 Maharashtra Act XIV of 1987, whereby the existing provisions of refund for temporary non user were made inapplicable in cases of motor cycles and tricycles, restricting the right of refund to Section 9(6) in the contingencies mentioned therein. It also introduced sub section (7) to section 9 conferring the right of refund in respect of motor cycles and tricycles in accordance with the rates specified in the Fifth Schedule. But the said schedule did not prescribe a separate rate of refund for the company owned vehicles. Therefore, the refund in respect of the company owned vehicles was the same as that payable to individual owned vehicles even though the tax paid on former class of vehicles was three times. Soon thereafter, the Maharashtra Legislature enacted Act IX of 1988, whereby the only relevant change for the present purpose was that the rate of refund was enhanced to three times in respect of the company owned vehicles. Before this Court, the appellant State submitted that the amendments enacted by the Maharashtra Acts XXXllI of 1987 and IX of 1988 had brought the principal Act as amended by the Maharashtra Act XIV of 1987 within the constitutional requirements of making one time tax 's regulatory and compensatory tax and that it was not necessary to decide if the Act as it stood when it was challenged before the High Court? was beyond the legislative competence of the State Legislature. The respondents in the appeals and the petitioners in the special leave petitions urged that as even after the amendment no refund was available in respect of a vehicle which had been registered for more than 13 years? the effect of that was that no refund al all was available in respect. of the tax paid for a vehicle for the 14th and 15th years. The impugned levy of tax ceased to be compensatory or regulatory and was void under Entry 57 of List II and was violative of Article 301 of the Constitution. Disposing of the appeals and dismissing the special leave petitions the Court. HELD: The tax imposed on the motor vehicles or a class of motor cycles would not be valid unless it is compensatory or regulatory or does not have any nexus with the vehicles using the roads. In such a case. the levy would be Section of the said Act XIV of 1987 added sub section (IC) to provide for the levy of one time tax at 15 times the annual rate on all motor cycles in the State. The said provisions further provided that in the case of motor cycles owned by a company or other commercial organisation, the one time tax was to be levied at thrice the rate. The fact that the act, as at present, did not provide for refund in the 14th and 15th years, did no make the law outside the competence of the State Legislature. he concept PG NO 484 of "regulatory and compensatory" tax does no imply mathematical precision of quid pro quo. [489E] After the amendment, the Act came with in the constitutional requirements of making he one time tax a regulatory and compensatory tax. It was true that the Act has no provided for refund in the 14h and 15h years but that does no make he law out sides the competence of the State Legislature. It is no mathematical precision that is necessary nor can it be. there is in the provisions as amended, as amended, a discernible and an identifiable object behind the levy and a nexus between the subject and the object of the levy, [491E F] Two principles have to be emphasised, firstly, that the tax must be regulatory and compenstaory and secondly, there must be no discrimination. A taxation law cannot claim immunity from the equality clause in Article 14 of the Constitution, but in view of the intrinsic complexity of fiscal adjustments of diverse elements, a considerable wide discretion and latitude in the matter of classification for taxation purpose is permissible. The life of Motor cycles and tricycles normally exceeds 25 years. Non refund for certain period is no conclusive of the matter. Even if mathematical provision is no possible, it cannot be said that it is wholly unmathematical. The collection of ax for a period of 15 ears at one point of time is a convenient method enabling the owner o use he vehicle for more than 25 years without having to pay the tax periodically and pay the enhanced tax at may be levied during the 25 years of life of the vehicle. Regulatory and compensatory tax can be levied to the extent e State is required to pay for rendering the services. [491G;492A C] The Act, as at present, is not violative of Article 145 of the Constitution. The fact that the company owned vehicles are taxed that three times the rate payable by individuals, does not make the legislation violatvie of Article 14. Histrocially, the company owned vehicles are always been taxed at a rate higher that the individually owned vehicles. he legislature has he power to distribute tax burden in a flexible manner and the Court would no interfere with the same. It could not be said that there was differentiation without any basis and as such there was discrimination. [492E H] In view of the principles applicable to the taxation laws and various other factors, the Maharashtra Act as amended from time to time does not suffer from any vice of being not regulatory or compensatory taxation nor from the vice of being violative of Article 14 of the Constitution, and the challenge to the provisions of the Act as amended PG NO 485 after the judgment of the High Court could not be maintained. [494G ;495A] After the amendments afore mentioned the Act does no suffer from the vice mentioned in the judgment of the High Court . The appeals were allowed thus, and the challenge made in the special leave petitions was dismissed. [495] The taxes would be realised in accordance with the Act and the necessary adjustments would be made accordingly. [495C] Bolani Ors. Ltd. vs State of Orissa. ; ; G.K. Krishnan vs The State of Tamil Nadu & Anr., [1975] 2 S.C.R. 715; Malwa Bus Service (P) Ld. vs State of Punjab and Ors. , ; ' International ouris Corporation vs State of Haryana & Ors., ; ; Income tax Officer, shillong & Anr. vs N. Takim Roy Rymbai, etc., ; Mrs. Meenakshi & Ors. vs, State of Karnataka & Ors., AIR 1983 SC 1283; Anant Mills Co. Ltd. vs State of Gujarat and Ors., [1975] 3 S>.C.R. 220; Khandige Sham Bhat & Ors. vs The Agricultural Income tax Officer; , and State of Karnataka vs K. Gopalakrishna Shenoy and Another, ; , refered to.

The respondents filed a suit against the petitioner in 1954 for the possession of certain property and for mesne profits and obtained decree in their favour. The petitioner 's appeal to the High Court was dismissed in April 1959 and a petition for special leave to appeal to this Court was granted in June, 1959. Thereafter, the 7th respondent died in November 1959. The petitioner filed the present applications in October 1964 for bringing on record the legal representatives of the 7th respondent and for condonation of delay on various grounds. It was also contended on behalf of the petitioner that in view of the fact that after the preliminary decree for mesne profits had been passed, the respondents/plaintiffs brought the heirs and legal representatives of the deceased 7th respondent on record in the final decree proceedings within the time prescribed, and as the legal representatives were brought on record at one stage of the suit on the basis of the rule laid down by the Privy Council in Brij Inder Singh vs Kanshi Ram, 44 I.A. 218, no question of abatement would arise in respect of the appeal; that the final decree proceedings are a stage in the suit and the appeal is another stage in the suit and, therefore, the bringing on record of the legal representatives in one stage of the suit will enure for all stages of the suit. HELD: (i) On the facts of the case there were no sufficient grounds for condoning the delay in bringing the legal representatives of the 7th respondent on the record. (ii) The order bringing the legal representatives of the respondent on record in the final decree proceedings cannot enure for the benefit of the appeal filed against the preliminary decree. The appeal therefore abated so far as the 7th respondent was concerned. [217D] An order bringing the legal representatives of a deceased party on the record passed at the stage of an interlocutory application in a suit, or passed while an appeal is pending where the suit is subsequently remanded to the trial court or if passed while an appeal is pending against an interlocutory order in passed while an appeal the subsequent stages of the suit ' in all that suit, would enure for made at one stage of the suit be it the suit these. cases the order is final appeal against the interlocutory order or final order in the suit, for here the appeal is only a continuation of the suit. But the same legal position cannot be invoked where an order is made in a suit subsequent to the filing of an appeal at an earlier stage. Such an order cannot be Projected,backwards into the appeal that has already been filed so as to become an order in that appeal [216F 217D] Brij Inder Singh vs Kanshi Ram, 44 I.A. 218 distinguished. Shankarnaraina Saralaya vs Laxmi Hengsu, A.I.R. 1931 referred to. N)3S.C.I. 1 212

Sub section (1) Of section 35 of the Indian Income tax Act, 1922, provided: the Income tax officer may on his own motion rectify any mistake apparent from the record and shall rectify any such mistake which has been brought to his notice by an assesses : Provided that no such rectification shall be made, having the effect of enhancing or reducing a 548 refund unless. the Income tax Officer. has given notice to the assessee of his. intention so to do and has allowed him a reasonable opportunity of being heard. " The appellant, a private limited company, was assessed to income tax for the assessment year 1953 54 under the provisions of the Indian Income tax Act, 1922, and as per the assessment order dated June 30, 1955, the amount of depreciation allowed under section 10(2)(vi) of the Act was Rs. 3,48,1O5. On August 8, 1955, the appellant made an application before the Income tax Officer for rectification of the order under section 35 of the Act, pointing out certain mistakes in calculation in regard to the depreciation amount. By his order of February 27, 1956, the Income tax Officer corrected the written down value of the different properties of the appellant and determined the total allowable depreciation to be Rs. 1,94,074. The appellant challenged the order dated February 27, 1956, on the grounds, inter alia, (1) that he was not given a written notice of the intended rectification of the written down value, (2) that the provisions under which the Income tax Officer acted, i.e., section 35 of the Act, was not meant for the purpose of making corrections in written down values, the correct provision being section 34 which specifically refers to excessive depreciation, and (3) that, in any case, he had exceeded his jurisdiction under section 35 of the Act in calculating the depreciation on the written down value of the buildings and machinery of the appellant acting suo motu, and that he could correct only those mistakes which had been pointed out by it. It was found that notice was given to the appellant of the intended determination of the written down value, though it was not a written notice, and that the matter was discussed with its representative. Held : (i) that the object of the provision as to notice under section 35 Of the Indian Income tax Act, 1922, is that no order should be passed to the detriment of an assessee without affording him an opportunity for being heard and that if, as a matter of fact,the assessee knew of the proceedings and the matter had been discussed with him, an adverse order would not be invalid merely because no written notice was given. (2) that the word " record " used in the phrase " mistake apparent from the record" in section 35(I) of the Act refers not only to the order of assessment but comprises all proceedings on which the assessment order is based and the Income tax Officer is entitled for the purpose of exercising his jurisdiction under section 35 to look into the whole evidence and the law applicable to ascertain whether there was an error. If he doubts the written down value of the previous year it is open to him to check up the previous calculations and, if he finds any mistake, to make fresh calculations in accordance with the law applicable including the rules made thereunder. A mistake contemplated by this section is not one which is 549 to be discovered as a result of an argument but it is open to the Income tax Officer to examine the record including the evidence and if he discovers any mistake he is entitled to rectify the error provided that if the result is enhancement of assessment or reducing the refund, then notice has to be given to the assessee and he should be allowed a reasonable opportunity of being heard. Venkatachalam vs Bombay Dyeing & Mfg. Co., Ltd., ; , Commissioner of Income tax vs Khemchand Ramdas, [1938] L.R. 65 I.A. 236 and Sidhramappa Andannappa Manviv. Commissioner of Income tax, , relied on.

The appellant .company reduced its capital and the reduction was confirmed by the High Court. On November 4 , 1954, i.e. during the course of the appellant 's accounting year ending November 30, 1954, the Registrar of Companies issued the requisite certificate under section 61(4) of the Indian Companies Act. The surplus share capital consequent on reduction was, however, not refunded to the shareholders during the said accounting year. It was refunded by actual payment or by credit entries in the next accounting year which ended on November 30, 1955. The Income tax Officer held that the said distribution to the extent of accumulated profits was 'dividend ' under section 2(6A)(d) of the Indian Income tax Act, 1922. He further held that the distribution took place in the accounting year ending November 30, 1955, relevant for the assessment year 1956 57. On these findings he calculated the rebate on super tax in the terms of cl. (i)(b) of the second proviso to paragraph D of Part II of the first schedule to the Finance Act, 1956. The findings of the Income tax Officer were upheld by the Appellate Assistant Commissioner and the Appellate Tribunal, and also, in reference, by the High Court. The appellant came to the Supremen Court by certificate. It was contended on behalf of the appellant: (1) In defining 'dividend ' to include capital receipts resulting from distribution of capital on reduction, the legislature went beyond the ambit of entry 54 List I, Seventh Schedule, Government of India Act, 1935, and section 2(6A)(d) of the Indian Income tax Act, 1922 was therefore, ultra vires. (2) The certificate of the Registrar under section 61(4) of the Indian Companies Act was issued on November 4, 1954 and therefore the 'distribution ' under section 2(6A)(d) took place in the previous year relevant to the assessment year 11955 56. HELD ': The expression 'income ' in entry 54 List I of the Seventh Schedule to the Government of India Act, 1935, and the corresponding entry 82 of List I of the Seventh Schedule to the Constitution of India must be widely and liberally construed so as to enable the Legislature to provide by law for the prevention of evasion of Income tax, [5H; 6A] 2 United Provinces vs Atiqa Begum, , Sardar Baldev Singh vs Commissioner of Income tax, Delhi and Ajmer, ; , Balaji vs Income tax Officer Special Investigation Circle, ; and Navnittal C. Javeri vs K.K. Sen, Appellate Assistant Commissioner of Income tax 'D ' Range, Bombay; , , referred to. A company may on the pretext of reducing its capital, utilise its accumulated profits to pay back to the shareholders the whole or part of the paid up amounts on the shares. This is a division of profits under the guise of division of capital. If this were permitted there would be evasion of super tax. Section 2(6A)(d) embodies a law to prevent such evasion and hence it falls within the ken of entry 54 of List I of Schedule Seven to the Government of India Act, 1935. [6H; 7A, G] There is no inconsistency between a receipt being a capital one under the company law and by fiction being treated as taxable under the Income tax Act. [7F G] Per Subba Rao. Mudholkar and Ramaswami, JJ. The expression 'distribution ' connotes something actual and not notional. Like 'paid ' or 'credited ' in section 16(2), distribution ' signifies 'the discharge of the company 's liability and making the dividend available to the members entitled thereto. [8D, F, G] J. Dalmia vs Commissioner of I.T. Delhi, and Mrs. P.R. Saraiya vs Commissioner of Income tax, Bombay City 1, Bombay; , , relied on. Distribution can ke physical, it can be constructive. One may distribute assets between different shareholders either by crediting the amount due to each one of them in their respective accounts, or by actually paying to each one of them the amount due to him. [8D] Distribution in the above manner may take place partly in one year and partly in another. But the amount of accumulated profits is fixed by the resolution of the company reducing its capital, and the figure does not change with the date of payment or credit. [9D, E] In the present case the payments and credits were actually given during the accounting year ending November 30, 1955. The dividend under section 2(6A)(d) must be deemed to have been distributed in the said year. The relevant assessment year therefore was 1956 57.[10F] Per Raghubar Dayal and Bachawat, JJ. The word distributed ', in section 2(6A)(d) does not mean 'paid ' or credited '. Cases under section 16(2) are not relevant to the issue. [14G H] The 'distribution ' contemplated by section 2(6A)(d) is distribution at the time of reduction of capital, that is to say, when the resolution of the company reducing the capital takes effect. It means allotment or apportionment of the surplus among the shareholders; this allotment takes place and each shareholder gets a vested right to his portion of the surplus as soon as the capital stands reduced. [12F H] While the distribution as above takes place on a single date i.e. the date of the reduction of capital, the payments to the shareholders either actual or by credit entries in books of account may be made subsequently and on different dates. The successive payments cannot be 'distribution ' contemplated by section 2(6A) (d). [13A C] 3 In the instant case the resolution for the reduction of the capital of the company and the consequential refund of the surplus capital to the shareholder took effect on November 4, 1954. Consequently the distribution of the 'dividend ' as defined by section 2(6A)(d) took place on that date i.e. during the previous year corresponding to the assessment year 1955 56.

Appeal No. 270 of 1959. Appeal by special leave from the judgment and order dated December 23, 1957, of the Allahabad High Court (Lucknow Bench) at Lucknow in Civil Miscellaneous Application (0. J.) No. 86 of 1954. C. B. Aggarwala, G. C. Mathur and C. P. Lal, for the appellants. Achhru Ram, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the respondent. November, 25. The Judgment of Sarkar, Subba Rao and Mudholkar, JJ., was delivered by Subba Rao, J., and that of Gajendragadkar and Wanchoo, JJ., was delivered by Wanchoo, J. SUBBA RAO, J. This is an appeal by special leave against the judgment and order of the High Court of Judicature at Allahabad, Lucknow Bench, allowing the petition filed by the respondent under article 226 of the Constitution. The facts are in a small compass and may be briefly stated. In the year 1933 the respondent was appointed a constable in U. P. Police Force; on December 1, 1945, he was promoted to the rank of head constable and in May, 1952 he was posted as officer incharge of Police Station, Intiathok, District Gonda. Complaints were received by the District Magistrate, Gonda, to the effect that the respondent was receiving bribes in the discharge of his duties. On September 16, 1952, the District Magistrate, Gonda, directed the Sub Divisional Magistrate to make an enquiry in respect of the 674 said complaints. On November 3,1952, the Sub Divisional Magistrate, after making the necessary enquiries, submitted a report to the District Magistrate recommending the transfer of the respondent to some other station. On November 17, 1952, the District Magistrate sent an endorsement to the Superintendent of Police to the effect that the Sub Divisional Magistrate had found substantial complaints against the integrity of the respondent, that he had also received such complaints and that his general reputation for integrity was not good, but that his transfer should, however, come after sometime and that in the meantime his work might be closely watched. On being called upon by the Superintendent of Police to submit an explanation for his conduct, the respondent submitted his explanation on November 29, 1952. On December 17, 1952, the respondent was forced to go on leave for two months. Before the expiry of his leave, he was reverted to his substantive post of head constable and transferred to Sitapur. On February 17, 1953, he was promoted to the rank of officiating Sub Inspector and posted as Station Officer at Sidholi. On February 27, 1953, the Superintendent of Police made the following endorsement in his character roll: "A strong officer with plenty of push in him and met with a strong opposition in this new charge. Crime control was very good but complaints of corruption were received which could not be substantiated. Integrity certified. " Meanwhile on further complaints, the C.I.D. probed the matter further and on July 26, 1953, the Superintendent of Police, Investigation Branch, C.I.D., reported that the respondent was a habitual bribetaker. On July 28, 1953, he was placed under suspension and on August 18, 1953, he was charged under section 7 of the Police Act with remissness in the discharge of his duty and unfitness for the same inasmuch as while posted as a Station Officer, Police Station, Intiathok, he had been guilty of dishonesty, corruption and misbehaviour in that he had on nine occasions, particulars of which were given in the charge, accepted bribes. it may be mentioned that the magisterial inquiry 675 related to seven of the nine charges alleged against the respondent. The trial was conducted by the, Superintendent of Police and the respondent submitted his explanation on September 12, 1953. The Superintendent of Police, who conducted the trial, examined many witnesses and found that seven out of the nine charges had been established. Thereafter he issued a notice to the respondent calling upon him to show cause why he should not be dismissed from the police force. On February 20, 1954, the respondent sub mitted his explanation and the Superintendent of Police, by his order dated February 22, 1954, dismissed the respondent from service with effect from the said date. The appeal preferred by the respondent to the Deputy Inspector General of Police was dismissed by his order dated June 2, 1954. Thereafter the respondent on August 5, 1954, filed a petition under article 226 of the Constitution before the High Court of Judicature at Allahabad, Lucknow Bench, for quashing the order of dismissal. Before the High Court three points were raised, namely, (1) as the petitioner was officiating. as Sub Inspector of Police at the time of the departmental trial the Suprintendent of Police had no power to dismiss him, since an order in such circumstances could only be made by a police officer senior in rank to a Superintendent; (2) the trial was vitiated by a number of serious irregularities; and (3) the specific acts with which the petitioner was charged were cognizable offences and, therefore, the Superintendent of Police had no jurisdiction to proceed with a departmental trial without complying with the provisions of subparagraph (1) of para. 486 of the Police Regulations. The learned Judges of the High Court held that the respondent was charged with committing cognizable offences and therefore sub paragraph (1) of para. 486 governed the situation and that, as no case, as required by the said sub paragraph, was registered against the respondent in the police station, the order of dismissal was invalid. They further held that the case was not covered by the first proviso to sub paragraph (1) of para. 486, as, in their opinion, the information 676 about the commission of the offences was not in the first instance received by the Magistrate and forwarded to the police for inquiry. In view of that finding they found it unnecessary for them to express any opinion upon other arguments which had been advanced on behalf of the respondent. In the result they issued a writ in the nature of certiorari quashing the impugned orders. Hence the appeal. Mr. C. B. Agarwala, learned counsel appearing for the appellants, raised before us the following points: (1) The Governor exercised his pleasure through the Superintendent of Police, and, as the Police Regulations were only administrative directions, the non compliance therewith would not in any way affect the validity of the order of dismissal. (2) If the order of dismissal was held to have been made under the statutory power conferred upon the Superintendent of Police, the regulations providing for investigation in the first place under chapter XIV of the Criminal Procedure Code were only directory in nature, and inasmuch as no prejudice was caused to the respondent the non compliance with the said regulations would not affect the validity of the order of dismissal. (3) The Superintendent of Police was authorized to follow the alternative procedure prescribed by subparagraph (3) of para. 486 and, therefore, the inquiry held without following the procedure prescribed by rule I was not bad. (4) As the magisterial inquiry was held in regard to practically all the charges, the subject matter of the departmental trial, the case is not covered by the provisions of para. 486 of the Police Regulations. In the case of The State of U. P. vs Babu Ram Upadhya (1) in which we have just delivered the judgment, we have considered the first three point; and for the reasons mentioned therein we reject the first three contentions. The appellants must succeed on the fourth contention. From the facts already narrated, the conduct of the respondent, when he was officer incharge of the Police Station, Intiathok, was the subject matter of (1) Civil Appeal No. 119 of 1950; ; 677 magisterial inquiry. The Sub Divisional Magistrate made inquiry in respect of seven of the charges which were the subject matter of the departmental trial and. submitted a report to the District Magistrate. The District Magistrate, in his turn, made an endorsement on the report and communicated the same to the Superintendent of Police recommending the transfer of the respondent and suggesting that in the meanwhile the work of the respondent might be closely watched. Though the Superintendent of Police gave at first a good certificate to the respondent, in respect of the same a further probe was made through the C.I.D. Thereafter the Superintendent of Police conducted a departmental trial in respect of the aforesaid seven charges and two other new charges of the same nature. The inquiry ended in the dismissal of the respondent. In the circumstances it would be hypertechnical to hold that there was no magisterial inquiry in respect of the matter which was the subject matter of the departmental trial. On the said facts we hold that the departmental inquiry was only a further step in respect of the misconduct of the respondent in regard whereto the magisterial inquiry was held at an earlier stage. If so, the question is whether para. 486 would govern the present inquiry or it would fall out side its scope. The relevant provisions of the Police Regulations read: Paragraph 486: "When the offence alleged against a police officer amounts to an offence only under s: 7 of the Police Act, there can be no magisterial inquiry under the Criminal Procedure Code. In such cases, and in other cases until and unless a magisterial inquiry is ordered, inquiry will be made under the direction of the Superintendent of Police in accordance with the following rules;" Paragraph 489: "A police officer may be departmentally tried under section 7 of the Police Act (1) after he has been tried judicially; (2) after a magisterial inquiry under the Criminal Procedure Code; 86 678 (3) after a police investigation under the Criminal Procedure Code or a departmental enquiry under paragraph 486 III above." A combined reading of these provisions indicates that para. 86 does not apply to a case where a magisterial inquiry is ordered; and that a police officer can be departmentally tried under section 7 of the Police Act after such a magisterial inquiry. In this case the departmental trial was held subsequent to the completion of the magisterial inquiry and therefore it falls within the express terms of para. 489(2). The fact that in the interregnum the police received further complaints or that the C.I.D. made further enquiries do not affect the question, if substantially the subject matter of the magisterial inquiry and the departmental trial is the same. In this case we have held that it was substantially the same and therefore the departmental trial was validly held. We, therefore, set aside the order made by the High Court. As we have pointed out earlier, the High Court, in the view taken by it, did not express its opinion on the other questions raised and argued before it. In the circumstances, we remand the matter to the High Court for disposal in accordance with law. The costs of this appeal will abide the result. WANCHOO, J. We have read the judgment just delivered by our learned brother Subba Rao J. We agree with the order proposed by him. Our reasons for coming to this conclusion are, however, the same which we have given in C.A. 119 of 1959, The State of Uttar Pradesh vs Babu Ram Upadhya. Appeal allowed. Case remanded.

The respondent was posted as officer incharge of a police station when complaints were received by the District Magis trate that the respondent was receiving bribes. The District Magistrate got an enquiry made by the Sub Divisional Magistrate and forwarded the report toghether with his own endorsement to the Superintendent of Police. The respondent was forced to go on 2 months leave and was reverted to his substantive post of Head Constable, but later he was promoted to the rank of officiating Sub Inspector and posted at another police station. Meanwhile on further complaints an investigation was made and it was reported that the respondent was a habitual bribe taker. He was charged under section 7 Police Act for 9 charges of bribery and after departmental trial was dismissed by the Superintendent of Police. He filed a Writ Petition before the High court challenging the order of dismissal inter alia on the ground that the offences charged being cognizable offences the Superintendent of Police had no jurisdiction to hold the departmental trial without first complying with the provisions of para. 486(1) of the U. P. Police Regulations. The High Court accepted this contention and quashed the order of dismissal. 673 Held (per Sarkar, Subba Rao and Mudholkar, JJ.) that the subject matter of the magisterial enquiry and of the depart mental trial was substantially the same and that the depart 'I mental trial was validly held. The fact that there was an interregnum between the magisterial enquiry and the departmental trial did not affect the question. Paragraph 486 did not apply to a case where a magisterial enquiry was ordered and a police officer could be departmentally tried under section 7 Police Act after such magisterial enquiry. Per Gajendragadkar and Wanchoo, JJ. The provisions of para. 486 were merely directory and even if there was non compliance therewith the order of dismissal was not invalidated.

The respondents in all these appeals are "extra depart mental agents" within the meaning of Rule 2(b) of the Posts and Telegraphs Extra Departmental Agents (Conduct of Service) Rules, 1964 issued under the authority of the Government of India. They were either dismissed or removed from service during the period between January 1, 1966 and June 18, 1974, admittedly without complying with the provi sions of article 311(2) of the Constitution. The question in each case is whether the respondent held a "civil post" as contemplated in article 311(2) of the Constitution. The High Court of Kerala, Andhra Pradesh & Orissa held that the respondents held a civil post under the Union of India and the orders terminating their services in violation of article 31.1(2) of the Constitution were invalid. Dismissing the appeals the Court, HELD: (1) An "extra departmental agent" held a "civil post" and his dismissal or removal would be invalid, if there was non compliance with article 311 (2) of the Constitu tion. [680 B C. 682 E] (2) An extra departmental agent is not a casual worker, but he holds a post under the administrative control of the State. It is apparent from the 1964 Rules that the em ployment of an extra departmental agent is in a post which exists "apart from" the person who happens to fill it at any particular time. Though such a post is outside the regular civil service, there is no doubt it is a post under the State. [681 E F] State of Assam & Ors. vs Kanak Chandra Dutta ; @ 682 applied. (3) The 1964 rules make it clear that these extra departmental agents work under the direct control and super vision of the authority who obviously have the right to control the manner in which they must carry out their du ties. There can be no doubt, therefore, that the relation ship between the Postal Authorities and the extra departmen tal agents are of master and servant. [662 C E] Venkataswamy vs Superintendent, Post Offices, AIR 1957 Orissa 112; V. Subbaravalu vs Superintendent of Post Offices, AIR 1961 Madras 166, held inapplicable.

An industrial dispute was referred by the Government of Uttar Pradesh for adjudication to the Adjudicator, Kanpur. ,Me Adjudicator held that the Malis were workmen under the U.p. but they were not Industrial employees and hence were not entitled to claim dear food allowance under the Government order dated December 6, 1948. The claims of the Malis with regard to weekly holidays and leave with wages were also rejected by the Adjudicator. 725 Two crow appeals were filed against the order of the Adjudicator before the Labour Appellate Tribunal. The appeal of the appellant was dismissed. As regards the appeal of respondents, the Tribunal gave the Malis benefit of dear food allowance. Their claim for leave with wages was also allowed on the ground of social justice. However, their claim for weekly holiday was rejected. The appellant filed a writ petition in the Allahabad High Court but that was dismissed as in fructuous. The appellant came to this court by special leave. The contentions raised by the appellant in this court were that the Malis were not workers within the meaning of section 2 of the U.P. , that Malis were not industrial employees within the meaning of Government order dated December 6, 1948, and hence were not entitled to dear food allowance and that the Labour Appellate Tribunal should not have granted the demand of the respondents for leave on ground of fair play and social justice. Held that the Malis were workers within the meaning of section 2, of the U.P. They were employed by the appellant, were paid by it and were, subject, to its control and supervision and *discharged the function of looking after the properties of the appellant. Their conditions, of service were also determined by the appellant and the continuance of their service also depended upon the pleasure of the appellant. The bungalows and gardens on which they worked were a kind of amenity supplied by the appellant to its officers. Hence, the Malis were engaged in operations which were incidentally connected with the main industry carried on by the employers The case of the Malis was similar to that of the bus drivers. The relation of the work carried on by the Malis with the industry was not remote, indirect or far fetched. The employee who is engaged in any work or operation which is incidentally,connected with the main industry of the employer is a workman, provided the other requirements of section 2 (s) of the industrial Disputes Act are satisfied. Held also, that the Malis were industrial employees within the meaning of the Government order dated December 6, 1948, and hence were entitled to claim the benefit of dear food allowance. The Tribunal was in error in limiting the scope of the expression, " Industrial , employees" by reference to the definition of the word "worker" as given in the Factories Act, 726 Held also, that the Tribunal was justified in granting the demand of the respondents for leave on grounds of fair play and social justice. The concept of social justice has now become such an integral part of industrial law that it is idle for any party to suggest that industrial adjudication can or should ignore the claims of social justice in dealing with industrial disputes. The concept of social justice is not narrow, one sided or pedantic and is not confined to industrial adjudication alone. Its sweep is comprehensive. It is founded on the basic ideal of socioeconomic equality and its aim is to assist the removal of socioeconomic disparities and inequalities. In dealing with industrial matters, it does not adopt a doctrinaire approach and refuses to yield blindly to abstract notions, but adopts a realistic and pragmatic approach. It endeavors to resolve the competing claims of employers and employees by finding a solution which is just and fair to both parties with the object of establishing harmony between capita i labour and relationship. Shri Bhikari, Kanpur vs Messrs. Cooper Allen & Co., Kanpur, ; The Upper India Chini Mills Mazdoor Union vs The Upper India Sugar Mills ; The Suti Mill Mazdoor Sabha, Kanpur vs Messrs. The British India Corporation Ltd., Kanpur, ; J.K. Iron& Steel Co. Lid, Kanpur vs The Iron and Steel Masdoor Union, Kanpur, ; Muir Mills Co. Ltd. vs Suti Mills Mazdoor Union, Kanpur, ; ; Messrs. Crown Aluminium Works vs Their Workmen, ; and The State of Mysore vs The Workers of Gold Mines, [1959] S.C.R. 895, referred to.

A Complaint was filed by the Special Railway Magistrate against the appellants, Balbir Singh and Ram Shankar, members of Delhi Police Force, alleging that the Search Memos which were signed by the sub Inspector Balbir Singh did not bear any signature of the witness Ram Shankar at the time when the said Search memos were in the custody of the Court and that they were interpolated subsequently by getting the same signed by the accused, Ram Shankar. The appellants contended before the Trial Court that the aforesaid complaint was not maintainable since prior sanction as required by section 197(3) Cr. P.C. was not obtained by the complainant to prosecute them. The trial court rejected the contention and the High Court confirmed the same in appeal by the appellants. The High Court, however, held that the Notification No. F.10/77/78 HP II dated 7th April 1980 issued by the Lt. Governor directing that the provisions of sub s.(2) of section 197 "shall apply to serving police officials of all ranks of Delhi Police Force" charged with the maintenance of public order, was bad in law as the Lt. Governor had no authority to issue the said Notification under sub s.(3) of section 197 Cr. Allowing Criminal Appeal No. 845/85 partly and dismissing the other appeal, ^ HELD: 1(i) The Judgment and order of the High Court declaring the impugned notification dated 7th April 1980 issued by the Lt. Governor of Delhi to be ultra vires is set aside and the learned Magistrate is directed to proceed with the case in accordance with law. [817 F] (ii) By virtue of the Notification No. S.O.183(E) dated 20th March 1974, the President empowered the Administrator of Union Territories, i.e. Lt. Governor of Delhi to exercise the 813 powers and functions of the State Government as provided in the Code of Criminal Procedure except the powers and functions provided in sections 8 and 477 of the said Act. The Notification dated 7th April 1980 issued by the Lt. Governor was made in exercise of powers conferred upon him under sub section (3) of Sec. 197 of the Code of Criminal Procedure read with the Government of India Notification dated March 20, 1974 mentioned before. Therefore, the Notification is not ultra vires the Constitution. [815 D E] 2. Reading the two notifications together, it is crystal clear that to start a proceeding against the member of all ranks of Delhi Police Officials in a Criminal Court, previous sanction of the Lt. Governor is imperative, provided the offence alleged to have been committed by such members of the Delhi Police Force has been committed while acting or purporting to act in discharge of their official duty. [815 F] In the instant case, the previous sanction of the Lt. Governor as provided in Section 197 (3) Criminal Procedure Code was, not at all necessary for initiating the proceedings against the two appellants, since the act of tampering of the Search Memos by them cannot be said to have been done in discharge of their official duties inasmuch as the said Search Memos were in the custody of the Court. [817 E F] Matajog Dobey vs H.C. Bhari, ; ; Pukhraj vs State of Rajasthan & Anr., ; ; Bhagwan prasad Srivastava vs N.P.Misra, [1971] 1 S.C.R. 317 and Darshan Kumar vs Sushil Malhotra & Ors. 1980 Crl. L.J. 154 relied upon. Bhikhaji Vaghaji vs L.K. Barot and Ors., 1982 Cr. L.J. 2014 approved.

The question as to which Court is competent to make a com plaint under section 476 A read with section 195(3) of the Code of Criminal Procedure where none wag made by the Court in which the offence was committed or its successor Court, will depend on the nature of the proceeding in which the offence was committed, whether civil, criminal or revenue, and on the hierarchy of superior Courts to which an appeal from such proceeding will ordinarily lie as contemplated by section 195(3) of the Code, apart from such exceptions as may be made in respect of any particular matters by any special notifications or laws. Where, however, appeals ordinarily lie to different courts, the one of the lowest grade will be the Court competent to make the complaint. Wadero Abdul Bahman vs Sadhuram, ([1930] and M. section Sheriff vs Govindan (A.I.R. , 1061), not approved. Under the Punjab Courts Act of 1918 and the hierarchy of civil Courts established thereby, appeals from the Courts of the various subordinate Judges who constitute distinct Courts do not ordinarily lie to the Senior Subordinate Judge but to the District Judge and the Court of the Additional Judge is not a Court of coordinate jurisdiction with that of the District Judge. The Act neither mentions nor recognises an Additional District Judge as a Court of that hierarchy. Consequently, in a case where offences under sections 193 and 471 of the Indian Penal Code were alleged to have been committed in a civil proceeding in the Court of a Subordinate Judge of the first class, exercising jurisdiction under the Punjab Courts Act of 1918, and neither he nor his successor made a complaint or rejected the application for the making of it, the Senior Subordinate Judge had no jurisdiction to entertain the matter and make the complaint either as a Court of appeal under section 476 B or of Its own authority under section 476 A of the Code of Criminal Procedure and the Additional 17 126 Judge, by wrongly describing himself as an Additional District Judge, could not assume a jurisdiction which he did not possess under those sections. The High Court has power to revise orders of subordinate Courts made without jurisdiction both under section 439 of the Code of Criminal Procedure and under section 115 of the Code of Civil Procedure, therefore, it was not necessary to decide under article 136 of the Constitution which of these two sections applied in the present case, but the High Court erred in upholding the complaint made by the Senior Subordinate Judge because that court had no jurisdiction to make the complaint. The High Court is not a Court to which the Subordinate Judge of the first class is subordinate within the meaning of section 196(3) of the Code of Criminal Procedure and could not, therefore, make the complaint of its own authority and should have remitted the application to the District Judge for disposal according to law.

The petitioners were convicted under section 302 read with section 34 I.P.C. and were sentenced to death on November 26, 1977. The High Court upheld the conviction and sentence on July 18, 1978. The petitioners ' Special Leave Petition against the judgment of the High Court was dismissed on March 5, 1979 and the Review Petition against the dismissal of the Special Leave Petition was also dismissed on March 27, 1981. The petitioners ' successive writ petitions challenging the validity of sections 302 and 34 I.P.C. were dismissed on January 20, 1981 and August 24, 1981 respectively. The present writ petitions were filed on March 2, 1983 on the basis of the decision in T.V. Vatheeswaran vs State of Tamil Nadu which was rendered on February 16, 1983. The contention on behalf of the petitioners was that more than two years had elapsed since they were sentenced to death by the trial court and therefore they were entitled in terms of the ruling in vatheeswaran to demand that the said sentence should be quashed and substituted by the sentence of life imprisonment. ^ HELD : Prolonged delay in the execution of a death sentence is unquestionably an important consideration for determining whether the sentence should be allowed to be executed. But no hard and fast rule that "delay exceeding two years in the execution of a sentence of death should be considered sufficient to entitle the person under sentence of death to invoke article 21 and demand the quashing of the sentence of death" can be laid down as has been done in Vatheeswaran. [594 E F] (i) No absolute or unqualified rule can be laid down that in every case in which there is a long delay in the execution of a death sentence, the 583 sentence must be substituted by the sentence of life imprisonment. There are several other factors which must be taken into account while considering the question as to whether the death sentence should be vacated. A convict is entitled to pursue all remedies lawfully open to him and get rid of the sentence of death imposed upon him and his taking recourse to them to ask for the commutation of his sentence even after it is finally confirmed by this Court is understandable. But, it is, at least, relevant to consider whether the delay in the execution of the death sentence is attributable to the fact that he has resorted to a series of untenable proceedings which have the effect of defeating the ends of justice. It is not uncommon that a series of review petitions and writ petitions are filed in this Court to challenge judgments and orders which have assumed finality, without any seeming justification. Stay orders are obtained in those proceedings and then, at the end of it all, comes the argument that there has been prolonged delay in implementing the judgment or order. The Court called upon to vacate a death sentence on the ground of delay caused in executing that sentence must find why the delay was caused and who is responsible for it. If this is not done, the law laid down by this Court will become an object of ridicule by permitting a person to defeat it by resorting to frivolous proceedings in order to delay its implementation. Further, the nature of the offence, the diverse circumstances attendant upon it, its impact upon the contemporary society and the question whether the motivation and pattern of the crime are such as are likely to lead to its repetition if the death sentence is vacated, re matters which must enter into the verdict as to whether the sentence should be vacated for the reason that its execution is delayed. The substitution of the death sentence by a sentence of life imprisonment cannot follow by the application of the two years ' formula as a matter of "quod erat demonstrandum." [595 D H; 596 AE] T.V. Vatheeswaran vs State of Tamil Nadu. overruled. (ii) The period of two years purports to have been fixed in Vatheeswaran after making "all reasonable allowance for the time necessary for appeal and consideration of reprieve. " It is not possible to agree with this part of the judgment in that case. The fixation of the time limit of two years does not accord with the common experience of the time normally consumed by the litigative process and the proceedings before the executive. A period far exceeding two years is generally taken by the High Court and this Court together for the disposal of matters involving even the death sentence. Very often four or five years elapse between the imposition of death sentence by the Sessions Court and the disposal of the Special Leave Petition or an Appeal by this Court in that matter. This is apart from the time which the President or the Governor, as the case may be, takes to consider petitions filed under article 72 or article 161 of the Constitution or the time which the Government takes to dispose of application filed under sections 432 and 433 of the Code of Criminal Procedure. [594 F H; 595 AC] (iii) Piare Dusadh is not an authority for the proposition that if a certain number of years have passed since the imposition of a death sentence, 584 that sentence must necessarily be commuted to life imprisonment. In that case the Federal Court commuted the sentence of death to sentence of transportation for life for reasons other than that a long delay had intervened after the death sentence was imposed. In Ediga Anamma, Piare Dusadh was regarded as a leading case on the point. In the other judgments of this Court referred to in Vatheeswaran, this Court was hearing appeals against judgments of High Courts confirming the sentence of death. However, the Court has not taken the narrow view that the jurisdiction to interfere with a death sentence can be exercised only in an appeal against the judgment of conviction and sentence. In very recent times, the sentence of death has been commuted to life imprisonment by this Court in quite a few cases for the reason, inter alia, that the prisoner was under the spectre of the sentence of death for an unduly long time after the final confirmation of that sentence. [589 B D H; 590 A D] Piare Dusadh, [1944] F.C.R. Vol.6 61; Ediga Anamma; , ; Sunil Batra vs Delhi Administration, ; ; Maneka Gandhi [1978] 2 S.C.R. 621; Bachan Singh, , Hussainara Khatoon; , ; Hoskot; , ; Bhuvan Mohan Patnaik; , ; and Prabhakar Pandurang Sangzgiri; , referred to. (iv) Article 21 is as much relevant at the stage of execution of the death sentence as it is in the interregnum between the imposition of that sentence and its execution. The essence of the matter is that all procedure, no matter what the stage, must be fair, just and reasonable. It is well established that a prisoner cannot be tortured or subjected to unfair or inhuman treatment. It is a logical extension of the self same principle that the death sentence, even if justifiably imposed, cannot be executed if supervening events make its execution harsh, unjust or unfair. A prisoner who has experienced living death for years on end is entitled to invoke the jurisdiction of this Court for examining the question whether, after all the agony and torment he has been subjected to, it is just and fair to allow the sentence of death to be executed. That is the true implication of article 21 of the Constitution. [593 B G] Bhuvan Mohan Patnaik; , ; Prabhakar Pandurang Sangzgiri; , ; and Sunil Batra vs Delhi Administration; , referred to. (v) Traditionally, subsequent events are taken into account in the area of civil law. There is no reason why they should not receive due consideration in other jurisdictions, particularly when their relevance on the implementation or execution of judicial verdicts is undeniable. Principles analogous to res judicata govern all judicial proceedings but when new situations emerge, particularly factual, after a verdict has assumed finality in the course of the hierarchical process, advertence to those situations is not barred on the ground that a final decision has been rendered already. That final decision is not a decision on new facts. Courts are never powerless to do justice, that 585 is to say, to ensure that the processes of law do not result in undue misery, suffering or hardship. That is why, even after the final seal of approval is placed upon a sentence of death, this Court has exercised its power to direct, ex debito justiciae, that though the sentence was justified when passed, its execution, in the circumstances of the case, is not justified by reason of the unduly long time which has elapsed since the confirmation of that sentence by this Court. [590 E H] In the instant case, the sentence of death imposed upon the petitioners by the Sessions Court and which was upheld by the High Court and this Court cannot be vacated merely for the reason that there has been a long delay in the execution of that sentence. Counsel for the petitioners have been asked to argue upon the reasons why, apart from the delay caused in executing the death sentence, it would be unjust and unfair to execute that sentence at this point of time. The question will be decided after hearing the parties. [596 G H; 597 A B] 2. Petitions filed under articles 72 and 161 of the Constitution and under sections 432 and 433, Cr. P.C. must be disposed of expeditiously. A self imposed rule should be followed by the executive authorities that every such petition shall be disposed of within a period of three months from the date on which it is received. [597 C]

The appellant in this appeal was convicted by the Presidency Magistrate, Bombay, of an offence under section 66(b) of the Bombay Prohibition Act (Act XXV of 1949) and sentenced to undergo imprisonment till the rising of the court and to pay a fine of Rs., 250 or in default to undergo rigorous imprisonment for one month. He preferred an appeal to the High Court at Bombay, which was summarily dismissed. After the dismissal of that appeal, the State of Bombay made a revision application to the High Court praying for enhancement of the sentence. Notice was issued to the appellant under section 439(2) of the Code of Criminal Procedure to show cause against enhancement. 95 Held that the summary dismissal of the appeal preferred by the appellant did not preclude him from taking advantage of the provisions of section 439(6) of the Code of Criminal Procedure and showing cause against his conviction when he was subsequently called upon to show cause why the sentence imposed on him should not be enhanced. Per DAS J. Sub section (6) of section 439 of the Code of Criminal Procedure confers a new and a valuable right on the accused. The language used in sub section (6) does not, in terms, place any fetter on the right conferred by it on the accused. This new right is not expressed to be conditioned or controlled by anything that may have happened prior to the revision application under sub section (1) for enhancement of sentence. Therefore, whenever there is an application for enhancement of sentence, a notice must issue under sub section (2) to the accused person to show cause and whenever such notice is issued, the accused person must, under sub section (6), be given an opportunity, in showing cause against enhancement, also to show cause against his conviction. It is not correct to say that sections 421, 435 & 439 of the Code give the court a discretion not to decide the appeal or revision brought before it. The discretion conferred on the High Court does not authorise it to say that it will not look at the appeal or revision. The Court 's bounden duty is to look into the appeal or revision and decide it, although in the process of arriving at its decision it has a very wide discretion. There is no reason for holding that there is a merger or replacement of the Judgment of the trial Court into or by the Judgment of the High Court only when the appeal or revision is heard on notice to the respondent and either allowed wholly or partially or dismissed but not when it is heard without notice to the respondent and dismissed summarily; for this purpose it makes no difference whether the dismissal is summary or otherwise, and there is a judgment of the High Court in all the three cases. The only difference in substance is that in the first two cases the judgment is final qua both parties while in the third case, i.e., when an appeal or revision by the accused is summarily dismissed without issuing notice to the State, the judgment is final only qua the accused who preferred the appeal or revision. This is based not on any technical doctrine of res judicata, for there is none in criminal cases, but on the general principle of finality of judgment. In the first two cases there can, after the judgment, be no further application by the State for enhancement of sentence and therefore no question of the application of section 439(6) can arise. In the last case, i.e., in case of summary dismissal the Judgment not being final qua the State, the State may apply for enhancement of sentence and if it does the accused becomes entitled again to show cause against his conviction also by reason of the special provisions of section 439(6). Per BHAGWATI and IMAM JJ. A Judgment pronounced by the High Court in the exercise of its appellate or revisional 96 jurisdiction after issue of a notice and a full hearing in the presence of both the parties would certainly be arrived at after due consideration of the evidence and all arguments and would therefore be a final judgment and such judgment when pronounced would replace the judgment of the lower court, thus constituting the only final judgment to be executed in accordance with law by the court below. When however a petition of appeal presented by a convicted person from jail is summarily dismissed under section 421 or a revision application made by him is dismissed summarily or in limine without hearing him or his pleader what the High Court does in such a case is to refuse to entertain the petition of appeal or the revision application and the order passed by the High Court dismissed or rejected" cannot be said to be an expression of the opinion of the court arrived at after due consideration of the evidence and all the arguments. No notice for enhancement of sentence can be issued by the High Court when a judgment is pronounced by it after a full hearing in the presence of both the parties either in exercise of its appellate or its revisional jurisdiction. Such notice for enhancement of sentence can be issued by it either suo motu or at the instance of an interested party when the judgment of the lower court subsists and is not replaced by its own judgment given in the exercise of its appellate or revisional jurisdiction. When the Judgment of the lower court has been under its scrutiny on notice being issued to the opposite party and on a full hearing accorded to both the parties notice for enhancement of sentence can only be issued by it before it pronounces its judgment replacing that of the lower court. When such hearing is in progress it is incumbent upon the High Court or the opposite party to make up its mind before the judgment is pronounced whether a notice for enhancement of sentence should issue to the accused. Case law discussed.

The appellant firm was assessed to sales tax under the pro visions of the Bihar Sales Tax, 1944, for three periods commencing from October 1, 1947, and ending on March 31, 1050. Its claim for certain deductions was disallowed, and its applications in revision under section 24 Of the Act to the Board of Revenue, Bihar, were dismissed by three orders dated August 20, 1953, September 3, 1953 and April 30, 1954. Under section 25(1) of the Act the appellant applied to the Board to state a case to the High Court of Patna on certain questions of law, but the applications were dismissed by order dated August 30, 1954, on the ground that no questions of law arose. The appellant then moved the High Court for requiring the Board to state a case on the said questions of law. The High Court dismissed the applications in respect of the first two periods of assessment, but by order dated November 17, 1934, directed the Board to state a 277 case in regard to the third period on one of the questions of law which only, in its opinion, arose. By its judgment dated January 21, 1957, the High Court answered the question against the appellant. On February 17, 1955, the appellant made applications to the Supreme Court for special leave to appeal against the orders of the Board of Revenue dated August 20, 953, and September 3, 1953, in respect of the first two periods; and on April 12, 1955, it similarly applied for special leave in respect of the third period. Leave was granted in respect of all the three applications by order dated December 23, 1955, the leave granted in regard to the third period being confined to the order of the Board dated August 30, 1954. When the appeals came up for hearing the question was raised as to whether the appeals were maintainable in view of the fact that no applications for leave to appeal were filed against the orders of the Board of Revenue and the High Court subsequent to the orders of the Board in respect of which only special leave had been granted. Held, that though the words of article 136 of the Constitution of India are wide, the Supreme Court has uniformly held as a rule of practice that there must be exceptional and special circumstances to justify the exercise of the discretion under that Article. Pritam Singh vs The State, ; , V. Govinda rajulu Mudaliar vs The Commissioner of Income tax, Hyderabad, A.I.R. 1959 S.C. 248 and Messrs Chimmonlall Rameshwarlal vs Commissioner of Income tax (Centyal), Calcutta, , relied on. Dhakeswari Cotton Mills Ltd. vs Commissioner of Income tax, West Bengal, ; and Baldev Singh vs Commis sioner of Income tax, Delhi and Ajmer, , explained. Held, further, that in the circumstances of the present case the appellant was not entitled to a grant of special leave against the orders of the Board of Revenue where the result would be to by pass the High Court by ignoring its orders. Held, also, that though special leave might have been granted on an application made under article 136, the Court is not precluded from coming to a conclusion at the time of the hearing of the appeal that such leave ought not to have been granted. Baldota Brothers vs Libra Mining Works, A.I.R. 1961 S.C.C. 100, followed.

Appeal No. 119 of 1959. Appeal by special leave from the judgment and order dated January 9, 1958, of the Allahabad High Court (Lucknow Bench), Lucknow, in Civil Misc. Application No. 115 of 1955. 683 C. B. Agarwala and C. P. Lal, for the appellants. G. section Pathak, Achru Ram, section N. Andley, Rameshwar Nath, J. B. Dadachanji and P. L. Vohra for the respondent. November, 25. The Judgment of Sarkar, Subba Rao and Mudholkar, JJ., was delivered by Subba Rao, J., and that of Gajendragadkar and Wanchoo, JJ., was delivered by Wanchoo, J. SUBBA RAO, J. This is an appeal by special leave against the judgment of the High Court of Judicature at Allahabad, Lucknow Bench, allowing the petition filed by the respondent under article 226 of the Constitution. The respondent was appointed a Sub Inspector of Police in December, 1948, and was posted at Sitapur in June, 1953. On September 6, 1953, the respondent went to village Madhwapur in connection with an investigation of a case of theft. On the evening of the said date when he was returning, accompanied by one Lalji, an ex patwari of Mohiuddinpur, he saw one Tika Ram coming from the side of a canal and going hurriedly towards a field. As the movements of Tika Ram appeared to be suspicious and as he was carrying something in the folds of his dhoti, the respondent searched him and found a bundle containing currency notes. The respondent counted the currency notes and handed them over to Lalji for being returned to Tika Ram, who subsequently got them and went his way. Subsequently when Tika Ram counted the currency notes at his house, he found that they were short by Rs. 250. Tika Ram 's case is that the bundle when taken by the respondent contained notes of the value of Rs. 650, but when he counted them in his house they were only of the value of Rs. 400. On September 9, 1953 Tika Ram filed a complaint to the Superintendent of Police, Sitapur, to the effect that the respondent and one Lalji had misappropriated a sum of its. There is dispute in regard to the interpretation of the complaint. On receipt of the said complaint, the Superintendent of Police made enquiries 684 and issued a notice to the respondent to show cause why his integrity certificate should not be withheld, upon which the respondent submitted his explanation on October 3, 1953. Thereafter the Superintendent of Police forwarded the file of the case to the Deputy Inspector General of Police, Central Range, U. P., who directed the Superintendent of Police to take proceedings under section 7 of the Police Act against the respondent. The departmental proceedings were started against the respondent; on November 2, 1953, a charge sheet was served upon the respondent under section 7 of the Police Act stating that there were strong reasons to suspect that the respondent misappropriated a sum of Rs. 250 from the purse of Tika Ram; the respondent filed his explanation to the charge made against him; and ultimately the Superintendent of Police held an enquiry and found on the evidence that the respondent was guilty of the offence with which he was charged. On January 2, 1954, the Superin tendent of Police issued another notice to the respondent to show cause why he should not be reduced to the lowest grade of Sub Inspector for a period of three years. In due course the respondent showed cause against the action proposed to be taken against him on a consideration of which the Superintendent of Police, Sitapur, by his order dated January 16, 1954 reduced the respondent to the lowest grade of Sub Inspector for a period of three years. When this order came to the notice of the D. 1. G., U. P., on a consideration of the entire record, he came to the con clusion that the respondent should be dismissed from service and on October 19, 1954 he made an order to that effect. On February 28, 1955 the Inspector General of Police confirmed that order; and the revision filed by the respondent against that order to the State Government was also dismissed in August 1955. Thereafter the respondent filed a petition under article 226 of the Constitution before the High Court of Judicature at Allahabad, Lucknow Bench, for quashing the said orders and the same was heard by a division bench consisting of Randhir Singh and Bhargava, JJ. The learned judges held that the provisions of para. 685 486 of the Police Regulations had not been observed and, therefore, the proceedings taken under section 7 of the Police Act were invalid and illegal. On that finding, they quashed the impugned orders; with the result that the order dismissing the respondent from service was set aside. The State Government, the Deputy Inspector General of Police, Lucknow, and the Inspector General of Police, Uttar Pradesh, Lucknow, have preferred the present appeal against the said order of the High Court. We shall now proceed to consider the various contentions raised by learned counsel in the order they were raised and argued before us. At the outset Mr. C. B. Agarwala, learned counsel for the appellants, contended that there was no breach of the provisions of para. 486 of the Police Regulations. If this contention be accepted, no other question arises 'in this case; therefore, we shall deal with the same. The material part of para. 486 of the Police Regulations reads thus: "When the offence alleged against a police officer amounts to an offence only under section 7 of the Police Act, there can be no magisterial inquiry under the Criminal Procedure Code. In such cases, and in other cases until and unless a magisterial inquiry is ordered, inquiry will be made under the direction of the Superintendent of Police in accordance with the following rules: I.Every information received by the police relating to the commission of a cognizable offence by a police officer shall be dealt with in the first place under Chapter XIV, Criminal Procedure Code, according to law, a case under the appropriate section being registered in the police station concerned. . . . This provision expressly lays down that every information received by the police relating to the commission of a cognizable offence by a police officer shall be dealt with in the first place under Ch. XIV of the Criminal Procedure Code. This provision will not apply if the information received by the police does not 87 686 relate to the commission of a cognizable offence. Learned counsel contends that the information received in the present case does not relate to any offence committed by the respondent, much less to a cognizable offence. This is a point raised before us for the first time. This does not find a place even in the statement of case filed by the appellants. In the High Court it was not contended that the information did not disclose any offence committed by the respondent. Indeed, it was common case that the information disclosed an offence committed by the respondent, but it had been contended by the appellants that the misappropriation of the part of the money amounted to an offence under section 403 of the Indian Penal Code, which is not a cognizable offence; and it was argued on behalf of the respondent that it amounted to an offence under section 409 of the Indian Penal Code. The learned judges accepted the contention of the respondent. Even so, it is said that whatever might been the contentions of the parties, the information given by Tika Ram to the Superintendent of Police clearly disclosed that no offence was alleged to have been committed by the respondent and that this Court would, therefore, be justified, even at this very late stage, to accept the contention of the appellants. But the contents of the said information do not in any way support the assertion. Paragraph 3 of the application given by Tika Ram to the Superintendent of Police, Sitapur, reads thus: "That on Sunday last dated 6th September, 1953 the applicant had with him the currency notes of Rs. 650. The opposite party as well as Shri Babu Ram met the applicant on the west of Rampur near the Canal. The opposite party said to the Sub Inspector "This man appears to be clad in rags but is possessed of considerable money." After saying this the person of the applicant was searched. The Sub Inspector, having opened the bundle of notes, handed over the (notes) one by one to the opposite party. " This statement clearly indicates that either the Sub . Inspector or both the Sub Inspector and Lalji searched the person of Tika Ram, that the Sub Inspector took 687 the bundle of notes and handed the same over, one by one, to Lalji for being returned to the applicant, and that out of Rs. 650 a sum of Rs. 250 was not returned to him. The facts alleged make out an offence against both the Sub Inspector as well as Lalji. The mere fact that the respondent is not shown as one of the opposite parties in the application does not affect the question, for the information given in the application imputed the commission of an offence to both the respondent and Lalji. The notice issued by the Supe rintendent of Police on November 2, 1953 to the respondent also charges him with an offence of misappropriation. It is stated that the said notice only says that the Superintendent of Police had good reasons to suspect that the respondent misappropriated the sum of money and that it does not aver that he committed the offence of misappropriation. But what matters is 'that the Superintendent of Police also understood from the information given and the enquiry conducted by him that the respondent had committed the offence. Reliance is placed upon paragraph 3 of the writ petition wherein the respondent herein stated that Tika Ram filed a complaint against Lalji and not against the respondent. As a fact that is correct in the sense that the respondent was not shown in that application as the opposite party though in the body of that application definite allegations were made against the respondent. In the counter affidavit filed by the Superintendent of Police on behalf of the State it was clearly averred that on September 9, 1953 Tika Ram appeared before him and filed a petition to the effect fiat one Lalji and the respondent had misappropriated a sum of Rs. 250. Whatever ambiguity there might have been in the information we do not find any this allegation dispels it and it is not open to the appellants at this stage to contend that the petition did not disclose any offence against the respondent. In the circumstances, we must hold that the information received by the police related to the commission of an offence by the respondent. Even so, it is contended that the said offence is not a cognizable offence. It is said that there was no 688 entrustment made by Tika Ram to the respondent and that, therefore, the offence did not fall under section 409 of the Indian Penal Code, which is a cognizable offence, but only under section 403 of the Indian Penal Code, which is not a cognizable offence. Section 405 of the Indian Penal Code defines "criminal breach of trust" and section 409 thereof prescribes the punishment for the criminal breach of trust by a public servant. Under section 405 of the Indian Penal Code, "Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or wilfully suffers any person so to do, commits "criminal breach of trust". To constitute an offence under this section, there must be an entrustment of property and dishonest misappropriation of it. The person entrusted may misappropriate it himself, or he may wilfully suffer another person to do so. In the instant case the respondent, being a police officer, was legally entitled to search a person found under suspicious circumstances; and Tika Ram in handing over the bundle of notes to the police officer must have done so in the confidence that he would get back the notes from him when the suspicion was cleared. In these circumstances, there cannot be any difficulty in holding that the currency notes were alleged to have been handed over by Tika Ram to the respondent for a specific purpose, but were dishonestly misappropriated by the respondent or at, any rate he wilfully suffered Lalji to misappropriate the same. We, therefore, hold that if the currency notes were taken by the respondent in discharge of his duty for inspection and return, he was certainly entrusted with the notes within the meaning of section 405 of the Indian Penal Code. If so, the information discloses a cognizable offence. We reject the first contention. The second objection of learned counsel for the appellants is that sub para. (3) of para. 486 of the 689 Police Regulations enables the appropriate police authority to initiate the departmental proceeding without complying with the provisions of sub para. (1) of para. The relevant portion of para. 486 of the Police Regulations reads: "When the offence amounts to an offence only under section 7 of the Police Act, there can be no magisterial inquiry under the Criminal Procedure Code. In such cases, and in other cases until and unless a magisterial inquiry is ordered, inquiry will be made under the direction of the Superintendent of Police in accordance with the following rules:. . " Rule I relates to a cognizable offence, r. II to a non cognizable. offence, including an offence under section 29 of the Police Act, and r. III to an offence under section 7 of the Police Act or a non cognizable offence, including an offence under section 29 of the Police Act. Rule III says: "When a Superintendent of Police sees reason to take action on information given to him, or on his own knowledge or suspicion, that a police officer subordinate to him has committed an offence under section 7 of the Police Act or a non cognizable offence (including an offence under section 29 of the Police Act) of which he considers it unnecessary at that stage to forward a report in writing to the District Magistrate under rule II above, he will make or cause to be made by an officer senior in rank to the officer charged, a departmental inquiry sufficient to test the truth of the charge. On the conclusion of this inquiry he will decide whether further action is necessary, and if so, whether the officer charged should be departmentally tried, or whether the District Magistrate should be moved to take cognizance of the case under the Criminal Procedure Code. " The argument is that the words "an offence under section 7 of the Police Act" take in a cognizable offence and that, therefore, this rule provides for a procedure alternative to that prescribed under r. I. We do not think that this contention is sound. Section 7 of the Police Act empowers certain officers to dismiss, suspend 690 or reduce any police officer of the subordinate rank whom they shall think remiss or negligent in the discharge of his duty, or unfit for the same. The grounds for punishment are comprehensive: they may take in offences under the Indian Penal Code or other penal statutes. The commission of such offences may also be a ground to hold that an officer is unfit to hold his office. Action under this section can, therefore, be taken in respect of, (i) offences only under section 7 of the Police Act without involving any cognizable or noncognizable offences, that is, simple remissness or negli gence in the discharge of duty, (ii) cognizable offences, and (iii) non cognizable offences. Paragraph 486 of the Police Regulations makes this clear. It says that when the offence alleged against a police officer amounts to an offence only under section 7 of the Police Act, there can be no magisterial inquiry under the Criminal Procedure Code. This part of the rule applies to an offence only under section 7 of the Police Act i. e., the first category mentioned above. Rule I refers to a cognizable offence i. e., the second category, rule 11 to a non cognizable offence i. e., the third category, and rule III applies to an offence under section 7 of the Police Act and to a noncognizable offence. Though the word "only" is not mentioned in rule 111, the offence under section 7 of the Police Act can, in the context, mean an offence only under section 7 of the said Act i.e., an offence falling under the first category. So understood, the three rules can be reconciled. We, therefore, hold that, as the offence complained of in the present case is a cognizable offence, it falls under rule I and not under rule 111. We, therefore, reject this contention. The third contention advanced by learned counsel for the appellants raises a constitutional point of considerable importance. The gist of the argument may be stated thus: In England, the service under the Crown is held at the Crown 's pleasure, unless the employment is for good behaviour or for a cause. But if there is a statute prescribing the terms of service and the mode of dismissal of the servant of the Crown, the statute would control the pleasure of the Crown. In India, the Constitution as well as the 691 earlier Constitution Acts of 1915, as amended in 1919, and 1935 embodied the incidents of "tenure at pleasure" of His Majesty, or the President or the Governor, as the case may be, but did not empower the Legislatures under the earlier Acts and the Parliament and the Legislatures under the Constitution to make a law abrogating or modifying the said tenure; therefore, any law made by appropriate authorities conferring a power on any subordinate officer to dismiss a servant must be construed not to limit the power of His Majesty, the President or the Governor, as the case may be, but only to indicate that they would express their pleasure only through the said officers. The rules made in exercise of a power conferred on a Government under a statute so delegating the power to a subordinate officer can only be administrative directions to enable the exercise of the pleasure by the concerned authorities in a reasonable manner and that any breach of those regulations cannot possibly confer any right on, or give a cause of action to, the aggrieved Government servant to go to a court of law and vindicate his rights. Mr. Pathak, learned counsel for the respondent, in countering this argument contends that the constitution Acts in India embodied the incidents of the tenure of the Crown 's pleasure in the relevant provisions and what the Parliament can do in England, the appropriate Legislatures in India also can do, that is, "the tenure at pleasure" created by the Constitution Acts can be abrogated, limited or modified by law enacted by the appropriate legislative bodies. Alternatively he contends that even if the Police Act does not curtail the tenure at pleasure, the Legislature validly made that law and the Government validly made statutory rules in exercise of the powers confered under that Act and that, therefore, the appropriate authorities can only dismiss the respondent in strict compliance with the provisions of the Act and the Rules made thereunder. To appreciate the problem presented and to afford a satisfactory answer it would be convenient to consider the relevant provisions. The Act we are concerned with in this case is the (Act V 692 of 1861). Its constitutional validity at the time it was ,made was not questioned. Under section 7 of the , as it originally stood, "the appointment of all police officers other than those mentioned in B. 4 of this Act shall, under such rules as the local Government shall from time to time sanction, rest with the Inspector General, Deputy Inspectors General, Assistant Inspectors General and District Superintendents of Police, who may, under such rules as aforesaid, at any time, dismiss, suspend or reduce any police officer. " That section was substituted by the present section in 1937 and later on some appropriate amend ments were made to bring it in conformity with the Constitution. Under the amended section, "Subject to such rules as the State Government may from time to time make under this Act, the Inspector General, Deputy Inspectors General, Assistant Inspectors General and District Superintendent of Police may at any time dismiss, suspend or reduce any police officer of the subordinate ranks whom they shall think remiss or negligent in the discharge of his duty, or unfit for the same". In exercise of the powers conferred on the Government by section 46 of the Act, the Government made the U. P. Police Regulations prescribing the procedure for investigation and inquiry. We shall ' deal with the Regulations at a later stage. In the Government of India Act, 1915, as amended by the Act of 1919, for the first time, the doctrine of "tenure at pleasure" was introduced by section 96 B. In exercise of the power conferred under sub section (2) certain classification rules were framed by the local Government. This Act was repealed by the Government of India Act, 1935, and the section corresponding to section 96 B was section 240(1) in the latter Act. Section 241(2) empowered, except as expressly provided by the Act, the Governor General and the Governor to prescribe the conditions of service of the servants they were empowered to appoint. The main difference between the Act of 1919 and that of 1935 was that in the former Act there was only one limitation on the Crown 's pleasure, namely, that no person in the service might be dismissed by 693 an authority subordinate to that by which he was appointed, whereas in the latter Act a second limitation was imposed, namely, that no such person should ' 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: see section 240, sub sections (2) and (3). Another difference between the said two Acts was that while under the former Act all the services were placed in the same position, under the latter Act special provision was made for the police force prescribing that the conditions of service of the subordinate ranks of the various police forces should be such as might be determined by or under the Acts relating to those forces respectively vide section 243. By the Constitution, the Act of 1935 was repealed, and, with certain changes in phraseology, cls. (1) and (2) of article 310 took the place of sub sections (1) and (4) of section 240 respectively, and article 309 took the place of section 241(2). Under article 313, "Until other provision is made in this behalf under this Constitution, all the laws in force immediately before the commencement of this Constitution and applicable to any public service or any post which continues to exist after the commencement of this Constitution, as an all India service or as service or post under the Union or a State shall continue in force so far as consistent with the provisions of this Constitution". The result is that the and the Police Regulations, made in exercise of the powers conferred on the Government under that Act, which .were preserved under section 243 of the Government of India Act, 1935, continue to be in force after the Con stitution so far as they are consistent with the provisions of the Constitution. It is common case, as the contentions of learned counsel disclose, that the Act and the Regulations framed thereunder were constitutionally valid at the inception and that they are also consistent with the provisions of the Constitution. The difference between the two contentions lies in the fact that according to one His Majesty 's pleasure cannot be modified 88 694 by a statute, according to the other it is subject to statutory provisions. The relevant provisions of the Constitution read thus: Article 309: "Subject to the provisions of this Constitution, Acts of the appropriate Legislature may regulate the recruitment, and conditions of service of persons appointed, to public services and posts in connection with the affairs of the Union or of any State: Provided that it shall be competent for the President or such person as he may direct in the case of services and posts in connection with the affairs of the Union, and for the Governor of a State or such person as he may direct in the case of services and posts in connection with the affairs of the State, to make rules regulating the recruitment, and the conditions of service of persons appointed, to such services and posts until provision in that behalf is made by or under an Act of the appropriate Legislature under this article, and any rules so made shall have effect subject to the provisions of any such Act. " Article 310: "Except as expressly provided by this Constitution, every person who is a member of a defence service or of a civil service or holds any post connected with defence or any Civil Post under the Union holds office during the pleasure of the President, and every person who is a member of a civil service of a State or holds any civil post under a State holds office during the pleasure of the Governor of the State." Under article 309 the appropriate Legislature may regulate the recruitment and conditions of service of persons appointed to public services. Under article 310 every person who is EC member of a public service described therein holds office during the pleasure of the President or the Governor, as the case may be. The words "conditions of service" in article 309 in their comprehensive sense take in the tenure of a civil servant: see N. W. F. Province vs Suraj Narain (1). Therefore, "the tenure at pleasure" is also one of the conditions of service. But article 309 opens out with a (i) A.I.R. (1949) P.C. 112. 695 restrictive clause, namely, "Subject to the provisions of this Constitution", and if there is no restrictive, clause in article 310, there cannot be any difficulty in holding that article 309 is subject to the provisions of ' Art 310; with the result that the power of the Legislature to lay down the conditions of service of persons appointed to public services would be subject to "the tenure at pleasure" under article 310. In that event, any law made by the Legislature could not affect the over riding power of the President or the Governor, as the case may be, in putting an end to the tenure at their pleasure. Would the opening words of the clause in article 310, namely, "Except as expressly provided by this Constitution", make any difference in the matter of interpretation? It should be noticed that the phraseology of the said clause in article 310 is different from that in article 309. If there is a specific provision in some part of the Constitution giving to a Government servant a tenure different from that provided for in article 310, that Government servant is excluded from the operation of article 310. The said words refer, inter alia, to articles 124, 148, 218 and 324 which provide that the Judges of the Supreme Court, the Auditor General, the Judges of the High Courts and the Chief Election Commissioner shall not be removed from their offices except in the manner laid down in those Articles. If the provisions of the Constitution specifically prescribing different tenures were excluded from article 310, the purpose of that clause would be exhausted and thereafter the Article would be free from any other restrictive operation. In that event, articles 309 and 310 should be read together, excluding the opening words in the latter Article, namely, "Except as expressly provided by this Constitution". Learne counsel seeks to confine the operation of the opening words in article 309 to the provisions of the Constitution which empower other authorities to make rules relating to the conditions of service of certain classes of public servants, namely, articles 146(2), 148(5) and 229(2). That may be so, but there is no reason why article 310 should be excluded therefrom. It follows that while article 310 provides for a tenure at pleasure 696 of the President or the Governor, article 309 enables the Legislature or the executive, as the case maybe, to make any law or rule in regard, inter alia, to conditions of service without impinging upon the overriding power recognized under article 310. Learned counsel for the respondent contends that this construction is inconsistent with that prevailing in the English law and that the intention of the framers of the Constitution could not have been to make a radical departure from the law of England. The law of England on the doctrine of "tenure at pleasure" has now become fairly crystallized. In England, all servants of the Crown hold office during the pleasure of the Crown; the right to dismiss at pleasure is an implied term in every contract of employment of the Crown, this doctrine is not based upon any prerogative of the Crown, but on public policy; if the terms of appointment definitely prescribe a tenure for good behaviour or expressly provide for a power, to determine for a cause, such an implication of a power to dismiss at pleasure is excluded, and an Act of Parliament can abrogate or amend the said doctrine of public policy in the same way as it can do in respect of any other part of common law. The said propositions are illustrated in the following decisions: Shenton vs Smith (1), Gould vs Stuart (2), Reilly vs The King(3), Terrell vs Secretary of State (4). This English doctrine was not incorporated in its entirety in the Indian enactments vide State of Bihar vs Abdul Majid (5), Parshotam Lal Dhingra vs Union of India (6). Section 96 B of the Government of India Act, 1915, for the first time in 1919, by amendment, statutorily recognized this doctrine, but it was made subject to a condition or s qualification, namely, that no person in that service might be dismissed by any authority subordinate to that by which he was appointed. Section 240 of the Act of 1935 imposed another limitation, namely, that a reasonable opportunity of showing cause against the action proposed to be taken in (i) (3) (5) ; (2) (4) (6) ; 697 regard to a person must be given to him. But neither of the two Acts empowered the appropriate Legislature to make a law abolishing or amending the said doctrine. The Constitution of India practically incorporated the provisions of sections 240 and 241 of the Act of 1935 in articles 309 and 310. But the Constitution has not made "the tenure at pleasure" subject to any law made by the appropriate Legislature. On the other hand, as we have pointed out, article 309 is expressly made subject to "the tenure at pleasure" in article 310. Nor the attempt of learned counsel for the respondent to discover such a power in the Legislature in the Entries of the appropriate Lists of the Seventh Schedule to the Constitution can be legally sustained. He referred, inter alia, to Entry 70 of List I and Entry 41 of List II. It is not disputed that Parliament can make law for the organization of the police and for the prevention and detection of crime. But under article 245 of the Constitution such a power is subject to the provisions of the Constitution and, therefore, is subject to the provisions of article 310. Nor can we imply such a power in Parliament or the Legislatures from article 154(2)(b) of the Constitution. Under article 154, "the executive power of the State shall be vested in the Governor and shall be exercised by him either directly or through officers subordinate to him in accordance with this Constitution", and under el. 2(b) thereof, "nothing in this Article shall prevent Parliament or the Legislature of the State from conferring by law functions on any authority subordinate to the Governor. " The argument is that a power to terminate the service at pleasure under article 310 is a part of the executive power of the State, that power under article 154 can be exercised by the Governor directly or through officers subordinate to him, and that under article 154(2)(b) the Parliament or the Legislature of the State can confer the same power on any authority subordinate to the Governor or, at any rate, can make a law prescribing that the Governor shall exercise the said pleasure through a particular officer. 698 We cannot agree either with the premises or the conclusion sought to be based on it. The first question is whether the power of the Governor under article 310 to terminate the services of a Government servant at pleasure is part of the executive power of the State under article 154 of the Constitution. Article 154 speaks of the executive power of the State vesting in the Governor; it does not deal with the constitutional powers of the Governor which do not form part of the executive power of the State. Article 162 says that, subject to the provisions of the Constitution, the executive power of the State shall extend to matters with respect to which the Legislature of the State has power to make laws. If the Legislature of the State has no power to make a law affecting the tenure at pleasure of the Governor, the said power must necessarily fall outside the scope of the executive power of the State. As we will presently show, the Legislature has no such power and, therefore, it cannot be a part of the executive power of the State. That apart, if the said power is part of the executive power in its general sense, article 162 imposes another limitation on that power, namely, that the said executive power is subject to the provisions of the Constitution and therefore, subject to article 310 of the Constitution. In either view, article 310 falls outside the scope of article 154 of the Constitution. That power may be analogous to that conferred on the Governor under articles 174, 175 and 176. Doubtless the Governor may have to exercise the said power whenever an occasion arises, in the manner prescribed by the Constitution, but that in itself does not make it a part of the executive power of the State or enable him to delegate his power. Even on the assumption that the power under article 310 is executive power within the meaning of article 154, it does not make any difference in the legal position so far as the present case is concerned. Article 310 of the Constitution says that unless expresssly provided by the Constitution to the contrary, every civil servant holds office during the pleasure of the Governor subject to the limitations prescribed under 699 article 311. Can it be said that article 154(2)(b) expressly provides for a different tenure? Can it be said that the said Article confers on the Parliament or the Legislature a power higher than that conferred on them under article 245 of the Constitution ? It only preserves the power of the Legislature, which it has under the Constitution, to make a law conferring functions on an authority subordinate to the Governor. That power under article 245 is not unlimited, but is subject to the provisions of the Constitution and there fore subject to article 310 thereof. It is then said that if the appellants ' contention were not accepted, it would lead to conflict of jurisdiction: while the Governor has the power under article 310 to dismiss a public servant at his pleasure, a statute may confer a power on a subordinate officer to dismiss a servant only subject to conditions; a subordinate officer functioning under an Act may not be able to dismiss a servant, but the Governor may be able to do so under similar circumstances; a subordi nate officer may dismiss a servant, but the Governor may order his continuance in office. This argument is based upon the misapprehension of the scope of article 309 of the Constitution. A law made by the appropriate Legislature or the rules made by the President or the Governor, as the case may be, under the said Article may confer a power upon a particular authority to remove a public servant from service; but the conferment of such a power does not amount to a delegation of the Governor 's pleasure. Whatever the said authority does is by virtue of express power conferred on it by a statute or rules made by competent authorities and not by virtue of any delegation by the Governor of his power. There cannot be conflict between the exercise of the Governor 's pleasure under article 310 and that of an authority under a statute, for the statutory power would be always subject to the overriding pleasure of the Governor. This conclusion, the argument proceeds, would throw a public servant in India to the mercy of the executive Government while their compeers in England 700 can be protected by legislation against arbitrary actions of the State. This apprehension has no real .basis, for, unlike in England, a member of the public service in India is constitutionally protected at least in two directions: (i) he cannot be dismissed by an authority subordinate to that by which he was appointed; (ii) he cannot be dismissed, removed or reduced in rank until he has been given a reasonable opportunity of showing cause against the action proposed to be taken in regard to him. A condition similar to the first condition in article 311 found in section 96 B of the Government of India Act, 1919, was hold by the Judicial Committee in R. T. Bangachari vs Secretary of State for India (1) to have a statutory force, and the second condition, which is only a reproduction of that found in sub section (2) of section 240 of the Government of India Act, 1935, was held in High Commissioner for India and High Commissioner for Pakistan vs I. M. Lall (2) as mandatory qualifying the right of the employer recognized in sub section (1) thereof. These two statutory protections to the Government servant are now incorporated in article 311 of the Constitution. This Article imposes two qualifications on the exercise of the pleasure of the President or the Governor and they quite clearly restrict the operation of the rule embodied in article 310(1) vide the observations of Das, C.J., in Dhingra 's case (3). The most important of these two limitations is the provision prescribing that a civil servant shall be given a reasonable opportunity of showing cause against the action proposed to be taken in regard to him. As this condition is a limitation on the "tenure at pleasure", a law can certainly be made by Parliament defining the content of "reasonable opportunity" and prescribing the procedure for giving the said opportunity. The appropriate High Court and the Supreme Court can test the validity of such a law on the basis whe ther the provisions prescribed provide for such an opportunity, and, if it is valid, to ascertain whether the reasonable opportunity so prescribed is really given to a particular officer. It may be that the (1) (1936) L.R. 64 I.A. 40. (2) (1948) L.R. 75 1.A. 225. (3) ; , 839. 701 framers of the Constitution, having incorporated in our Constitution the "tenure at pleasure" unhampered by legislative interference, thought that the said limitations and qualifications would reasonably protect the interests of the civil servants against arbitrary actions. The discussion yields the following results: (1) In India every person who is a member of a public service described in article 310 of the Constitution holds office during the pleasure of the President or the Governor, as the case may be, subject to the express provisions therein. (2) The power to dismiss a public servant at pleasure is outside the scope of article 154 and, therefore, cannot be delegated by the Governor to a subordinate officer, and can be exercised by him only in the manner prescribed by the Constitution. (3) This tenure is subject to the limitations or qualifications mentioned in article 311 of the, Constitution. (4) The Parliament or the Legislatures of States cannot make a law abrogating or modifying this tenure so as to impinge upon the overriding power conferred upon the President or the Governor under article 310, as qualified by article 311. (5) The Parliament or the Legislatures of States can make a law regulating the conditions of service of such a member which includes proceedings by way of disciplinary action, without affecting the powers of the President or the Governor under article 310 of the Constitution read with article 311 thereof. (6) The Parliament and the Legislatures also can make a law laying down and regulating the scope and content of the doctrine of "reasonable opportunity" embodied in article 311 of the Constitution; but the said law would be subject to judicial review. (7) If a statute could be made by Legislatures within the foregoing permissible limits, the rules made by an authority in exercise of the power conferred thereunder would likewise be efficacious within the said limits. What then is the effect of the said propositions in their application to the provisions of the and the rules made thereunder? The of 89 702 1861 continues to be good law under the Constitution. Paragraph 477 of the Police Regulations shows that the rules in Chapter XXXII thereof have been framed under section 7 of the . Presumably, they were also made by the Government in exercise of its power under section 46(2) of the . Under para. 479(a) the Governor 's power of punishment with reference to all officers is preserved; that is to say, this provision expressly saves the power of the Governor under article 310 of the Constitution. "Rules made under a statute must be treated for all purposes of construction or obligation exactly as if they were in the Act and are to be of the same effect as if contained in the Act, and are to be judicially noticed for all purposes of construction or obligation": see Maxwell "On the Interpretation of Statutes", 10th edn., pp. 5051. The statutory rules cannot be described as, or equated with, administrative directions. If so, the and the rules made thereunder constitute a self contained code providing for ' the appointment. of police officers and prescribing the procedure for their removal. It follows that where the appropriate authority takes disciplinary action under the or the rules made thereunder, it must conform to the provisions of the statute or the rules which have conferred upon it the power to take the said action. If there is any violation of the said provisions, subject to the question which we will presently consider whether the rules are directory or mandatory, the public servant would have a right to challenge the decision of that authority. Learned counsel for the appellants relied upon the following decisions of the Privy Council and this Court in support of his contention that the said rules are administrative directions: R. T. Rangachari vs Secretary of State for India (1), R. Venkata Rao vs Secretary of State for India (2), High Commissioner for India and High Commissioner for Pakistan vs I. M. Lall (3), section A. Venkataraman vs The Union of India(4), and Khem Chand vs The Union of India(5). In Venkata Rao 's (1) (1936) L.R. 64 I.A. 40. (3) (1948) L.R. 75 I.A. 225. (2) (1936) L.R. 64 I.A. 55. (4) ; (5) ; 703 case (1) a reader of the Government Press was dismissed and in the suit filed by him against the Secretary, of State for India he complained, inter alia, that the dismissal was contrary to the statute inasmuch as it was not preceded by any such inquiry as was prescribed by rule XIV of the Civil Services Classification Rules made under section 96B(2) of the Government of India Act. Under section 96B of the said Act, every person in civil service holds office during the pleasure of His Majesty. Sub section (2) of that section empowers the Secretary of State for India to make rules laying down, among others, the conditions of service, and sub section (5) declares that no rules so made shall be construed to limit or abridge the power of the Secretary of State in Council to deal with the case of any person in the civil service of the Crown in India in such manner as may appear to him to be just and equitable. On a construction of these provisions the Judicial Committee held that His Majesty 's pleasure was paramount and could not legally be controlled or limited by the rules. Two reasons were given for the conclusion, namely, (i) section 96B in express terms stated that the office was held during the pleasure and there was no room for the implication of a contractual term that the rules were to be observed; and (ii) sub section (2) of section 96B and the rules made careful provisions for redress of grievances by administrative process and that sub section (5) reaffirmed the superior authority of the Secretary of State in Council over the civil service. It may be noticed that the rules framed in exercise of the power conferred by the Act was to regulate the exercise of His Majesty 's pleasure. The observations were presumably coloured by the doctrine of "tenure at pleasure" obtaining in England, namely, that it could only be modified by statute, influenced by the princi ple that the rules made under a statute shall be consistent with its provisions and, what is more, based upon a construction of the express provisions of the Act. These observations cannot, in our opinion, be taken out of their context and applied to the provisions of our Constitution and the Acts of our Legislatures in derogation of the well settled principles of (1) (1936) L. R. 64 I. A. 55. 704 statutory construction. In Bangachari 's case (1) a police officer was dismissed by an authority subordinate to that by which he had been appointed. The appeal was heard along with that in Venkata Rao 's case (2) and the judgments in both the appeals were delivered on the same day. The Judicial Committee distinguished Venkata Rao 's case (2) with the following observations at p. 53: "It is manifest that the stipulation or proviso as to dismissal is itself of statutory force and stands on a footing quite other than any matters of rule which are of infinite variety and can be changed from time to time. " These observations do not carry the matter further an our remarks made in connection with Venkata Rao 's case (2) would equally apply to this case. I.M. Lall 's case (3) turns upon sub section (3) of section 240 of the Government of India Act, 1935. Again the Judicial Committee made a distinction between the rules and the provisions of the Act and ruled that sub sections (2) and (3) of section 240 indicated a qualification or exception to the antecedent provisions in sub section (1) of section 240. This decision only adopted the reasoning in the earlier decision. The remarks made by us in connection with Venkata Rao 's case (2) would equally apply to this decision. This Court in section A. Venkataraman 's case (4) incidentally noticed the observations of the Judicial Committee in Venkata Rao 's case (2) and observed that the rules, which were not incorporated in a statute, did not impose any legal restriction upon the right of the Crown to dismiss its servants at pleasure. This Court was not laying down any general proposition, but was only stating the gist of the reasoning in Venkata Rao 's case (2). Das, C.J., if we may say so, correctly stated the scope of the rule in Venkata Rao 's case (2) in the decision in Khem Chand 's case (5), when he stated at p. 1091 "The position of the Government servant was, therefore, rather insecure, for his office being held during the pleasure of the Crown under the Government of India Act, 1915, the rules could not override (1) (1936) L.R. 64 I.A. 40. (3) (1948) L.R. 75 I.A. 225. (2) (1936) L.R. 64 I.A. 55. (4) ; (5) ; 705 or derogate from the statute and the protection of the rules could not be enforced by action so as to nullify the statute itself." To state it differently, the Government of India Act, 1915, as amended in 1919, and that of 1935 expressly and clearly laid down that the tenure was at pleasure and therefore the rules framed under that Act must be consistent with the Act and not in derogation of it. These decisions and the observations made therein could not be understood to mark a radical departure from the fundamental principle of construction that rules made under a statute must be treated as exactly as if they were in the Act and are of the same effect as if contained in the Act. There is another principle equally fundamental to the rules of construction, namely, that the rules shall be consistent with the provisions of the Act. The decisions of the Judicial Committee on the provisions of the earlier Constitution Acts can be sustained on the ground that the rules made in exercise of power conferred under the Acts cannot override or modify the tenure at pleasure provided by section 96B or section 240 of the said Acts, as the case may be. Therefore, when the paramountcy of the doctrine was conceded or declared by the statute, there might have been justification for sustaining the rules made under that statute in derogation thereof on the ground that they were only administrative directions, for otherwise the rules would have to be struck down as inconsistent with the Act. In such a situation, if the statute was valid it would be valid in so far as it did not derogate from the provisions of article 310, read with article 311 the rules made thereunder would be as efficacious as the Act itself. So long as the statute and the rules made thereunder do not affect the power of the Governor in the present case the Governor 's pleasure is expressly preserved they should be legally enforceable. In this context the decisions of the different High Courts in India are cited at the Bar. It would not serve any purpose to consider every one of them in detail. It would suffice if their general trend be noticed. They express two divergent views: one line relies upon the observations 706 of the Privy Council in Venkata Rao 's case (1) and lays down that all statutory rules vis a vis the disciplinary proceedings taken against a Government servant are administrative directions, and the other applies the well settled rules of construction and holds that the appropriate authority is bound to comply with the mandatory provisions of the rules in making an inquiry under a particular statute. A close scrutiny of some of the decisions discloses a distinction implied, though not expressed, between statutory rules defining the scope of reasonable opportunity and those governing other procedural steps in the disciplinary process. In our view, subject to the overriding power of the President or the Governor under article 310, as qualified by the provisions of article 311, the rules governing disciplinary proceedings cannot be treated as administrative directions, but shall have the same effect as the provisions of the statute whereunder they are made, in so far a, , they are not inconsistent with the provisions thereof We have already negatived the contention of learned counsel that the Governor exercises his pleasure through the officers specified in section 7 of the , and therefore, it is not possible to equate the Governor 's pleasure with that of the specified officers ' statutory power. If so, it follows that the inquiry under the Act shall be made in accordance with its provisions and the rules made thereunder. Then learned counsel contends that even if the said rules have statutory force, they are only directory and the non compliance with the rules will not invalidate the order of dismissal made by the appropriate authority. Before we consider the principles governing the question whether the rules are mandatory or directory, it would be convenient at this stage to notice broadly the scope and the purpose of the inquiry contemplated by the rules. Section 2 of the constitutes the police establishment; section 7 empowers specified officers to (1) [1936] L.R. 64 I.A. 55. 707 punish specified subordinate officers who are remiss or negligent in discharge of their duties or unfit for the same; section 46 enables the Government to make rules. to regulate the procedure to be followed by the magistrate and police officers in discharge of any duty imposed on them by or under the Act; under section 7, read with section 46 of the , the Police Regulations embodied in chapter XXXII were framed. Paragraph 477 of the Regulations says that the rules in that chapter have been made under section 7 of the and apply only to officers appointed under section 2 of the and that no officer appointed under that section shall be punished by executive order otherwise than in the manner provided in that chapter. Paragraph 478 prescribes the nature of the punishment that can be imposed on the delinquent officers. Paragraph 479 empowers specified officers to punish specified subordinate officers. Paragraph 483 gives the procedure to be followed in the matter of the inquiry against a police officer. It reads: "Subject to the special provision contained in paragraph 500 and to any special orders which may be passed by the Governor in particular cases a proceeding against a police officer will consist of A A magisterial or police inquiry, followed, if this inquiry shows the need for further action, by B A judicial trial, or C A departmental trial, or both, consecutively." Paragraph 484 declares that the nature of the inquiry in any particular case will vary according to the nature of the offence. If the offence is cognizable or non cognizable, the inquiry will be according to Schedule II of the Criminal Procedure Code. If the information is received by the District Magistrate, he may in exercise of his powers under the Criminal Procedure Code either, (1) make or order a magisterial inquiry; or (2) order an investigation by the Police. Paragraph 485 reads: "When a magisterial inquiry is ordered it will be made in accordance with the Criminal Procedure Code and the Superintendent of Police will have no direct 708 concern with it until the conclusion of judicial proceedings or until and unless the case is referred to him for further disposal, but he must give any assistance to the inquiring magistrate that he may legally be called upon to give and he must suspend the accused should this become necessary under paragraph 496." Paragraph 486 says that there can be no magisterial inquiry under the Criminal Procedure Code when the offence alleged against a police officer amounts to an offence only under section 7 of the , and it provides further that in such cases, and in, other cases until and unless a magisterial inquiry is ordered, inquiry will be made under the direction of the Superintendent of Police in accordance with the rules given thereunder. Under rule I thereof, "Every information received by the police relating to the commission of a cognizable offence by a police officer shall be dealt with in the first place under Chapter XIV, Criminal Procedure Code, according to law, a case under the appropriate section being registered in the police station concerned". There are six provisos to that rule. Rule II provides for the inquiry of a non cognizable offence; and rule III prescribes the procedure in regard to an offence only under section 7 of the or a non cognizable offence of which the Superintendent of Police considers unnecessary at that stage to forward a report in writing to the District Magistrate. Paragraph 488 deals with a judicial trial and para. 489 with a departmental trial. Paragraph 489 says: "A police officer may be departmentally tried under section 7 of the (1) after he has been tried judicially; (2) after a magisterial inquiry under the Criminal Procedure Code; (3) after a police investigation under the Criminal Procedure Code or a departmental enquiry under paragraph 486,III above. " There are other provisions dealing with the manner of conducting the inquiries and other connected matters. The rules provide for the magisterial and police inquiry followed, if the inquiry showed the need for further action, by a judicial trial or a departmental 709 trial, or both, consecutively. In the case of cognizable offences the Superintendent of Police is directed to investigate under chapter XIV of the Criminal Pro p, cedure Code and in the case of non cognizable offences in the manner provided in rule II of para. 486, and in the case of an offence only under section 7 of the or a non cognizable offence in the manner provided under rule III of para. After one or other of the relevant procedure is followed, the Superintendent of Police is empowered to try a police officer departmentally. The question is whether rule I of para. 486 is directory. The relevant rule says that the police officer shall be tried in the first place under chapter XIV of the Criminal Procedure Code. The word "shall" in its ordinary import is "obligatory"; but there are many decisions wherein the courts under different situations construed the word to mean "may". This Court in Hari Vishnu Kamath vs Syed Ahmad Ishaque (1) dealt with this problem at p. 1125 thus: "It is well established that an enactment in form mandatory might in substance be directory and that the use of the word "shall" does not conclude the matter. " It is then observed: "They (the rules) are well known, and there is no need to repeat them. But they are all of them only aids for ascertaining the true intention of the legislature which is the determining factor, and that must ultimately depend on the context. " The following quotation from Crawford "On the Construction of Statutes", at p. 516, is also helpful in this connection: "The question as to whether a statute is mandatory or directory depends upon the intent of the legislature and not upon the language in which the intent is clothed. The meaning and intention of the legislature must govern, and these are to be ascertained, not only from the phraseology of the provision, but also by considering its nature, its design, and the (1) ; 90 710 consequences which would follow from construing it the one way or the other. " This passage was approved by this Court in State of U. P. vs Manbodhan Lal Srivastava (1). In Craies on Statute Law, 5th edition, the following passage appears at p. 242: "No universal rule can be laid down as to whether mandatory enactments shall be considered directory only or obligatory with an implied nullification for disobedience. It is the duty of Courts of Justice to try to get at the real intention of the Legislature by carefully attending to the whole scope of the statute to be construed. " A valuable guide for ascertaining the intention of the Legislature is found in Maxwell on "The Interpretation of Statutes", 10th edition, at p. 381 and it is: "On the other hand, where the prescriptions of a statute relate to the performance of a public duty and where the invalidation of acts done in neglect of them would work serious general inconvenience or injustice to persons who have no control over those entrusted with the duty without promoting the essential aims of the legislature, such prescriptions seem to be generally understood as mere instructions for the guidance and government of those on whom the duty is imposed, or, in other words, as directory only. The neglect of them may be penal, indeed, but it does not affect the validity of the act done in disregard of them. " This passage was accepted by the Judicial Committee of the Privy Council in the case of Montreal Street Railway Company vs Normandin (2 ) and by this Court in State of U. P. vs Manbodhan Lal Srivastava (1). The relevant rules of interpretation may be briefly stated thus: When a statute uses the word "shall", prima facie, it is mandatory, but the Court may ascertain the real intention of the legislature by carefully attending to the whole scope of the statute. For ascertaining the real intention of the Legislature the Court may consider, inter alia, the nature and the design of the statute, and the consequences which (1) ; , 545. (2) L.R. [1917] A.C.770. 711 would follow from construing it the one way or the other, the impact of other provisions whereby the necessity of complying with the provisions in question is avoided, the circumstance, namely, that the statute provides for a contingency of the non compliance with the provisions, the fact that the non compliance with the provisions is or is not visited by some penalty, the serious or trivial consequences that flow therefrom, and, above all, whether the object of the legislation will be defeated or furthered. Now what is the object of rule I of para. 486 of the Police Regulations? In our opinion, it is conceived not only to enable the Superintendent of Police to gather information but also to protect the interests of subordinate officers against whom departmental trial is sought to be held. After making the necessary investigation under chapter XIV of the Criminal Procedure Code, the Superintendent of Police may as well come to the conclusion that the officer concerned is innocent, and on that basis drop the entire proceedings. He may also hold that it is a fit case for criminal prosecution, which, under certain circumstances, an honest officer against whom false charges are framed may prefer to face than to submit himself to a departmental trial. Therefore,the rules are conceived in the interest of the department as well as the officer. From the stand point of the department as well as the officer against whom departmental inquiry is sought to be intiated, the preliminary inquiry is very important and it serves a real purpose. Here the setting aside of the order of dismissal will not affect the public in general and the only consequence will be that the officer will have to be proceeded against in the manner prescribed by the rules. What is more, para. 487 and para. 489 make it abundantly clear that the police investigation under the Criminal Procedure Code is a condition precedent for the departmental trial. Paragraph 477 emphasizes that no officer appointed under section 2 of the shall be punished by executive order otherwise than in the manner provided under chapter XXXII of the Police Regulations. This is an imperative injunction prohibiting 712 inquiry in non compliance with the rules. Paragraph 489 only empowers the holding of a departmental trial in regard to a police officer only after a police investigation under the Criminal Procedure Code. When a rule says that a departmental trial can be held only after a police investigation, it is not permissible to hold that it can be held without such investigation. For all the foregoing reasons, we hold that para. 486 is mandatory and that, as the investigation has not been held under chapter XIV of the Criminal Procedure Code, the subsequent inquiry and the order of dismissal are illegal. For the foregoing reasons we hold that, as the respondent was dismissed without complying with the provisions of para. 486(1), the order of dismissal is illegal and that the High Court is right in setting aside the order of dismissal. In the result, the appeal fails and is dismissed with costs. WANCHOO, J. We regret we are unable to agree that the appeal be dismissed. Babu Ram Upadhya (respondent) was a sub inspector of police who was appointed in December, 1948. In 1953, he was posted at Sitapur. On September 6, 1953, he was returning from a village called Madhwapur, when he saw a man who was subsequently found to be Tika Ram coming from the side of a canal and going hurriedly into a field. The movements of Tika Ram roused his suspicion. One Lalji, an ex patwari, was also with the sub inspector. Tika Ram was called and searched, and a bundle containing currencynotes was found on him. The sub inspector took the bundle and counted the notes and handed them over to Lalji. Lalji in his turn handed over the notes to Tika Ram. Thereafter Tika Ram, who is an old man, almost blind, went away. When he reached his house, he found that there was a shortage of Rs. 250. He then made a complaint to the Superintendent of Police on September 9, 1953, in which he gave the above facts. An inquiry was made by the Superintendent of Police and ultimately, departmental proceedings under section 7 of the were taken 713 against the respondent. These proceedings resulted in his dismissal and thereupon the respondent applied to the High Court under article 226 of the Constitution. The main contention of the respondent was that r. 486 of the Police Regulations framed under section 7 of the was not observed and therefore the departmental proceedings taken against him were illegal. The reply of the appellant was two fold: in the first place, it was urged that r. 486 did not apply as there was no report of a cognizable offence against the sub inspector; and in the next place, it was urged that the rules contained in the Police Regulations were only administrative rules and even if there was non compliance with any of them, it would not affect the departmental proceedings taken against the respondent, provided there was no breach of the guarantees contained in article 311 of the Constitution. The High Court held that there was a report of a cognizable offence under section 409 of the Indian Penal Code against the respondent and therefore the procedure provided by r. 486 ought to have been followed. It further held that r. 486 had been framed under section 7 of the and was a statutory provision, which had the force of law. As such, following the earlier view taken by the High Court in two other cases it held that a dismissal as a result of departmental proceedings which took place without complying with r. 486 would be illegal. In consequence, the writ petition was allowed. The appellant then applied for a certificate to enable it to appeal to this Court, which was refused. Thereupon special leave was prayed for from this Court, which was granted; and that is how the matter has come up before us. Mr. C. B. Aggarwala on behalf of the appellant urges the same two points before us. So far as the first point is concerned, we are of opinion that there is no force in it. There is no doubt that in the complaint made by Tika Ram, the name of the respondent was not shown in the heading; but from the facts disclosed in the body of the complaint it is clear that the sub inspector searched the person of Tika Ram and recovered a bundle containing currency notes. He 714 did so obviously under the authority vested in him as a police officer. When therefore he was satisfied that there was no reason to take any further action against Tika Ram, it was his duty to see that the entire amount taken by him from Tika Ram on search was returned to him (Tika Ram). The High Court was right in the view that where property is taken away with the intention that it will continue to be the property of the person from whose possession it has been taken away, there will be an entrustment of the property to the person taking it away, and if. subsequently the person taking it away converts it to his own use or suffers some other person to do so, there will be criminal breach of trust and not merely criminal misappropriation. Thus an offence under section 409 of the Indian Penal Code appears to have been committed prima facie on the facts of this case. As an offence under section 409 is a cognizable offence, r. 486 of the Police Regulations would apply. This brings us to the main point in the present appeal. Sec. 7 of the under which r. 486 has been framed is in these terms: "Subject to such rules as the State Government may from time to time make under this Act, the Inspector General, Deputy Inspectors General, Assistant Inspectors General and District Superintendents of Police may at any time dismiss, suspend or reduce any police officer of the subordinate ranks whom they shall think remiss or negligent in the discharge of his duty or unfit for the same; or may award any one or more, of the following punishments to any police officer of the subordinate ranks, who shall discharge his duty in a careless or negligent manner, or who, by any act of his own shall render himself unfit for the discharge thereof, name (a) fine to any amount not exceeding one month 's pay; (b) confinement to quarters for a term not exceeding fifteen days, with or without punishment, drill, extra guard, fatigue or other duty; (c) deprivation of good conduct pay; 715 (d) removal from any office of distinction or special emolument;". It gives power to four grades of police officers to dismiss, suspend or reduce any police officer of the subordinate ranks whom they think remiss or negligent in the discharge of his duty or unfit for the same. It also provides for infliction of four other kinds of punishment by these four grades of officers on any police officer of the subordinate ranks who discharges his duty in a careless or negligent manner or who by any act of his own renders himself unfit for the discharge thereof. In the present case we are concerned with dismissal and what we shall say hereafter should be taken to be confined to a case of dismissal. Sec tion 7 shows that the power of dismissal conferred by it on the four grades of police officers is to be exercised subject to such rules as the State Government may from time to time make under the . The contention on behalf of the respondent is that the power of dismissal has to be exercised subject to rules and therefore, when r. 486 of the Police Regulations (framed under section 7) provided a certain procedure to be followed with respect to cases in which a cognizable offence was involved it was not open to the authority concerned to disregard that procedure. In effect, it is urged that r. 486 is a mandatory provision and non compliance with it would invalidate the departmental proceedings. It is not in dispute in this case that the procedure provided by r. 486 was not followed. That procedural provision is that where a report of a cognizable crime is made against a police officer belonging to the subordinate ranks, it has to be registered as provided in Chapter XIV of the Code of Criminal Procedure and investigated as provided thereunder. Thereafter the authority concerned has to decide whether to send the case for trial before a court of law or to take departmental proceedings. In this case no report was registered as provided under Chapter XIV of the Code of Criminal Procedure and no investigation was made as provided in that Chapter. All that happened was that the Superintendent of Police to whom Tika Ram had complained inquired into the 716 complaint of Tika Ram and thereafter decided to hold a departmental inquiry under section 7 of the against the respondent. The main contention on behalf of the appellant is that the Rules framed under section 7 of the are administrative rules and in any case they are only directory and non compliance with them would not vitiate the subsequent proceedings unless there is a breach of the guarantee contained in article 311 of the Constitution, as all public servants hold their office at the pleasure of the President or the Governor, as the case may be, other than those expressly excepted under the Constitution. Reliance in this connection is placed on the case of R. Venkata Rao vs Secretary of State for India in Council (1). This brings us to a consideration of the tenure on which public servants hold office. The position in England is that all public servants hold office at the pleasure of His Majesty, that is to say, their service was terminable at any time without amuse: (see Shenton vs Smith (2 )). By law, however, it is open to Parliament to prescribe a different tenure and the King being a party to every Act of Parliament is understood to have accepted the change in the tenure when he gives assent to such law: (see Gould vs Stuart (3)). This principle applied in India also before the Government of India Act, 1915, was amended by the addition of section 96 B therein. Section 96 B for the first time provided by statute that every person in the civil service of the Crown held office during His Majesty 's pleasure, subject to the provisions of the Government of India Act and the rules made thereunder and the only protection to a public servant against the exercise of pleasure was that he could not be dismissed by any authority subordinate to that by which he was appointed. It was this section, which came for consideration before the Privy Council in Venkata Rao 's case (1) and the Privy Council held that in spite of the words ".subject to the rules made under the Government of India Act," Venkata Rao 's employment was not of a (1) (1936) L.R. 64 I.A. 55 (2) (3) 717 limited and special kind during pleasure with an added contractual term that the procedure prescribed, by the Rules must be observed; it was by the express terms of section 96 B held "during His Majesty 's pleasure" and no right of action as claimed by Venkata Rao existed. The Privy Council further held that the terms of section 96 B assured that the tenure of office, though at pleasure, would not be subject to capricious or arbitrary action but would be regulated by the rules which were manifold in number, most minute in particularity and all capable of change; but there was no right in the public servant enforceable by action to hold his office in accordance with those rules and he could therefore be dismissed notwithstanding the failure to observe the procedure prescribed by them. The main point which was urged in Venkata Rao 's case (1) was that under r. XIV of the Civil Services Classification Rules no public servant could be dismissed, removed or reduced in rank except after a properly recorded departmental inquiry. In Venkata Rao 's case (1) the departmental inquiry prescribed by the rules was found not to have been held. Even so, the Privy Council held that the words used in section 96 B could not and did not cut down the pleasure of His Majesty by rules though it was observed that the terms of the section contained a statutory and solemn assurance, that the tenure of office, though at pleasure., would not be subject to capricious or arbitrary, action, but would be regulated by rule. It was further added that supreme care should be taken that this assurance is carried out in the letter and in the spirit. The Privy Council further held that in ' the case before it, there had been a serious and complete failure to adhere to important and indeed fundamental rules, and mistakes of a serious kind had been made and wrongs had been done which called for redress; even so; they were of the view that as a matter of law that redress was not obtainable from courts by action. ,. This was the position under the Government of India Act 1915. There was however a material change in the Government of India Act, 1935. So far, there (1) (1936) L.R. 64 I. A. 55. 91 718 was one protection to a public servant, namely, that he could not be dismissed by an authority subordinate to that by which he was appointed. In the Government of India Act, 1935, section 240(1) laid down that " except as expressly provided by this Act, every person who is a member of a civil service of the Crown in India. holds office during His Majesty 's pleasure. " The words of this section are different from those of section 96 B and the tenure of all public servants other than those expressly provided for was to be during His Majesty 's pleasure. There were, however, two safeguards provided by sub sections (2) and (3) of section 240. The first was the same (namely, that no public servant will be dismissed by an officer subordinate to that who appointed him); but a further exception was added to the pleasure tenure, namely, no public servant shall be dismissed until he has been given a reasonable opportunity of showing cause against the action proposed to be taken in regard to him. This protection came to be considered by the Privy Council in High Commissioner for India and High Commissioner for Pakistan vs 1. M. Lall (1) and it was held that it was a mandatory provision and qualified the pleasure tenure and provided a condition precedent to the exercise of power by His Majesty provided by sub section (1) of section 240. Thus by the Government of India Act, 1935, there were two statutory guarantees to public servants against the exercise of the pleasure of his Majesty; but it is clear from section 240 of the Government of India Act, 1935, that the pleasure of His Majesty to dismiss was not otherwise subject to rules framed under the subsequent provisions of the Government of India Act appearing in Chapter 11 of Part X dealing with public services. This position continued till we come to the Constitution. Article 310(1) of the Constitution provides for what was contained in section 240(1) of the Government of India Act, 1935, and is in these terms: "(1) Except as expressly provided by this Constitution, every person who is a member of a defence (1) (1948) L.R. 75 I.A. 225. 719 service or of a civil service of the Union or of an all India service or holds any post connected with defence, or any civil post under the Union, holds office during the pleasure of the President, and every person who is a member of a civil service of a State or holds any civil post under a State holds office during the pleasure of the Governor of the State. " It will be clear therefore that all public servants except as expressly provided by the Constitution hold their office during the pleasure of the President or the Governor, as the case may be. Article 311 then provides for two guarantees and is similar in terms to section 240(2) and (3) of the Government of India Act, 1935 and the two guarantees are the same, (namely, (i) that no person shall be dismissed or removed by an authority subordinate to that by which he was appointed, and (ii) no such person shall be dismissed or removed or reduced in rank until he has been given a reason able opportunity of showing cause against the action proposed to be taken in regard to him). In Parshotam Lal Dhingra vs Union of India (1), this Court held that article 311 was in the nature of a proviso to article 310, that it provides two constitutional guarantees cutting down the pleasure of the President or the Governor, as the case may be, and that it was a mandatory provision which had to be complied with before the pleasure provided in article 310 can be exercised. Mr. Pathak for the respondent urges that in view of the words of article 310 statute or statutory rules can also cut down the nature of the pleasure tenure provided by article 310 in the same way as in England an Act of Parliament cuts down the ambit of His Majesty 's pleasure in the matter of dismissal. He relies on the words "as expressly provided by this Constitution" and urges that it is open to the legisla ture to cut down the pleasure tenure by law or to provide for its being affected by statutory rules. In this connection he relies on article 309 as well as article 154 of the Constitution. Now, article 309 begins with the words "subject to the provisions of this Constitution" land lays down that "Acts of the appropriate Legislature may regulate the recruitment, and conditions of (1) ; 720 service of person appointed, to public services and posts in connection with the affairs of the Union or of any State". The proviso to article 309 lays down that "it shall be competent for the President or the Governor as the case may be to make rules relating to recruitment and conditions of service until provision in that behalf is made by or under an Act of the appropriate Legislature". It will be clear immediately that article 309 is subject to the provisions of the Constitution and therefore subject to article 310 and therefore, any law passed or rules framed under article 309 must be subject to article 310 and cannot in any way affect the pleasure tenure laid down in article 310. The words "except as expressly provided by this Constitution" appearing in article 310 clearly show that the only exceptions to the pleasure tenure are those expressly contained in the Constitution and no more. These exceptions, for example, are contained inter alia in articles 124. 148, 280 and 324 and also in article 310 (2). Therefore, unless there is an express provision in the Constitution cutting down the pleasure tenure, every public servant holds office during the pleasure of the President or the Governor, as the case may be. We cannot accept the argument that a law passed under article 309 prescribing conditions of service would become an express provision of the Constitution and would thus cut down the pleasure tenure contained in article 310. As the Privy Council pointed in Venkata Rao 's case (1), the rules framed under article 309 or the laws passed thereunder amount to a statutory and solemn assurance that the tenure of office though at pleasure will not be subject to capricious or arbitrary action but will be regulated by rule. But if the rules or the law define the content of the guarantee contained in article 311 (2) they may to that extent be mandatory but only because they carry out the guarantee contained in article 311 (2). Excepting this, any law or rule framed under article 309 cannot cut down the pleasure tenure as provided in article 310. The same in our opinion applies to a law passed under article 154 (2)(b) which authorises Parliament or the legislature of a State to confer functions on any (1) (1936) L.R. 64 I.A. 55. 721 authority subordinate to the Governor. If any law is passed conferring on any authority the power to dismiss or remove or reduce in rank, that law cannot cut down the content of the pleasure tenure as contained in article 310; that law would be passed under article 245 and that article also begins with the words "subject to the provisions of this Constitution". Therefore, the law passed under article 154 (2) (b) would also in the same way as the law under article 309 be subject to the pleasure tenure contained in article 310 and cannot cut down the content of that tenure or impose any further fetters on it except those contained in article 311. The position therefore that emerges from the examination of the relevant Articles of the Constitution is that all public servants other than those who are excepted expressly by the provisions of the Constitution hold office during the pleasure of the President or the Governor, as the case may be, and that no law or rule passed or framed under article 309 or article 154 (2) (b) can cut down the content of the pleasure tenure as contained in article 310 subject to article 311. With this basic position in our Constitution, let us turn to the with which we are concerned. Section 7 thereof lays down that four grades of officers will have power to dismiss, suspend or reduce any police officer of the subordinate ranks subject to such rules as the State Government may from time to time make under the . Though the is a pre constitutional law which has continued under article 372 of the Constitution, it cannot in our opinion stand higher than a law passed under article 309 or article 154 (2) (b) and out down the content of the pleasure tenure as contained in article 310. The police officers of the subordinate ranks are not expressly excluded from the operation of the pleasure tenure by any provision of the Constitution; they, therefore, hold office during the pleasure of the Governor and the only protection that they can claim are the two guarantees contained in article 311. It is true that section 7 lays down that the four grades of officers empowered to dismiss will act according to rules framed by the State Government; but that does not in our opinion mean that 722 these rules could introduce any further fetter on the pleasure tenure under which the police officers of the subordinate ranks are in service. It was necessary to provide for the framing of rules because the section envisages conferment of, powers of punishment of various kinds on four grades of officers relating to various cadres of police officers in the subordinate ranks. It was left to the rules to provide which four grades of officers would dismiss police officers of which subordinate rank or would give which punishment to a police officer of which subordinate rank. Such rules would in our opinion be mandatory as they go to the root of the jurisdiction of the four grades of police officers empowered to act under section 7. But further rules may be framed under section 7 to guide these police officers how to act when they proceed to dismiss or inflict any other punishment on police officers of the subordinate ranks. These rules of procedure, however, cannot all be mandatory, for if they were so they would be putting further fetters than those provided in article 311 on the pleasure of the Governor to dismiss a public servant. of course, if any of the rules framed under section 7 carry out the purposes of article 311(2), to that extent they will be mandatory and in that sense their contravention would in substance amount to contravention of article 311 itself. If this were not so, it would be possible to forge further fetters on the pleasure of the Governor to dismiss a public servant and this in the light of what we have said above is clearly not possible in view of the provisions of the Constitution. On the other hand, it will not be possible by means of rules framed under section 7 to take away the guarantee provided by article 311(1), which lays down that no public servant shall be dismissed by an authority subordinate to that by which he was appointed. If any rule under section 7, for example, lays down otherwise it will clearly be ultra vires in view of article 311(1). The rules therefore that are framed under section 7 would thus be of two kinds, namely (1) those which define the jurisdiction of four grades of officers to inflict a particular kind of punishment on a particular police officer of the subordinate rank they will be mandatory 723 for they go to the root of the jurisdiction of the officer exercising the power, but even these rules cannot go against the provisions of article 31 1 (1); and (2) procedural rules, which again may be of two kinds. Some of them may prescribe the manner in which the guarantee contained in article 311 (2) may be carried out and if there are any such rules they will be mandatory. The rest will be merely procedural and can only be directory as otherwise if they are also mandatory further fetters on the power of the Governor to dismiss at his pleasure contained in article 310 would be forged and this is not permissible under the Constitution. It is from this angle that we shall have to consider 486. Before, however, we come to r. 486 itself, we may dispose of another argument, namely, that the four grades of officers who have the power to dismiss under section 7 are exercising the statutory authority vested in them and are not exercising the Governor 's pleasure of dismissal under article 310 and therefore their action in dismissing an officer is subject to all the rules framed for their guidance. We are of opinion that this argument is fallacious. Article 310 defines the pleasure tenure and by necessary implication gives power to the Governor to dismiss at pleasure any public servant subject to the exceptions contained in article 310 and also subject to the guarantees contained in article 311. This power of the Governor to dismiss is executive power of the State and can be exercised under article 154(1) by the Governor himself directly or indirectly through officers subordinate to him. Thus it is open to the Governor to delegate his power of dismissal to officers subordinate to him; but even when those officers exercise the power of dismissal, the Governor is indirectly exercising it through those to whom he has delegated it and it is still the pleasure of the Governor to dismiss, which is being exercised by the subordinate officers to whom it may be delegated. Further though the Governor may delegate his executive power of dismissal at pleasure to subordinate officers he still retains in himself the power to dismiss at pleasure if he thinks fit in a particular case in spite 724 of the delegation. There can be no question that where a delegation is made, the authority making the delegation retains in itself what has been delegated. Therefore, even where a subordinate officer is exercising the power to dismiss he is indirectly exercising the power of the Governor to dismiss at pleasure and so his power of dismissal can only be subject to the same limitations to which the power of the Governor would be subject if he exercised it directly. But it is said that in the present case the power has not been delegated by the Governor under article 154(1) and that it had been conferred on those police officers by law. In our opinion, that makes no difference to the nature of the power, which is being exercised by these four grades of officers under the . As we have already said article 154(2)(b) gives power to Parliament or the legislature of a State by law to confer functions on any authority subordinate to the Governor. When the function of dismissal is conferred by law on any authority subordinate to the Governor it is nothing more than delegation of the Governor 's executive power to dismiss at pleasure by means of law and stands in no better position than a delegation by the Governor himself under article 154(1). Whether it is delegation by the Governor himself or whether it is delegation by law under article 154(2)(b) or by an existing law, which must be treated as analogous to a law under article 154(2)(b), the officer exercising the power of dismissal is only indirectly exercising, the Governor 's power to dismiss at pleasure and his order of dismissal has the same effect as the order of the Governor to dismiss at pleasure. Therefore, his order also is only subject to the two fetters provided in article 311 of the Constitution and cannot be subjected to any more fetters by procedural rules other than those framed for carrying out the object of article 311(2). Therefore, when the four grades of officers proceed to dismiss any police officer of the subordinate rank under section 7 of the , they are merely exercising. the power of the Governor to dismiss at pleasure indirectly; and the only fetters that can be placed on that power are those contained in the Constitution, namely, article 311. 725 We may in this connection refer once again to the case of Venkata Rao (1) where the dismissal was by an, officer subordinate to the Governor of Madras; but ' that dismissal was also held to be an indirect exercise I of His Majesty 's pleasure to dismiss, and that is why it was held that if r. XIV of the Classification Rules was not complied with, a public servant had no right of action against an order dismissing him at His Majesty 's pleasure. Therefore, whenever a subordinate officer exercises the power to dismiss, whether that power is delegated by the Governor, or is delegated under a law made under article 154(2)(b) or under an existing law analogous to that, he is merely exercising indirectly the power of the Governor to dismiss at pleasure and his action is subject only to the two guarantees contained in article 311. The fact therefore that the police officer in this case made the order of dismissal by virtue of section 7 will make no difference and he will be deemed to be exercising the power of the Governor to dismiss at pleasure by delegation to him by law of that power. We may add that even where there is delegation by law of the power of the Governor to dismiss at pleasure, the power of the Governor himself to act directly and dismiss at pleasure cannot be taken away by that law, for that power he derives from article 310 of the Constitution. The present case therefore must be judged on the same basis as any case of dismissal directly by the Governor and would only be subject to the two limitations contained in article 311. We now come to r. 486. This rule, as we have already indicated, provides that if there is any complaint of the commission of any cognizable crime by a police officer, it must be registered in the relevant police station, under Chapter XIV of the Code of Criminal Procedure and investigated in the manner provided by that Chapter. After the investigation is complete, it is open to the authority concerned, be it the Superintendent of Police or the District Magistrate, to decide whether to proceed in a court of law (1) (1936) L.R. 64 I.A. 55. 92 726 or to hold a departmental inquiry or do both, though in the last case the departmental inquiry must take place only after the judicial trial is over. The first question then that arises is whether r. 486 is meant to carry out the purpose of article 311(2). As we read r. 486, we cannot see that it is meant for that purpose; it only provides for a police investigation under Chapter XIV of the Code of Criminal Procedure. The police officer making an investigation under Chapter XIV is not bound to examine the person against whom he is investigating, though there is nothing to prevent him from doing so. Nor is the person against whom an investigation is going on under Chapter XIV bound to make a statement to the police officer. In these circumstances, the purpose of an investigation under Chapter XIV is not relevant under article 311(2) which says that a public servant shall not be dismissed without giving him a reasonable opportunity of showing cause against the action proposed to be taken in regard to him. Therefore, r. 486 not being meant for the purpose of carrying out the object of article 311 (2) cannot be mandatory and cannot add a further fetter on the exercise of the power to dismiss or remove at the pleasure of the Governor over and above the guarantees contained in article 311. It appears to us that the object of r. 486 is that the authority concerned should first make a preliminary inquiry to find out if there is a case against the officer complained against either to proceed in a court or to take departmental action. The investigation prescribed by r. 486 is only for this purpose. Incidentally it may be that after such an investigation, the authority concerned may come to the conclusion that there in no case either ' to send the case to court or to hold a departmental inquiry. But that in our opinion is what would happen in any case of complaint against a public servant in any department of Government. No authority entitled to take action against a public servant would straightaway proceed to put the case in court or to hold a departmental inquiry. It seems to us axiomatic if a complaint is received against any public servant of any department, that the authority 727 concerned would first always make some kind of a preliminary inquiry to satisfy itself whether there is any case for taking action at all; but that is in our opinion for the satisfaction of the authority and has nothing to do with the protection afforded to a public servant under article 311. Rule 486 of the Police Regulations also in our opinion is meant for this purpose only and not meant to carry out the object contained in article 311(2). The opportunity envisaged by article 311(2) will be given to the public servant after the the authority has satisfied itself by preliminary inquiry that there is a case for taking action. Therefore, r. 486 which is only meant to gather materials for the satisfaction of the authority concerned, whether to take action or not, even though a statutory rule cannot be considered to be mandatory as that would be forging a further fetter than those contained in article 311 on the power of the Governor to dismiss at pleasure. We are therefore of opinion that r. 486 is only directory and failure to comply with it strictly or otherwise will not vitiate the subsequent proceedings. We may incidentally indicate two further aspects of the matter. In the first place, if the argument is that the Governor must exercise the pleasure himself so that only the two limitations provided in article 311 may come into play; it appears that the Governor has exercised his pleasure in this case inasmuch as he dismissed the revisional application made to him by the respondent. There appears no reason to hold that the Governor exercises his pleasure only when he passes the original order of dismissal but not otherwise. Secondly the fact that r. 486 contains the word "shall" is not decisive on the point that it is mandatory: (see Crawford on Statutory Construction, p. 519, para. 262). In view of what we have said already, the context shows that r. 486 can only be directory. If so, failure to observe it strictly or otherwise will not invalidate the subsequent departmental proceedings. This brings us to the last point which has been urged in this case; and that is whether there was substantial compliance with r. 486. We have already 728 pointed out that there was no strict compliance with r. 486 as no case wag registered on the complaint of Tika Ram and no investigation was made under Chapter XIV of the Code of Criminal Procedure. But there is no doubt in this case that before the Superintendent of Police gave the charge sheet to the respondent in November, 1953, which was the beginning of the departmental proceedings against the respondent, he made a preliminary inquiry into the complaint of Tika Ram and was satisfied that there was a case for proceeding against the respondent departmentally. In these circumstances it appears to us that the spirit of r. 486 was substantially complied with and action was only taken against the respondent when on a preliminary inquiry the Superintendent of Police was satisfied that departmental action was necessary. Even if r. 486 had been strictly complied with, this is all that could have happened. In these circumstances we are of opinion that r. 486 which in our opinion is directory was substantially complied with in spirit and therefore the subsequent departmental proceedings cannot be held to be illegal, simply because there was no strict compliance with r. 486. The High Court therefore in our opinion was wrong in holding that the subsequent departmental inquiry was illegal and its order quashing the order of dismissal on this ground alone cannot be sustained. We would therefore allow the appeal. BY COURT In accordance with the opinion of the majority, this appeal is dismissed with costs.

The respondent was a sub Inspector of Police. A complaint was received by the Superintendent of Police that the com plainant was carrying currency notes of Rs. 650 in a bundle when he was stopped by the respondent and his person was searched, that the respondent opened the bundle of notes and handed over the notes one by one to one Lalji, who was with him and that Lalji returned the notes to him but on reaching home he found the notes short by Rs. 250. Proceedings under section 7 of the Police Act were taken against the respondent on the charge of misappropriation of Rs. 250 and he was dismissed from service by an order of the Deputy Inspector General of Police. The respondent filed a writ petition before the High Court challenging the order of the dismissal on the ground that the authorities had acted in violation of Rule I of Para. 486 of the U. P. Police Regulation. This rule required that every information received by the police relating to the commission of a cognizable offence by a Police Officer shall be dealt with in the first place under Ch. XIV, Code of Criminal Procedure. The High Court held that the provisions of para. 486 of the Police Regulations had not been observed and that the proceedings taken under section 7 of the Police Act were invalid and illegal and accordingly quashed the order of dismissal. The appellant contended (i) that the complaint did not make out any cognizable offence against the respondent and r. I of Para. 486 was not applicable in this case, (ii) that r. III of Para. 486 enabled the authorities to initiate departmental proceedings without complying with the provisions of r. I, (iii) that the Police Regulations made in exercise of the power conferred on the Government under the Police Act delegating the power of the Governor to dismiss at pleasure to a subordinate officer were only administrative directions for the exercise of the pleasure in a reasonable manner and any breach of the regulations did not confer any right or give a cause of action to the public servant, and (iv) that the regulations were only directory and the non compliance with the rules did not invalidate the order of dismissal. 680 Held, (per Sarkar, Subba Rao and Mudholkar, JJ.) that the order of dismissal was illegal as it was based upon an enquiry held in violation of r. I of Para 486 of the Police Regulations. The facts alleged in the complaint made out a cognizable offence under section 405 Indian Penal Code against the respondent, and the provisions of r. I of Para . 486 were applicable to it. A Police Officer making a search of a person was 'entrusted ' with the money handed over by the person searched. Rule III of Para. 486 did not deal with cognizable offences, it dealt with offences falling only under section 7 Police Act and to non cognizable offences. Rule III did not provide an alternative procedure to that prescribed under r. I. The position with regard to the tenure of public servants and to the taking of disciplinary action against them under the present Constitution was as follows: (i) Every person who was a member of a public service described in article 310 of the Constitution held office during the pleasure of the President or the Governor. (ii) The power to dismiss a public servant at pleasure was outside the scope of article I54 and, therefore, could not be delegated by the Governor to a subordinate officer, and could be exercised by him only in the manner prescribed by the Constitution. (iii) This tenure was subject to the limitations or qualifi cations mentioned in article 311. (iv )Parliament or the Legislature of States could not make a law abrogating or modifying this tenure so as to impinge upon the overriding power conferred upon the President or the Governor under article 310, as qualified by article 311. (v) Parliament or the Legislatures of States could make a law regulating the conditions of service of such a member which included proceedings by way of disciplinary action, without affecting the powers of the President or the Governor under article 310 read with article 311. (vi) Parliament and the Legislatures also could makea law laying down and regulating the scope and content of the doctrine of "reasonable opportunity" embodied in article 311 but the said law was subject to judicial review. (vii) If a statute could be made by Legislatures within the foregoing permissible limits, the rules made by an authority in exercise of the power conferred thereunder would likewise be efficacious within the said limits. N. W. F. Province vs Suraj Narain, A.I.R. 1949 P. C. 112, Shenton vs Smith, , Gould vs Stuart, , Reilly vs The King, , Terrell vs Secretary of State, , State of Bihar vs Abdul Majid; , , Parshotam Lal Dhingra vs Union of India, , R. T. Rangachari vs Secretary of State for India, (1936) L.R. 64 I.A. 40 and High Commissioner for India and High Commissioner for Pakistan vs I. M. Lall, (1948) L.R. 75 I.A. 225, referred to. The Police Act and the rules made thereunder constituted a self contained code providing for the appointment of police officers and prescribing the procedure for their removal. Any authority taking action under the Police Act or the rules made thereunder must conform to the provisions thereof and if there was any violation of those provisions the public servant had a right to challenge the order of the authority if the rules were mandatory Paragraph 486 of the Police Regulations was mandatory and not directory. The rules were made in the interests of both the department and the police officers. The word used in para 486 was "shall" and in the context it could not be read as "may". Hari Vishnu Kamath vs Syed Ahmed Ishaque, , State of U. P. vs Manbodhan Lal Srivastava, [1958] S.C.R. 533 and Montreal Street Railway Company v Noymandin, L.R. ; , referred to. Subject to the overriding power of the President or the Governor under article 310, as qualified by article 311, rules governing disciplinary proceeding could not be treated as administrative directions, but had the same effect as the provisions of the statute whereunder they were made, in so far as they were not inconsistent with the provisions thereof. The Governor did not exercise his pleasure through the officers specified in section 7 of the Police Act, and the Governor 's pleasure. could not be equated with the statutory power of the officers specified An inquiry under the Act had to be made in accordance with the provisions of the Act and the rules made thereunder. R. T. Rangachari vs Secretary of State for India, L.R. 64 I.A. 40, High Commissioner for India and High Commissioner for Pakistan vs I. M. Lall, (1948) L.R. 75 I.A. 225, R. Venkata Rao vs Secretary of State for India, (1936) L.R. 64 I.A. 55, section A. Venkataraman V. Union of India, [1954] S.C.R. 1150 and Khem Chand vs The Union of India, [1958] S.C.R. 1080, referred to. Per Gajendragadkar and Wanchoo, JJ. The provisions of para 486 were merely directory and a non compliance therewith did not invalidate the disciplinary action taken against the respondent. All public servants, other than those excepted expressly by the Constitution, held office during the pleasure of the President or the Governor, and no law or rule framed under article 300 or article I54(2)(b) could cut down the content of the pleasure tenure in article 310 subject to article 31i. The Police Act could not stand higher than a law passed under article 309 or article 154(2)(b) and could not cut down the content of the pleasure tenure in article 310 682 The Police officers held office during the pleasure of the Governor and the only protection they could claim was the two guarantees contained in article 311. The rules framed under section 7 Police Act would be of two kinds, namely (1) those which defined the jurisdiction of the four grades of officers specified in section 7 to inflict particular kind of punishment on particular police officers of the subordinate ranks such rules would be mandatory but they could not go against the provisions of article 311, and (2) procedural rules. The procedural rules could be of two kinds: (i) those that prescribed the manner in which the guarantee contained in article 311(2) May be carried out such rules would be mandatory, and (ii) other merely procedural rules they could only be directory. The power of the Governor to dismiss was executive power of the State and could be exercised under article 154(i) by the Governor himself directly or indirectly through officers subordinate to him. The officers specified in section 7 of the Police Act were exercising the powers of the Governor to dismiss at pleasure and their powers were subject to the same limitations to which the Governor was subject. Whether it was delegation by the Governor himself or whether it was delegation by law under article 154(2)(b) or by the existing law, which must be treated as analogous to a law under article 154(2)(b), the officer exercising the power of dismissal was only indirectly exercising the Governor 's power to dismiss at pleasure. His order also was subject to the two fetters under article 311 and could not be subjected to any more fetters by procedural rules other than those framed for carrying out the objects of article 311(2). R. Venkata Rao vs Secretary of State for India in Council, [1936] 64 I.A. 55, referred to. Paragraph 486 was not meant for the purpose of carrying out the object of article 311(2) and could not be mandatory and could not add a further fetter on the exercise of the power to dismiss at the pleasure of the Governor over and above the fetters contained in article 311. This rule was only meant to gather materials for the satisfaction of the authority concerned, whether to take action or not. As such para 486 was merely directory and a failure to comply therewith strictly or otherwise did not vitiate the disciplinary action.

A money suit against the appellant was dismissed by the trial court but the first appellate court passed an ex parte decree against him. The appellant 's property was sold in execution and purchased by the decreeholder. The appellant went to the High Court which set aside the exparte decree and remanded the suit. The appellant then filed an appli cation for restitution under section 144 of the Code of Civil Procedure. It was stayed pending proceedings in the main suit. 'Me suit was finally decided against the applicant, by the High Court. Thereafter the trial court allowed the appellant 's application for restitution. After intermediate proceedings the High Court decided in Letters Patent Appeal that the appellant was not entitled to restitution. He appealed to this Court by special leave. HELD: The application for restitution was filed by the appellant before the passing of a fresh decree by the High Court in second appeal. At the time of the application therefore the appellant was entitled to restitution because on that date the decree in execution of which the properties were sold had been set aside. The appellant was therefore entitled to restitution notwithstanding anything which happened subsequently. [27 C E] The principle of the doctrine of restitution is that on the reverse of a decree the law imposes an obligation on the party to the suit who received the benefit of the erroneous decree to make restitution to the other party for what he has lost. The Court in making restitution is bound to restore the parties so far as they can be restored to the same position they were in at the time when the Court by its erroneous action had displaced them from. [27 E F] Zainal Abdin Khan vs Muhammad Asghar All Khan, I.L.R. 10 All 166, relied on. Set Umedmal & Anr. vs Srinath Ray & Anr. I.L.R. 27 Cal. 810, Raghu Nandan Singh vs Jagdish Singh, , Abdul Rahaman vs Sarafat Ali, and Shivbai Kom Babya Swam vs Yesoo, I.L.R. , referred to. Lal Bhagwant Singh vs Rai Sahib Lala Sri Kishen Das, , distinguished.

The appellants and the five respondents were displaced persons. The Deputy Custodian of Nizamabad District allotted about 60 acres of land to the five respondents. The allotment was by way of lease. There was no condition imposed upon them that they should cultivate the lands personally. While the lease was continuing in force, the Government of India issued a Press Note on November 13, 1953 by which they announced that they had decided to allot evacuee agricultural land in Hyderabad State to displaced persons whose claims for agricultural land had been verified under the Displaced Persons (Claims) Act, 1950. The appellants made an application in pursuance of this notifi cation and on May 4, 1954 the land now in dispute, though under a subsisting lease in favour of the respondents, was allotted to them. In the mean time the , came into force on October 9, 1954. Under Section 20 of this Act, the Regional Settlement Com missioner issued Sanads in favour of appellants in respect of these lands. Both the appellants and the respondents claimed these disputed plots. The matter went up to the Deputy Chief Settlement Commissioner. He referred the case of both parties to the Government of India for action under section 33 of the Act. The matter was considered under section 33 of the Act by the Deputy Secretary in the Rehabilitation Ministry who upheld the contentions of these respondents. The result was that the allotment made in favour of the appellants was set aside. It is the legality of this order that is challenged in this appeal. Held (i) The order of the Central Government was covered by section 33 of the Act as one dealing with and rectifying an error committed in relation to a "thing done or action taken" with respect to a rehabilitation grant to a displaced person. Not merely the order of the Regional Settlement Commission rebut the entire question as to whether the respondents as original allottees by way of lease were entitled to the relief of restoration was referred to the Central Government by reason of the order of the Deputy Chief Settlement Commissioner. Both the parties were heard on all the points by the Central Government before the orders were passed and it would not therefore be right to consider that the matter in issue before the Central Government was namely the correctness of the order of the Regional Settlement Commissioner, which read in vacuo might not be comprehended within section 39 of the Act. (ii) It is manifest that a Sanad can be lawfully issued only on the basis of a valid order of allotment. If an order of allotment which is the basis upon which a grant is made 104 is set aside it would follow, and the conclusion is inescapable that the grant cannot survive, because in order that grant should be valid, it should have been effected by a competent officer under a valid order. If the validity of that order is effectively put an end to, it would be impossible to maintain unless there were any express provision in the Act or in the rules, that the grant still stands. On the facts of this case it was held that where an order making any allotment was set aside the title which was obtained on the basis of the continuance of that order also fell with it. Partumal vs Managing Officer, Jaipur, I.L.R. , distinguished. Balwant Kaur vs Chief Settlement Commissioner (Lands), I.L.R. [1964] Punjab 36, approved.

The appellant Board passed a special resolution on September 28, 1956, imposing water tax in Hapur and a notification by the Uttar Pradesh Government was published in the Uttar Pradesh Gazette under section 135(2) of the U.P. Municipalities Act (2 of 1916) notifying the resolution. Fifteen house owners of Hapur who received notices from the appellant Board for the payment of the tax petitioned to the High Court under article 226 ,of the Constitution and asked for a writ or order preventing the appellant Board from realising the tax. The main objections were (a) that the resolution of the appellant Board framing the proposal was not pub lished in a local paper of Hapur published in Hindi and (b) that the rules framed for the imposition of the tax did not accompany the resolution which was affixed on the notice board at the office of the appellant Board in purported compliance with the requirements for publication. The imposition was also challenged on the ground that articles 14 and 19 of the Constitution were violated. A single judge of the High Court held that the tax was illegal inasmuch as the mandatory requirements of the Municipalities Act were not complied with by the appellant Board while imposing the tax and that section 135(3) of the Act (which cures all defects in the imposition of the tax by making the notification of Government conclusive evidence of the legality of the imposition) was ultra vires article 14 of the Constitution because it created a bar against proof and left no remedy to the tax payers thereby making a discrimination between them and other litigants. He further held that the sub section by making Government the sole judge of compliance with the Act conferred judicial power on Government contrary to the intendment of the Constitution. The appellant Board appealed under the Letters Patent. The Divisional Bench upheld the order of the single judge. The case was however certified as fit for appeal under article 133 and the Board appealed to this Court. The contentions raised in appeal were: (i) s.135(3) shuts out all ,enquiry into the procedure by which a tax had been imposed and therefore suffered from excessive delegation of legislative function. (ii) The tax had not been validly imposed a there had been non observance of mandatory provisions; (iii) section 135(3) was discriminatory; and (iv) the sub section was also bad because it conferred judicial functions on the State Government. HELD : Per Gajendragadkar, C.J., Hidayatullah, Shah and Sikri. JJ. (i) The rule of conclusive evidence in s.135(3) does not shut out all enquiry by courts. There are certain matters which cannot be established by a notification under s.135(3). For example no notification can issue unless there is a special resolution under section 134. The special resolu 951 tion is a sine qua non for the notification. Again the notification cannot authorise the imposition of a tax not included in section 128 of the Municipalities Act. Neither the Municipal Board nor the State Government can exercise such power. What the section does is to put beyond question the procedure by which the tax is imposed, that is to say the various steps taken to impose it. A tax not authorised, can never be within the protection afforded to the procedure for imposing taxes. Such a tax may be challenged, not with reference to the manner of imposition but as an illegal impost. [958 A D] (ii) There can be no doubt that some of the provisions of sections 131 to 134 of the Act are mandatory. But all of them are not of the same character. In the present case, as in Raza Buland Sugar Co. Ltd. and in Berar Swadeshi Vanaspati, the provisions not observed were of a directory character and therefore the imposition had the protection of section 135(3). [958 H] Raza Buland Sugar Co. Ltd. vs Municipal Board, Rampur. ; and Berar Swadeshi Vanaspati vs Municipal Committe, Committee Sheogaon & Anr. , relied on. (iii) Mandatory provisions must be fully complied with, and directory provisions should be substantially complied with. In either case the agency for seeing to this compliance is the State Government. It is hardly to be expected that the State Government would not do its duty or that it would allow breaches of the provisions to go unrectified. In cases of minor departure from the letter of the law especially in matters not fundamental, it is for the Government to see whether there has been substantial or reasonable compliance. Once Government condones the departure, the decision of the Government is rightly made final by making the notification conclusive evidence of the compliance with the requirements of the Act. [959 H 960 D] (iv) The power to tax belongs to the State Legislature but is exercised by the local authority under the control of the State Government. It is impossible for the State Legislature to impose taxes in local areas because local conditions and needs must very. The power must be delegated. The taxes however are predetermined and a procedure for consulting the wishes of the people is devised. But the matter is not left entirely in the hands of the Municipal Boards. As the State Legislature cannot supervise the due observance of its laws by the municipal Boards power is given to the State Government to check their actions. The proceedings for the imposition of the tax must come to a conclusion at some stage after which it can be said that the tax has been imposed. That stage is reached, not when the special resolution of the Municipal Board is passed but when the notification by Government is issued. After the notification all enquiry must cease. This is not a case of excessive delegation unless one starts with the notion that the State Government may collude with the Municipal Board to disregard deliberately the provisions for The imposition of the tax. There is no warrant for such a supposition. The provision making the notification conclusive evidence of the proper imposition of the tax is conceived in the best interest of compliance of the provisions by the Board and not to facilitate their breach. [960 F 961 E] Excessive delegation is most often found when the legislature does not perform all the essential legislative functions and leaves them to some other agency. The Legislature here performs all essential functions in the imposition of the tax. The selection of the tax for imposition in a municipal area is by the legislative will expressed in section 128. Neither the Municipal Board, nor the Government can go outside the list of taxes therein included. The procedure for the imposition of the tax is also, laid down 952 by the Legislature for the Municipal Board to follow and the State Government is there to ensure due observance of that procedure. in view of all this there was no excessive delegation or conferral or legislative functions on the appellant Board or the State Government. [961 F 962 C] (v) There are numerous statutes including the Evidence Act, in which a fact is taken to be conclusively proved from the existence of some other fact. The law is full of fictions and irrebuttable presumptions which also involve proof of facts. The tax payers in the Municipality are allowed to object to the proposal for the tax and the rules and to, have their objections considered. They cannot be allowed to keep on agitating. Section 135(3) which only concludes objections against the procedure followed in the imposition of the tax cannot be said to be discriminatory and viola tive of article 14. [962 D H] (vi) The objection that the impugned sub section involves the exercise of judicial functions not open to the legislature is wholly erroneous. The subsection only shuts out further enquiry and makes the notification final. [962 H] Per Wanchoo, J. (dissenting) (i) Section 135(3) bars enquiry by courts into all procedural provisions relating to imposition of taxes and therefore it bars enquiry into any matter covered by section 131 to section 135(1) of the Act. It cannot be read down as barring enquiry only into some procedural provisions i.e. from section 131 to section 133 and not into the other procedural provisions i.e. section 134 and section 135(1). [968 D] Section 135(3) is not a rule of evidence; it is a substantive provision which lays down in effect that once a notification under section 135(2) is issued it will be conclusively presumed that the tax is in accordance with all the procedural provisions with respect to the imposition thereof. [969 E] Ishar Ahmad Khan vs Union of India, [1962] Supp. 3 S.C.R. 235, referred to. The effect of section 135(3) is that the procedural provisions are given the go by in the matter of imposition of tax and as soon as a notification under section 135(2) is shown to the court, the court is helpless, in the matter even though none of the provisions of section 131 to section 135(1) may have been complied with. [969 H] (ii) In the field of local taxation relating to municipal boards and district boards and similar other bodies there are reasons for delegating :fixation of rate to such bodies subject to proper safeguards. This is exactly what has been done under the Act subject to the safeguards contained in sections 131 to section 135(1). If those safeguards are followed the delegation would be proper delegation and could not be challenged as ultra vires on the ground of excessive delegation. But if the legislature after laying down with great care safeguards as to the imposition of tax including its rate makes a blanket provision like section 135(3), which at one stroke does away with all those safeguards and this is what section 135(3) has done in the present case the position that results is that there is delegation of even the essential function of fixing the rate to the subordinate authority without any safeguard. Such a delegation would be excessive delegation and would be ultra vires. [972 D F] (iii) Section 135(3) inasmuch as it makes the delegation contained in sections 128 to 135(2) excessive must be severed from the rest of the sections which are otherwise a proper delegation of legislative authority and should be struck down on the ground of excessive delegation. [973 B] 953

The respondent Municipality issued a notice under sub section (1) Of section 153A of the Bombay District Municipal Act, 1901, as adapted and applied to the State of Saurashtra and as amended by Act XI Of 1955, calling upon the appellant to show cause why it should not be directed to discharge the effluent Of it 's chemical works in the manner specified in the notice. On the appellant objecting to the notice and the requisition contained therein, a Special Officer was appointed by the Government under sub section (3) of that section to hold an enquiry in the matter. The Special Officer treated some of the issues raised,, as preliminary issues of law and held that the question whether the discharge of the effluent polluted the water and adversely affected the fertility of the soil was a matter for the subjective satisfaction of the Municipality and binding on him and was as such beyond the scope of his enquiry. The question for determination in this appeal was whether the Special Officer was right in the view he took of section 153A(3) Of the Act and in restricting the scope of the enquiry in the way he did. 389 Held, that Special Officer took a wrong view of his jurisdiction under section 153A(3) Of the Act and was in error in restricting the scope of the enquiry. There could be no doubt on a proper appreciation of the scheme laid down by the provision of section 153A of the Act, correctly construed, that while the subjective satisfaction of the Municipality as to the existence of the nuisance could not be questioned at the initial stage when it sought to put the machinery provided by sub section (1) in motion or under sub section (2) where such existence was admitted, the situation contemplated by sub section (3) where the notice and the requisition were wholly disputed, and no mere modification of the requisition sought, was entirely different. The language of sub section (3) and particularly the words " to hold an enquiry into the matter " used by it clearly indicated that where there was such a contest, it was the duty of the Special Officer to enquire into the existence of the alleged nuisance and come to a finding of his own. The status of the Special Official and powers conferred on him by the relevant provisions of the Act, clearly indicated that sub section (3) was intended by the Legislature to be a protection against any arbitrary exercise of its power by the Municipality. It was of the utmost importance that such proceedings should in the interest of the community, be disposed of with all possible expedition. 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.

The Estate of Maharaja Man Singh of Ayodhya Raj devolved on his death successively on his two widows and thereafter, according to V the plaintiff a minor on his grandfather G, who died in 1942. Respondent claimed the estate as adopted son of the junior widow of the Maharaja. V filed a petition for leave to sue in forma pauperis for declaration of title to the estate making his father R a party. The plaintiff 's petition was rejected by the Subordinate Judge, on the ground that it disclosed no cause of action. R 's application to be transposed as petitioner was also rejected. V and R preferred revision applications to the High Court of Allahabad. The plaintiff 's application was rejected by the High Court holding inter alia that there was nothing in the petition to show that succeeded to the estate as the nearest male reversioner of the last male holder. R 's application was rejected by the High Court on the ground that relief in an application to sue in forma pauperis is personal to the applicant and nobody else can be made a co applicant, because 1, R. 10 of the Code of Civil Procedure does not apply to a proceeding for permission to sue as a pauper. ^ Held, that O. XXXIII of the Code of Civil Procedure lays down the procedure for institution of a suit by pauper. By cl. 5 (d) the court is required to ascertain whether the allegation made in the petition show a cause of action, but it does not enter upon a trial of the issues affecting the merits of the claim made by the petitioner. By the statute, the jurisdiction of the Court is restricted to ascertaining whether on the allegations a cause of action is shown: the jurisdiction does not extended to trial of issues which must fairly be left for decision at the hearing of the suit. An application to sue in forma pauperis, is but a method prescribed by the Code for institution of a suit by a pauper without payment of Court fee; and there is nothing personal in such an application. The suit commences from the 676 moment an application for permission to sue in forma pauperis as required by O. 33 of the Code is presented, and O. 1 r. of the Code would be as much applicable in such a suit as in a suit in which court fee had been duly paid. A person who claims to join a petitioner praying for leave to sue in forma pauperis must himself be a pauper. Claim to join by transposition as an applicant must be investigated; it is not liable to be rejected on the ground that the claim made by the original applicant is personal to himself.

% As a result of the order passed by the High Court, proceedings under section 44(2a) of the West Bengal Estates Acquisition Act, 1953 were re opened by the Special Revenue officer and final orders were passed on 9.2.1982. The Ist respondent preferred an appeal against this order before the 9th Additional District Judge, the competent authority to hear an appeal. On 1.12.83 the Ist respondent obtained an opinion of the Advocate General regarding the aforesaid proceedings, and filed that opinion with an application. The Additional District Judge passed an order on 25.2.86 rejecting the prayer of the Ist respondent that the appeal be disposed of in accordance with the opinion of the Advocate General, but observed that the opinion of the Advocate General could only be looked into as the ground of appeal on behalf of the Ist respondent. The date of hearing of the appeal was fixed on 19.4.86 to suit the convenience of the Advocates of the parties. A petition under article 227 was filed in the High Court against the 818 aforesaid order by the Ist respondent. The High Court treated this petition as a revision application challenging the order passed by the Additional District Judge on 25.2.86, and held that the Additional District Judge should have disposed of the appeal in accordance with the opinion of the Advocate General, and quashed the proceedings under Section 44(2a) as well as the appeal that was pending hearing before the Additional District Judge. Allowing the Appeal by the State this Court, ^ HELD: l. The High Court lost sight of the fact that the only grievance against the order of the 9th Additional District Judge was that he refused to decide the appeal in accordance with the opinion of the Advocate General and that he did not give an early date of hearing. The question about the suo moto proceedings under section 44(2a) and the validity of the Amendment Act, 1969 and its effect were not considered by the appellate authority and in fact the appeal was still pending before the 9th Additional District Judge which was yet to be heard and disposed of. [823G H] 2. The High Court after examining the legal aspect without having been raised before it decided the matter so that neither appeal remains nor any proceedings remain and in doing so the High Court went on without there being proper grounds before it and without giving an opportunity to the appellant State of West Bengal, to have their say in this matter. [824A B] 3. The order passed by the High Court dated 20.5.87 is, therefore, completely without jurisdiction and on matters which were not before it and also without giving adequate opportunity of hearing and, therefore, deserves to be quashed, and is quashed. [824B c] 4. The appeal that was filed by the Ist respondent before the 9th Additional District Judge was pending when the High Court passed the impugned order, revives. It could not be said that the appeal is disposed of as observed by the High Court. It is directed that the appeal which was pending before the 9th Additional District Judge shall be heard by the Additional District Judge in accordance with law. [824C D]

On May 14,1959 ,a number of documents were seized from the possession of the respondent by the Enforcement Officer in execution of a search warrant. The search warrant was issued by the Chief Presidency Magistrate under sub section (3) of section 19 of the Foreign Exchange Regulation Act, 1947. The Director of Enforcement with the permission of the Chief Presidency Magistrate retained those seized documents for a period exceeding four months. On October 5, 1959, the respondent filed an application before the Chief Presidency Magistrate in which he claimed the return of the seized documents on the basis, of the provision of section 19 A of the Foreign Exchange Regulation Act. On this application the Chief Presidency Magistrate directed the return of all the documents to the respondent except those mentioned at items 2 and 7 of the search list. The respondent went up in revision against this order for the continued retention of the two documents, and the High Court allowed the revision and ordered the return of these documents also to the respondent. Against this order appeal was filed in this Court. Held:(i) The Magistrate has no jurisdiction over the articles seized in execution of the search warrant issued under section 19(3) of the Foreign Exchange Regulation Act and that he cannot permit the retention of such documents by the Director of Enforcement after the expiry of the period he is entitled to keep them in accordance with the provisions of section 19 A of the Act. The Enforcement Officer has a right under section 19 A to retain the articles seized for a period not exceeding four months and it is not necessary for him to obtain permission from the Magistrate for retaining the seized documents within the statutory period. Therefore, the Magistrate issuing the search warrant has nothing to do with the retention or disposal of the documents seized in execution of the search warrant either during the statutory period of four months or after the expiry of that period. Mohammad Serajuddin vs R. C. Mishra, [1962] 1 Supp. S.C.R. 545, distinguished. (ii) In view of the specific provision for the issue of a search warrant under sub section (3) of section 19 of the Foreign Exchange Regulation Act, the provisions of sections 96, 98 and Form No. 8 of Schedule V of the Code would not be applicable to the search warrants issued under sub section (3) of section 19. The provisions of SS. 101, 102, 103 of the Code will apply to searches under sub section (3) of section 19 of the Act as there is no specific provision in the Act with respect to the conduct of the search. 725 (iii) The provisions of section 5(2) of the Code will not apply to an investigation conducted under the Act because the Act is a special Act and it provides under s.19 A for the necessary investigation into the alleged suspected commission of an offence" under the Act, by the Director of Enforcement. (iv) No express provision is necessary in the statute for the return of documents after the expiry of the statutory period. Provisions are necessary for retaining documents of others and not for returning them to persons entitled. Therefore the documents seized have to be returned to the person from whose possession they had been seized after the expiry of the statutory period. (v) Under s.19 A of the Act the Director of Enforcement can justifiably retain with himself the documents seized till the final disposal of the proceedings taken under s.23 of the Act if the proceedings had commenced before the period of four months, during which he could keep the documents. In the present case he could not have retained those documents beyond four months because no such proceeding had been commenced within 4 months. In the present case proceedings under s.23 did start prior to the order for the return of documents. On the facts of this case it was held that the direction of the Magistrate in regard to the retention of documents was an order giving effect to the spirit behind the provision of section 19 A.

Appeal No. 353 of 1959. Appeal from the judgment and order dated April 22, 1958, of the Punjab High Court (Circuit Bench) at Delhi in Civil Writ No. 257 D of 1957. M. C. Setalvad, Attorney General of India, section N. Andley, J. B. Dadachanji Rameshwar Nath and P. L. Vohra, for the Appellant. G. section Pathak, R. L. Anand and Janardan Sharma, for the respondent No. 2. 591 1960. November 22. The Judgment of the Court was delivered by WANCHOO, J. This is an appeal on a certificate granted by the Punjab High Court. Sharda Singh (hereinafter called the respondent) was in the service of the appellant mills. On August 28, 1956, the respondent was transferred from the night shift to the day shift in accordance with para 9 of the Standing Orders governing the workmen in the appellant mills. At that time an industrial dispute was pending bet ween the appellant mills and their workmen. The transfer was to take effect from August 30, 1956; but the respondent failed to report for work in the day shift and was marked absent. On September 1, 1956, he submitted an application to the General Manager to the effect that he had reported for duty on August 30, at 10 30 p.m. and had worked during the whole night, but had not been marked present. He had again gone to the mills on the night of August 31, but was not allowed to work on the ground that he had been transferred to the day shift. He complained that he had been dealt with arbitrarily in order to harass him. Though he said that he had no objection to carrying out the orders, he requested the manager to intervene and save him from the high handed action taken against him, adding that the mills would be responsible for his wages for the days he was not allowed to work. On September 4, 1956, he made an application to the industrial tribunal, where the previous dispute was pending, under section 33 A of the , No. XIV of 1947, (hereinafter called the Act) and complained that he had been transferred without any rhyme or reason from one shift to another and that this amounted to alteration in the conditions of his service, which was prejudicial and detrimental to his interest. As this alteration was made against the provisions of section 33 of the Act, he prayed for necessary relief from the tribunal under section 33 A. On September 5, 1956, the General Manager replied to the letter of September 1, and told the respondent that his transfer from. one shift to the other had been ordered on 592 August 28, and he had been told to report for work in the day shift from August 30; but instead of obeying the order which was made in the normal course and report for work as directed he had deliberately disobeyed the order and reported for work on August 30 in the night shift. He was then ordered to leave and report for work in the day shift. He however did not even then report for work in the day shift and absented himself intentionally and thus disobeyed the order of transfer. The General Manager therefore called upon the respondent to show cause why disciplinary action should not be taken against him for wailfully refusing to obey the lawful orders of the departmental officers and he was asked to submit his explanation within 48 hours. The respondent submitted his explanation on September 7, 1956. Soon after it appears the appellant mills received notice of the application under section 33 A and they submitted a reply of it on October 5, 1956. Their case was that transfer from one shift to another was within the power of the management and could not be said to be an alteration in the terms and conditions of service to the prejudice of the workman and therefore the complaint under section 33 A was not maintainable. The appellant mills also pointed out that a domestic inquiry was being held into the subsequent conduct of the respondent and prayed that proceedings in the application under section 33 A should be stayed till the domestic inquiry was concluded. No action seems to have been taken on this complaint under section 33 A, for which the appellant mills might as they had prayed for stay However, the domestic inquiry continued and on February 25, be partly responsible of those proceedings. against the respondent 1957, the inquiry officer reported that t e charge of misconduct was proved. Thereupon the General Manager passed an order on March 5, 1957, that in view of the serious misconduct of the respondent and looking into his past records, he should be dismissed; but as an industrial dispute was pending then, the General Manager ordered that the permission of the industrial tribunal should be taken before the order of dismissal was 593 passed and an application should be made for seeking such permission under section 33 of the Act. In the meantime, a notification was issued on March 1, 1957, by which 10th March, 1957, was fixed for the coming into force of certain provisions of the Central Act, No. XXXVI of 1956, by which sections 33 and 33 A were amended. The amendment made a substantial change in section 33 and this change came into effect from March 10, 1957. The change was that the total ban on the employer against altering any condition of ser vice to the prejudice of workmen and against any action for misconduct was modified. The amended section provided that where an employer intended to take action in regard to any matter connected with the dispute or in regard to any misconduct connected with the dispute, he could only do so with the express permission in writing of the authority before which the dispute was pending; but where the matter in regard to which the employer wanted to take action in accordance with the Standing Orders applicable to a workman was not connected with the dispute or the misconduct for which action was proposed to be taken was not connected with the dispute, the employer could take such action as he thought proper, subject only to this that in case of discharge or dismissal one month 's wages should be paid and an application should be made to the tribunal before which the dispute was pending for approval of the action taken against the employee by the employer. In view of this change in the law, the appellant mills thought that as the misconduct of the respondent in the present case was not connected with the dispute then pending adjudication, they were entitled to dismiss him after paying him one month 's wages and applying for approval of the action taken by them. Consequently, no application was made to the tribunal for permission in accordance with the order of the General Manager of March 5, 1957, already referred to. Later, on April 2, 19579 an order of dismissal was passed by the General Manager after tendering one month 's wages to the respondent and an application was made to the authority concerned for approval of the action taken against the respondent. 594 Thereupon the respondent filed another application under section 33 A of the Act on April 9, 1957, in which he complained that the appellant mills had terminated his services without the express permission of the tribunal and that this was a contravention of the provisions of section 33 of the Act; he therefore prayed for necessary relief. On April 18, 1957, an interim order was passed by the tribunal on this application by which as a measure of interim relief, the appellant mills were ordered to permit the respondent to work with effect from April 19 and the respondent was directed to report for duty. It was also ordered that if the management failed to take the respondent back, the respondent would be paid his full wages with effect from April 19 after he had reported for duty. On May 6, 1957, however, the application dated April 9, 1957, was dismissed as defective and therefore the interim order of April 18 also came to an end. On the same day (namely, May 6, 1957), the respondent made another application under section 33 A in which he removed the defects and again complained that his dismissal on April 2, 1957, without the express previous permission of the tribunal was against section 33 and prayed for proper relief. It is this application which is pending at present and has not been disposed of, though more than three years have gone by. It is also not clear what has happened to the first application of September 4,1956, in which the respondent complained that his conditions of service had been altered to his prejudice by his transfer from one shift to another. Applications under section 33 and section 33 A of the Act should be disposed of quickly and it is a matter of regret that this matter is pending for over three years, though the appellant mills must also share the blame for this state of affairs ' However, the appellant mills gave a reply on May 14,1957, to the last application under section 33 A and objected that there was no breach of section 33 of the Act, their case being that the amended section 33 applied to the order of dismissal passed on April 2, 1957. Further, on the merits, the appellant mills ' case was that the dismissal was in the circumstances justified. 595 The matter came up before the tribunal on May 16, 1957. On this date, the tribunal again passed an interim order, which was to the effect that as a measure of interim relief, the respondent should be permitted to work from May 17 and the respondent was directed to report for duty. It was further ordered that in case the management failed to take him back, they would pay him his full wages with effect from the date he reported for duty. Thereupon the appellant mills filed a writ petition before the High Court. Their main contention before the High Court was two fold. In the first place it was urged that the tribunal had no jurisdiction to entertain an application under section 33 A of the Act in the circumstances of this case after the amended sections 33 and 33 A came into force from March 10, 1957. In the alternative it was contended that the tribunal had no jurisdiction to pass an interim order of reinstatement or in lieu thereof payment of full wages to the respondent even before considering the questions raised in the application under section 33 A on the merits. The High Court held on the first point that in view of section 30 of the Industrial Disputes (Amendment and Miscellaneous Provisions) Act, No. XXXVI of 1956, the present case would be governed by section 33 as it was before the amendment and therefore the tribunal would have jurisdiction to entertain the complaint dated May 6, 1957, under section 33 A of the Act. On the second point, the High Court held that the order of the tribunal granting interim relief was within its jurisdiction and was justified. In consequence, the writ petition was dismissed. Thereupon the appellant mills applied and was granted a certificate by the High Court to appeal to this Court; and that is how the matter has come up before us. The same two points which were raised in the High Court have been urged before us. We are of opinion that it is not necessary in the present case to decide the first point because we have come to the conclusion that the interim order of May 16, 1957, is manifestly erroneous in law and cannot be supported. Apart from the question whether the tribunal had jurisdiction 596 to pass an interim order like this without making an interim award, (a point which was considered and left open by this Court in The Management of Hotel Imperial vs Hotel Workers ' Union (1)), we are of opinion that where the tribunal is dealing with an application under section 33 A of the Act and the question before it is whether an order of dismissal is against the provisions of section 33 it would be wrong in law for the tribunal to grant reinstatement or full wages in case the employer did not take the workman back in its service as an interim measure. It is clear that in case of a complaint under section 33 A based on dismissal against the provisions of section 33, the final order which the tribunal can pass in case it is in favour of the workman, would be for reinstatement. That final order would be passed only if the employer fails to justify the dismissal before the tribunal, either by showing that proper domestic inquiry was held which established the misconduct or in case no domestic inquiry was held by producing evidence before the tribunal to justify the dismissal: See Punjab National Bank Ltd. vs All India Punjab National Bank Employees ' Federation (2), where it was held that in an inquiry under section 33 A, the employee would not succeed in obtaining an order of reinstatement merely by proving contravention of section 33 by the employer. After such contravention is proved it would still be open to the employer to justify the impugned dismissal on the merits. That is a part of the dispute which the tribunal has to consider because the complaint made by the employee is to be treated as an industrial dispute and all the relevant aspects of the said dispute fall to be considered under section 33 A. Therefore, when a tribunal is considering a complaint under section 33 A and it has finally to decide whether an employee should be reinstated or not, it is not open to the tribunal to order reinstatement as an interim relief, for that would be giving the workman the very relief which he could get only if on a trial of the complaint the employer failed to justify the order of dismissal. The interim relief ordered in this case was that the work (1) ; (2) ; 597 man should be permitted to work: in other words he was ordered to be reinstated; in the alternative it was ordered that if the management did not take him back they should pay him his full wages. We are of opinion that such an order cannot be passed in law as an interim relief, for that would amount to giving the, respondent at the outset the relief to which he would be entitled only if the employer failed in the proceedings under section 33 A. As was pointed out in Hotel Imperial 's case (1),ordinarily, interim relief should not be the whole relief that the workmen would get if they succeeded finally. The order therefore of the tribunal in this case allowing reinstatement as an interim relief or in lieu thereof payment of full wages is manifestly erroneous and must therefore be set aside. We therefore allow the appeal, set aside the order of the High Court as well as of the tribunal dated May 16, 1957, granting interim relief. Learned counsel for the respondent submitted to us that we should grant some interim relief in case we came to the conclusion that the order of the tribunal should be set aside. In the circumstances of this case we do not think that interim relief to the respondent is justified hereafter. As we have pointed above, applications under sections 33 and 33 A should be dealt with expeditiously. We trust that the applications dated September 4, 1956, which appears to have been overlooked and of May 6, 1957, will now be dealt with expeditiously and finally disposed of by the tribunal, as all applications under section 33 A should be. In the circumstances we pass no order as to costs. Appeal allowed.

One Sharda Singh, respondent, who was an employee of the appellant mills was dismissed for disobeying the orders of the managing authority. He filed an application before the Industrial tribunal under section 33 A of the , contesting his dismissal on various grounds, whereupon the tribunal passed an order to the effect that as an interim measure the respondent be permitted to work in the appellant mills and if the management failed to take him back his full wages be paid from the date he reported for duty. The appellant mills then filed a Writ Petition before the High Court contesting the interim order of the Tribunal and the High Court held that the interim relief granted to the respondent was justified. On appeal by a certificate of the High Court, Held, that the interim order passed by the tribunal reinsta ting the respondent was erroneous. Such an interim relief could not be given by the Tribunal as it would amount to prejudging the respondents ' case and granting him the whole relief at the outset without deciding the legality of his dismissal after hearing the appellant employer. The Management, Hotel Imperial and Ors. vs Hotel Workers ' Union, ; , and Punjab National Bank vs All India Punjab National Bank Employees ' Federation, A.I.R. , referred to.

The appellant, a working journalist who was appointed on November, 1961 as a Staff Correspondent in the Calcutta Office of the respondent company while working as such at Calcutta, applied on 29 April, 1975 to the Government of West Bengal under sub section (1) of section 17 of the Working Jour nalists and Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955 for recovery of the unpaid portion of his wages relating to the period April 1968 to February 1973. While the conciliation proceedings were on, he was promoted and transferred to Pune on 16 February, 1976. The Conciliation Officer reported the fail ure of the proceedings before him on 16 November, 1976 and the Government of West Bengal made a reference under sub section (2) of section 17 of the Act to the First Labour Court, West Bengal on 23 August, 1977 for the adjudication of the dis pute between the parties. The preliminary objection raised by the respondent company that the Government of West Bengal was not competent to make the reference was rejected by the Labour Court. The respondent company 's writ petition chal lenging 'the order of the Labour Court was allowed by a Single Judge whose decision was affirmed in appeal by the Division Bench of the High Court. Allowing the appeal by special leave and dismissing the writ petition of the respondent company, this Court. HELD: (i) Sub section (1) ors. 17 of the Act requires that an application by the newspaper employee complaining that an amount due to him has remained unpaid by the employer should be made to the State Government. Which is the State Govern ment to which such application lies is 476 indicated by r: 36 of the Rules made under the Act and that rule provides that an application under section 17 of the Act shall be made to the Government of the State where the central office or the branch office of the newspaper estab lishment in which the newspaper employee is employed is situated. It is the location of the central office or the branch office in which the newspaper employee is employed which determines which State Government it will be. The rule works in favour of the convenience of the newspaper employ ee. [478C E] (ii) Sub section (2) of section 17 provides that if any question arises as to the amount due under the Act to a newspaper employee from his employer, the State Government may refer the question to any Labour Court, constituted by it under the or under any corresponding law relating to investigation and settlement of industrial disputes in force in the State. If a question arises as to the amount due, it is a question which arises on the appli cation made by the newspaper employee, and the application having been made before the appropriate State Government, it is that State Government which will call for an adjudication of the dispute by referring the question to a Labour Court. The State Government before whom the application for recov ery is made is the. State Government which will refer the question as to the amount due to a Labour Court. [478F G; 479C D] In this case, the appellant was employed at the Calcutta branch of the respondent company. He made the application to the Labour Department of the Government of West Bengal for recovery of the unpaid portion of his wages. When the ques tion arose as to the amount due to the appellant, the Gov ernment of West Bengal made the reference for adjudication to the First Labour Court, West Bengal. Upon the construc tion of sub section (2) of section 17 as indicated at (ii) above, it is beyond dispute that the Government of West Bengal is competent to make the reference. The High Court erred in holding that the reference was without jurisdiction and that it was the State of Maharashtra which was competent to make the reference. [479E G]

In the State of Madhya Pradesh vs V. P. Sharma, ; this Court held that once a declaration under section 6 of the Land Acquisition Act 1894 was made the notification under section 4(1) of the Act was exhausted and there could be no successive notifications under section 6 with respect to land in a locality specified in one notification under section 4(1). Relying on the above judgment the present writ petitions were filed in order to challenge successive notifications under section 6 following a single notification under section 4(1) in respect of land belonging to them. Meanwhile in order to meet the situation created by the judgment in V. P. Sharma 's case the President of India promulgated the Land Acquisition (Amendment and Validation) Ordinance (1 of 1967). The Ordinance was later followed by the Land Acquisition (Amendment and Validation) Act 1967. Section 2 of this Act purported to amend section 5 A of the principal Act by allowing the making of more than one report in respect of land which had been notified under section 4(1). Section 3 purported to amend section 6 of the principal Act by empowering different declarations to be made from time to time in respect of different parcels of land covered by the same notification under section 4(1) irrespective of whether one report or different reports had been made under section 5 A sub section Section 4 of the Act purported to validate all acquisitions of land made or purporting to have been made under the principal Act before the commencement of the ordinance namely January 10, 1967, notwithstanding that more than one declaration under section 6 had been made in pursuance of the same notification under section 4(1), and notwithstanding any judgment, decree or order of any court to the contrary. The Amending Act also laid down time limits for declarations under section 6 of the principal Act after the notification under s 4(1), had been issued in respect of notifications made after January 20. 1967 the time limit was three years; in respect of notification made before that date the time limit was to be two years after that date. Provision was also made for payment of interest on compensation due to persons in respect of whose land declarations under section 6 had been delayed beyond a specified period; no interest was however, to be paid to those to whom compensation had already been paid. The petitioners by leave of Court amended their petitions to attack the validity of the. aforesaid Validating Act on the following main grounds : (1) By seeking to validate past transactions of a kind which had been declared invalid by this Court without retrospectively changing the substantive law under which the past transactions had been effected the legislature was encroaching over the domain of the judicial power vested by the Constitution in the judiciary exclusively; (ii) The Validating Act did not L4Sup. C.I.1684 42 revive the notification under section 4 which had become exhausted after the first declaration under section 6 and no acquisition following thereafter could be made without a fresh notification under section 4; (iii) The Validating Act violated article 31(2) of the Constitution inasmuch as it purported to authorise acquisitions without fresh notifications under section 4 thereby allowing compensation to be paid on the basis of the said . notification under section 4 without allowing for increase in the value of land thereafter; (iv) The Validating Act violated article 14 of the Constitution in various ways. HELD: Per Wanchoo C.J., Bachawat & Mitter, JJ. (i) The American doctrine of well defined separation of legislative and judicial powers has no application to India and it cannot be said that an Indian Statute which seeks to validate invalid actions ' is bad if the invalidity has already been pronounced upon by a court of law. A.K. Gopalan vs State, ; , referred to. (ii) The absence of a provision in the amending Act to give retrospective operation to section 3 of the Act does not affect the validity of section 4. It was open to Parliament to adopt either course e.g. (a) to provide expressly for the retrospective operation of section 3, or, (b) to lay down that no acquisition purporting to have been made and no action taken before the Land Acquisition (Amendment and Validation) Ordinance, 1967 shall be deemed to be invalid or even to have become invalid because, inter alia, of the making of more than one declaration under section 6 of the Land Acquisition Act, notwithstanding any judgment decree or order to the contrary. Parliament was competent to validate such actions and transactions, its power in that behalf being only circumscribed by appropriate entries in the Lists of the Seventh Schedule and the fundamental rights set forth in Part III of the Constitution. Section 4 of the Amending Act being within the legislative competence of Parliament, the provisions thereof are binding on all courts of law notwithstanding judgments, orders or decrees to the contrary rendered or made in the past. [67 C F] Case law referred to. (iii) The impugned Act does not violate article 31(2). The Act does not in express terms enact any law which directly affects compensation payable in respect of property acquired nor does it lay down any principles different from those which were already in the Land Acquisition Act of 1894. After the amendment of the Constitution in 1955 the question of compensation is not justiciable and it is enough if the law provides that a person expropriated must be given compensation for his property or lays down the principles therefor. [67 G H] The Legislature might well have provided in the Act of 1894 that it would be open to the appropriate Government after issuing a notification under section 4 to consider objections raised under section 5 with regard to the different localities from time to time enabling different reports to fie made under section 5 A with consequent adjustments in section 6 providing for declarations to be made as and when each report under section 5A was considered. By the validation of action taken under section 6 more than once in respect of a single notification under section 4, the original scheme of acquisition is not altered. The public purpose behind the notification remains the same. It is not as if a different public purpose and acquisition of land for such purpose were being interploated by means of the Validating Act. Only the shortcoming in the Act as to want to provision to enable more than one decla ration under section 6 are being removed. [68 D F] 43 The date of valuation under the Validation Act is that of the issue of notification under section 4(1), a principle which has held the field since 1923 Legislative competence to acquire land under the provisions of the Land Acquisition Act cannot be challenged because of constant appreciation of land values all over the country due to the prevalent abnormal inflation. There must be some time lag between the commencement and conclusion of land acquisition proceedings and in principle there is nothing wrong in accepting the said commencement as the date of valuation. Sections 4 and 23 of the Land Acquisition Act are protected by article 31(5) (a) of the Constitution. Only sections 5 A and 6 of the Act have been amended. The amendment does not alter the principle of compensation fixed by the Act nor contravene article 31 of the Constitution in any way. [69 G 70 B] It cannot be said of the Validating Act that it was fixing an arbitrary date for the valuation of the property which bore no relation to the acquisition proceedings. The population in Indian cities especially in the capital is ever increasing. The State has to plan the development of cities and it is not possible to take up all schemes in all directions at the same time. The resources of the State may not be sufficient to acquire all the area required by a scheme at the same time. Of necessity the area under the proposed acquisition would have to be carved into blocks and the development of one or more blocks at a time could only be taken up in consonance with the resources available. Even contiguous blocks could be developed gradually and systematically. In view of such factors it cannot be said that the principle of fixing compensation on the basis of the price prevailing on the date of the notification under section 4(1) of the Land Acquisition Act was not a relevant principle which satisfied the requirements of article 31(2).[70 C 71 H] The State of West Bengal vs Mrs. Bela Banerjee, ; , State of Madras vs D. Namasivaya Mudaliar, ; and, P.V. Mudaliar vs Deputy Collector, ; , considered. (iv) The validating Act was not violative of article 14. Whenever an Amending Act is passed there is bound to be some difference in treatment between transactions which have already taken place and those which are to take place in the future. That by itself will not attract the operation of article 14. Again, even with respect to transactions which may be completed in the future, a reasonable classification will not be struck down. [72 C] Jalan Trading Co. vs Mazdoor Union, ; , relied on. It is not possible to say that because the Legislature thought of improving upon the Act of 1894 by prescribing certain limits of time as from 20th January 1967 the difference in treatment in cases covered by the notification before the said date and after the said date denies equal protection of laws because the transactions are not similarly circumstanced. Some of the notifications issued under section 4 must have been made even more than 3 years before 20th January, 1967 and such cases obviously could not be treated in the same manner 'as notifications issued after that date. article 14 does not strike at differentiation caused by the enactment of a law between transactions governed thereby and those which are not so governed. [73 H 74 B] Hatisingh Manufacturing Co., Ltd. vs Union of India, ; No grievance can be made because interest is denied to persons who have already taken the compensation. Even here the classification is not unreasonable and cannot be said to be unrelated to the object of the Act. [74 E F] 44 Per Shelat and Vaidialingam, JJ. (dissenting) By validating the acquisition orders and declarations made on the basis of an exhausted notification under section 4 the impugned Act saves government from having to issue a fresh notification and having to pay compensation calculated on the market value as on the date of such fresh notification and depriving the expropriated owner of the benefit of the appreciated value in the meantime. The real object of section 4 of the impugned Act is thus to save the State from having to compensate for such appreciation under the device of validating all that is done under an exhausted section 4 notification and thus in reality fixing an anterior date i.e. the date of such a dead section 4 notification for fixing the compensation. The impugned Act thus suffers from a two fold vice : (i) that it purports to validate acquisitions orders and notifications without resuscicating the notification under section 4 by any legislative provision on the basis of which alone the validated acquisitions, orders and declarations can properly be sustained and (ii) that its provisions are in derogation of article 31(2) as interpreted by this Court by fixing compensation on the basis of value on the date of notifications under section 4 which had become exhausted and for keeping them alive no legislative provision is to be found in the impugned Act. It is therefore not possible to agree with the view that the purpose of section 4 is to fill the lacuna pointed out in Sharma 's case nor with the view that it raises a question of adequacy of compensation. The section under the guise of validating the acquisitions, orders and notifications camouflages the real object of enabling acquisitions by paying compensation on the basis of values frozen by notifications under s 4 which by part acquisitions thereunder had lost their efficacy and therefore required the rest of the land to be notified afresh and paying compensation on the date of such fresh notifications. The fact that neither section 4 nor section 23 of the principal Act are altered does not make any difference. [89 D H, 85 H] Section 4 of the Amending Act must therefore be struck down as invalid. [90 A]

The appellant, with its head office at Kanpur in U.P., runs two woollen mills one of which is in Dhariwal in the State of Punjab. The raw material purchased by the head office at Kanpur was sent from various centres to the mills and no raw material used in the mills was purchased locally or within the area of the Market Committee. On demand of market fee by the Committee under section 23 of the Punjab Agricultural Produce Markets Act, 1961 the appellant stated that no purchase or sale of the raw material received by the mills took place within the area of the Market Committee and that for this reason the Committee had no jurisdiction to levy any fee in respect of those materials. A Writ Petition filed by the appellant in the High Court was dismissed a infructuous since the Market Committee agreed to withdraw the assessment and to make fresh assessment according to the rules. Some time later, however, the Market Committee once again levied market fee and penalty. A single Judge of the High Court quashed the demand notice of the Market Committee on the ground that the assessment order was not in accordance with the provisions of the Act and Rules. But a Division Bench of the High Court allowed the Committee 's Letters Patent Appeal. On the question whether the Market Committee was competent to levy fees. Dismissing the appeal, ^ HELD: Clauses (b) and (c) of rule 29 (7) of the Punjab Agricultural Produce Markets (General) Rules, 1962 would be attracted bringing the transaction within the term 'bought or sold ' if in pursuance of the agreement of sale or purchase, even if entered at the head office of the mills at Kanpur, the agricultural produce was weighed in the market area or if in pursuance of the 160 agreement of sale or purchase the agricultural produce was delivered in the said area to the purchaser or to some other person on behalf of the purchaser. [163 E F] In the instant case both clauses (b) and (c) would be applicable provided the transaction of sale was completed immediately on the delivery of the goods to the mills on weighment within the market area, if the delivery and/or weighment are such that without both or either of them there will no sale at all in law. [164 A B]

These appeals arose out of a representative suit filed on behalf of the creditors of defendants I to 6 who hat executed a trust deed on August 26, 1936, conveying their properties to three trustees with authority to dispose of the one and distribute the ale proceeds ratably amongst the creditors. The trust deed required "the three trustees to act according to the decision arrived at either unanimously or by majority." The trustees accepted the trust and conveyed all the properties except the family house in administration of the trust. Two of the sale deeds in favour of two of the creditors, defendants 13 and 14, a mortgagee creditor, in the suit were executed by only two or the trustees . In a suit brought by the said defendants 1 to 6 for administration of trust the trial court passed a preliminary decree. The High Court on appeal remanded the matter to the trial court for a finding as to the market value of the lands sold. The trial court submitted its finding. At this stage defendants 1 to 6 withdrew the suit which we dismissed. The present suit under O. I, r. 8 of the Code of Civil Procedure we filed on October 29, 1947, before such withdrawal. The claimed made therein, inter alia, were for a declaration that the properties in question were still impressed with the trust, for the removal the surviving trustee and appointment of an a administrator to realise the amount, recover position of the properties and re sell them. The trial Judge passed a decree infavour of the plaintiffs . The High Court in substance confirmed that decree but modified it by awarding simple interest 207 instead of compound Interest decreed in favour of defendant 14. The two sale deeds, executed by only two of the trustees, were declared invalid and it was found that the third trustee did not give his consent to it. The sale deed in favour of defendant 12 was declared invalid on the ground that he had intermeddled with the trust estate and had thus become a trustee de sou tort. The courts below also rejected the pleas of limitation and res judicata raised on behalf of the defendants. Some of the creditor detendants appealed. After the appeals had been admitted by this Court the High Court amended the decretal order by substituting the words 'mesne profits ' by 'net profits ' under sections 151 and 152 of the Code of Civil Procedure. ^ Held, that the question whether article 120 or article 134 of Indian Limitation Act applied to a case had to be decided on the case made in the plaint, read as whole and properly construed. Since the present suit was not one for a mere declaration but for possession of property, having been valued and framed as such, deliverable to the administrator, it was governed by article 134 and not by article 120 of the Act and was thus within time. It was not correct to say that section 63 of the Indian Trust Act was exhaustive as to the remedies available to a beneficiary under a private trust or that claim for constructive possession, such as was made in the present suit, was prohibited under that section. Rani Chhatra Kumari Devi vs Prince Mohan Bikram Shah, Pat. 851, distinguished. Subbaiya Pandaram vs Mohammad Mustapha merachayar , (1923) L. R. 50 IE A. 295, A Subramania Iyer vs P. Nagarathna Naicker , (1910)20 Mad. L. J. 151 and Masjid shahid Ganj vs Shiromani Gurdwara Prabandhak Committee Amritsar (1940) L. R. 67 I. A. 251, referred to. Nor could the suit be said to be barred by res judicata since it did not fall within the scope of section II of the Code of civil Procedure. The suit being one under o. 1, r. 8 of the Code, it could not be said that defendants I to 6, plaintiff in the earlier suit, and the creditors, plaintiffs in the present suit, where the same party or parties claiming through each other. Clause 23 of the trust deed, properly construed, conformed to the provision of section 48 of the Trusts Act that where there are more trustees than one, they must all join in the execution of the trust, and did not provide for an exception to that rule, even though it provided that decisions by the trustees need not a ways be unanimous but could be by majority as well. Such sale deeds as had been executed by 208 two of the trustees only must therefore fail. The alternative. case of consent given by the third trustee to the transaction could be of no avail since it could not be substantiated by evidence Lala man Mohan Das vs Janaki Man Prasad, (1944) L. R. 72 I. A. 39, referred to. The High Court had jurisdiction under sections 151 and 152 of the Code of Civil Procedure to correct the obvious error in the decretal order even though the appeals from the said decree had already been admitted by this Court. Nor could the amendment be challenged on merits. Although a successful plaintiff would not normally be entitled to mesne profits for more than three years in view of article 109 of the Limitation Act, the court had jurisdiction in the case of a trust to make appropriate direction in the decree, while awarding net profiles to the trust and interest to the mortgagee, in adjustment of the equities between them. Salgur Prasad V Har Narain Das (1932) L.R. 59 I. A. 147, Bhagwat Dayal Singh vs Debi Dayal Sahu, (1908) L. R. 35 I. A. 48 and Jagannath Prasad Singh Chowdhury vs Surajmal Jalal , (1926) L. R. 54 I. A. 1, referred to. Even slight intermeddling with the trust estate is sufficient to make a person trustee de son tort. Since in the instant case, the acts of intermeddling by one of the defendant covered a fairly long period, the courts below were right in holding that the sale in his favour must be set aside as one in favour, of a trustee de son tort.

In the Civil Suit No. 203 of 1955, on the original side of the Bombay High . Court, filed by the decree holder/respondent against the appellant/judgment, debtor for recovery of certain amount of money, summons were served on the judgment debtor who after filing his written statement absented himself, and did not take any further part in the proceedings of the Court resulting in a decree dated 29 6 1960 for Rs. 65,953.79. On 20 12 1961, Goa became a part of India and was made a Union Territory of India by the Constitution (Twelth Amendment) Act, 1962 passed on 27 3 1962. The decree holder applied to the Bombay High Court for transferring the decree to Goa Court for execution and by an order dated 28 8 1963 the decree was transferred to the Goa Court for execution. The execution application before the Executing Court at Panjim filed on 21 1 1964 was dismissed on 26 4 1965, holding that the decree transferred to it by the Bombay High Court was not executable. An appeal was preferred to the Additional Judicial Commissioner on 1 6 1965 and the appellant Judgment debtor filed his reply. During the pendency of the appeal, the Code of Civil Procedure was extended to Goa on 15 6 1966 by the Goa, Daman and Diu Extension of the Code of Civil Procedure and Arbitration) Act (30) of 1965 and repealing the Portuguese Code. The Additional Judicial Commissioner by its order dated 28 6 1967 held that in view of article 261(3) of the Constitution, the decree passed by the Bombay High Court could not be treated as nullity and, was therefore, executable. On appeal by certificate, the appellant/judgment debtor contended (1) that the decree passed by me Bombay High Court qua Goa Court was a nullity being a decree of a foreign court. Even if the decree was not a nullity it could be executed by a Goa court if the original decree had been approved by the Goa Court under section 50 of the Portuguese Code; (2) that`the Bombay High Court transferring the decree for execution to the Goa Court under sections 38 and 39 of the C.P.C. was without jurisdiction inasmuch as the C.P.C. had not been applied to Goa when the order of transfer was passed. (3) that as the provisions of the C.P.C. were applied to Goa after the order of the Execution Court was passed and a vested right had accrued to the appellant/judgment debtor the 'J decree continued to be inexecutable and could not be validated by article 261(3) of the Constitution. The respondent/decree holder contended (1) that inasmuch as the judgment debtor had appeared and participated in the suit for some time the decree passed by the Bombay High Court could not be said to be a nullity (ii) that as the C.P.C. was made applicable while the appeal was pending before the Additional Judicial Commissioner, Goa the decree became clearly executable and the order of transfer of the decree by the Bombay High Court stood validated. and (iii) that in view of the provisions of article 261(3) of the Constitution of India, there was no bar to the execution of the decree, which was passed by a court which was in the territory of India. 150 Dismissing the appeal, the Court, ^ HELD: (1) Where a party appears before the court, the decree of the court, even mf it is a foreign court is not a nullity. [154 D] Raj Rajendra Sardar Maloji Marsingh Rao Shitole vs Sri Shankar Saran and others; , , distinguished and held not applicable. Shaligram vs Daulat Ram, ; and Lalji Raja & Sons vs Firm Hansraj Nathuram, ; , applied. (2) The right of the judgment debtor to pay up the decree passed against him cannot be said to be a vested right, nor can the question of executability of the decree be regarded as a substantive vested right of the judgment debtor. A fortiorary, the execution proceedings being purely a matter of procedure it is well settled that any change in law which is made during the pendency of the cause would be deemed to be retrospective in operation and the Appellate Court is bound to take notice of the change in law. The Additional Judicial Commissioner was competent to take notice of the change in the law. [154 E F, 155 G] Mohanlal Chunilal Kothari vs Tribhovan Haribhai Tamboli, ; , 715 716. Gummalapura Taggina Matada Kotturswami vs Setra Veerava and others, A.T.R , 579 and Jose De Costa and another vs Bascora Sedashiva Sinai Naroornin and others, A.I.R. 1975 S.C. 1843, 1849, followed. (3) The proposition adumbrated viz., that the executability of the decree was a vested right which could not be taken away by the applicability of the Code of Civil Procedure to Goa during the pendency of the appeal is wrong, since the executability of the decree could not be considered to be a vested right [155F G] Lalji Raja and Sons. vs Firm Hansraj Nathuram ; , followed. (4) The contention that as the Code of Civil Procedure was not applicable to Goa at the time when the Bombay High Court passed the order transferring the decree to the Goa Court, the order of transfer was absolutely without jurisdiction was wrong.[156 C D] As the decree was passed by the Bombay High Court, section 38 of the Code of Civil Procedure would clearly apply and the decree passed by the Bombay High Court was not a foreign decree. It is true that at the time when the Bombay High Court passed the order of transfer, the Code of Civil Procedure had not been applied to Goa. But, that does not put the respondent/decree holder out of Court. The decree could be transferred and was valid and executable. But, because of infirmity, it could not be executed so long as the C.P.C. was not made applicable to Goa. Thus, the only bar which stood in the way of the execution of the decree was the non applicability of the provisions of the C.P.C. to Goa. This was, however, not an insurmountable bar or an obstacle and the bar or the obstacle disappeared the moment the Code of Civil Procedure was applied to Goa on 15 6 1966. [156 D F] HELD FURTHER: (5) The instant case is a fit case in which the doctrine A of eclipse would apply and the wall or the bar which separated Bombay from Goa having disappeared, there was no impediment in the execution of a decree. The decree lay dormant only so far as no bridge was built between Bombay and Goa but as soon as the bridge was constructed in the shape of the application of the provisions of the Code of Civil Procedure to Goa the decree became at once executable. [156 F G] (6) In the instant case, the decree passed by the Bombay High Court having been passed by a Court of competent jurisdiction and not being a nullity because the judgment debtor had appeared and participated in the proceedings of the Court to some extent, and the order of transfer under section 38 of the Code of Civil Procedure also not having suffered from any inherent lack of jurisdiction, the decree became enforceable and executable as soon as the Code of Civil Procedure was applied to Goa. [157 E F] 151 Bhagwan Shankar vs Rajaram Bapu Vithal, A.I.R. 1951 Bom. 125, 127, approved. (7) article 261(3) of the Constitution enjoins that a decree shall be executable in ally part of the territory of India, according to law. In the instant case, the decree was passed by the Bombay High Court after the Constitution came into force and article 261(3) would apply to the decree passed by the Bombay High Court. The Article would also apply to Goa because at the time when the application for execution was made in Goa Court, the Constitution had already been made applicable to that State also. [158 C D] (8) It is true that at the time when the Executing Court dismissed the suit of the decree holder/respondent, the Code of Civil Procedure had not been applied and the Portuguese Code continued to apply but after the application of the Code of Civil Procedure by virtue of the Goa, Daman and Diu (Extension of the Code of Civil Procedure and the Arbitration) Act, 1965. the Portuguese Code which was in force in Goa was clearly repealed and the present case does not fall within any of the clauses mentioned in the saving provisions of section 4 of the Act. Thus, when the Civil Procedure Code was made applicable to Goa during the pendency of the appeal, the appellate Court, namely, the Additional Judicial Commissioner was bound to decide the matter in accordance with the law that was in force. Hence, the contention the matter in accordance with the law that was in force. Hence, the contention that the words "according to law" in article 261(3) would mean that the decree would be executable only in accordance with the law in force in the Portuguese Code is not correct. [158 B F] [Jose De Costa and another vs Bascore Sadashiva Sinai Narcornin and others, A.I.R. 1975 S.C. 1843, 1849 followed.]

The respondent Delhi Cloth Mills has a complex over an area of 63 acres at Bara Hindu Rao and Kishan Gnaj, Delhi, which is a nonconforming area and the industry of the kind in which the mill is engaged in was required to be shifted consequent upon the enforcement of Master Plan prepared by Delhi Development Authority under the Delhi Development Act, 1966, which plan amongst other things was to assign land use. The Delhi Cloth Mills in September 1982, approached the DDA and put forth a proposal for shifting the mill and for redeveloping the Mill area for group housing and flatted factories. The DDA by Resolution No. 26 agreed to the scheme to be implemented in phases but it took care to examine the matter further from Delhi 's economics point of view. In September 1983, the DDA turned down the request of the respondent for allotment of an alternate site in a conform ing area for shifting the mill. Thereupon the Mill applied to the Secretary, Labour/Labour Commissioner, Delhi Adminis tration for permission to close down the Mill under Sec. 25(D) of the Industrial Disputes Act, on the ground that the Mill could not be kept located in a non coforming area as otherwise penal consequences would follow. On April 15, 1985, the request of the Mill was turned down by the Secre tary, Labour/Labour Commissioner. Thereupon the Delhi Mill filed a writ petition before the High Court for direction that the DDA be directed to implement its resolution No. 26 dated Feb. 1, 1983. It may be mentioned here that during the pendency of the writ petition before the High Court, DDA had reviewed the situation and passed a fresh resolution No. 3 dated August 1, 1986 reviewing the earlier resolution dated Feb. 1, 1983 recalling the grant of approval with regard to the scheme propounded by the DCM. Thereafter DDA reiterated its Resolution of August 1, 1986 by another resolution dated November 3, 1986. 952 The High Court quashed the two later resolutions and re stored the resolution dated February 1, 1983. It took the view that the Mill could not be kept working in a non con forming area as otherwise it would attract penal action under the law after the lapse of three years from Jan. 18, 1986. Both Union of India and DDA have filed appeals in this Court by special leave against the High Court 's order. In the meantime DCM filed a writ petition in the High Court which was allowed by a Full Bench of the High Court on March 1, 1989 ordering closure of the Mill. Delhi Adminis tration filed special leave petition in this Court against the said order and the Mill filed another special leave petition against the order of the High Court dated 3.3.1989 extending time for grant of permission by the Lt. Governor for Closure of the factory till March 30, 1989. When these matters reached hearing in this Court, DCM and its employees had reached an agreement in the matter of closure of the factory. The Special Leave Petitions were therefore dis missed by this Court; and on the file of this Court remained these two appeals. Dismissing the appeals with a direction, this Court, HELD: The factory has been ordered to be closed and the employer and the employees have entered a settlement. The supposed basis for reviewing or recalling resolution dated February 1, 1983 on the basis of its affectation to the industry and economy of Delhi as also to the workmen has vanished. On this footing and on the events which have come by, the challenge to the judgment and order of the High Court loses rigour. [956F G] Resolution No. 26 dated February 1, 1983, approving the scheme is given by the DCM provided that the scheme had taken all necessary safeguards and controls which would help triggering re development and rehabilitation in the congest ed areas of the central core of the capital.[956G] Appeals dismissed conveying a direction that the DDA shall grant the DCM conditional approval subject to removal of the enumerated objections raised or such of them as are valid and tenable in law after DCM is heard by the Municipal Corporation of Delhi. The matter be formalised forthwith by the DDA and other authorities connected therewith within eight weeks so that the settlement between the workers and the DCM and other matters connected do not stagnate and move to the benefit of all concerned. [960G H] 953

The respondent, filed petitions under Am. 226 and 227 in the Assam High Court asking that notifications by the State Government of the transfer of one District & Sessions Judge and the appointment and posting of another be quashed on the ground that the High Court alone could make the transfers and. in any event, the High Court was to be consulted and was not consulted before the impugned orders were made. The High Court held that there was no consultation with regard to the posting of one of the District Judges and that his transfer was irregular as the High Court alone could have ordered it; and furthermore that the transfer of the other. District Judge was for a like reason also irregular. Holding, however, that none of the District Judges could be said to occupy wrongly the office of District & Sessions judge, the High Court declined the writ of quo warranto and dismissed the petition, but without costs to the State Govenment. One of the learned Judges of the High Court who comprised the Division Bench that heard the petitions,, in a separate but concurring judgment, passed some scathing remarks on the action of the Government which he described as mala fide and actuated by some ulterior motive. On being moved by the State Government, the High Court granted certificates under article 132 of the Constitution to appeal to the Supreme Court on the ground that the judgment involved the interpretation of articles 233 and 235 of the Constitution. By these appeals the State Government sought a reversal of the opinion of the High Court on the two Articles. Three questions arose for decision in the appeal: (a) who is to order transfer of a District Judge the State Government or the High Court; (b) is the provision regarding consultation in article 233 mandatory or directory and if the former, whether the High Court was not in fact consulted; and (c) whether the remarks complained of about the State Government made by the learned Judge should be expunged. HELD: (i) Under article 233 the Governor is only concerned with the appointment, promotion and posting to the cadre of district Judges but not with the transfer of District Judges already appointed or promoted and posted to the cadre. The latter is a matter of control of District Judges which is vested in the High Court under article 235. [460 G] The word posting means either to station some one at a place or to assign someone to a post, I.e. a position or a job, especially one to which a person is appointed. In article 233 it bears the second meaning. The word occurs in association with the words 'appointment ' and 'promotion ' and takes its colour from them. These words indicate the stage when 454 455 a person first gets a position or job and 'posting 'by association means the assignment of an appointee or promotee to a position in the cadre of District Judges. The word 'posting ' cannot be understood in the sense of 'transfer ' when the idea of appointment and promotion is involved in the combination. This meaning is quite out of place because 'transfer ' operates at a stage beyond appointment and promotion. Transfer, therefore, falls within the control vested in the High Court. [460 C G] State of West Bengal vs Nripendranath Bagcht,[1966] 1 S.C.R. 771, referred to. (ii) As the High Court acting under article 235 and not the State Government is the authority to make transfers, no question can arise of a consultation on this account. In the present case, however, consultation as required by article 233, was necessary before one of the District Judges was promoted and posted as a District Judge. Chandra Mohan vs U.P. , referred to. (iii) The power to expunge is an extraordinary power and can be exercised only when a clear case is made out. Although the opinion of this Court may be that the learned Judge need not have made the remarks complained of, it could not be said that in making them he acted with such impropriety that the extraordinary powers should be exercised. [462 DIP]

Appeal No. 119 of 1959. Appeal by special leave from the judgment and order dated January 9, 1958, of the Allahabad High Court (Lucknow Bench), Lucknow, in Civil Misc. Application No. 115 of 1955. 683 C. B. Agarwala and C. P. Lal, for the appellants. G. section Pathak, Achru Ram, section N. Andley, Rameshwar Nath, J. B. Dadachanji and P. L. Vohra for the respondent. November, 25. The Judgment of Sarkar, Subba Rao and Mudholkar, JJ., was delivered by Subba Rao, J., and that of Gajendragadkar and Wanchoo, JJ., was delivered by Wanchoo, J. SUBBA RAO, J. This is an appeal by special leave against the judgment of the High Court of Judicature at Allahabad, Lucknow Bench, allowing the petition filed by the respondent under article 226 of the Constitution. The respondent was appointed a Sub Inspector of Police in December, 1948, and was posted at Sitapur in June, 1953. On September 6, 1953, the respondent went to village Madhwapur in connection with an investigation of a case of theft. On the evening of the said date when he was returning, accompanied by one Lalji, an ex patwari of Mohiuddinpur, he saw one Tika Ram coming from the side of a canal and going hurriedly towards a field. As the movements of Tika Ram appeared to be suspicious and as he was carrying something in the folds of his dhoti, the respondent searched him and found a bundle containing currency notes. The respondent counted the currency notes and handed them over to Lalji for being returned to Tika Ram, who subsequently got them and went his way. Subsequently when Tika Ram counted the currency notes at his house, he found that they were short by Rs. 250. Tika Ram 's case is that the bundle when taken by the respondent contained notes of the value of Rs. 650, but when he counted them in his house they were only of the value of Rs. 400. On September 9, 1953 Tika Ram filed a complaint to the Superintendent of Police, Sitapur, to the effect that the respondent and one Lalji had misappropriated a sum of its. There is dispute in regard to the interpretation of the complaint. On receipt of the said complaint, the Superintendent of Police made enquiries 684 and issued a notice to the respondent to show cause why his integrity certificate should not be withheld, upon which the respondent submitted his explanation on October 3, 1953. Thereafter the Superintendent of Police forwarded the file of the case to the Deputy Inspector General of Police, Central Range, U. P., who directed the Superintendent of Police to take proceedings under section 7 of the Police Act against the respondent. The departmental proceedings were started against the respondent; on November 2, 1953, a charge sheet was served upon the respondent under section 7 of the Police Act stating that there were strong reasons to suspect that the respondent misappropriated a sum of Rs. 250 from the purse of Tika Ram; the respondent filed his explanation to the charge made against him; and ultimately the Superintendent of Police held an enquiry and found on the evidence that the respondent was guilty of the offence with which he was charged. On January 2, 1954, the Superin tendent of Police issued another notice to the respondent to show cause why he should not be reduced to the lowest grade of Sub Inspector for a period of three years. In due course the respondent showed cause against the action proposed to be taken against him on a consideration of which the Superintendent of Police, Sitapur, by his order dated January 16, 1954 reduced the respondent to the lowest grade of Sub Inspector for a period of three years. When this order came to the notice of the D. 1. G., U. P., on a consideration of the entire record, he came to the con clusion that the respondent should be dismissed from service and on October 19, 1954 he made an order to that effect. On February 28, 1955 the Inspector General of Police confirmed that order; and the revision filed by the respondent against that order to the State Government was also dismissed in August 1955. Thereafter the respondent filed a petition under article 226 of the Constitution before the High Court of Judicature at Allahabad, Lucknow Bench, for quashing the said orders and the same was heard by a division bench consisting of Randhir Singh and Bhargava, JJ. The learned judges held that the provisions of para. 685 486 of the Police Regulations had not been observed and, therefore, the proceedings taken under section 7 of the Police Act were invalid and illegal. On that finding, they quashed the impugned orders; with the result that the order dismissing the respondent from service was set aside. The State Government, the Deputy Inspector General of Police, Lucknow, and the Inspector General of Police, Uttar Pradesh, Lucknow, have preferred the present appeal against the said order of the High Court. We shall now proceed to consider the various contentions raised by learned counsel in the order they were raised and argued before us. At the outset Mr. C. B. Agarwala, learned counsel for the appellants, contended that there was no breach of the provisions of para. 486 of the Police Regulations. If this contention be accepted, no other question arises 'in this case; therefore, we shall deal with the same. The material part of para. 486 of the Police Regulations reads thus: "When the offence alleged against a police officer amounts to an offence only under section 7 of the Police Act, there can be no magisterial inquiry under the Criminal Procedure Code. In such cases, and in other cases until and unless a magisterial inquiry is ordered, inquiry will be made under the direction of the Superintendent of Police in accordance with the following rules: I.Every information received by the police relating to the commission of a cognizable offence by a police officer shall be dealt with in the first place under Chapter XIV, Criminal Procedure Code, according to law, a case under the appropriate section being registered in the police station concerned. . . . This provision expressly lays down that every information received by the police relating to the commission of a cognizable offence by a police officer shall be dealt with in the first place under Ch. XIV of the Criminal Procedure Code. This provision will not apply if the information received by the police does not 87 686 relate to the commission of a cognizable offence. Learned counsel contends that the information received in the present case does not relate to any offence committed by the respondent, much less to a cognizable offence. This is a point raised before us for the first time. This does not find a place even in the statement of case filed by the appellants. In the High Court it was not contended that the information did not disclose any offence committed by the respondent. Indeed, it was common case that the information disclosed an offence committed by the respondent, but it had been contended by the appellants that the misappropriation of the part of the money amounted to an offence under section 403 of the Indian Penal Code, which is not a cognizable offence; and it was argued on behalf of the respondent that it amounted to an offence under section 409 of the Indian Penal Code. The learned judges accepted the contention of the respondent. Even so, it is said that whatever might been the contentions of the parties, the information given by Tika Ram to the Superintendent of Police clearly disclosed that no offence was alleged to have been committed by the respondent and that this Court would, therefore, be justified, even at this very late stage, to accept the contention of the appellants. But the contents of the said information do not in any way support the assertion. Paragraph 3 of the application given by Tika Ram to the Superintendent of Police, Sitapur, reads thus: "That on Sunday last dated 6th September, 1953 the applicant had with him the currency notes of Rs. 650. The opposite party as well as Shri Babu Ram met the applicant on the west of Rampur near the Canal. The opposite party said to the Sub Inspector "This man appears to be clad in rags but is possessed of considerable money." After saying this the person of the applicant was searched. The Sub Inspector, having opened the bundle of notes, handed over the (notes) one by one to the opposite party. " This statement clearly indicates that either the Sub . Inspector or both the Sub Inspector and Lalji searched the person of Tika Ram, that the Sub Inspector took 687 the bundle of notes and handed the same over, one by one, to Lalji for being returned to the applicant, and that out of Rs. 650 a sum of Rs. 250 was not returned to him. The facts alleged make out an offence against both the Sub Inspector as well as Lalji. The mere fact that the respondent is not shown as one of the opposite parties in the application does not affect the question, for the information given in the application imputed the commission of an offence to both the respondent and Lalji. The notice issued by the Supe rintendent of Police on November 2, 1953 to the respondent also charges him with an offence of misappropriation. It is stated that the said notice only says that the Superintendent of Police had good reasons to suspect that the respondent misappropriated the sum of money and that it does not aver that he committed the offence of misappropriation. But what matters is 'that the Superintendent of Police also understood from the information given and the enquiry conducted by him that the respondent had committed the offence. Reliance is placed upon paragraph 3 of the writ petition wherein the respondent herein stated that Tika Ram filed a complaint against Lalji and not against the respondent. As a fact that is correct in the sense that the respondent was not shown in that application as the opposite party though in the body of that application definite allegations were made against the respondent. In the counter affidavit filed by the Superintendent of Police on behalf of the State it was clearly averred that on September 9, 1953 Tika Ram appeared before him and filed a petition to the effect fiat one Lalji and the respondent had misappropriated a sum of Rs. 250. Whatever ambiguity there might have been in the information we do not find any this allegation dispels it and it is not open to the appellants at this stage to contend that the petition did not disclose any offence against the respondent. In the circumstances, we must hold that the information received by the police related to the commission of an offence by the respondent. Even so, it is contended that the said offence is not a cognizable offence. It is said that there was no 688 entrustment made by Tika Ram to the respondent and that, therefore, the offence did not fall under section 409 of the Indian Penal Code, which is a cognizable offence, but only under section 403 of the Indian Penal Code, which is not a cognizable offence. Section 405 of the Indian Penal Code defines "criminal breach of trust" and section 409 thereof prescribes the punishment for the criminal breach of trust by a public servant. Under section 405 of the Indian Penal Code, "Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or wilfully suffers any person so to do, commits "criminal breach of trust". To constitute an offence under this section, there must be an entrustment of property and dishonest misappropriation of it. The person entrusted may misappropriate it himself, or he may wilfully suffer another person to do so. In the instant case the respondent, being a police officer, was legally entitled to search a person found under suspicious circumstances; and Tika Ram in handing over the bundle of notes to the police officer must have done so in the confidence that he would get back the notes from him when the suspicion was cleared. In these circumstances, there cannot be any difficulty in holding that the currency notes were alleged to have been handed over by Tika Ram to the respondent for a specific purpose, but were dishonestly misappropriated by the respondent or at, any rate he wilfully suffered Lalji to misappropriate the same. We, therefore, hold that if the currency notes were taken by the respondent in discharge of his duty for inspection and return, he was certainly entrusted with the notes within the meaning of section 405 of the Indian Penal Code. If so, the information discloses a cognizable offence. We reject the first contention. The second objection of learned counsel for the appellants is that sub para. (3) of para. 486 of the 689 Police Regulations enables the appropriate police authority to initiate the departmental proceeding without complying with the provisions of sub para. (1) of para. The relevant portion of para. 486 of the Police Regulations reads: "When the offence amounts to an offence only under section 7 of the Police Act, there can be no magisterial inquiry under the Criminal Procedure Code. In such cases, and in other cases until and unless a magisterial inquiry is ordered, inquiry will be made under the direction of the Superintendent of Police in accordance with the following rules:. . " Rule I relates to a cognizable offence, r. II to a non cognizable. offence, including an offence under section 29 of the Police Act, and r. III to an offence under section 7 of the Police Act or a non cognizable offence, including an offence under section 29 of the Police Act. Rule III says: "When a Superintendent of Police sees reason to take action on information given to him, or on his own knowledge or suspicion, that a police officer subordinate to him has committed an offence under section 7 of the Police Act or a non cognizable offence (including an offence under section 29 of the Police Act) of which he considers it unnecessary at that stage to forward a report in writing to the District Magistrate under rule II above, he will make or cause to be made by an officer senior in rank to the officer charged, a departmental inquiry sufficient to test the truth of the charge. On the conclusion of this inquiry he will decide whether further action is necessary, and if so, whether the officer charged should be departmentally tried, or whether the District Magistrate should be moved to take cognizance of the case under the Criminal Procedure Code. " The argument is that the words "an offence under section 7 of the Police Act" take in a cognizable offence and that, therefore, this rule provides for a procedure alternative to that prescribed under r. I. We do not think that this contention is sound. Section 7 of the Police Act empowers certain officers to dismiss, suspend 690 or reduce any police officer of the subordinate rank whom they shall think remiss or negligent in the discharge of his duty, or unfit for the same. The grounds for punishment are comprehensive: they may take in offences under the Indian Penal Code or other penal statutes. The commission of such offences may also be a ground to hold that an officer is unfit to hold his office. Action under this section can, therefore, be taken in respect of, (i) offences only under section 7 of the Police Act without involving any cognizable or noncognizable offences, that is, simple remissness or negli gence in the discharge of duty, (ii) cognizable offences, and (iii) non cognizable offences. Paragraph 486 of the Police Regulations makes this clear. It says that when the offence alleged against a police officer amounts to an offence only under section 7 of the Police Act, there can be no magisterial inquiry under the Criminal Procedure Code. This part of the rule applies to an offence only under section 7 of the Police Act i. e., the first category mentioned above. Rule I refers to a cognizable offence i. e., the second category, rule 11 to a non cognizable offence i. e., the third category, and rule III applies to an offence under section 7 of the Police Act and to a noncognizable offence. Though the word "only" is not mentioned in rule 111, the offence under section 7 of the Police Act can, in the context, mean an offence only under section 7 of the said Act i.e., an offence falling under the first category. So understood, the three rules can be reconciled. We, therefore, hold that, as the offence complained of in the present case is a cognizable offence, it falls under rule I and not under rule 111. We, therefore, reject this contention. The third contention advanced by learned counsel for the appellants raises a constitutional point of considerable importance. The gist of the argument may be stated thus: In England, the service under the Crown is held at the Crown 's pleasure, unless the employment is for good behaviour or for a cause. But if there is a statute prescribing the terms of service and the mode of dismissal of the servant of the Crown, the statute would control the pleasure of the Crown. In India, the Constitution as well as the 691 earlier Constitution Acts of 1915, as amended in 1919, and 1935 embodied the incidents of "tenure at pleasure" of His Majesty, or the President or the Governor, as the case may be, but did not empower the Legislatures under the earlier Acts and the Parliament and the Legislatures under the Constitution to make a law abrogating or modifying the said tenure; therefore, any law made by appropriate authorities conferring a power on any subordinate officer to dismiss a servant must be construed not to limit the power of His Majesty, the President or the Governor, as the case may be, but only to indicate that they would express their pleasure only through the said officers. The rules made in exercise of a power conferred on a Government under a statute so delegating the power to a subordinate officer can only be administrative directions to enable the exercise of the pleasure by the concerned authorities in a reasonable manner and that any breach of those regulations cannot possibly confer any right on, or give a cause of action to, the aggrieved Government servant to go to a court of law and vindicate his rights. Mr. Pathak, learned counsel for the respondent, in countering this argument contends that the constitution Acts in India embodied the incidents of the tenure of the Crown 's pleasure in the relevant provisions and what the Parliament can do in England, the appropriate Legislatures in India also can do, that is, "the tenure at pleasure" created by the Constitution Acts can be abrogated, limited or modified by law enacted by the appropriate legislative bodies. Alternatively he contends that even if the Police Act does not curtail the tenure at pleasure, the Legislature validly made that law and the Government validly made statutory rules in exercise of the powers confered under that Act and that, therefore, the appropriate authorities can only dismiss the respondent in strict compliance with the provisions of the Act and the Rules made thereunder. To appreciate the problem presented and to afford a satisfactory answer it would be convenient to consider the relevant provisions. The Act we are concerned with in this case is the (Act V 692 of 1861). Its constitutional validity at the time it was ,made was not questioned. Under section 7 of the , as it originally stood, "the appointment of all police officers other than those mentioned in B. 4 of this Act shall, under such rules as the local Government shall from time to time sanction, rest with the Inspector General, Deputy Inspectors General, Assistant Inspectors General and District Superintendents of Police, who may, under such rules as aforesaid, at any time, dismiss, suspend or reduce any police officer. " That section was substituted by the present section in 1937 and later on some appropriate amend ments were made to bring it in conformity with the Constitution. Under the amended section, "Subject to such rules as the State Government may from time to time make under this Act, the Inspector General, Deputy Inspectors General, Assistant Inspectors General and District Superintendent of Police may at any time dismiss, suspend or reduce any police officer of the subordinate ranks whom they shall think remiss or negligent in the discharge of his duty, or unfit for the same". In exercise of the powers conferred on the Government by section 46 of the Act, the Government made the U. P. Police Regulations prescribing the procedure for investigation and inquiry. We shall ' deal with the Regulations at a later stage. In the Government of India Act, 1915, as amended by the Act of 1919, for the first time, the doctrine of "tenure at pleasure" was introduced by section 96 B. In exercise of the power conferred under sub section (2) certain classification rules were framed by the local Government. This Act was repealed by the Government of India Act, 1935, and the section corresponding to section 96 B was section 240(1) in the latter Act. Section 241(2) empowered, except as expressly provided by the Act, the Governor General and the Governor to prescribe the conditions of service of the servants they were empowered to appoint. The main difference between the Act of 1919 and that of 1935 was that in the former Act there was only one limitation on the Crown 's pleasure, namely, that no person in the service might be dismissed by 693 an authority subordinate to that by which he was appointed, whereas in the latter Act a second limitation was imposed, namely, that no such person should ' 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: see section 240, sub sections (2) and (3). Another difference between the said two Acts was that while under the former Act all the services were placed in the same position, under the latter Act special provision was made for the police force prescribing that the conditions of service of the subordinate ranks of the various police forces should be such as might be determined by or under the Acts relating to those forces respectively vide section 243. By the Constitution, the Act of 1935 was repealed, and, with certain changes in phraseology, cls. (1) and (2) of article 310 took the place of sub sections (1) and (4) of section 240 respectively, and article 309 took the place of section 241(2). Under article 313, "Until other provision is made in this behalf under this Constitution, all the laws in force immediately before the commencement of this Constitution and applicable to any public service or any post which continues to exist after the commencement of this Constitution, as an all India service or as service or post under the Union or a State shall continue in force so far as consistent with the provisions of this Constitution". The result is that the and the Police Regulations, made in exercise of the powers conferred on the Government under that Act, which .were preserved under section 243 of the Government of India Act, 1935, continue to be in force after the Con stitution so far as they are consistent with the provisions of the Constitution. It is common case, as the contentions of learned counsel disclose, that the Act and the Regulations framed thereunder were constitutionally valid at the inception and that they are also consistent with the provisions of the Constitution. The difference between the two contentions lies in the fact that according to one His Majesty 's pleasure cannot be modified 88 694 by a statute, according to the other it is subject to statutory provisions. The relevant provisions of the Constitution read thus: Article 309: "Subject to the provisions of this Constitution, Acts of the appropriate Legislature may regulate the recruitment, and conditions of service of persons appointed, to public services and posts in connection with the affairs of the Union or of any State: Provided that it shall be competent for the President or such person as he may direct in the case of services and posts in connection with the affairs of the Union, and for the Governor of a State or such person as he may direct in the case of services and posts in connection with the affairs of the State, to make rules regulating the recruitment, and the conditions of service of persons appointed, to such services and posts until provision in that behalf is made by or under an Act of the appropriate Legislature under this article, and any rules so made shall have effect subject to the provisions of any such Act. " Article 310: "Except as expressly provided by this Constitution, every person who is a member of a defence service or of a civil service or holds any post connected with defence or any Civil Post under the Union holds office during the pleasure of the President, and every person who is a member of a civil service of a State or holds any civil post under a State holds office during the pleasure of the Governor of the State." Under article 309 the appropriate Legislature may regulate the recruitment and conditions of service of persons appointed to public services. Under article 310 every person who is EC member of a public service described therein holds office during the pleasure of the President or the Governor, as the case may be. The words "conditions of service" in article 309 in their comprehensive sense take in the tenure of a civil servant: see N. W. F. Province vs Suraj Narain (1). Therefore, "the tenure at pleasure" is also one of the conditions of service. But article 309 opens out with a (i) A.I.R. (1949) P.C. 112. 695 restrictive clause, namely, "Subject to the provisions of this Constitution", and if there is no restrictive, clause in article 310, there cannot be any difficulty in holding that article 309 is subject to the provisions of ' Art 310; with the result that the power of the Legislature to lay down the conditions of service of persons appointed to public services would be subject to "the tenure at pleasure" under article 310. In that event, any law made by the Legislature could not affect the over riding power of the President or the Governor, as the case may be, in putting an end to the tenure at their pleasure. Would the opening words of the clause in article 310, namely, "Except as expressly provided by this Constitution", make any difference in the matter of interpretation? It should be noticed that the phraseology of the said clause in article 310 is different from that in article 309. If there is a specific provision in some part of the Constitution giving to a Government servant a tenure different from that provided for in article 310, that Government servant is excluded from the operation of article 310. The said words refer, inter alia, to articles 124, 148, 218 and 324 which provide that the Judges of the Supreme Court, the Auditor General, the Judges of the High Courts and the Chief Election Commissioner shall not be removed from their offices except in the manner laid down in those Articles. If the provisions of the Constitution specifically prescribing different tenures were excluded from article 310, the purpose of that clause would be exhausted and thereafter the Article would be free from any other restrictive operation. In that event, articles 309 and 310 should be read together, excluding the opening words in the latter Article, namely, "Except as expressly provided by this Constitution". Learne counsel seeks to confine the operation of the opening words in article 309 to the provisions of the Constitution which empower other authorities to make rules relating to the conditions of service of certain classes of public servants, namely, articles 146(2), 148(5) and 229(2). That may be so, but there is no reason why article 310 should be excluded therefrom. It follows that while article 310 provides for a tenure at pleasure 696 of the President or the Governor, article 309 enables the Legislature or the executive, as the case maybe, to make any law or rule in regard, inter alia, to conditions of service without impinging upon the overriding power recognized under article 310. Learned counsel for the respondent contends that this construction is inconsistent with that prevailing in the English law and that the intention of the framers of the Constitution could not have been to make a radical departure from the law of England. The law of England on the doctrine of "tenure at pleasure" has now become fairly crystallized. In England, all servants of the Crown hold office during the pleasure of the Crown; the right to dismiss at pleasure is an implied term in every contract of employment of the Crown, this doctrine is not based upon any prerogative of the Crown, but on public policy; if the terms of appointment definitely prescribe a tenure for good behaviour or expressly provide for a power, to determine for a cause, such an implication of a power to dismiss at pleasure is excluded, and an Act of Parliament can abrogate or amend the said doctrine of public policy in the same way as it can do in respect of any other part of common law. The said propositions are illustrated in the following decisions: Shenton vs Smith (1), Gould vs Stuart (2), Reilly vs The King(3), Terrell vs Secretary of State (4). This English doctrine was not incorporated in its entirety in the Indian enactments vide State of Bihar vs Abdul Majid (5), Parshotam Lal Dhingra vs Union of India (6). Section 96 B of the Government of India Act, 1915, for the first time in 1919, by amendment, statutorily recognized this doctrine, but it was made subject to a condition or s qualification, namely, that no person in that service might be dismissed by any authority subordinate to that by which he was appointed. Section 240 of the Act of 1935 imposed another limitation, namely, that a reasonable opportunity of showing cause against the action proposed to be taken in (i) (3) (5) ; (2) (4) (6) ; 697 regard to a person must be given to him. But neither of the two Acts empowered the appropriate Legislature to make a law abolishing or amending the said doctrine. The Constitution of India practically incorporated the provisions of sections 240 and 241 of the Act of 1935 in articles 309 and 310. But the Constitution has not made "the tenure at pleasure" subject to any law made by the appropriate Legislature. On the other hand, as we have pointed out, article 309 is expressly made subject to "the tenure at pleasure" in article 310. Nor the attempt of learned counsel for the respondent to discover such a power in the Legislature in the Entries of the appropriate Lists of the Seventh Schedule to the Constitution can be legally sustained. He referred, inter alia, to Entry 70 of List I and Entry 41 of List II. It is not disputed that Parliament can make law for the organization of the police and for the prevention and detection of crime. But under article 245 of the Constitution such a power is subject to the provisions of the Constitution and, therefore, is subject to the provisions of article 310. Nor can we imply such a power in Parliament or the Legislatures from article 154(2)(b) of the Constitution. Under article 154, "the executive power of the State shall be vested in the Governor and shall be exercised by him either directly or through officers subordinate to him in accordance with this Constitution", and under el. 2(b) thereof, "nothing in this Article shall prevent Parliament or the Legislature of the State from conferring by law functions on any authority subordinate to the Governor. " The argument is that a power to terminate the service at pleasure under article 310 is a part of the executive power of the State, that power under article 154 can be exercised by the Governor directly or through officers subordinate to him, and that under article 154(2)(b) the Parliament or the Legislature of the State can confer the same power on any authority subordinate to the Governor or, at any rate, can make a law prescribing that the Governor shall exercise the said pleasure through a particular officer. 698 We cannot agree either with the premises or the conclusion sought to be based on it. The first question is whether the power of the Governor under article 310 to terminate the services of a Government servant at pleasure is part of the executive power of the State under article 154 of the Constitution. Article 154 speaks of the executive power of the State vesting in the Governor; it does not deal with the constitutional powers of the Governor which do not form part of the executive power of the State. Article 162 says that, subject to the provisions of the Constitution, the executive power of the State shall extend to matters with respect to which the Legislature of the State has power to make laws. If the Legislature of the State has no power to make a law affecting the tenure at pleasure of the Governor, the said power must necessarily fall outside the scope of the executive power of the State. As we will presently show, the Legislature has no such power and, therefore, it cannot be a part of the executive power of the State. That apart, if the said power is part of the executive power in its general sense, article 162 imposes another limitation on that power, namely, that the said executive power is subject to the provisions of the Constitution and therefore, subject to article 310 of the Constitution. In either view, article 310 falls outside the scope of article 154 of the Constitution. That power may be analogous to that conferred on the Governor under articles 174, 175 and 176. Doubtless the Governor may have to exercise the said power whenever an occasion arises, in the manner prescribed by the Constitution, but that in itself does not make it a part of the executive power of the State or enable him to delegate his power. Even on the assumption that the power under article 310 is executive power within the meaning of article 154, it does not make any difference in the legal position so far as the present case is concerned. Article 310 of the Constitution says that unless expresssly provided by the Constitution to the contrary, every civil servant holds office during the pleasure of the Governor subject to the limitations prescribed under 699 article 311. Can it be said that article 154(2)(b) expressly provides for a different tenure? Can it be said that the said Article confers on the Parliament or the Legislature a power higher than that conferred on them under article 245 of the Constitution ? It only preserves the power of the Legislature, which it has under the Constitution, to make a law conferring functions on an authority subordinate to the Governor. That power under article 245 is not unlimited, but is subject to the provisions of the Constitution and there fore subject to article 310 thereof. It is then said that if the appellants ' contention were not accepted, it would lead to conflict of jurisdiction: while the Governor has the power under article 310 to dismiss a public servant at his pleasure, a statute may confer a power on a subordinate officer to dismiss a servant only subject to conditions; a subordinate officer functioning under an Act may not be able to dismiss a servant, but the Governor may be able to do so under similar circumstances; a subordi nate officer may dismiss a servant, but the Governor may order his continuance in office. This argument is based upon the misapprehension of the scope of article 309 of the Constitution. A law made by the appropriate Legislature or the rules made by the President or the Governor, as the case may be, under the said Article may confer a power upon a particular authority to remove a public servant from service; but the conferment of such a power does not amount to a delegation of the Governor 's pleasure. Whatever the said authority does is by virtue of express power conferred on it by a statute or rules made by competent authorities and not by virtue of any delegation by the Governor of his power. There cannot be conflict between the exercise of the Governor 's pleasure under article 310 and that of an authority under a statute, for the statutory power would be always subject to the overriding pleasure of the Governor. This conclusion, the argument proceeds, would throw a public servant in India to the mercy of the executive Government while their compeers in England 700 can be protected by legislation against arbitrary actions of the State. This apprehension has no real .basis, for, unlike in England, a member of the public service in India is constitutionally protected at least in two directions: (i) he cannot be dismissed by an authority subordinate to that by which he was appointed; (ii) he cannot be dismissed, removed or reduced in rank until he has been given a reasonable opportunity of showing cause against the action proposed to be taken in regard to him. A condition similar to the first condition in article 311 found in section 96 B of the Government of India Act, 1919, was hold by the Judicial Committee in R. T. Bangachari vs Secretary of State for India (1) to have a statutory force, and the second condition, which is only a reproduction of that found in sub section (2) of section 240 of the Government of India Act, 1935, was held in High Commissioner for India and High Commissioner for Pakistan vs I. M. Lall (2) as mandatory qualifying the right of the employer recognized in sub section (1) thereof. These two statutory protections to the Government servant are now incorporated in article 311 of the Constitution. This Article imposes two qualifications on the exercise of the pleasure of the President or the Governor and they quite clearly restrict the operation of the rule embodied in article 310(1) vide the observations of Das, C.J., in Dhingra 's case (3). The most important of these two limitations is the provision prescribing that a civil servant shall be given a reasonable opportunity of showing cause against the action proposed to be taken in regard to him. As this condition is a limitation on the "tenure at pleasure", a law can certainly be made by Parliament defining the content of "reasonable opportunity" and prescribing the procedure for giving the said opportunity. The appropriate High Court and the Supreme Court can test the validity of such a law on the basis whe ther the provisions prescribed provide for such an opportunity, and, if it is valid, to ascertain whether the reasonable opportunity so prescribed is really given to a particular officer. It may be that the (1) (1936) L.R. 64 I.A. 40. (2) (1948) L.R. 75 1.A. 225. (3) ; , 839. 701 framers of the Constitution, having incorporated in our Constitution the "tenure at pleasure" unhampered by legislative interference, thought that the said limitations and qualifications would reasonably protect the interests of the civil servants against arbitrary actions. The discussion yields the following results: (1) In India every person who is a member of a public service described in article 310 of the Constitution holds office during the pleasure of the President or the Governor, as the case may be, subject to the express provisions therein. (2) The power to dismiss a public servant at pleasure is outside the scope of article 154 and, therefore, cannot be delegated by the Governor to a subordinate officer, and can be exercised by him only in the manner prescribed by the Constitution. (3) This tenure is subject to the limitations or qualifications mentioned in article 311 of the, Constitution. (4) The Parliament or the Legislatures of States cannot make a law abrogating or modifying this tenure so as to impinge upon the overriding power conferred upon the President or the Governor under article 310, as qualified by article 311. (5) The Parliament or the Legislatures of States can make a law regulating the conditions of service of such a member which includes proceedings by way of disciplinary action, without affecting the powers of the President or the Governor under article 310 of the Constitution read with article 311 thereof. (6) The Parliament and the Legislatures also can make a law laying down and regulating the scope and content of the doctrine of "reasonable opportunity" embodied in article 311 of the Constitution; but the said law would be subject to judicial review. (7) If a statute could be made by Legislatures within the foregoing permissible limits, the rules made by an authority in exercise of the power conferred thereunder would likewise be efficacious within the said limits. What then is the effect of the said propositions in their application to the provisions of the and the rules made thereunder? The of 89 702 1861 continues to be good law under the Constitution. Paragraph 477 of the Police Regulations shows that the rules in Chapter XXXII thereof have been framed under section 7 of the . Presumably, they were also made by the Government in exercise of its power under section 46(2) of the . Under para. 479(a) the Governor 's power of punishment with reference to all officers is preserved; that is to say, this provision expressly saves the power of the Governor under article 310 of the Constitution. "Rules made under a statute must be treated for all purposes of construction or obligation exactly as if they were in the Act and are to be of the same effect as if contained in the Act, and are to be judicially noticed for all purposes of construction or obligation": see Maxwell "On the Interpretation of Statutes", 10th edn., pp. 5051. The statutory rules cannot be described as, or equated with, administrative directions. If so, the and the rules made thereunder constitute a self contained code providing for ' the appointment. of police officers and prescribing the procedure for their removal. It follows that where the appropriate authority takes disciplinary action under the or the rules made thereunder, it must conform to the provisions of the statute or the rules which have conferred upon it the power to take the said action. If there is any violation of the said provisions, subject to the question which we will presently consider whether the rules are directory or mandatory, the public servant would have a right to challenge the decision of that authority. Learned counsel for the appellants relied upon the following decisions of the Privy Council and this Court in support of his contention that the said rules are administrative directions: R. T. Rangachari vs Secretary of State for India (1), R. Venkata Rao vs Secretary of State for India (2), High Commissioner for India and High Commissioner for Pakistan vs I. M. Lall (3), section A. Venkataraman vs The Union of India(4), and Khem Chand vs The Union of India(5). In Venkata Rao 's (1) (1936) L.R. 64 I.A. 40. (3) (1948) L.R. 75 I.A. 225. (2) (1936) L.R. 64 I.A. 55. (4) ; (5) ; 703 case (1) a reader of the Government Press was dismissed and in the suit filed by him against the Secretary, of State for India he complained, inter alia, that the dismissal was contrary to the statute inasmuch as it was not preceded by any such inquiry as was prescribed by rule XIV of the Civil Services Classification Rules made under section 96B(2) of the Government of India Act. Under section 96B of the said Act, every person in civil service holds office during the pleasure of His Majesty. Sub section (2) of that section empowers the Secretary of State for India to make rules laying down, among others, the conditions of service, and sub section (5) declares that no rules so made shall be construed to limit or abridge the power of the Secretary of State in Council to deal with the case of any person in the civil service of the Crown in India in such manner as may appear to him to be just and equitable. On a construction of these provisions the Judicial Committee held that His Majesty 's pleasure was paramount and could not legally be controlled or limited by the rules. Two reasons were given for the conclusion, namely, (i) section 96B in express terms stated that the office was held during the pleasure and there was no room for the implication of a contractual term that the rules were to be observed; and (ii) sub section (2) of section 96B and the rules made careful provisions for redress of grievances by administrative process and that sub section (5) reaffirmed the superior authority of the Secretary of State in Council over the civil service. It may be noticed that the rules framed in exercise of the power conferred by the Act was to regulate the exercise of His Majesty 's pleasure. The observations were presumably coloured by the doctrine of "tenure at pleasure" obtaining in England, namely, that it could only be modified by statute, influenced by the princi ple that the rules made under a statute shall be consistent with its provisions and, what is more, based upon a construction of the express provisions of the Act. These observations cannot, in our opinion, be taken out of their context and applied to the provisions of our Constitution and the Acts of our Legislatures in derogation of the well settled principles of (1) (1936) L. R. 64 I. A. 55. 704 statutory construction. In Bangachari 's case (1) a police officer was dismissed by an authority subordinate to that by which he had been appointed. The appeal was heard along with that in Venkata Rao 's case (2) and the judgments in both the appeals were delivered on the same day. The Judicial Committee distinguished Venkata Rao 's case (2) with the following observations at p. 53: "It is manifest that the stipulation or proviso as to dismissal is itself of statutory force and stands on a footing quite other than any matters of rule which are of infinite variety and can be changed from time to time. " These observations do not carry the matter further an our remarks made in connection with Venkata Rao 's case (2) would equally apply to this case. I.M. Lall 's case (3) turns upon sub section (3) of section 240 of the Government of India Act, 1935. Again the Judicial Committee made a distinction between the rules and the provisions of the Act and ruled that sub sections (2) and (3) of section 240 indicated a qualification or exception to the antecedent provisions in sub section (1) of section 240. This decision only adopted the reasoning in the earlier decision. The remarks made by us in connection with Venkata Rao 's case (2) would equally apply to this decision. This Court in section A. Venkataraman 's case (4) incidentally noticed the observations of the Judicial Committee in Venkata Rao 's case (2) and observed that the rules, which were not incorporated in a statute, did not impose any legal restriction upon the right of the Crown to dismiss its servants at pleasure. This Court was not laying down any general proposition, but was only stating the gist of the reasoning in Venkata Rao 's case (2). Das, C.J., if we may say so, correctly stated the scope of the rule in Venkata Rao 's case (2) in the decision in Khem Chand 's case (5), when he stated at p. 1091 "The position of the Government servant was, therefore, rather insecure, for his office being held during the pleasure of the Crown under the Government of India Act, 1915, the rules could not override (1) (1936) L.R. 64 I.A. 40. (3) (1948) L.R. 75 I.A. 225. (2) (1936) L.R. 64 I.A. 55. (4) ; (5) ; 705 or derogate from the statute and the protection of the rules could not be enforced by action so as to nullify the statute itself." To state it differently, the Government of India Act, 1915, as amended in 1919, and that of 1935 expressly and clearly laid down that the tenure was at pleasure and therefore the rules framed under that Act must be consistent with the Act and not in derogation of it. These decisions and the observations made therein could not be understood to mark a radical departure from the fundamental principle of construction that rules made under a statute must be treated as exactly as if they were in the Act and are of the same effect as if contained in the Act. There is another principle equally fundamental to the rules of construction, namely, that the rules shall be consistent with the provisions of the Act. The decisions of the Judicial Committee on the provisions of the earlier Constitution Acts can be sustained on the ground that the rules made in exercise of power conferred under the Acts cannot override or modify the tenure at pleasure provided by section 96B or section 240 of the said Acts, as the case may be. Therefore, when the paramountcy of the doctrine was conceded or declared by the statute, there might have been justification for sustaining the rules made under that statute in derogation thereof on the ground that they were only administrative directions, for otherwise the rules would have to be struck down as inconsistent with the Act. In such a situation, if the statute was valid it would be valid in so far as it did not derogate from the provisions of article 310, read with article 311 the rules made thereunder would be as efficacious as the Act itself. So long as the statute and the rules made thereunder do not affect the power of the Governor in the present case the Governor 's pleasure is expressly preserved they should be legally enforceable. In this context the decisions of the different High Courts in India are cited at the Bar. It would not serve any purpose to consider every one of them in detail. It would suffice if their general trend be noticed. They express two divergent views: one line relies upon the observations 706 of the Privy Council in Venkata Rao 's case (1) and lays down that all statutory rules vis a vis the disciplinary proceedings taken against a Government servant are administrative directions, and the other applies the well settled rules of construction and holds that the appropriate authority is bound to comply with the mandatory provisions of the rules in making an inquiry under a particular statute. A close scrutiny of some of the decisions discloses a distinction implied, though not expressed, between statutory rules defining the scope of reasonable opportunity and those governing other procedural steps in the disciplinary process. In our view, subject to the overriding power of the President or the Governor under article 310, as qualified by the provisions of article 311, the rules governing disciplinary proceedings cannot be treated as administrative directions, but shall have the same effect as the provisions of the statute whereunder they are made, in so far a, , they are not inconsistent with the provisions thereof We have already negatived the contention of learned counsel that the Governor exercises his pleasure through the officers specified in section 7 of the , and therefore, it is not possible to equate the Governor 's pleasure with that of the specified officers ' statutory power. If so, it follows that the inquiry under the Act shall be made in accordance with its provisions and the rules made thereunder. Then learned counsel contends that even if the said rules have statutory force, they are only directory and the non compliance with the rules will not invalidate the order of dismissal made by the appropriate authority. Before we consider the principles governing the question whether the rules are mandatory or directory, it would be convenient at this stage to notice broadly the scope and the purpose of the inquiry contemplated by the rules. Section 2 of the constitutes the police establishment; section 7 empowers specified officers to (1) [1936] L.R. 64 I.A. 55. 707 punish specified subordinate officers who are remiss or negligent in discharge of their duties or unfit for the same; section 46 enables the Government to make rules. to regulate the procedure to be followed by the magistrate and police officers in discharge of any duty imposed on them by or under the Act; under section 7, read with section 46 of the , the Police Regulations embodied in chapter XXXII were framed. Paragraph 477 of the Regulations says that the rules in that chapter have been made under section 7 of the and apply only to officers appointed under section 2 of the and that no officer appointed under that section shall be punished by executive order otherwise than in the manner provided in that chapter. Paragraph 478 prescribes the nature of the punishment that can be imposed on the delinquent officers. Paragraph 479 empowers specified officers to punish specified subordinate officers. Paragraph 483 gives the procedure to be followed in the matter of the inquiry against a police officer. It reads: "Subject to the special provision contained in paragraph 500 and to any special orders which may be passed by the Governor in particular cases a proceeding against a police officer will consist of A A magisterial or police inquiry, followed, if this inquiry shows the need for further action, by B A judicial trial, or C A departmental trial, or both, consecutively." Paragraph 484 declares that the nature of the inquiry in any particular case will vary according to the nature of the offence. If the offence is cognizable or non cognizable, the inquiry will be according to Schedule II of the Criminal Procedure Code. If the information is received by the District Magistrate, he may in exercise of his powers under the Criminal Procedure Code either, (1) make or order a magisterial inquiry; or (2) order an investigation by the Police. Paragraph 485 reads: "When a magisterial inquiry is ordered it will be made in accordance with the Criminal Procedure Code and the Superintendent of Police will have no direct 708 concern with it until the conclusion of judicial proceedings or until and unless the case is referred to him for further disposal, but he must give any assistance to the inquiring magistrate that he may legally be called upon to give and he must suspend the accused should this become necessary under paragraph 496." Paragraph 486 says that there can be no magisterial inquiry under the Criminal Procedure Code when the offence alleged against a police officer amounts to an offence only under section 7 of the , and it provides further that in such cases, and in, other cases until and unless a magisterial inquiry is ordered, inquiry will be made under the direction of the Superintendent of Police in accordance with the rules given thereunder. Under rule I thereof, "Every information received by the police relating to the commission of a cognizable offence by a police officer shall be dealt with in the first place under Chapter XIV, Criminal Procedure Code, according to law, a case under the appropriate section being registered in the police station concerned". There are six provisos to that rule. Rule II provides for the inquiry of a non cognizable offence; and rule III prescribes the procedure in regard to an offence only under section 7 of the or a non cognizable offence of which the Superintendent of Police considers unnecessary at that stage to forward a report in writing to the District Magistrate. Paragraph 488 deals with a judicial trial and para. 489 with a departmental trial. Paragraph 489 says: "A police officer may be departmentally tried under section 7 of the (1) after he has been tried judicially; (2) after a magisterial inquiry under the Criminal Procedure Code; (3) after a police investigation under the Criminal Procedure Code or a departmental enquiry under paragraph 486,III above. " There are other provisions dealing with the manner of conducting the inquiries and other connected matters. The rules provide for the magisterial and police inquiry followed, if the inquiry showed the need for further action, by a judicial trial or a departmental 709 trial, or both, consecutively. In the case of cognizable offences the Superintendent of Police is directed to investigate under chapter XIV of the Criminal Pro p, cedure Code and in the case of non cognizable offences in the manner provided in rule II of para. 486, and in the case of an offence only under section 7 of the or a non cognizable offence in the manner provided under rule III of para. After one or other of the relevant procedure is followed, the Superintendent of Police is empowered to try a police officer departmentally. The question is whether rule I of para. 486 is directory. The relevant rule says that the police officer shall be tried in the first place under chapter XIV of the Criminal Procedure Code. The word "shall" in its ordinary import is "obligatory"; but there are many decisions wherein the courts under different situations construed the word to mean "may". This Court in Hari Vishnu Kamath vs Syed Ahmad Ishaque (1) dealt with this problem at p. 1125 thus: "It is well established that an enactment in form mandatory might in substance be directory and that the use of the word "shall" does not conclude the matter. " It is then observed: "They (the rules) are well known, and there is no need to repeat them. But they are all of them only aids for ascertaining the true intention of the legislature which is the determining factor, and that must ultimately depend on the context. " The following quotation from Crawford "On the Construction of Statutes", at p. 516, is also helpful in this connection: "The question as to whether a statute is mandatory or directory depends upon the intent of the legislature and not upon the language in which the intent is clothed. The meaning and intention of the legislature must govern, and these are to be ascertained, not only from the phraseology of the provision, but also by considering its nature, its design, and the (1) ; 90 710 consequences which would follow from construing it the one way or the other. " This passage was approved by this Court in State of U. P. vs Manbodhan Lal Srivastava (1). In Craies on Statute Law, 5th edition, the following passage appears at p. 242: "No universal rule can be laid down as to whether mandatory enactments shall be considered directory only or obligatory with an implied nullification for disobedience. It is the duty of Courts of Justice to try to get at the real intention of the Legislature by carefully attending to the whole scope of the statute to be construed. " A valuable guide for ascertaining the intention of the Legislature is found in Maxwell on "The Interpretation of Statutes", 10th edition, at p. 381 and it is: "On the other hand, where the prescriptions of a statute relate to the performance of a public duty and where the invalidation of acts done in neglect of them would work serious general inconvenience or injustice to persons who have no control over those entrusted with the duty without promoting the essential aims of the legislature, such prescriptions seem to be generally understood as mere instructions for the guidance and government of those on whom the duty is imposed, or, in other words, as directory only. The neglect of them may be penal, indeed, but it does not affect the validity of the act done in disregard of them. " This passage was accepted by the Judicial Committee of the Privy Council in the case of Montreal Street Railway Company vs Normandin (2 ) and by this Court in State of U. P. vs Manbodhan Lal Srivastava (1). The relevant rules of interpretation may be briefly stated thus: When a statute uses the word "shall", prima facie, it is mandatory, but the Court may ascertain the real intention of the legislature by carefully attending to the whole scope of the statute. For ascertaining the real intention of the Legislature the Court may consider, inter alia, the nature and the design of the statute, and the consequences which (1) ; , 545. (2) L.R. [1917] A.C.770. 711 would follow from construing it the one way or the other, the impact of other provisions whereby the necessity of complying with the provisions in question is avoided, the circumstance, namely, that the statute provides for a contingency of the non compliance with the provisions, the fact that the non compliance with the provisions is or is not visited by some penalty, the serious or trivial consequences that flow therefrom, and, above all, whether the object of the legislation will be defeated or furthered. Now what is the object of rule I of para. 486 of the Police Regulations? In our opinion, it is conceived not only to enable the Superintendent of Police to gather information but also to protect the interests of subordinate officers against whom departmental trial is sought to be held. After making the necessary investigation under chapter XIV of the Criminal Procedure Code, the Superintendent of Police may as well come to the conclusion that the officer concerned is innocent, and on that basis drop the entire proceedings. He may also hold that it is a fit case for criminal prosecution, which, under certain circumstances, an honest officer against whom false charges are framed may prefer to face than to submit himself to a departmental trial. Therefore,the rules are conceived in the interest of the department as well as the officer. From the stand point of the department as well as the officer against whom departmental inquiry is sought to be intiated, the preliminary inquiry is very important and it serves a real purpose. Here the setting aside of the order of dismissal will not affect the public in general and the only consequence will be that the officer will have to be proceeded against in the manner prescribed by the rules. What is more, para. 487 and para. 489 make it abundantly clear that the police investigation under the Criminal Procedure Code is a condition precedent for the departmental trial. Paragraph 477 emphasizes that no officer appointed under section 2 of the shall be punished by executive order otherwise than in the manner provided under chapter XXXII of the Police Regulations. This is an imperative injunction prohibiting 712 inquiry in non compliance with the rules. Paragraph 489 only empowers the holding of a departmental trial in regard to a police officer only after a police investigation under the Criminal Procedure Code. When a rule says that a departmental trial can be held only after a police investigation, it is not permissible to hold that it can be held without such investigation. For all the foregoing reasons, we hold that para. 486 is mandatory and that, as the investigation has not been held under chapter XIV of the Criminal Procedure Code, the subsequent inquiry and the order of dismissal are illegal. For the foregoing reasons we hold that, as the respondent was dismissed without complying with the provisions of para. 486(1), the order of dismissal is illegal and that the High Court is right in setting aside the order of dismissal. In the result, the appeal fails and is dismissed with costs. WANCHOO, J. We regret we are unable to agree that the appeal be dismissed. Babu Ram Upadhya (respondent) was a sub inspector of police who was appointed in December, 1948. In 1953, he was posted at Sitapur. On September 6, 1953, he was returning from a village called Madhwapur, when he saw a man who was subsequently found to be Tika Ram coming from the side of a canal and going hurriedly into a field. The movements of Tika Ram roused his suspicion. One Lalji, an ex patwari, was also with the sub inspector. Tika Ram was called and searched, and a bundle containing currencynotes was found on him. The sub inspector took the bundle and counted the notes and handed them over to Lalji. Lalji in his turn handed over the notes to Tika Ram. Thereafter Tika Ram, who is an old man, almost blind, went away. When he reached his house, he found that there was a shortage of Rs. 250. He then made a complaint to the Superintendent of Police on September 9, 1953, in which he gave the above facts. An inquiry was made by the Superintendent of Police and ultimately, departmental proceedings under section 7 of the were taken 713 against the respondent. These proceedings resulted in his dismissal and thereupon the respondent applied to the High Court under article 226 of the Constitution. The main contention of the respondent was that r. 486 of the Police Regulations framed under section 7 of the was not observed and therefore the departmental proceedings taken against him were illegal. The reply of the appellant was two fold: in the first place, it was urged that r. 486 did not apply as there was no report of a cognizable offence against the sub inspector; and in the next place, it was urged that the rules contained in the Police Regulations were only administrative rules and even if there was non compliance with any of them, it would not affect the departmental proceedings taken against the respondent, provided there was no breach of the guarantees contained in article 311 of the Constitution. The High Court held that there was a report of a cognizable offence under section 409 of the Indian Penal Code against the respondent and therefore the procedure provided by r. 486 ought to have been followed. It further held that r. 486 had been framed under section 7 of the and was a statutory provision, which had the force of law. As such, following the earlier view taken by the High Court in two other cases it held that a dismissal as a result of departmental proceedings which took place without complying with r. 486 would be illegal. In consequence, the writ petition was allowed. The appellant then applied for a certificate to enable it to appeal to this Court, which was refused. Thereupon special leave was prayed for from this Court, which was granted; and that is how the matter has come up before us. Mr. C. B. Aggarwala on behalf of the appellant urges the same two points before us. So far as the first point is concerned, we are of opinion that there is no force in it. There is no doubt that in the complaint made by Tika Ram, the name of the respondent was not shown in the heading; but from the facts disclosed in the body of the complaint it is clear that the sub inspector searched the person of Tika Ram and recovered a bundle containing currency notes. He 714 did so obviously under the authority vested in him as a police officer. When therefore he was satisfied that there was no reason to take any further action against Tika Ram, it was his duty to see that the entire amount taken by him from Tika Ram on search was returned to him (Tika Ram). The High Court was right in the view that where property is taken away with the intention that it will continue to be the property of the person from whose possession it has been taken away, there will be an entrustment of the property to the person taking it away, and if. subsequently the person taking it away converts it to his own use or suffers some other person to do so, there will be criminal breach of trust and not merely criminal misappropriation. Thus an offence under section 409 of the Indian Penal Code appears to have been committed prima facie on the facts of this case. As an offence under section 409 is a cognizable offence, r. 486 of the Police Regulations would apply. This brings us to the main point in the present appeal. Sec. 7 of the under which r. 486 has been framed is in these terms: "Subject to such rules as the State Government may from time to time make under this Act, the Inspector General, Deputy Inspectors General, Assistant Inspectors General and District Superintendents of Police may at any time dismiss, suspend or reduce any police officer of the subordinate ranks whom they shall think remiss or negligent in the discharge of his duty or unfit for the same; or may award any one or more, of the following punishments to any police officer of the subordinate ranks, who shall discharge his duty in a careless or negligent manner, or who, by any act of his own shall render himself unfit for the discharge thereof, name (a) fine to any amount not exceeding one month 's pay; (b) confinement to quarters for a term not exceeding fifteen days, with or without punishment, drill, extra guard, fatigue or other duty; (c) deprivation of good conduct pay; 715 (d) removal from any office of distinction or special emolument;". It gives power to four grades of police officers to dismiss, suspend or reduce any police officer of the subordinate ranks whom they think remiss or negligent in the discharge of his duty or unfit for the same. It also provides for infliction of four other kinds of punishment by these four grades of officers on any police officer of the subordinate ranks who discharges his duty in a careless or negligent manner or who by any act of his own renders himself unfit for the discharge thereof. In the present case we are concerned with dismissal and what we shall say hereafter should be taken to be confined to a case of dismissal. Sec tion 7 shows that the power of dismissal conferred by it on the four grades of police officers is to be exercised subject to such rules as the State Government may from time to time make under the . The contention on behalf of the respondent is that the power of dismissal has to be exercised subject to rules and therefore, when r. 486 of the Police Regulations (framed under section 7) provided a certain procedure to be followed with respect to cases in which a cognizable offence was involved it was not open to the authority concerned to disregard that procedure. In effect, it is urged that r. 486 is a mandatory provision and non compliance with it would invalidate the departmental proceedings. It is not in dispute in this case that the procedure provided by r. 486 was not followed. That procedural provision is that where a report of a cognizable crime is made against a police officer belonging to the subordinate ranks, it has to be registered as provided in Chapter XIV of the Code of Criminal Procedure and investigated as provided thereunder. Thereafter the authority concerned has to decide whether to send the case for trial before a court of law or to take departmental proceedings. In this case no report was registered as provided under Chapter XIV of the Code of Criminal Procedure and no investigation was made as provided in that Chapter. All that happened was that the Superintendent of Police to whom Tika Ram had complained inquired into the 716 complaint of Tika Ram and thereafter decided to hold a departmental inquiry under section 7 of the against the respondent. The main contention on behalf of the appellant is that the Rules framed under section 7 of the are administrative rules and in any case they are only directory and non compliance with them would not vitiate the subsequent proceedings unless there is a breach of the guarantee contained in article 311 of the Constitution, as all public servants hold their office at the pleasure of the President or the Governor, as the case may be, other than those expressly excepted under the Constitution. Reliance in this connection is placed on the case of R. Venkata Rao vs Secretary of State for India in Council (1). This brings us to a consideration of the tenure on which public servants hold office. The position in England is that all public servants hold office at the pleasure of His Majesty, that is to say, their service was terminable at any time without amuse: (see Shenton vs Smith (2 )). By law, however, it is open to Parliament to prescribe a different tenure and the King being a party to every Act of Parliament is understood to have accepted the change in the tenure when he gives assent to such law: (see Gould vs Stuart (3)). This principle applied in India also before the Government of India Act, 1915, was amended by the addition of section 96 B therein. Section 96 B for the first time provided by statute that every person in the civil service of the Crown held office during His Majesty 's pleasure, subject to the provisions of the Government of India Act and the rules made thereunder and the only protection to a public servant against the exercise of pleasure was that he could not be dismissed by any authority subordinate to that by which he was appointed. It was this section, which came for consideration before the Privy Council in Venkata Rao 's case (1) and the Privy Council held that in spite of the words ".subject to the rules made under the Government of India Act," Venkata Rao 's employment was not of a (1) (1936) L.R. 64 I.A. 55 (2) (3) 717 limited and special kind during pleasure with an added contractual term that the procedure prescribed, by the Rules must be observed; it was by the express terms of section 96 B held "during His Majesty 's pleasure" and no right of action as claimed by Venkata Rao existed. The Privy Council further held that the terms of section 96 B assured that the tenure of office, though at pleasure, would not be subject to capricious or arbitrary action but would be regulated by the rules which were manifold in number, most minute in particularity and all capable of change; but there was no right in the public servant enforceable by action to hold his office in accordance with those rules and he could therefore be dismissed notwithstanding the failure to observe the procedure prescribed by them. The main point which was urged in Venkata Rao 's case (1) was that under r. XIV of the Civil Services Classification Rules no public servant could be dismissed, removed or reduced in rank except after a properly recorded departmental inquiry. In Venkata Rao 's case (1) the departmental inquiry prescribed by the rules was found not to have been held. Even so, the Privy Council held that the words used in section 96 B could not and did not cut down the pleasure of His Majesty by rules though it was observed that the terms of the section contained a statutory and solemn assurance, that the tenure of office, though at pleasure., would not be subject to capricious or arbitrary, action, but would be regulated by rule. It was further added that supreme care should be taken that this assurance is carried out in the letter and in the spirit. The Privy Council further held that in ' the case before it, there had been a serious and complete failure to adhere to important and indeed fundamental rules, and mistakes of a serious kind had been made and wrongs had been done which called for redress; even so; they were of the view that as a matter of law that redress was not obtainable from courts by action. ,. This was the position under the Government of India Act 1915. There was however a material change in the Government of India Act, 1935. So far, there (1) (1936) L.R. 64 I. A. 55. 91 718 was one protection to a public servant, namely, that he could not be dismissed by an authority subordinate to that by which he was appointed. In the Government of India Act, 1935, section 240(1) laid down that " except as expressly provided by this Act, every person who is a member of a civil service of the Crown in India. holds office during His Majesty 's pleasure. " The words of this section are different from those of section 96 B and the tenure of all public servants other than those expressly provided for was to be during His Majesty 's pleasure. There were, however, two safeguards provided by sub sections (2) and (3) of section 240. The first was the same (namely, that no public servant will be dismissed by an officer subordinate to that who appointed him); but a further exception was added to the pleasure tenure, namely, no public servant shall be dismissed until he has been given a reasonable opportunity of showing cause against the action proposed to be taken in regard to him. This protection came to be considered by the Privy Council in High Commissioner for India and High Commissioner for Pakistan vs 1. M. Lall (1) and it was held that it was a mandatory provision and qualified the pleasure tenure and provided a condition precedent to the exercise of power by His Majesty provided by sub section (1) of section 240. Thus by the Government of India Act, 1935, there were two statutory guarantees to public servants against the exercise of the pleasure of his Majesty; but it is clear from section 240 of the Government of India Act, 1935, that the pleasure of His Majesty to dismiss was not otherwise subject to rules framed under the subsequent provisions of the Government of India Act appearing in Chapter 11 of Part X dealing with public services. This position continued till we come to the Constitution. Article 310(1) of the Constitution provides for what was contained in section 240(1) of the Government of India Act, 1935, and is in these terms: "(1) Except as expressly provided by this Constitution, every person who is a member of a defence (1) (1948) L.R. 75 I.A. 225. 719 service or of a civil service of the Union or of an all India service or holds any post connected with defence, or any civil post under the Union, holds office during the pleasure of the President, and every person who is a member of a civil service of a State or holds any civil post under a State holds office during the pleasure of the Governor of the State. " It will be clear therefore that all public servants except as expressly provided by the Constitution hold their office during the pleasure of the President or the Governor, as the case may be. Article 311 then provides for two guarantees and is similar in terms to section 240(2) and (3) of the Government of India Act, 1935 and the two guarantees are the same, (namely, (i) that no person shall be dismissed or removed by an authority subordinate to that by which he was appointed, and (ii) no such person shall be dismissed or removed or reduced in rank until he has been given a reason able opportunity of showing cause against the action proposed to be taken in regard to him). In Parshotam Lal Dhingra vs Union of India (1), this Court held that article 311 was in the nature of a proviso to article 310, that it provides two constitutional guarantees cutting down the pleasure of the President or the Governor, as the case may be, and that it was a mandatory provision which had to be complied with before the pleasure provided in article 310 can be exercised. Mr. Pathak for the respondent urges that in view of the words of article 310 statute or statutory rules can also cut down the nature of the pleasure tenure provided by article 310 in the same way as in England an Act of Parliament cuts down the ambit of His Majesty 's pleasure in the matter of dismissal. He relies on the words "as expressly provided by this Constitution" and urges that it is open to the legisla ture to cut down the pleasure tenure by law or to provide for its being affected by statutory rules. In this connection he relies on article 309 as well as article 154 of the Constitution. Now, article 309 begins with the words "subject to the provisions of this Constitution" land lays down that "Acts of the appropriate Legislature may regulate the recruitment, and conditions of (1) ; 720 service of person appointed, to public services and posts in connection with the affairs of the Union or of any State". The proviso to article 309 lays down that "it shall be competent for the President or the Governor as the case may be to make rules relating to recruitment and conditions of service until provision in that behalf is made by or under an Act of the appropriate Legislature". It will be clear immediately that article 309 is subject to the provisions of the Constitution and therefore subject to article 310 and therefore, any law passed or rules framed under article 309 must be subject to article 310 and cannot in any way affect the pleasure tenure laid down in article 310. The words "except as expressly provided by this Constitution" appearing in article 310 clearly show that the only exceptions to the pleasure tenure are those expressly contained in the Constitution and no more. These exceptions, for example, are contained inter alia in articles 124. 148, 280 and 324 and also in article 310 (2). Therefore, unless there is an express provision in the Constitution cutting down the pleasure tenure, every public servant holds office during the pleasure of the President or the Governor, as the case may be. We cannot accept the argument that a law passed under article 309 prescribing conditions of service would become an express provision of the Constitution and would thus cut down the pleasure tenure contained in article 310. As the Privy Council pointed in Venkata Rao 's case (1), the rules framed under article 309 or the laws passed thereunder amount to a statutory and solemn assurance that the tenure of office though at pleasure will not be subject to capricious or arbitrary action but will be regulated by rule. But if the rules or the law define the content of the guarantee contained in article 311 (2) they may to that extent be mandatory but only because they carry out the guarantee contained in article 311 (2). Excepting this, any law or rule framed under article 309 cannot cut down the pleasure tenure as provided in article 310. The same in our opinion applies to a law passed under article 154 (2)(b) which authorises Parliament or the legislature of a State to confer functions on any (1) (1936) L.R. 64 I.A. 55. 721 authority subordinate to the Governor. If any law is passed conferring on any authority the power to dismiss or remove or reduce in rank, that law cannot cut down the content of the pleasure tenure as contained in article 310; that law would be passed under article 245 and that article also begins with the words "subject to the provisions of this Constitution". Therefore, the law passed under article 154 (2) (b) would also in the same way as the law under article 309 be subject to the pleasure tenure contained in article 310 and cannot cut down the content of that tenure or impose any further fetters on it except those contained in article 311. The position therefore that emerges from the examination of the relevant Articles of the Constitution is that all public servants other than those who are excepted expressly by the provisions of the Constitution hold office during the pleasure of the President or the Governor, as the case may be, and that no law or rule passed or framed under article 309 or article 154 (2) (b) can cut down the content of the pleasure tenure as contained in article 310 subject to article 311. With this basic position in our Constitution, let us turn to the with which we are concerned. Section 7 thereof lays down that four grades of officers will have power to dismiss, suspend or reduce any police officer of the subordinate ranks subject to such rules as the State Government may from time to time make under the . Though the is a pre constitutional law which has continued under article 372 of the Constitution, it cannot in our opinion stand higher than a law passed under article 309 or article 154 (2) (b) and out down the content of the pleasure tenure as contained in article 310. The police officers of the subordinate ranks are not expressly excluded from the operation of the pleasure tenure by any provision of the Constitution; they, therefore, hold office during the pleasure of the Governor and the only protection that they can claim are the two guarantees contained in article 311. It is true that section 7 lays down that the four grades of officers empowered to dismiss will act according to rules framed by the State Government; but that does not in our opinion mean that 722 these rules could introduce any further fetter on the pleasure tenure under which the police officers of the subordinate ranks are in service. It was necessary to provide for the framing of rules because the section envisages conferment of, powers of punishment of various kinds on four grades of officers relating to various cadres of police officers in the subordinate ranks. It was left to the rules to provide which four grades of officers would dismiss police officers of which subordinate rank or would give which punishment to a police officer of which subordinate rank. Such rules would in our opinion be mandatory as they go to the root of the jurisdiction of the four grades of police officers empowered to act under section 7. But further rules may be framed under section 7 to guide these police officers how to act when they proceed to dismiss or inflict any other punishment on police officers of the subordinate ranks. These rules of procedure, however, cannot all be mandatory, for if they were so they would be putting further fetters than those provided in article 311 on the pleasure of the Governor to dismiss a public servant. of course, if any of the rules framed under section 7 carry out the purposes of article 311(2), to that extent they will be mandatory and in that sense their contravention would in substance amount to contravention of article 311 itself. If this were not so, it would be possible to forge further fetters on the pleasure of the Governor to dismiss a public servant and this in the light of what we have said above is clearly not possible in view of the provisions of the Constitution. On the other hand, it will not be possible by means of rules framed under section 7 to take away the guarantee provided by article 311(1), which lays down that no public servant shall be dismissed by an authority subordinate to that by which he was appointed. If any rule under section 7, for example, lays down otherwise it will clearly be ultra vires in view of article 311(1). The rules therefore that are framed under section 7 would thus be of two kinds, namely (1) those which define the jurisdiction of four grades of officers to inflict a particular kind of punishment on a particular police officer of the subordinate rank they will be mandatory 723 for they go to the root of the jurisdiction of the officer exercising the power, but even these rules cannot go against the provisions of article 31 1 (1); and (2) procedural rules, which again may be of two kinds. Some of them may prescribe the manner in which the guarantee contained in article 311 (2) may be carried out and if there are any such rules they will be mandatory. The rest will be merely procedural and can only be directory as otherwise if they are also mandatory further fetters on the power of the Governor to dismiss at his pleasure contained in article 310 would be forged and this is not permissible under the Constitution. It is from this angle that we shall have to consider 486. Before, however, we come to r. 486 itself, we may dispose of another argument, namely, that the four grades of officers who have the power to dismiss under section 7 are exercising the statutory authority vested in them and are not exercising the Governor 's pleasure of dismissal under article 310 and therefore their action in dismissing an officer is subject to all the rules framed for their guidance. We are of opinion that this argument is fallacious. Article 310 defines the pleasure tenure and by necessary implication gives power to the Governor to dismiss at pleasure any public servant subject to the exceptions contained in article 310 and also subject to the guarantees contained in article 311. This power of the Governor to dismiss is executive power of the State and can be exercised under article 154(1) by the Governor himself directly or indirectly through officers subordinate to him. Thus it is open to the Governor to delegate his power of dismissal to officers subordinate to him; but even when those officers exercise the power of dismissal, the Governor is indirectly exercising it through those to whom he has delegated it and it is still the pleasure of the Governor to dismiss, which is being exercised by the subordinate officers to whom it may be delegated. Further though the Governor may delegate his executive power of dismissal at pleasure to subordinate officers he still retains in himself the power to dismiss at pleasure if he thinks fit in a particular case in spite 724 of the delegation. There can be no question that where a delegation is made, the authority making the delegation retains in itself what has been delegated. Therefore, even where a subordinate officer is exercising the power to dismiss he is indirectly exercising the power of the Governor to dismiss at pleasure and so his power of dismissal can only be subject to the same limitations to which the power of the Governor would be subject if he exercised it directly. But it is said that in the present case the power has not been delegated by the Governor under article 154(1) and that it had been conferred on those police officers by law. In our opinion, that makes no difference to the nature of the power, which is being exercised by these four grades of officers under the . As we have already said article 154(2)(b) gives power to Parliament or the legislature of a State by law to confer functions on any authority subordinate to the Governor. When the function of dismissal is conferred by law on any authority subordinate to the Governor it is nothing more than delegation of the Governor 's executive power to dismiss at pleasure by means of law and stands in no better position than a delegation by the Governor himself under article 154(1). Whether it is delegation by the Governor himself or whether it is delegation by law under article 154(2)(b) or by an existing law, which must be treated as analogous to a law under article 154(2)(b), the officer exercising the power of dismissal is only indirectly exercising, the Governor 's power to dismiss at pleasure and his order of dismissal has the same effect as the order of the Governor to dismiss at pleasure. Therefore, his order also is only subject to the two fetters provided in article 311 of the Constitution and cannot be subjected to any more fetters by procedural rules other than those framed for carrying out the object of article 311(2). Therefore, when the four grades of officers proceed to dismiss any police officer of the subordinate rank under section 7 of the , they are merely exercising. the power of the Governor to dismiss at pleasure indirectly; and the only fetters that can be placed on that power are those contained in the Constitution, namely, article 311. 725 We may in this connection refer once again to the case of Venkata Rao (1) where the dismissal was by an, officer subordinate to the Governor of Madras; but ' that dismissal was also held to be an indirect exercise I of His Majesty 's pleasure to dismiss, and that is why it was held that if r. XIV of the Classification Rules was not complied with, a public servant had no right of action against an order dismissing him at His Majesty 's pleasure. Therefore, whenever a subordinate officer exercises the power to dismiss, whether that power is delegated by the Governor, or is delegated under a law made under article 154(2)(b) or under an existing law analogous to that, he is merely exercising indirectly the power of the Governor to dismiss at pleasure and his action is subject only to the two guarantees contained in article 311. The fact therefore that the police officer in this case made the order of dismissal by virtue of section 7 will make no difference and he will be deemed to be exercising the power of the Governor to dismiss at pleasure by delegation to him by law of that power. We may add that even where there is delegation by law of the power of the Governor to dismiss at pleasure, the power of the Governor himself to act directly and dismiss at pleasure cannot be taken away by that law, for that power he derives from article 310 of the Constitution. The present case therefore must be judged on the same basis as any case of dismissal directly by the Governor and would only be subject to the two limitations contained in article 311. We now come to r. 486. This rule, as we have already indicated, provides that if there is any complaint of the commission of any cognizable crime by a police officer, it must be registered in the relevant police station, under Chapter XIV of the Code of Criminal Procedure and investigated in the manner provided by that Chapter. After the investigation is complete, it is open to the authority concerned, be it the Superintendent of Police or the District Magistrate, to decide whether to proceed in a court of law (1) (1936) L.R. 64 I.A. 55. 92 726 or to hold a departmental inquiry or do both, though in the last case the departmental inquiry must take place only after the judicial trial is over. The first question then that arises is whether r. 486 is meant to carry out the purpose of article 311(2). As we read r. 486, we cannot see that it is meant for that purpose; it only provides for a police investigation under Chapter XIV of the Code of Criminal Procedure. The police officer making an investigation under Chapter XIV is not bound to examine the person against whom he is investigating, though there is nothing to prevent him from doing so. Nor is the person against whom an investigation is going on under Chapter XIV bound to make a statement to the police officer. In these circumstances, the purpose of an investigation under Chapter XIV is not relevant under article 311(2) which says that a public servant shall not be dismissed without giving him a reasonable opportunity of showing cause against the action proposed to be taken in regard to him. Therefore, r. 486 not being meant for the purpose of carrying out the object of article 311 (2) cannot be mandatory and cannot add a further fetter on the exercise of the power to dismiss or remove at the pleasure of the Governor over and above the guarantees contained in article 311. It appears to us that the object of r. 486 is that the authority concerned should first make a preliminary inquiry to find out if there is a case against the officer complained against either to proceed in a court or to take departmental action. The investigation prescribed by r. 486 is only for this purpose. Incidentally it may be that after such an investigation, the authority concerned may come to the conclusion that there in no case either ' to send the case to court or to hold a departmental inquiry. But that in our opinion is what would happen in any case of complaint against a public servant in any department of Government. No authority entitled to take action against a public servant would straightaway proceed to put the case in court or to hold a departmental inquiry. It seems to us axiomatic if a complaint is received against any public servant of any department, that the authority 727 concerned would first always make some kind of a preliminary inquiry to satisfy itself whether there is any case for taking action at all; but that is in our opinion for the satisfaction of the authority and has nothing to do with the protection afforded to a public servant under article 311. Rule 486 of the Police Regulations also in our opinion is meant for this purpose only and not meant to carry out the object contained in article 311(2). The opportunity envisaged by article 311(2) will be given to the public servant after the the authority has satisfied itself by preliminary inquiry that there is a case for taking action. Therefore, r. 486 which is only meant to gather materials for the satisfaction of the authority concerned, whether to take action or not, even though a statutory rule cannot be considered to be mandatory as that would be forging a further fetter than those contained in article 311 on the power of the Governor to dismiss at pleasure. We are therefore of opinion that r. 486 is only directory and failure to comply with it strictly or otherwise will not vitiate the subsequent proceedings. We may incidentally indicate two further aspects of the matter. In the first place, if the argument is that the Governor must exercise the pleasure himself so that only the two limitations provided in article 311 may come into play; it appears that the Governor has exercised his pleasure in this case inasmuch as he dismissed the revisional application made to him by the respondent. There appears no reason to hold that the Governor exercises his pleasure only when he passes the original order of dismissal but not otherwise. Secondly the fact that r. 486 contains the word "shall" is not decisive on the point that it is mandatory: (see Crawford on Statutory Construction, p. 519, para. 262). In view of what we have said already, the context shows that r. 486 can only be directory. If so, failure to observe it strictly or otherwise will not invalidate the subsequent departmental proceedings. This brings us to the last point which has been urged in this case; and that is whether there was substantial compliance with r. 486. We have already 728 pointed out that there was no strict compliance with r. 486 as no case wag registered on the complaint of Tika Ram and no investigation was made under Chapter XIV of the Code of Criminal Procedure. But there is no doubt in this case that before the Superintendent of Police gave the charge sheet to the respondent in November, 1953, which was the beginning of the departmental proceedings against the respondent, he made a preliminary inquiry into the complaint of Tika Ram and was satisfied that there was a case for proceeding against the respondent departmentally. In these circumstances it appears to us that the spirit of r. 486 was substantially complied with and action was only taken against the respondent when on a preliminary inquiry the Superintendent of Police was satisfied that departmental action was necessary. Even if r. 486 had been strictly complied with, this is all that could have happened. In these circumstances we are of opinion that r. 486 which in our opinion is directory was substantially complied with in spirit and therefore the subsequent departmental proceedings cannot be held to be illegal, simply because there was no strict compliance with r. 486. The High Court therefore in our opinion was wrong in holding that the subsequent departmental inquiry was illegal and its order quashing the order of dismissal on this ground alone cannot be sustained. We would therefore allow the appeal. BY COURT In accordance with the opinion of the majority, this appeal is dismissed with costs.

The respondent was a sub Inspector of Police. A complaint was received by the Superintendent of Police that the com plainant was carrying currency notes of Rs. 650 in a bundle when he was stopped by the respondent and his person was searched, that the respondent opened the bundle of notes and handed over the notes one by one to one Lalji, who was with him and that Lalji returned the notes to him but on reaching home he found the notes short by Rs. 250. Proceedings under section 7 of the Police Act were taken against the respondent on the charge of misappropriation of Rs. 250 and he was dismissed from service by an order of the Deputy Inspector General of Police. The respondent filed a writ petition before the High Court challenging the order of the dismissal on the ground that the authorities had acted in violation of Rule I of Para. 486 of the U. P. Police Regulation. This rule required that every information received by the police relating to the commission of a cognizable offence by a Police Officer shall be dealt with in the first place under Ch. XIV, Code of Criminal Procedure. The High Court held that the provisions of para. 486 of the Police Regulations had not been observed and that the proceedings taken under section 7 of the Police Act were invalid and illegal and accordingly quashed the order of dismissal. The appellant contended (i) that the complaint did not make out any cognizable offence against the respondent and r. I of Para. 486 was not applicable in this case, (ii) that r. III of Para. 486 enabled the authorities to initiate departmental proceedings without complying with the provisions of r. I, (iii) that the Police Regulations made in exercise of the power conferred on the Government under the Police Act delegating the power of the Governor to dismiss at pleasure to a subordinate officer were only administrative directions for the exercise of the pleasure in a reasonable manner and any breach of the regulations did not confer any right or give a cause of action to the public servant, and (iv) that the regulations were only directory and the non compliance with the rules did not invalidate the order of dismissal. 680 Held, (per Sarkar, Subba Rao and Mudholkar, JJ.) that the order of dismissal was illegal as it was based upon an enquiry held in violation of r. I of Para 486 of the Police Regulations. The facts alleged in the complaint made out a cognizable offence under section 405 Indian Penal Code against the respondent, and the provisions of r. I of Para . 486 were applicable to it. A Police Officer making a search of a person was 'entrusted ' with the money handed over by the person searched. Rule III of Para. 486 did not deal with cognizable offences, it dealt with offences falling only under section 7 Police Act and to non cognizable offences. Rule III did not provide an alternative procedure to that prescribed under r. I. The position with regard to the tenure of public servants and to the taking of disciplinary action against them under the present Constitution was as follows: (i) Every person who was a member of a public service described in article 310 of the Constitution held office during the pleasure of the President or the Governor. (ii) The power to dismiss a public servant at pleasure was outside the scope of article I54 and, therefore, could not be delegated by the Governor to a subordinate officer, and could be exercised by him only in the manner prescribed by the Constitution. (iii) This tenure was subject to the limitations or qualifi cations mentioned in article 311. (iv )Parliament or the Legislature of States could not make a law abrogating or modifying this tenure so as to impinge upon the overriding power conferred upon the President or the Governor under article 310, as qualified by article 311. (v) Parliament or the Legislatures of States could make a law regulating the conditions of service of such a member which included proceedings by way of disciplinary action, without affecting the powers of the President or the Governor under article 310 read with article 311. (vi) Parliament and the Legislatures also could makea law laying down and regulating the scope and content of the doctrine of "reasonable opportunity" embodied in article 311 but the said law was subject to judicial review. (vii) If a statute could be made by Legislatures within the foregoing permissible limits, the rules made by an authority in exercise of the power conferred thereunder would likewise be efficacious within the said limits. N. W. F. Province vs Suraj Narain, A.I.R. 1949 P. C. 112, Shenton vs Smith, , Gould vs Stuart, , Reilly vs The King, , Terrell vs Secretary of State, , State of Bihar vs Abdul Majid; , , Parshotam Lal Dhingra vs Union of India, , R. T. Rangachari vs Secretary of State for India, (1936) L.R. 64 I.A. 40 and High Commissioner for India and High Commissioner for Pakistan vs I. M. Lall, (1948) L.R. 75 I.A. 225, referred to. The Police Act and the rules made thereunder constituted a self contained code providing for the appointment of police officers and prescribing the procedure for their removal. Any authority taking action under the Police Act or the rules made thereunder must conform to the provisions thereof and if there was any violation of those provisions the public servant had a right to challenge the order of the authority if the rules were mandatory Paragraph 486 of the Police Regulations was mandatory and not directory. The rules were made in the interests of both the department and the police officers. The word used in para 486 was "shall" and in the context it could not be read as "may". Hari Vishnu Kamath vs Syed Ahmed Ishaque, , State of U. P. vs Manbodhan Lal Srivastava, [1958] S.C.R. 533 and Montreal Street Railway Company v Noymandin, L.R. ; , referred to. Subject to the overriding power of the President or the Governor under article 310, as qualified by article 311, rules governing disciplinary proceeding could not be treated as administrative directions, but had the same effect as the provisions of the statute whereunder they were made, in so far as they were not inconsistent with the provisions thereof. The Governor did not exercise his pleasure through the officers specified in section 7 of the Police Act, and the Governor 's pleasure. could not be equated with the statutory power of the officers specified An inquiry under the Act had to be made in accordance with the provisions of the Act and the rules made thereunder. R. T. Rangachari vs Secretary of State for India, L.R. 64 I.A. 40, High Commissioner for India and High Commissioner for Pakistan vs I. M. Lall, (1948) L.R. 75 I.A. 225, R. Venkata Rao vs Secretary of State for India, (1936) L.R. 64 I.A. 55, section A. Venkataraman V. Union of India, [1954] S.C.R. 1150 and Khem Chand vs The Union of India, [1958] S.C.R. 1080, referred to. Per Gajendragadkar and Wanchoo, JJ. The provisions of para 486 were merely directory and a non compliance therewith did not invalidate the disciplinary action taken against the respondent. All public servants, other than those excepted expressly by the Constitution, held office during the pleasure of the President or the Governor, and no law or rule framed under article 300 or article I54(2)(b) could cut down the content of the pleasure tenure in article 310 subject to article 31i. The Police Act could not stand higher than a law passed under article 309 or article 154(2)(b) and could not cut down the content of the pleasure tenure in article 310 682 The Police officers held office during the pleasure of the Governor and the only protection they could claim was the two guarantees contained in article 311. The rules framed under section 7 Police Act would be of two kinds, namely (1) those which defined the jurisdiction of the four grades of officers specified in section 7 to inflict particular kind of punishment on particular police officers of the subordinate ranks such rules would be mandatory but they could not go against the provisions of article 311, and (2) procedural rules. The procedural rules could be of two kinds: (i) those that prescribed the manner in which the guarantee contained in article 311(2) May be carried out such rules would be mandatory, and (ii) other merely procedural rules they could only be directory. The power of the Governor to dismiss was executive power of the State and could be exercised under article 154(i) by the Governor himself directly or indirectly through officers subordinate to him. The officers specified in section 7 of the Police Act were exercising the powers of the Governor to dismiss at pleasure and their powers were subject to the same limitations to which the Governor was subject. Whether it was delegation by the Governor himself or whether it was delegation by law under article 154(2)(b) or by the existing law, which must be treated as analogous to a law under article 154(2)(b), the officer exercising the power of dismissal was only indirectly exercising the Governor 's power to dismiss at pleasure. His order also was subject to the two fetters under article 311 and could not be subjected to any more fetters by procedural rules other than those framed for carrying out the objects of article 311(2). R. Venkata Rao vs Secretary of State for India in Council, [1936] 64 I.A. 55, referred to. Paragraph 486 was not meant for the purpose of carrying out the object of article 311(2) and could not be mandatory and could not add a further fetter on the exercise of the power to dismiss at the pleasure of the Governor over and above the fetters contained in article 311. This rule was only meant to gather materials for the satisfaction of the authority concerned, whether to take action or not. As such para 486 was merely directory and a failure to comply therewith strictly or otherwise did not vitiate the disciplinary action.

One Raja Sahib took a lease from the District Board, Allahabad,. with respect to the realisation of bayai and bazar dues on the sale of commodities in the bazar. The appellant was his employee to collect these dues. A peon of Raja Sahib asked Shyam Lal, P.W. 2, who had sold linseed to Mewa Lal, respondent No. 2, to come to the Munim and pay the beyai dues. Mewa Lal asked Shyam Lal not to pay those dues. The peon took Shyam Lal to the appellant. The respondent No. 2 armed with a lathi, came there and on appellant 's asking him as to why he was creating obstruction in the realisation of the dues, filthily abused him and threatened to kill him. The appellant, thereafter, on obtaining sanction of the District Magistrate, instituted a complaint against Respondent No. 2 for prosecuting him for an offence under section 107 of the United Provinces District Board Act. The trial Magistrate convicted him of the offences under sections 504 and 506 of the Indian Penal Code and also of an offence under section 107 of the Act. On appeal, Sessions judge acquitted him of all the charges. Against acquittal, the appellant filed an appeal to the High Court which was dismissed. On appeal by certificates three contentions were raised by the appellant in this Court: (i) The order of the Sessions judge aquitting Mewa Lal was bad as no notice of hearing of the appeal was issued to the appellant, on whose complaint the Magistrate convicted him, (ii) The High Court was wrong in holding that the Raja could not collect the Tah Bazari dues through his agents, and (iii) that the appellant had requisite sanction under section 182 of the Act, for prosecuting Mewa Lal, respondent No. 2. Held that section 107 of the Act does not make obstruction or molestation of an employee of the person under contract with 359 the Board, an offence. The section speaks of the obstruction or molestation of two classes of persons. One class consists of persons employed by the District Board under the Act. The Raja or the appellant is not an employee of the District Board. The second class consists of those persons who are under contract with the Board under the Act. Surely, the person under contract with the Board is the Raja and not the appellant. The appellant is only an employee of the Raja. In view of these considerations, the acquittal of the respondent No. 2 could not be interfered with merits. The appeal, therefore, must be dismissed. The appeal was not heard on merits. If was considered not necessary to decide the first contention and the Court did not express any opinion on the second contention as the terms of the lease were not known. The third contention was held to be correct.

On August 19, 1964, officers belonging to the Department of the appellant raided and searched the premises of a company and foreibly removed certain accounts and goods. The respondents challenged the department 's action by writ petitions filed in the High Court under article 226 of the Constitution praying that the articles seized should be returned. It was contended by the petitioners that on a proper construction of section 41 of the Madras General Sales Tax Act, No. 1 of 1959, the officers of the Department had no authority to search the premises and seize any account books or goods found there; that if section 41(4) authorised seizure and confiscation of goods, it was beyond the legislative competence of the State Legislature, for it was not covered by item 54 of List II of the Seventh Schedule to the Constitution relating to "taxes on the sale or purchase of goods"; and that if various provisions in section 41 were capable of being construed as authorising search and seizure, they were violative of article 19(1)(f) and (g) of the Constitution. The High Court allowed the Petitions holding, inter alia, that section 41 (2) did not permit a search being made and only provided for inspection; the power of seizure or confiscation in section 41(4) was beyond the legislative competence of the State Legislature; and that subsections (2), (3) and (4) of section 41 contained unreasonable res trictions and were violative of article 19(1) (f) and (g). The High Court also found with respect to one of the petitions that the search warrant had been issued without the application of Mind by the magistrate and was bad. On appeal to this Court; Held: dismissing the appeal, (i)Anything recovered during the search must be returned to the petitioners for the safeguards provided by section 165 of the Code of Criminal Procedure were not followed and in one case the finding of the High Court that the search warrant issued by the magistrate was bad on various grounds was not challenged; furthermore anything confiscated must also be returned as sub section (4) of section 41 must fall.[163 B D]. Clause (a) of the second proviso to sub section (4) gives power to the officer ordering confiscation to give the person affected an option to pay in lieu of confiscation, in cases where the goods are taxable under the Act, the tax recoverable and an additional amount and thus provides for recovery of tax even before the first sale in 149 the State which is the point of time in a large majority of cases for recovery of tax. As such it was repugnant to the entire scheme of the Act and sub section (4) must therefore be struck down. As Clause (a) compels the officer to give the option and thus compels recovery of tax before the first point of sale, which cannot have occurred in cases of goods seized from the dealer himself, it is clearly intended by the legislature to go together with the main part of the Section and is not therefore severable. [159F 16OD]. (ii) Although generally speaking the power to inspect does not give power to search, where, as in the case of section 41 (2) the power has been given to inspect not merely accounts registers, records, goods, etc., but also to inspect the offices, shops etc. , these two powers together amount to giving the concerned officer the power to enter and search the offices etc. and if he finds any accounts or goods in the offices, shops, etc., to respect them. The High Court was therefore wrong in holding that there was no power of search whatsoever under sub section (2). [154H 155E]. The proviso to sub section (2) in providing that all searches under "this sub section" shall be made in accordance with the provisions of the Code of Criminal Procedure, bears out the construction that the main part of sub section (2) contemplates searches. Similarly it is clear from sub section (3) which gives power to seize accounts etc., in certain circumstances, that sub section (2) must include the power of search for a seizure under sub section (3) is not possible unless there is a search. [156D E. 158B C]. The contention that as the main part of sub section (2) does not provide for search of a purely residential accommodation and therefore the proviso is otiose must be rejected. Although generally a provision is an exception to the main part of the section, it Is recognised that in exceptional cases, as in the present case, the provision may be a substantive provision itself. [156D F]. Bhonda Urban District Council vs Taff Vale Railway Co., L. R. Commissioner of Income tax vs Nandlal Bhandari & Sons , and State of Rajasthan vs Leela Jain. ; , referred to. (ii)Sub sections (2) and (3) of section 41 are not violative of article 19 as they are protected by clauses (5) and (6) of article 19 of the Constitution. [162F G]. The High Court had wrongly assumed that the provisions of the Criminal Procedure Code did not apply to a search under section 41(2). In view of the safeguards provided in section 165 Cr. P.C. and in Chapter VII of that Code, it cannot be said that the power to search provided in sub section (2) is not a reasonable restriction keeping in View the object of the search, namely, prevention of evasion of tax. [161EG]. The mere fact that the Act gives power to Government to em power any officer to conduct the search is no reason to strike down the provision for it cannot be assumed that Government will not empower officers of proper status to make searches. [160 H], To, exercise the power of seizure under sub section (3) the officer concerned has to record his reasons in writing, has to give a receipt for the accounts seized, and can only retain the items seized beyond a period of 30 days with the permission of the next higher officer. These are sufficient safeguards and the restriction, if any, on 150 the right to hold property and the right to carry on trade by sub section (3) must therefore be held to be a reasonable restriction. [162 D G]. While the court held that the Legislature has power to provide for search and seizure in connection with taxation law in order that evasion may be checked, it did not decide the general question whether a power to confiscate goods which are found on search and which are not entered in account books of the dealer is an ancillary power necessary for the purpose of stopping evasion of tax. [159C D]. K.S. Papanna and another vs Deputy Commercial Tax Officer, Gunkakal, (1967) XIX S.T.C. 506; referred to.

The appellant had issued notice to the respondents under section 34(1)( of the Income Tax Act, 1922 in respect of an escaped income of Rs. 47,595 for the assessment year 1944 45. The case of the respondents was that the impugned notice was bad because the Income Tax Officer proceeded against the respondents without obtaining the necessary sanction of the Central Board of Revenue as required by cl. (iii) of the proviso to section 34(1) of the Act. The respondents filed a writ petition in the High Court challenging the notice issued under section 34(1) of the article The respondents succeeded before the High Court. 438 Held: (i) The sanction under cl. (iii) of the proviso to section 34(1) is, however, necessary only where the notice in question is issued under cl. (ii) of the proviso. That is evidently what the legislature meant when it said "in any case failing under cl. (ii)". The words "in any case" used in cl. (iii) only mean a case in which notice can be issued under cl. Such a notice can be issued only when the escaped income is of one lakh of rupees and over. Clause (iii) requires such sanction where the notice is issued under cl. (ii) and when on a construction of cl. (ii), no notice can be issued with respect to a class of escaped assessments, there can possibly be no requirement of the sanction of the Central Board of Revenue. If a notice is issued by virtue of some other provision sub as the second proviso to sub section (3) of section 34, it would be a notice "in any other case" referred to in cl. (iii) of the proviso to sub section (1) of section 34 and in such a case the sanction which is required is only that of the Commissioner. Such a sanction was obtained in this case and therefore, the notice cannot be said to be bad because the sanction of the Central Board of Revenue had not been obtained. In the present case the income which has escaped assessment is below one lakh of rupees and more than eight years have elapsed since the assessment year in respect of which the income is alleged to have escaped assessment. Clearly, therefore, no notice could issue under cl. (ii) The High Court erred in holding that the provisions of the second proviso to section 34(3) would not apply to a case where the escaped assessment is of an amount less than a lakh of rupees and more than eight years have elapsed. Apparently, the High Court has overlooked the fact that the second proviso to sub section (3) of section 34 was amended first by Act 25 of 1953 and then by Act. 18 of 1956. The amendment of 1956 would govern the whole of section 34(1) and would consequently include even an escaped assessment with respect to which limitation is provided in cl. (ii) of the first proviso to section 34(1). The result would be the same even if the case fell to be governed by the Amending Act of 1953, though not by that of the Amending Act of 1956.

The appellants were the office bearers of a sugar concern. A complaint with the police was registered against them under sub rule 3 of Rule '3 of the Sugarcane (Control) Order, 1955 read with section 7 of the , On the ground that they had failed to pay to the sellers within the time prescribed the price of the sugarcane purchased by them. Objecting to the investigation of the alleged offence the appellants filed a writ petition under article 226 of the Constitution but the High Court ' refused to interfere. By special leave they came to this Court. The contentions urged on behalf of the appellants were (i) that sub rule 3 of rule 3 could not have been validly issued under section 3 of the because the latter section applied only to foodstuffs and not to food crops (ii) that the regulation of the price of sugarcane being expressly dealt with by the Bihar Sugar Factories Control Act, 1937 the same power could not by implication be spelt out from the provisions of the Order and the Act, (iii) that Parliament had no competence to enact any law relating to the control of sugarcane as that subject was within the exclusive legislative jurisdiction of the State, the same being a part of agriculture. (iv) that there was violation of the fundamental right under article 19(1) of the Constitution by the impugned order. (v) that in view of section 11 of the Act no cognizance could have been taken of the offence, (vi) that the complaint made before the police did not disclose a cognizabIe offence and as such the police was not empowered to investigate the complaint. HELD: (i) In view of the scheme of sections 2 and 3 of the Act and the judgment of this Court in Ch. Tika Ramji 's case the contention that food crops were outside the purview of section 3 of the Act must be rejected. [675 B G] Ch. Tika Ramji & Ors. vs State o/U.P. & Ors. , applied. (ii) The power sought to be exercised in the present case was not implied one for sub rule (3) of rule 3 gives a specific mandate that unless there is an agreement in writing to the contrary between the parties the purchaser shall pay to the seller the price of the sugarcane purchased within 14 days. [676 G H] 674 Even if the Bihar Sugar Factories Control, Act, 1937 provides anything to the contrary it must be held to have been altered by a competent authority namely Parliament, under Art, 372 of the Constitution. [677 A B] (iii) Parliament was competent to enact the and to confer power on the Government under section 3 of the Act as Entry 33 of List III of the Constitution empowers Parliament to legislate in respect of production, supply and distribution of foodstuffs. [677 C D] (iv) There was no contravention of article 19(1) because no fundamental right is conferred on a buyer not to pay the price of the goods purchased by him or to pay the same whenever he pleases. [677 E] (v) The plea based on section 11 of the Act was premature because no ,court had yet taken cognizance of the case. [677 F] (vi) The offence complained of was punishable with three years ' imprisonment and fell within the 2nd Schedule of the Code of Criminal Procedure. It was therefore a cognizable offence as defined in section 4(1)(f) of the Code. [677 G]

The appellant was born on January 7, 1915. He joined the Editorial Staff of the Civil and Military Gazette, Lahore, towards the end of 1938 and continued to serve the Civil and Military Gazette upto January 7, 1943, when he joined the Army. During the Second World War he was granted an Emergency Commission in the Army w.e.f March 7, 1943 with the rank of Lieutenant w.e.f June 3, 1948 but with seniority in that rank w.e.f. September 1944. Later, he, having been selected by the Special Recruitment Board as an Emergency Recruit from the "open market" was appointed to the Indian Administrative Service on August 7, 1950 and allocated to the Orissa Cadre. As regards Emergency Recruits from the open market the year of allotment was to be determined according to the "open Market Emergency Recruitment Scheme" called also 'N ' formula. The year of allotment in each case would be 1949 Y, where Y = N1 + 1/2 of N2. N2 means the period of previous experience. The previous experience is the number of completed years of actual experience of the officers after attaining the age of 25 and upto 31st December, 1948 as certified by the Special Recruitment Board. N1 means the period of continuous employment on a pay or income of not less than of Rs. 800/ per month before 31st December, 1944 and the 31st December 1948, inclusive. The larger the figure of "Y", the earlier the date of allotment and seniority. The period of previous experience (N2) in the case of the appellant worked out to 8 years 11 months 25 days rounded off to 8 years (i.e. 7 1 40 to 31 12 48). The figure of N1 was worked out taking the "protection pay" admissible to Army Officers as per F.R. 9(21)(b) i.e. excluding the Calcutta 25 compensatory allowance and lodging allowance. Therefore, by its letter dated June 11, 1952, the Ministry of Home Affairs fixed the year of allotment of the petitioner to the Indian Administrative Service as 1944. (1949 minus 5). The appellant held various posts in the Indian Civil Administrative Service cadre of Orissa and was also on deputation to the Government of India from 1952 to April 7, 1964. During this period, he was appointed as the Salt Commissioner and Managing Director, Hindustan Salt Ltd. with Head quarter at Jaipur. He held both these posts from September 11, 1953 to December 23, 1963, and only as Salt Commissioner till April 7, 1964, whereafter he was reverted to the State of Orissa. He was compulsorily retired by the Government on June 9, 1971. By its order dated September 1, 1977, the State Government gave him pay and allowances in the super time scale from November 29, 1967 to April 24, 1968 and thereafter selection grade from April 15, 1968 to June 9, 1971. Respondent 1 rejected his representation (a) for refixing his year of allotment by condoning the shortage of 6 days in determining N2 and by taking into consideration allowances for purposes of N1 (b) for granting the benefit of F.R. 49 and (c) for granting the benefit under F.R. 30. The appellant, therefore, filed a writ petition to the High Court claiming three reliefs, namely, (a) Refixation of the year of allotment as 1942 instead of 1944 in the Indian Administrative Service, alleging that by refusing to treat the Calcutta compensatory allowance and lodging allowance as pay under FR 9(21)(b) and to condone the six days ' shortage in determining the number of completed years of editorial experience under 'N ' formula, Respondent 1, by its order dated June 11, 1952, denied him seniority, (b) pay as admissible under FR 49 i.e. full salary of one post and additional salary upto a maximum of 50% of the second post, for the period from September 11, 1961 to December 23, 1963 during which he held both the posts of Salt Commissioner and Managing Director, Hindustan Salt Ltd. and (c) Placement in the super time scale w.e.f. July 24, 1962, i.e. the date when his junior Sri V.V. Ananta Krishnan was appointed to the super time scale, under the "Next Below Rule" implied in F.R. 30. The High Court refused to grant the reliefs, prayed for, and dismissed the Writ Petition. Dismissing the appeal by special leave, the Court ^ HELD: 1. In view of the categorical averment in his application for grant of special leave to this Court under Article 136 of the Constitution that "he was no longer interested in the relief for determination of the year of allotment, according to the 'N ' formula, since he was on the verge of retirement" the appellant cannot be heard to say that the Government of India had not arrived at a correct decision in assigning 1944 as the year of allotment to him. [33H 34A, 34G] (2) Normally the decision of the Government of India assigning a year of allotment to a particular officer under Rule 3 of the Indian Administrative Service (Regulation of Seniority) Rules, 1954, or, in accordance with orders and instructions issued by the Central Government in that behalf before the commencement of these Rules, is final and cannot be interfered by the Courts under Article 226 of the Constitution unless such decision was capricious or arbitrary or in breach of the said Rules. The same principle should apply to the assignment of a year of allotment under the 'N ' formula. [36F] 26 Even according to the appellant, he was not entitled, under the 'N ' formula as it stands, to a credit of more than 8 years. If that be so, the High Court quite properly declined to exercise its extra ordinary jurisdiction under Article 226 of the Constitution, inasmuch as no writ or direction could be issued, in a matter which was essentially in the discretion of the Government, to refix his seniority by giving credit for 9 years instead of 8 years as provided for, as admittedly the relevant instructions require "completed years of actual experience". [36E] There is no question of condoning the short fall of six days by relaxation of the relevant Rules under the powers vested in the Government of India by the All India Services (Conditions of Service Residuary Matters) Rules, 1960, since these Rules were not in force when the Government of India, Ministry of Home Affairs, by its letter dated July 19, 1951, issued a statement showing the years of allotment assigned to officers borne on the Indian Civil Administrative cadre of Orissa, wherein the year of allotment assigned to the petitioner was 1943 1/2, or even at the time when the Ministry of Home Affairs by its letter dated June 11, 1952 rejected his representation in that behalf, while revising his year of allotment to 1944. Further, the Government of India adopted a uniform policy in this regard and short falls of even less than 6 days have not been condoned so that there could be uniformity of taking note of "completed years of service" irrespective of the short fall of number of days in calculating the year of allotment in every case under the 'N ' formula. The Government of India have also held that the 'Recruitment Rules ' cannot be relaxed under Rule 3. [36H 37C, 38D] Even assuming there was a power to condone the deficiency, the matter rested entirely in the discretion of the Government of India. When a decision in a policy matter like relaxation is left to the absolute discretion of the Executive, courts cannot interfere and issue a direction to the Government of India to reconsider the matter afresh, after a lapse of more than 25 years. It would not only disturb the combined gradation list of the Officers belonging to the Indian Administrative Service, but also affect the seniority of many officers who have not been impleaded in these proceedings. [38G] (3) The definition of 'pay ' in the case of a military officer, introduced by F.R. 9(21)(b) is for 'protection pay ' when such officer is recruited in civil service under the employment of the Union of India, i.e., for fixation of his pay in such service, as is made clear by F. Rs. 2 and 3. F.R. 2 provides that the Fundamental Rules shall apply, subject to the provisions of F.R. 3, to all Government servants whose pay is debitable to civil estimates and to any other class of Government servants to which the President may, by general or special order, declare them to be applicable. F.R. 3 provides, that unless it be otherwise distinctly provided by or under the Rules, "Nothing in these Rules shall apply to Government servants whose conditions of service are governed by Army or Marine Regulations". F.R. 9(21)(b) had, therefore, no relevance in the matter of fixing the seniority of Emergency Recruits from the "Open Market" to the Indian Administrative Service, like the petitioner, even when they were drawn from the Army, but was applicable only in regard to fixation of their initial pay. [39E, D, G] The 'pay ' for purposes of determining the year of allotment under 'N ' formula of such recruits drawn from the Army was, as per the underlying principles set out in the Ministry of Home Affairs dated July 18, 1949, the 27 "basic pay" which necessarily exclude allowances. This concept of "basic pay" for fixation of initial pay is reflected in the Indian Administrative Service (Pay) Rules, 1954, which takes into account only the "initial pay". [40G] The rule which requires credit to be given for the period of continuous employment on pay or income not less than Rs. 800/ p.m., would apply uniformly to all recruits drawn from different sources, namely, persons who were previously lawyers, or employed in business houses or in Government service. Uniformity in such a case can only be attained by excluding allowances in every case, because the allowances which persons drawn from those different sources would be getting, would be varied in character. The Government of India, therefore, acted fully in consonance with Articles 14 and 16 of the Constitution. [41A C] The concept of 'pay ' under F.R. 9(21)(b) cannot be introduced for purposes of regulating the year of allotment under 'N ' formula, as it relates to fixation of seniority and not of pay. If the definition of 'pay ' in F.R. 9(21)(b) was to be taken note of, then Calcutta compensatory allowance and marriage allowance would also be included. Then, a rule which makes seniority dependent upon marriage allowance, and therefore, on whether the officer was married or not will be violative of Article 14 of the Constitution. The inclusion of 'pay ' as defined in F.R. 9(21)(b) in the 'N ' formula to include lodging allowance is not permissible as it was essentially compensatory in character. Any other construction will lead to manifest injustice as it would result in discrimination between persons similarly situated i.e., between an Army Officer in receipt of lodging allowance in lieu of rent free quarters and one in occupation of such rent free quarters, in the matter of seniority in the Indian Administrative Service. [41G H, 42D E] (4) The conditions of service of members of the Indian Administrative Service are regulated by the provisions of All India Services Act, 1951 and the various Rules and Regulations framed thereunder, such as Indian Administrative Service (Recruitment) Rules, 1954, Indian Administrative Service (Cadre) Rules, 1954, Indian Administrative Service (Pay) Rules, 1954, Indian Administrative Service (Regulation of Seniority) Rules, 1954, Indian Administrative Service (Appointment by Promotion) Regulation, 1955, All India Services (Discipline and Appeal) Rules, 1955, and 1969, All India Services (Conditions of Service Residuary Matters) Rules, 1960 etc. When there is specified provision made in regard to them on a particular subject regulating their conditions of service in the said Act and the Rules, the question of applicability of the Fundamental Rules does not arise. [42G 43A] Even assuming that the Fundamental Rules were applicable on August 7, 1950 i.e. at the time when the petitioner was appointed to the Indian Administrative Service, these Fundamental Rules ceased to be applicable on the coming into force of the aforesaid rules and regulations framed under the Act, unless the President by an order under F.R. 2 declared them to be so applicable. [43B] The provisions of F.R. 49 ceased to apply from the date on which the Indian Administrative Service (Pay) Rules 1954, were brought into force, as it makes no provision for 'additional pay '. Even if they were F.R. 49, in terms, provides that when a civil servant holds two posts, he is disentitled to draw the salary of both the posts. All that such a civil servant becomes 28 entitled to is the salary of the higher post, but no additional pay can be allowed for performing the duties of the lower post. Thus, the pay of one of the posts can be allowed. Even assuming that the provisions in the Fundamental Rules would continue to apply to a member of the Indian Administrative Service in regard to which no specific provision is made by framing a rule under the All India Services Act, 1951, and therefore, in the instant case, the appellant was still governed by F.R. 49, he had no claim to any additional salary, on the materials on record. [44A] (5) The intention underlying the second proviso to F.R. 30(1) which is commonly known as the "Next Below Rule" is the principle that when an officer in a post (whether within the cadre of his service or not) is for any reason prevented from officiating in his turn in a post on higher scale or grade borne on the cadre of the service to which he belongs, he may be authorised by special order of the appropriate authority proforma officiating promotions into such scale of pay and thereupon be granted the pay of that scale of grade, if they be more advantageous to him on each occasion on which the officer immediately junior to him in the cadre of his service draws officiating pay in that scale or grade. The principle behind the so called rule is evidently that an officer out of his regular line should not suffer by forfeiting acting promotion which he would otherwise have received had he remained in his regular line. [44G 45A] The State of Mysore vs M. H. Bellary, ; , referred to. The 'Next Below Rule ' is not a rule of any independent application. It sets out only the guiding principles for application in any case in which the President or the Governor proposes to regulate an officiating pay by special order under the second proviso to F.R. 30 (1). The condition precedent to the application of the 'Next Below Rule ' must, therefore, be fulfilled in each individual case before any action can be taken under this proviso. [45F] (6) The promotion to a post in super time scale involves an element of selection and is not by mere seniority. As a rule of universal application, the benefit of the "Next Below Rule" though available in the selection grade has never been extended when there is a promotion to a post in super time scale in the Indian Administrative Service for considerations of policy, namely, (1) the length of service which officers in States have to put in before they get promotion to super time scale is not uniform; (ii) Most of the States have got Divisional Commissioners, while some States do not have this post; (iii) The posts of Secretaries in some States carry pay in super time scale while in others these posts carry pay in the senior scale, and (iv) An officer might be good enough to be a Divisional Commissioner, but might not be good enough to be Joint Secretary to the Government of India. [45G,46B D] The process of appointment to the super time scale is by selection. When the element of selection comes in, this promotion must be subject only to the claims of exceptional merit and suitability, and is not a mater of right. Promotion to the super time scale is, therefore, not a matter of course. The Officer must stand the test of suitability and his integrity must be beyond doubt. For this purpose there is a Senior Selection Committee which pre 29 pares a select list of suitable officers which must be approved by the Union Public Service Commission. The Senior Selection Committee has to prepare a panel of names for each grade and submit the same for approval to the Union Public Service Commission as well as to the Government of India, Ministry of Home Affairs. The select list has to be reviewed and revised every year, and the Senior Selection Committee meets annually. The essence of holding Selection Committee meeting annually is that each annual proceeding is independent of the other. That is why as soon as the proceedings of the new Selection Committee are approved by the Union Public Service Commission, the proceedings of the earlier Selection Committee becomes inoperative. No manner of continuity can, therefore, be imputed to the proceedings of the various Selection Committees. [48 D F] In the instant case, the appellant cannot claim as a right the super time scale merely on the basis of his seniority among the members of the Indian Administrative Service belonging to the Orissa cadre, if he was 'consciously ' passed over by the Senior Selection Committee or Government of India, Ministry of Home Affairs. [48 C, G] Union of India vs M.L. Capoor, ; , referred to.

The respondent in the two appeals was compulsorily retired by an order dated 20 4 74 under Rule 16(3) of the All India Services (Death cum Retirement) Rules, 1958. The respondent challenged the said order by filing a Writ Petition before the Andhra Pradesh High Court. A single Judge of that Court allowed the petition. The said decision was affirmed by the Division Bench in appeal. Allowing the appeals by certificate the Court, ^ HELD: 1. An analysis of Rule 16(3) of the All India Services (Death cum Retirement) Rules, 1958 clearly shows that the following essential ingredients of the Rule must be satisfied before an order of compulsory retiring a Government servant is passed: (i) that the member or the service must have completed 30 years of qualifying service or the age of SO years (as modified by notification dated 16 7 1969); (ii) that the Government has an absolute right to retire the Government servant concerned because the word "require" confers an unqualified right on the Central Government servant; (iii) that the order must be passed in public interest; and (iv) that three months ' previous notice in writing shall be given to the Government servant concerned before the order is passed. [742 G H. 713 A B] . The provision gives an absolute right to the Government and not merely a discretion, and, therefore implied it excludes the rules of natural justice. [743 B] 2. Compulsory retirement after the employee has put in a sufficient number of years of service having qualified for full pension is neither a punishment nor a stigma so as to attract the provisions of Article 311(2) of the Constitution. In fact, after an employee has served for 25 or 30 years and is retired on full pensionary benefits, it cannot be said that he suffered any real prejudice. [743 C D] 3. The object of Rule 16(3) is to weed out the dead wood in order to maintain a high standard of efficiency and initiative in the State service. It is not necessary that a good officer may continue to be efficient for all times to come. It may be that there may be some officers who may possess a better initiative and higher standard of efficiency and if given chance the work of the Government might show marked improvement. In such a case compulsory retirement of an officer who fulfils the conditions of Rule 16(3) is undoubtedly in public interest and is not passed by way of punishment. Similarly, there may be cases of officers who are corrupt or of doubtful integrity and who may be considered fit for being compulsorily retired in public interest. Since 737 they have almost reached the fag end of their career and their retirement would A not cast any aspersion, nor does it entail any civil consequences. Of course, it may be said that if such officers were allowed to continue they would have drawn their salary until the usual date of retirement. But, this is not an absolute right which can be claimed by an officer who has put in 30 years of service or attained the age of 50 years. Rule 16(3) does nothing of the sort of attaching stigma. [743 D H] 4. The jurisprudential philosophy of Rule 16(3) and other similarly worded provisions like F.R. 56(j) and other rules relating to Government servants is noteworthy. Rule 16(3) as it stands is one of the facets of the doctrine of pleasure incorporated in Article 310 of the Constitution and is controlled only by those contingencies which are expressly mentioned in Article 311. If the order of retirement under Rule 16(3) does not attract Article 311(2), it is manifest that no stigma of punishment is involved. The order is passed by the highest authority, namely, the Central Government in the name of the President and expressly excludes the application of rules of natural justice. [744A C] The safety valve of public interest is the most powerful and the strongest safeguard against any abuse or colourable exercise of power under this Rule. Moreover, when the Court is satisfied that the exercise of power under the rule amounts to a colourable exercise of jurisdiction or is arbitrary or malafide, it can always be struck down. While examining this aspect of the matter the Court would have to act only on the affidavits, documents annexures, notifications and other papers produced before it by the parties. It cannot delve deep into the confidential or secret records of the Government to fish out materials to prove that the order is arbitrary or malafide. The court, has, however, the undoubted power subject to any privilege or claim that may be made by the State. to send for the relevant. confidential personal file of the Government servant and peruse it for its own satisfaction without using it as evidence. [744 C E] The main object of Rule 16(3) is to instil a spirit of dedication and dynamism in the working of the State Services so as to ensure purity and cleanliness in the administration which is the paramount need of the hour as the services are one of the pillars of our great democracy. Any element or constituent of the service which is found to be lax or corrupt, inefficient or not up to the work or has outlived his utility has to be weeded out. Rule 16(3) provides the methodology for achieving the object. [744 E G; Before the Central Government invokes the power under Rule 16(3), it must take particular care that the rule is not used as a ruse for victimisation by getting rid of honest and unobliging officers in order to make way for incompetent favourites of the Government which is bound to lead to serious demoralisation in the service and defeat the laudable object which the rule seeks to sub serve. If any such case comes to the notice of the Government the officer responsible for advising the Government must be strictly dealt with. [744 G H] Compulsory retirement contemplated by Rule 16(3) is designed to infuse the administration with initiative and activism so that it is made poignant and piquant, specious and subtle so as to meet the expanding needs of the nation which require explanation of "fields and pastures now". Such a retirement 738 involves no stain or stigma nor does it entail any penalty or civil consequences. In fact the rule merely seeks to strike a just balance between the termination of the completed career of a tired employee and maintenance of top efficiency in the diverse activities of the administration. [745 A B] An order of compulsory retirement on one had causes no prejudice to the Government servant who is made to lead a restful life enjoying full pensionary and other benefits and on the other gives a new animation and equanimity to the services The employees should try to understand the true spirit behind the rule which is not to penalise them but amounts just to a fruitful incident of the service made in the larger interest of the country. Even, if the employee feels that he has suffered, he should derive sufficient solace and consolation from the fact that this is his small contribution to the country for every good cause claims its martyr. [745 B D] Shyam Lal vs State of U.P., ; ; T. G. Shivcharan Singh and Ors. vs The State of Haryana A.I.R. ; Union of India vs Col. J. N. Sinha and Anr., [1971] 1 SCR 791; M. V. Puttabhatta vs The State of Mysore and Anr., ; ; State of Assam & Anr. etc. vs Prasanta Kumar Das etc. [19731 3 S.C.R. 158 & 167; Tara Singh etc. vs State of Rajasthan and Ors. ; ; Mayenghaon Rahamohan Singh vs The Commissioner (Admn.) Manipur and Ors., ; ; applied. Before passing an order under Rule 16(3), it is not an entry here or an entry there which has to be taken into consideration by the Government but the overall picture of the officer during the long years of his service that he put in has to be considered from the point cf view of achieving higher standards of efficiency and dedication so as to be retained even after the officer has put in the requisite number of years of service. [750 C D] Under the various rules on the subject, it is not every adverse entry or remark that has to be communicated to the officer concerned. The superior officer may make certain remarks while assessing the work and conduct of the subordinate officer based on his personal supervision or contact. Some of these remarks may be purely innocuous or may be connected with general reputation of honesty or integrity that a particular officer enjoys. It will indeed be difficult if not possible to prove by positive evidence that a particular officer is dishonest but those who have had the opportunity to watch the performance of the said officer from close quarters are in a position to know the nature and character, not only of his performance but also of the reputation he enjoys. Therefore on the ground of non communication of adverse remarks, the impugned orders cannot be set aside. [748? G H, 749 A] R. L. Butail vs Union of India and ors., and union of India vs Col. J. N. Sinha and Anr., [1971] 1 SCR 791; applied. State of Uttar Pradesh vs Chandra Mohan Nigam & Ors., ; referred to. Madan Mohan Prasad vs State of Bihar and Ors., ; distinguished. All that is necessary is that the Government of India, before passing an order under Rule 16(3) should consider the report of the Review Committee 739 which is based on full and complete analysis of the history of the service of A the employee concerned. [753 F G] In the instant case, it was clearly pleaded by the appellants ill the High Court that the report of the Review Committee was in fact considered by the Government of India before passing the impugned order. An examination of the confidential file also confirms this. [753 G H 754 A] State of U.P. vs Chandra Mohan Nigam and Ors. and section R. Venkataraman vs Union of India and Anr., [19,9] 2 SCR 202; distinguished. Chief Security officer, Eastern Railway & Anr. vs Ajay Chandra Bagchi ; overruled. In the instant case (a) there is no legal error in the impugned order passed by the Government of India, retiring Mr. Reddy. The order is not arbitrary as could be seen from the material of the record. The Government of India acted on the orders passed by the Home Minister concerned who had considered the report of the Review Committee in its various aspects. There is nothing to show that Reddy was victimised in any way. On the other hand, the history Of his service shows that he was always given his due. He was taken by the I.P.S. and allotted the year 1952. He was promoted to the selection grade also at the proper time. The order of suspension was withdrawn and the department enquiry was dropped and the officer was reinstated and later promoted as D.I.G. These facts completely militate against the concept of victimisation. [756 F H, 757 A] (b) The impugned order is a bonafide order and does not suffer from any legal infirmity. [757 G]

A money suit against the appellant was dismissed by the trial court but the first appellate court passed an ex parte decree against him. The appellant 's property was sold in execution and purchased by the decreeholder. The appellant went to the High Court which set aside the exparte decree and remanded the suit. The appellant then filed an appli cation for restitution under section 144 of the Code of Civil Procedure. It was stayed pending proceedings in the main suit. 'Me suit was finally decided against the applicant, by the High Court. Thereafter the trial court allowed the appellant 's application for restitution. After intermediate proceedings the High Court decided in Letters Patent Appeal that the appellant was not entitled to restitution. He appealed to this Court by special leave. HELD: The application for restitution was filed by the appellant before the passing of a fresh decree by the High Court in second appeal. At the time of the application therefore the appellant was entitled to restitution because on that date the decree in execution of which the properties were sold had been set aside. The appellant was therefore entitled to restitution notwithstanding anything which happened subsequently. [27 C E] The principle of the doctrine of restitution is that on the reverse of a decree the law imposes an obligation on the party to the suit who received the benefit of the erroneous decree to make restitution to the other party for what he has lost. The Court in making restitution is bound to restore the parties so far as they can be restored to the same position they were in at the time when the Court by its erroneous action had displaced them from. [27 E F] Zainal Abdin Khan vs Muhammad Asghar All Khan, I.L.R. 10 All 166, relied on. Set Umedmal & Anr. vs Srinath Ray & Anr. I.L.R. 27 Cal. 810, Raghu Nandan Singh vs Jagdish Singh, , Abdul Rahaman vs Sarafat Ali, and Shivbai Kom Babya Swam vs Yesoo, I.L.R. , referred to. Lal Bhagwant Singh vs Rai Sahib Lala Sri Kishen Das, , distinguished.

Appeal No. 419 of 1958. Appeal by special leave from the judgment and order dated August 20, 1957, of the Calcutta High a Court in Income tax Reference No. 1 of 1956. Hardyal Hardy and D. Gupta, for the appellant. N. C. Chatterjee, Dipak Choudhri and B. N. Ghosh, for the respondent. November 28. The Judgment of the Court was delivered by KAPUR, J. This is an appeal by special leave against the judgment and order of the High Court of Judicature at Calcutta in a reference made by the Income tax Appellate Tribunal under section 66(1) of the Income tax Act. The following question was referred: "Whether in the facts and circumstances of this case, the Appellate Tribunal was right in holding that Rs. 61,818 spent by the assessee to train Indian boys as jockeys, did not constitute expenses of the business of the assessee allowable under section 10(2)(xv)?" which was answered in favour of the respondent. The Commissioner is the appellant before us and the assessee is the respondent. The respondent is an association of persons whose business is to hold race meetings in Calcutta on a commercial basis. It holds two series of race meetings during the two seasons of the year. The respondent does not own any horses and therefore does not employ jockeys but they are employed by owners and trainers of horses which are run in the races. It is a matter of some importance to the respondent that there should be jockeys available to the owners with sufficient skill and experience because the success of races to a considerable extent depends upon the experience and skill of a jockey who rides a horse in a race. Because it was of the opinion that there was a risk of the jockeys becoming unavailable and that such unavailability would seriously affect its business which might result in its closing 731 down the business, the respondent considered it expedient to remedy that defect. Therefore in 1948, it, established a school for the training of Indian boys as jockeys so that after their training they might be available for purposes of race meetings held under its auspices. The school, however, did not prove a success and after having been in existence for three years it was closed down. During the year ending March 31, 1949, the respondent spent a sum of Rs. 62,818 on the running of its school and claimed that amount as a deduction under section 10(2)(xv) of the Income tax Act and also in the assessment under the Business Profits Tax for the chargeable accounting period ending March 31, 1949. This claim was disallowed by the Income Tax Officer and on appeal by Appellate Assistant Commissioner and also by the Income tax Appellate Tribunal. At the instancc of the respondent the question already quoted was referred to the High Court and was answered in favour of the respondent. This appeal is brought by special leave against that judgment. The decision under the Business Profits Tax Act will be consequential upon the decision of the deduction under the Income tax Act. The Tribunal found that it was not the business of the respondent to provide jockeys to owners and trainers, that the jockeys trained in the respondent 's school were not bound to ride only in the races run by the respondent and that the benefit, if any, which accrued was of an enduring nature. It also found that the respondent had been conducting race meetings since long, that it was not the case of the assessee that if it did not train jockeys they would become unavailable and that the mere policy of producing efficient Indian jockeys was not a sufficient consideration for treating the expenditure as one incurred for the business of the respondent. For these reasons the expenditure was disallowed. Before the Appellate Assistant Commissioner, it was contended by the respondent, that the reason for incurring the expenditure was "to promote efficient Indian jockeys" and it was in the interest of the respondent to see that the races are not abandoned on 732 account of the scarcity of jockeys. In the order of the Tribunal it is stated that this was not the case of the respondent, and therefore when the respondent wanted paragraph 5 of the statement to be substituted by the following: "It was the case of the assessee that unless it trained Indian Jockeys, time may come when there may not be sufficient number of trained jockeys to ride horses in the races conducted by the assessee. " the Tribunal did not agree to do so. Counsel for the appellant raised three points before us; (1) The question as to whether an item of expenditure is wholly and exclusively laid out for the purposes of business or not is a question of fact; (2) the connection between an expenditure and profit earning of the assessee should be direct and substantial and not remote and (3) to be admissible as revenue expenditure it should not be in the nature of a capital expense, i.e., it should not bring into existence an asset of an enduring nature. As to the first question this court has held in Eastern Investments Ltd. vs Commissioner of Income tax, West Bengal (1) that "though the question must be decided on the facts of each case, the final conclusion is one of law". In Commissioner of Income Tax vs Chandulal Keshavlal & Co. (2), this Court said: "Another test is whether the transaction is properly entered into as a part of the assessee 's legitimate commercial undertaking in order to facilitate the carrying on of its business; and it is immaterial that a third party also benefits thereby. (Eastern Investment Ltd. vs Commissioner of Income Tax, (1951) 20 I.T.R. 1). But in every case it is a question of fact whether the expenditure was expended wholly and exclusively for the purpose of trade or business of the assessee. In the present case the finding is that it was laid out for the purpose of the assessee 's business and there is evidence to support this finding." But those observations must be read in the context. In that case the assessee firm was the Managing Agent of a Company and at the request of the Directors of (1) ; , 598. (2) , 610. 733 the latter agreed to accept a lesser commission for the year of account than it was entitled to. It was found, by the Appellate Tribunal there that the amount was expended for reasons of commercial expediency and was not given as a bounty but to strengthen the managed company so that if its financial position became strong the assessee would benefit thereby, and an the evidence the Tribunal came to the conclusion that the amount was wholly and exclusively for the purpose of such business. It was on this evidence that the expense was held to be wholly and exclusively laid out for the purpose of the assessee 's business and this was the finding referred to. In that case the Tribunal had not misdirected itself as to the true scope and meaning of the words "wholly and exclusively laid out for the purpose of the assessee 's business". In the present case the Income tax Appellate Tribunal had misdirected itself as to the true scope and meaning of these words. In our opinion, in the circumstances of this case, it cannot be said that the finding of the Tribunal was one of fact. The question as to whether the expenses of running the school for jockeys is deductible has to be decided taking into consideration the circumstances of this case. The business of the respondent was to run race meetings on a commercial scale for which it is necessary to have races of as high an order as possible. For the popularity of the races run by the respondent and to make its business profitable it was necessary that there were jockeys of requisite skill and experience in sufficient numbers who would be available to the owners and trainers because without such efficient jockeys the running of race meetings would not be commercially profitable. It was for this purpose that the respondent started the school for training Indian jockeys. , If there were not sufficient number of efficient Indian jockeys to ride horses its interest would have suffered, and it might have had to abandon its business if it did not take steps to make jockeys of the necessary calibre available. Therefore any expenditure which was incurred for preventing the extinction 93 734 of the respondent 's business would, in our opinion, be expenditure wholly and exclusively laid out for the purpose of the business of the assessee and would be an allowable deduction. This finds support from decided cases. In Commissioner of Income tax vs Chandulal Keshavlal & Co. (1), this Court held that in order to justify a deduction the disbursement must be for reasons of commercial expediency; it may be voluntary but incurred for the assessee 's business; and if the expense is incurred for the purpose of the business of the assessee it does not matter that the payment also enures to the benefit of a third party. Another test laid down was that if the transaction is properly entered into as a part of the assessee 's legitimate commercial undertaking in order to facilitate the carrying on of its business it is immaterial that a third party also benefits thereby. In British Insulated and Helsby Cables vs Atherton (2), Viscount Cave L. C. held that a Bum of money expended, not of necessity and with a view to a direct and immediate benefit to the trade, but voluntarily and on the ground of commercial expediency and in order indirectly to facilitate the carrving on of the business may yet be expended wholly and exclusively for the purpose of the trade. In a case more recently decided Morgan vs Tate & Lyle Ltd. (3) the assessee company was engaged in sugar refining business and it incurred expenses in a propaganda campaign to oppose the threatened nationalisation of the industry. It was held by the House of Lords by a majority that the object of the expenditure being to preserve the assets of the company from seizure and so to enable it to carry on its business and earning profits, the expense was an admissible deduction being wholly and exclusively laid out for the purpose of the company 's trade. Lord Morton of Henryton said: "Looking simply at the words of the rule I would ask:"If money so spent is not spent for the purpose of the company 's trade, for what purpose is it spent?" If the assets are seized, the company can no longer (1) , 610. (2) (3) 735 carry on the trade which has been carried on by the use of these assets. Thus the money is spent to preserve the very existence of the company 's trade". See also Strong & Co. vs Woodifield(1), the observations of Lord Davey; and Smith vs Incorporated Council of Law Reporting (2). Counsel for the appellant relied upon the judgment of the Privy Council in Ward & Co. Ltd. vs Commissioner of Taxes (3 ), but that decision proceeds on a different statute where the words were of a very restrictive character, the words being: ". . . . Expenditure or loss of any kind not exclusively incurred in the production of the assessable income derived from that source. . . This case was distinguished in Morgan vs Tate & Lyle(4) on the ground that the language of the Now Zealand statute was much narrower than the language of r. 3A in England. Reference was also made by the appellant to Boarland vs Kramat Pulai Ltd. (5). In that case Directors of three Companies engaged in tin mining in Malaya incurred expenditure on printing. and circulating to shareholders a pamphlet containing remarks of the Chairman of the Company. The pamphlet was an attack on the policy and acts of the Socialist Government and it was held that the question whether the money was wholly and exclusively laid out or expended for the purpose of trade within the meaning of rules applicable to the question was one of law but on a consideration of the question it was held that the expenditure was not solely incurred with that object. It is not necessary to discuss that case at any length because what was held in that case was that the pamphlet was not wholly and exclusively for the purpose of the company 's trade. Applying the law, as laid down in those cases, to the present case the conclusion is that the amount in dispute was laid out wholly and exclusively for the purpose of the respondent 's business because if the (1) ; (2) [19I4] 3 K.B. 674. (3) [1923] A.C 145. (4) (5) 736 supply of jockeys of efficiency and skill failed the business of the respondent would no longer be possible. Thus the money was spent for the preservation of the respondent 's business. As to the third point there is no substance in the submission that the expenditure was in the nature of a capital expense because no asset of enduring nature was being created by this expense. In our opinion the High Court has rightly held that the expenditure claimed was one which was wholly and exclusively laid out for the purpose of the respondent 's business. It was to prevent the threatened extinction of the business of the respondent. In the result this appeal is dismissed with costs. Appeal dismissed.

The business of the respondent club was to run race meetings on a commercial scale. The club did not own any horse, and therefore did not employ jockeys. it was a matter of some importance to the club that there were jockeys of requisite skill and experience in sufficient numbers who would be available to the owners and trainers because otherwise the running of the race meetings would not be commercially profitable and its interest would suffer and it might have had to abandon its business if it did not take steps to make jockeys of the necessary calibre available. Therefore it established a school for the training of Indian boys as jockeys and claimed the sums spent on the running of the school as deductable amount under section 10 (2)(XV) of the Indian Income Tax Act. The question was whether in the circumstances of the case the expenditure claimed was one which was wholly and exclusively laid out for the purpose of the respondent 's business. Held, that any expenditure which was incurred for preventing the extinction of a business would be expenditure wholly and exclusively laid opt for the purpose of the business of the assessee and would be an allowable deduction. In the instant case the amount in dispute was laid out wholly and exclusively for the purpose of the respondent 's business, because if the supply of jockeys of requisite efficiency and skill failed, the business of the respondent would no longer be possible. Eastern Investments Ltd. vs Commissioner of Income tax, West Bengal, ; and Commissioner of Income tax vs Chandulal Keshavlal & Co., ; relied on, British Insulated and Helsby Cables vs Atherton, [1926] A. C. 205, Morgan vs Tate & Lyle Ltd., and Boarland vs Kramat Pulai Ltd., , discussed. Strong & Co. vs Woodifield, ; and Smith vs Incorporated Council of Law Reporting, , referred to. Ward & Co. Ltd. vs Commissioner of Taxes, [1923] A. C. 145, distinguished.

The respondent was an owner of an estate in Madhya Pradesh. Under the provisions of the Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act, 1950 the respondent 's estate was vested in the State and he became entitled to compensation. The compensation was to be paid at the rate of ten times the net income. The net in come would be calculated by deducting from the gross income, inter alia, the average of the income tax paid in respect of the income from big forest during 30 agricultural years proceeding March 31, 1951. In calculating the net income the Compensation Officer deducted not only income tax but also super tax and the respondent appealed to the Settlement Commissioner against the deduction of super tax. On the rejection of the appeal the respondent filed a writ petition in the High Court and the High Court held that on a construction of the various provisions of the Act it was wrong to deduct the super tax while calculating the compensation payable to the respondent. The appellant filed this appeal on special leave granted by this Court. It was contended on behalf of the appellant that the object of the r. 2(2) (c) of Schedule I to the Act is to provide a method for ascertaining the net income of an estate and therefore there cannot be any distinction between income tax and super tax and the expression "income tax" has been used comprehensively to include super tax also. The contention on behalf of the respondent was that from a historical point as well as from the provisions of the Act it is seen that income tax and super tax were distinct and separate and the former does not include the latter. Held:(i) There are two essential differences between income tax and super tax. They are (1) though both the taxes are assessed on the total income of a person, the total income for the purpose of income tax is computed on the basis of income classified chargeable under the different heads mentioned in section 6 of the Income tax Act whereas super tax is not concerned with the different heads, but is payable on the total income so ascertained and (2) while super tax 1, except in a few cases, is payable by the assessee direct, the income tax is payable by him direct as well as by deduction. (ii)Examining the provisions of r. 2(2)(c) Schedule I of the Act it is evident that with the knowledge that under the In come tax Act two seperate duties namely income tax and super tax are imposed the Legislature has used the expression "income tax". If the intention was to refer to both the taxes it would have stated income tax and super tax. The mention of the one and the omission of the other is a sure indication of its intention. The qualification that income tax paid should have been in respect of the income received from the big 839 forests necessarily excludes super tax for under the Income tax Act no super tax is payable in respect of the income re ceived from big forest but only in respect of the total income. (iii)Having regard to the terms of r. 2(2)(c) of Sche dule I to the Act it is clear that income tax does not take in super tax. Case law reviewed. Brooks vs Commissioner of Inland Revenue, , Bates. In re: Salmea vs Bates, and Reckitt vs Reckitt,

The appellant State issued a notification under section 4 of the West Bengal Estates Acquisition Act, 1953 covering the land comprised in the tea garden of the respondent company. The Revenue Officer issued notices to the respondent company initiating proceedings for assessment of rent. The Company objected stating that it was not an intermediary within the meaning of the Act and since its tea estate comprised of free hold land the Revenue Officer had no jurisdiction to assess the rent under Section 42(2) of the Act. The Revenue Officer rejected the contention and fixed the rent at Rs.2,375.94 per year. On revision preferred by the State, the Revenue Officer determined the rent at Rs.8,765.24 per year. The Company preferred appeals before the Tribunal. The appeals were dismissed in default and the restoration applications were also rejected. Thereafter, the Company preferred applications before the High Court under Section 115 CPC read with Article 227 of the Constitution for restoration of the two appeals, and obtained stay of the operation of the Revenue Officer 's order. During the pendency of the cases, the Additional Deputy Commissioner informed the respondent that inspite of the repeated reminders the company had not executed the long term lease for 30 years on prepayment of the requisite number of instalments or rent and cess. The respondent company replied pointing out that the High Court had granted the stay order and therefore the matter stood stayed till the disposal of the said cases. Thereafter, the Collector served upon the Company, a notice under section 106 of the Transfer of Property Act, 880 1882 determining the tenancy of the company In respect of the tea garden on the expiry of the specified date. The company was required to hand over the vacant and peaceful possession of the tea garden. In reply to the said notice, the company stated that in view of the stay order granted by the High Court no further proceedings be taken. Thereafter the Collector took over the possession of the tea garden. The applications before the High Court were still pending. However, aggrieved by the order of the Collector taking over its tea garden, the Respondent preferred a Writ Petition before the High Court Allowing the writ petition, the High Court directed the appellant State Government and other authorities to deliver the possession of the tea garden to the Company within a month. Aggrieved by the High Court 's order, the State as also the West Bengal Tea Development Corporation to whom the possession of the tea garden is transferred by the State, preferred appeals, before this Court. Disposing of the appeals, this Court, HELD:1. The Revenue Officer had initially determined the rent at the rate of Rs.2,371.94 per year, but the same was not accepted by the Government and on a representation made by the State Government, the Revenue Officer had refixed the rent at Rs.8,769.24 per year by order dated 22.8.1968. The Company had challenged the rent refixed at Rs. 8.769.24 and the High Court had stayed the order of the Revenue Officer fixing the rent at the rate of Rs.8,769.24. In view of these circumstances, it was necessary on the part of the Collector to have passed an order of summary settlement as contemplated under Form I Schedule F of the West Bengal Estates Acquisition Rules, 1954. The High Court was, therefore, right in holding that the Collector had no jurisdiction to terminate the tenancy on the ground of non payment of rent for not executing a lease deed inasmuch as the Collector had not mentioned in the notice terminating the tenancy under Section 106 of the Transfer of Property Act, that he was prepared to accept the rent at the rate of Rs. 2,375.94 per year as determined initially by the Revenue Officer. [886 F H; 887 A,B] 2.In order to do complete justice between the parties, it is proper that the respondent Company should be given the prosession of the tea garden provided the Company pays the entire arrears of rent from 27.7.1965to 21.4.1981, the date when the Company was dispossessed, 881 calculated at the rate of Rs. 8,769.24 per year after adjusting any amount already paid, within three months. There would be no necessity for the Collector to make any order of summary settlement and a long term lease should be executed as contemplated under sub section (3) of Section 6 of the West Bengal Estates Acquisition Act, 1953. As soon as the arrears of rent are paid by the Company and a lease deed is executed, the Company should be handed over the possession of the tea garden. In case any increase in the amount of rent is permissible under the law due to lapse of time, the State Government would be free to take the same into consideration while granting the long term lease. [887 B D]

In Income Tax Officer, Kolar Circle and Anr. vs Seghu Buchiah Setty. , this Court held that the recovery proceedings initiated against the assessee respondent on the basis of the original demand notice were had as it was of the view that the amount of tax assessed when reduced as a result of the appellate orders a fresh demand notice had to be served on the respondent before he could be treated as a defaulter. To get over the difficulties in the collection of income tax and other direct taxes created by the decision in Seghu Chetty 's case, the was passed with retrospective effect by an express provision in section 5. The property belonging to two brothers, the certificate debtors in C.A. 1575(NT) 71 and C.A. 1965 (NT) of 1963 respectively were purchased by M/s Jurdine Henderson (Ltd.) on September 20, 1954, i.e. after service of notices under section 7 of the Bengal Public Demands Recovery Act, 1913. The objections raised by the certificate debtors were rejected and the property came to be sold. In both cases the Company received a notice on August 6, 1956 fixing a date for settling the terms of the sale proclamation in respect of the respective one half share of each of the two Certificate debtors. Immediately thereafter the respondent company made an application in each of the two cases that it had purchased the property being unaware of the pendency of any Certificate case against any of its vendors for realization of incometax dues and that the Company was the owner of the property and it was not liable to be sold as that of the Certificate debtor. The Certificate Officer rejected the objection holding that the purchase having been made after service of notice under section 7 of the Bengal Act on the Certificate debtor, was void as against any claim enforceable in execution of the Certificate and hence the Company had no right to object to the sale. The Company went up in appeal before the Commissioner and succeeded in both the cases. Two revisions were filed before the Board of Revenue which were allowed. The respondent company then moved the High Court under Article 227 of the Constitution. The petition giving rise to Civil Appeal No. 1575 was allowed. The other petition giving rise to C.A. 1965 of 1971 was dismissed by the same Bench. 556 Two questions, namely (a) the locus standi of the purchaser Company to prefer a claim objecting to the sale of the property and (b) the effect of section 3(1)(a) and (b) of the Validation Act, 1964 read with Section 35(4) of the Income Tax Act, 1962 arose for decision in these appeals. Allowing C.A. 1575/71 and dismissing C.A. 1965/71 (both by certificates) the Court. ^ HELD: 1. The Company as a purchaser of the property of the certificate debtors had locus standi to prefer the claim. The company preferred a claim objecting to the sale of property on the ground that it was not liable to be sold as it had purchased the property from the two certificate debtors. In the Bengal Public Demands Recovery Act, 1913, there is no express provision enabling a person other than the Certificate debtor claiming an interest in the property to be sold to file any objection. He, of course, under section 22 can take recourse to the said provision by filing an application to set aside the sale of immovable property on deposit of the amounts provided therein. But the rules in Schedule II under section 38 have the effect as if enacted in the body of the Act. In Schedule II is to be found rule 39 which is very much like rule 58 of Order 21 of the Code of Civil Procedure, 1908. [561 F G] (a) It was open to it to show under rule 40 that at the date of the service of notice under section 7 it had some interest in the property in dispute. If the notice served at the beginning of the two Certificate cases under section 7 on the two Certificate debtors was not a valid notice in the sense that in one case on the reduction of the amount of the Certificate it became necessary to give a fresh notice and in the other without a fresh demand notice under the Income tax Act for the enhanced amount, the Certificate case could not proceed, then the Company had validly purchased the property and its purchase was not void. The property purchased by it could not then be sold for realization of the income tax dues against the two brothers. If, however, no fresh notice was necessary to be served in either of the two cases then it is plain that the Company 's purchase was void as against the claim enforceable in execution of the Certificate. [561 H, 562 A C] (b) It is clear from sections 7, 8, 9 and 10 of the Bengal Public Demands Recovery Act, 1913, that if the Certificate is modified or varied by the certificate officer under Section 10, while disposing of the petition of objection filed by the Certificate debtor under section 9, then the Certificate case proceeds further without a fresh notice under section 7.[561 D E] In the instant case, the amount was not reduced on the objection of the Certificate debtor but it was reduced on receipt of the information from the Income Tax Officer. [561 E] 2. The transfer was void against the Certificate claims in both cases under section 8(a) of the Bengal Public Demands Recovery Act, 1913. In both the cases notices under section 7 of the Bengal Act had been served upon the Certificate debtor before the property in question was transferred by them to the company. In neither of the two cases did the certificate proceeding became invalid, in one case by reduction of the demand and in the other by an enhancement, since clause (c) of section 3(1) of the Validation Act clearly and expressly provides that no proceedings in relation to Government dues 557 shall be invalid merely because no fresh notice was served upon the assessee, after the dues were enhanced or reduced in any appeal or proceeding. [566 E F] Ram Swarup Gupta vs Behari Lal Baldeo Prasad and Ors., ; Distinguished. (a) On a plain reading of clause (a) of section 3 of the Validation Act, it is clear that the intention of the Legislature is not to allow the nullification of the proceedings which were initiated for recovery of the original demand. On the basis of another notice of demand for the enhanced amount two courses are open to the department (i) to initiate another proceedings for the recovery of the amount by which the dues are enhanced treating it as a separate demand or (2) to cancel the first proceedings and start a fresh one for the recovery of the entire amount including the enhanced one. In the latter case, the first proceedings started for the recovery of the original amount will lose its force and the fresh proceedings will have to proceed de novo. But in the former, the proceedings are not affected at all. [564 E G] 3. (b) The argument that the effect of sub section (4) of section 35 of the Income Tax Act has not been done away with by clause (a) of section 3 of the Validation Act, 1964 is not correct. Firstly on a correct interpretation of sub section (4) of section 35 it would be noticed that though the expression used is "the sum payable" but in the context it would mean only the "extra enhanced sum payable" and not the whole of the enhanced amount. The expression "sum payable" had to be used in sub section (4) because that sub section was also providing for a contingency where by the rectification order the amount of refund was reduced. In such a case the expression "the sum payable" would obviously mean the difference between the amount refunded and the reduced amount which was liable to be refunded. Secondly, even if it were to be held that in the case of enhancement the expression "the sum payable" in sub section (4) means the whole of the enhanced amount by a rule of harmonious construction it has got to be held that in view of section 3(1)(a) of the Validation Act even in the case of a rectification a notice of demand is to be served now only in respect of the amount by which the Government dues are enhanced. [565 B E] 4. Sub clause (i) of clause (b) of sub section (1) of section 3 of the Validation Act clearly provides that it is not necessary for the Taxing Authority to serve upon the assessee a fresh notice of demand. The only thing which he is required to do that he has to give intimation of the fact of such deduction to the assessee and to the Tax Recovery officer. The purpose of giving intimation to the assessee is to bring it to his pointed knowledge that the demand against him has been reduced, although by other methods also such as by service of a copy of the Appellate Order or the revisional order being served on him he may be made aware of that. The intimation to the Tax Recovery Officer is essential as without that intimation from the Taxing Authority he cannot reduce the amount of the Certificate debt in the proceedings already commenced. [565 E H] (a) The view of the High Court that the provision contained in subclause (ii) of clause (b) of section 3(1) of the Validation Act is mandatory and in absence of a formal intimation to the assessee and to the Tax Recovery Officer as required by the said provision the proceedings initially started could not be continued under sub clause (iii), is not sustainable in law. [565 H, 566 A] 558 (b) On the facts of the case in C.A. 1575(NT)/71, the requirement of sub clause (ii) stood fulfilled and nothing further had to be done in the matter by the Taxing Authority. That being so the proceedings initiated on the basis of the notice of demand served upon the assessee before the reduction of the amount in appeal could be continued in relation to the amount so reduced from the stage at which such proceedings stood immediately before such disposal as provided for in sub clause (iii). [566 C D]

The appellant firm was assessed to sales tax under the pro visions of the Bihar Sales Tax, 1944, for three periods commencing from October 1, 1947, and ending on March 31, 1050. Its claim for certain deductions was disallowed, and its applications in revision under section 24 Of the Act to the Board of Revenue, Bihar, were dismissed by three orders dated August 20, 1953, September 3, 1953 and April 30, 1954. Under section 25(1) of the Act the appellant applied to the Board to state a case to the High Court of Patna on certain questions of law, but the applications were dismissed by order dated August 30, 1954, on the ground that no questions of law arose. The appellant then moved the High Court for requiring the Board to state a case on the said questions of law. The High Court dismissed the applications in respect of the first two periods of assessment, but by order dated November 17, 1934, directed the Board to state a 277 case in regard to the third period on one of the questions of law which only, in its opinion, arose. By its judgment dated January 21, 1957, the High Court answered the question against the appellant. On February 17, 1955, the appellant made applications to the Supreme Court for special leave to appeal against the orders of the Board of Revenue dated August 20, 953, and September 3, 1953, in respect of the first two periods; and on April 12, 1955, it similarly applied for special leave in respect of the third period. Leave was granted in respect of all the three applications by order dated December 23, 1955, the leave granted in regard to the third period being confined to the order of the Board dated August 30, 1954. When the appeals came up for hearing the question was raised as to whether the appeals were maintainable in view of the fact that no applications for leave to appeal were filed against the orders of the Board of Revenue and the High Court subsequent to the orders of the Board in respect of which only special leave had been granted. Held, that though the words of article 136 of the Constitution of India are wide, the Supreme Court has uniformly held as a rule of practice that there must be exceptional and special circumstances to justify the exercise of the discretion under that Article. Pritam Singh vs The State, ; , V. Govinda rajulu Mudaliar vs The Commissioner of Income tax, Hyderabad, A.I.R. 1959 S.C. 248 and Messrs Chimmonlall Rameshwarlal vs Commissioner of Income tax (Centyal), Calcutta, , relied on. Dhakeswari Cotton Mills Ltd. vs Commissioner of Income tax, West Bengal, ; and Baldev Singh vs Commis sioner of Income tax, Delhi and Ajmer, , explained. Held, further, that in the circumstances of the present case the appellant was not entitled to a grant of special leave against the orders of the Board of Revenue where the result would be to by pass the High Court by ignoring its orders. Held, also, that though special leave might have been granted on an application made under article 136, the Court is not precluded from coming to a conclusion at the time of the hearing of the appeal that such leave ought not to have been granted. Baldota Brothers vs Libra Mining Works, A.I.R. 1961 S.C.C. 100, followed.

By an order dated May 25, 1954, the Supreme Court granted the petitioners in the case special leave to appeal against the judgment and order of the High Court at Calcutta. In accordance with the order, the petitioners furnished the security amounts directed to be deposited within the time specified in the order. The Registrar of the High Court did not issue any notice of admission of 'appeal to be served by the Appellant 's Solicitor on the Respondents as envisaged in rule 9 of Order XIII, S.C.R. Nor did the Appellant following the practice of the High Court, move that Court for It admission" of the appeal until January 11, 1955. The Respondents first moved the High Court complaining of default on the part of the appellants in due prosecution of the appeal and latter moved the Supreme Court for action under rule 13 of Order XIII of the Supreme Court Rules. The application in the High Court was therefore kept pending. Held: After the grant of special leave under article 136, the Registrar of the Supreme Court transmits, in accordance with the 244 provisions of rule 8 of Order XIII of the Supreme Court Rules, a certified copy of the Supreme Court 's order to the Court or tribunal appealed from, Rule 9 of Order XIII of the Supreme Court Rules enjoins upon the Court or tribunal appealed from to act, in the absence of any special directions in the order, in accordance with the provisions contained in Order XLV of the Civil Procedure Code, so far as they are applicable. Accordingly the Court or Tribunal to which the order is transmitted receives deposits on account of security for the Respondents ' costs, printing costs, and any other deposits if so ordered by the Supreme Court, and sets about preparing the record of the appeal for transmission to the Supreme Court. Therefore, action under rule 13 of Order XIII, S.C.R., for rescinding the order granting special leave cannot be initiated unless the Court or tribunal appealed from reports to the Supreme Court that the appellant has not been diligent in taking steps to enable that Court to carry out the directions, if any, contained in the order of the Supreme Court and to act in accordance with the provisions of Order XLV of the Civil Procedure Code so far as applicable to appeals under Article 136 of the Constitution. In view of rule 9 of Order XIII of the Supreme Court Rules, the application of Order XLV of the Code of Civil Procedure to appeals under Article 136 of the Constitution is restricted. The Court or tribunal appealed from, no doubt, has to carry out the directions contained in the order granting special leave, and to receive the security for the Respondents ' costs and other necessary deposits, but once the security is furnished and the other deposits are made, the formality of "admission" envisaged by rule 8 of Order XLV of the Civil Procedure Code is unnecessary, because in such cases the order .granting special leave by itself operates as an admission of the appeal as soon as the conditions in the order relating to the furnishing of security or making of deposits are complied with. Appeals under Article 136 thus stand on a different footing from appeals on grant of certificate by the High Court itself. In the letter case, the High Court has exclusive jurisdiction over the matter until it admits the appeal under rule 8 of Order XLV of the Civil Procedure Code. Rule 9 of Chapter 32 of the Original Side Rules of the Calcutta High Court envisages "admission" of appeals to the Supreme Court whether by an order of the Supreme Court or under Order XLV of the Civil Procedure Code. And when an appeal arising from an order made by the Supreme Court under Article 136 of the Constitution, has been so "admitted", the said rule enjoins upon the Registrar to issue notice of such admission for service by the appellant on the Respondents. In cases where special leave has been granted by the Supreme Court, it is not necessary for the appellant to move the High Court appealed from for the formal admission of his appeal. As the order granting special leave itself lays down the conditions to be fulfilled by the appellants, the admission will be regarded as final only when the directions are complied with and as 245 soon as this is done it would be the duty of the Registrar to issue a notice of the admission of the appeal for service upon the respondents. In default of the issue of such notice, the appellant cannot be held responsible for laches in the prosecution of his appeal with regard to the steps required to be taken after the admission of his appeal.

The appellant assessee filed a memorandum of appeal to the Assistant Commissioner, Sales Tax, stating therein that the amount of admitted tax had been paid and forfeited the statement by an affidavit. Before the hearing, he produced a certificate from the Sales Tax Officer that the tax had been paid. The Assistant Commissioner relying on the Allahabad High Court 's decision in Swastika Tannery, Jaimau vs Commissioner of Sales tax, U.P. rejected as defective the memorandum of appeal, holding that it was not accompanied by the challan showing the deposit of admitted tax under section 9 of the Uttar Pradesh Sales Tax Act, 1948 and r. 66 of the U.P. Sales tax Rules. Against this order the assessee directly filed special leave to appeal to this Court without exhausting the remedies of revision and reference provided in the Act. This Court granted Special Leave and; HELD:The appeal must be allowed. (i) By the word "entertain" in the proviso to section 9 is meant the first occasion on which the Court take up the matter for consideration. It may be at the admission stage or if by the rules of that Tribunal, the appeals are automatically admitted, it will be the time of hearing of the appeal. But on the first occasion when the court takes up the matter for consideration, satisfactory proof must be presented that the tax was paid within the period of limitation available for the appeal. Rule 66(2) lays down one uncontestable mode of proof which the Court will always accept but it does not exclude the operation of the proviso when equally satisfactory proof is made available to the officer hearing the appeal and it is proved to his satisfaction that the payment of the tax has been duly made and in time. [512E F; 513E G] In the present case, when the Assistant Commissioner took tip the appeal for consideration, satisfactory proof was available in the shape of a certificate. Swastika Tannery of Jaimau vs Commissioner of Sales tax, U.P. Lucknow, (1963) 14 S.T.C. 518, disapproved. Kundan Lal vs Jagannath Sharma, A.I.R. 1962 All. 547; Dhoom Chand Jain vs Chaman Lal Gupta and Anr. A.I.R. 1962 All. 42: Haji Rahim Bux & Sons & Ors. vs Firm Samiullah & Sons, A.I.R. 1963 All. 320, approved. (ii) Though this Court would not ordinarily grant special leave to appeal against an order when other remedies were available and had not been exhausted, there is no inflexible rule that this Court will never entertain such an appeal. It would have been futile in this case for the assessee to have gone to the court of revision which was bound by the decision in Swastika Tannery of Jaimau vs Commissioner of Sales tax, U.P. and it would have been equally 506 futile to have gone to the High Court on a reference. The matter was more easily disposed of by giving special leave in this Court and this was one of those extra ordinary cases in which the ends of justice would be better served, by avoiding a circuity of action and by dealing with this matter in this Court directly. [513H 514C]

In assessment proceedings under the Wealth Tax Act for four assessment years the assessee claimed a deduction in the computation of his net wealth on account of income tax, wealth tax and gift tax liabilities. The Wealth Tax Officer allowed only part of the deductions claimed The appeal of the assessee was dismissed by the Appellate Assistant Commissioner of Wealth Tax. In the second appeal before the Appellate Tribunal, the assessee filed statements showing particulars of the income tax, wealth tax and gift tax liabilities in respect of the different assessment years. The Revenue contended that the income tax liability and the gift tax liability for one of the assessment years [1965 66] had been cancelled by the Appellate Assistant Commissioner in appeals against the assessment orders and those appellate orders of the Appellate Assistant Commissioner having become final in view of the dismissal of the Revenue 's appeals by the Appellate Tribunal, there was no outstanding demand on account of income tax and gift tax for that year and that therefore these two items do not constitute 'debts owed ' by the assessee and so would not qualify for deduction under section 2(m) of the Wealth Tax Act. The Appellate Tribunal following two judgments of this Court [Commissioner of Income Tax vs Keshoram Industries Pvt. Ltd. (1966) 59 I.T.R. 767 and H.H. Setu Parvati Bayi vs Commissioner of Wealth Tax Kerala , held that so long as the liability to pay the tax had arisen before the relevant valuation dates it was immaterial that the assessments were quantified after the valuation of dates, that the question whether a debt was owed by the assessee must be examined with reference to the position obtaining on the valuation date and that nothing happening subsequently could be considered in computing the net wealth. 491 The High Court having refused te call for a reference from the Appellate Tribunal under section 27(3) of the Act the Revenue appealed to this Court. Allowing the appeals in part. ^ HELD: 1. Whether a debt was owed by the assessee on the valuation date would depend on the fact that a liability had already crystallised under the relevant taxing statute on the valuation date. [494 D] 2. An income tax liability crystallises on the last day of the previous year relevant to the assessment year under the Income Tax Act, a wealth tax liability crystallises on the valuation date for the relevant assessment year under the Wealth Tax Act and a gift tax liability crystallises on the last day of the previous year for the relevant assessment year under the Gift Tax Act. [494 E] 3. The quantification of the income tax, wealth tax or gift tax liability is determined by a corresponding assessment order, and even if the assessment order is made after the valuation date relevant to the wealth tax assessment in which the claim to deduction is made, there is a debt owed by the assessee on the valuation date. It is the quantification of the tax liability by the ultimate judicial authority which will determine the amount of the debt owed by the assessee on the valuation date. So long as such ultimate determination indicates the existence of a positive tax liability, it must be held that there is a debt owed by the assessee on the valuation date even though such determination may be subsequent in point of time to the valuation date. If, however, it is found on such ultimate determination that there is no tax liability it cannot be said that merely because originally a tax liability could be envisaged there was a debt owed by the assessee. [495 B E] 4. Section 2(m) (iii) (a) denies deduction of an amount of tax which is outstanding on the valuation date if the assessee contends in appeal, revision or other proceeding that he is not liable to pay the tax. It presupposes that there is a subsisting tax demand and the assessee has challenged its validity. It refers to the initial stage only where an appeal, revision or other proceeding is pending merely. It does not proceed beyond that stage to the point where, in consequence of such appeal, revision or other proceeding, the tax liability has been found to be nil. Once it is determined that the tax liability is nil, it cannot be said that any amount of tax is outstanding. Such a situation does not bring section 2(m) (iii) (a) into operation at all. If upon the ultimate determination it is found that the amount of tax is nil, the assessee is denied the deduction claimed by him not on the ground of section 2(m) (iii) (a) but because the superior authority has found that there is no tax liability whatever. [496 A D] In the instant case, the income tax and the gift tax liabilities for the assessment year 1965 66 subsequently set aside on appeal after the valuation dates, cannot be regarded as debts owed by the assessee on the relevant valuation dates. [495 G] 492 Commissioner of Income Tax vs Keshoram Industries Pvt Ltd. ; ; H.H. Setu Parvati Bayi vs Commissioner of Wealth Tax, Kerala referred to. Late P. Appavoo Pillai vs Commissioner of Wealth Tax Madras reversed.

Appeal No. 517 of 1958. Appeal from the judgment and order dated October 31, 1957, of the Kerala High Court in O. P. No. 215 of 1957. G. B. Pai and Sardar Bahadur, for the appellant. Hardyal Hardy and D. Gupta, for the respondents. November 29. The Judgment of the Court was delivered by SHAH, J. C. A. Abraham hereinafter referred to as the appellant and one M. P. Thomas carried on business in food grains in partnership in the name and style of M. P. Thomas & Company at Kottayam. M. P. Thomas died on October 11, 1949. For the account years 1123, 1124 and 1125 M.E. corresponding to August 1947 July 1948, August 1948 July 1949 and August 1949 July 1950, the appellant submitted as a partner returns of the income of the firm as an unregistered firm. In the course of the assessment proceedings, it was discovered that the firm had carried on transactions in different commodities in fictitious names and had failed to disclose substantial income earned therein. By order dated November 29, 1954, the Income Tax Officer assessed the suppressed income of the firm in respect of the assessment year 1124 M.E. under the Travancore Income Tax Act and in respect of assessment years 1949 50 and 1950 51 under the Indian Income Tax Act and on the same day issued notices under section 28 of the Indian Income Tax Act in respect of the years 1949 50 and 1950 51 and 767 under section 41 of the Travancore Income Tax Act for the year 1124 M.E., requiring the firm to show cause why penalty should not be imposed. These notices were served upon the appellant. The Income Tax Officer after considering the explanation of the appellant imposed penalty upon the firm, of Rs. 5,000 in respect of the year 1124 M. E., Rs. 2,O00 in respect of the year 1950 51 and Rs. 22,000 in respect of the year 1951 52. Appeals against the orders passed by the Income Tax Officer were dismissed by the Appellate Assistant Commissioner. The appellant then applied to the High Court of Judicature of Kerala praying for a writ of certiorari quashing the orders of assessment and imposition of penalty. It was claimed by the appellant inter alia that after the dissolution of the firm by the death of M. P. Thomas in October, 1949, no order imposing a penalty could be passed against the firm. The High Court rejected the application following the judgment of the Andhra Pradesh High Court in Mareddi Krishna Reddy vs Income Tax Officer, Tenali (1). Against the order dismissing the petition, this appeal is preferred with certificate of the High Court. In our view the petition filed by the appellant should not have been entertained. The Income Tax Act provides a complete machinery for assessment of tax and imposition of penalty and for obtaining relief in respect of any improper orders passed 'by the Income Tax authorities, and the appellant could not be permitted to abandon resort to that machinery and to invoke the jurisdiction of the High Court under article 226 of the Constitution when he had adequate remedy open to him by an appeal to the Tribunal. But the High Court did entertain the petition and has also granted leave to the appellant to appeal to this court. The petition having been entertained and leave having been granted, we do not think that we will be justified at this stage in dismissing the appeal in limine. On the merits, the appellant is not entitled to relief. The Income Tax Officer found that the appellant had, with a view to evade payment of tax, (1) 768 deliberately concealed material particulars of his income. Even though the firm was carrying on transactions in food grains in diverse names, no entries in respect of those transactions in the books of account were posted and false credit entries of loans alleged to have been borrowed from several persons were made. The conditions prescribed by section 28(1)(c) for imposing penalty were therefore fulfilled. But says the appellant, the assessee firm had ceased to exist on the death of M. P. Thomas, and in the absence of a provision in the Indian Income Tax Act whereby liability to pay penalty may be imposed after dissolution against the firm under section 28(1)(c) of the Act, the order was illegal. Section 44 of the Act at the material time stood as follows: "Where any business,. carried on by a firm. has been discontinued . every person who was at the time of such discontinuance . a partner of such firm,. shall in respect of the income, profits and gain of the firm be jointly and severally liable to assessment under Chapter IV for the amount of tax payable and all the provisions of Chapter IV shall, so far as may be, apply to any such assessment. " That the business of the firm was discontinued because of the dissolution of the partnership is not disputed. It is urged however that a proceeding for imposition of penalty and a proceeding for assessment of income tax are matters distinct, and section 44 may be resorted to for assessing tax due and payable by a firm business whereof has been discontinued, but an order imposing penalty under section 28 of the Act cannot by virtue of section 44 be passed. Section 44 sets up machinery for assessing the tax liability of firms which have discontinued their business and provides for three consequences, (1) that on the discontinuance of the business of a firm, every person who was at the time of its discontinuance a partner is liable in respect of income, profits and gains of the firm to be assessed jointly and severally, (2) each partner is liable to pay the amount of tax payable by the firm, and (3) that the provisions of Chapter, so far as may be, apply to such assessment. The liability declared by section 44 is 769 undoubtedly to assessment under Chapter IV, but the expression "assessment" used therein does not merely mean computation of income. The expression "assessment" as has often been said is used in the Income Tax Act with different connotations. In Commissioner of Income Tax, Bombay Presidency & Aden vs Khemchand Ramdas (1), the Judicial Committee of the Privy Council observed: "One of the peculiarities of most Income tax Acts is that the word "assessment" is used as meaning sometimes the computation of income, sometimes the determination of the amount of tax payable and sometimes the whole procedure laid down in the Act for imposing liability upon the tax payer. The Indian Income tax Act is no exception in this respect. . ". A review of the provisions of Chapter IV of the Act sufficiently discloses that the word "assessment" has been used in its widest connotation in that chapter. The title of the chapter is "Deductions and Assessment". The section which deals with assessment merely as computation of income is section 23; but several sections deal not with computation of income, but determination of liability, machinery for imposing liability and the procedure in that behalf. Section 18A deals with advance payment of tax and imposition of penalties for failure to carry out the provisions there in. Section 23A deals with power to assess individual members of certain companies on the income deemed to have been distributed as dividend, section 23B deals with assessment in case of departure from taxable territories, section 24B deals with collection of tax out of the estate of deceased persons; section 25 deals with assessment in case of discontinued business, section 25A with assessment after partition of Hindu Undivided families and sections 29, 31, 33 and 35 deal with the issue of demand notices and the filing of appeals and for reviewing assessment and section 34 deals with assessment of incomes which have escaped assessment. The expression "assessment" used in these sections is not used merely in the sense of computation of income and there is in our judgment no ground for holding (1) 770 that when by section 44, it is declared that the partners or members of the association shall be jointly and severally liable to assessment, it is only intended to declare the liability to computation of income under section 23 and not to the application of the procedure for declaration and imposition of tax liability and the machinery for enforcement thereof. Nor has the expression, "all the provisions of Chapter IV shall so far as may be apply to such assessment" a restricted content: in terms it says that all the provisions of Chapter IV shall apply so far as may be to assessment of firms which have discontinued their business. By section 28, the liability to pay additional tax which is designated penalty is imposed in view of the dishonest contumacious conduct of the assessee. It is true that this liability arises only if the Income tax Officer is satisfied about the existence of the conditions which give him jurisdiction and the quantum thereof depends upon the circumstances of the case. The penalty is not uniform and its imposition depends upon the exercise of discretion by the Taxing authorities; but it is imposed as a part of the machinery for assessment of tax liability. The use of the expression "so far as may be" in the last clause of section 44 also does not restrict the application of the provisions of Chapter IV only to those which provide for computation of income. By the use of the expression "so far as may be" it is merely intended to enact that the provisions in Ch. IV which from their nature have no application to firms will not apply thereto by virtue of section 44. In effect, the Legislature has enacted by section 44 that the assessment proceedings may be commenced and continued against a firm of which business is discontinued as if discontinuance has not taken place. It is enacted manifestly with a view to ensure continuity in the application of the machinery provided for assessment and imposition of tax liability notwithstanding discontinuance of the business of firms. By a fiction, the firm is deemed to continue after discontinuance for the purpose of assesment under Chapter IV. The Legislature has expressly enacted that the provisions of Chapter IV shall apply to the assessment of 771 a business carried on by a firm even after discontinuance of its business, and if the process of assessment includes taking steps for imposing penalties, the plea that the Legislature has inadvertently left a lacuna in the Act stands refuted. It is implicit in the contention of the appellant that it is open to the partners of a firm guilty of conduct exposing them to penalty under section 28 to evade penalty by the simple expedient of discontinuing the firm. This plea may be accepted only if the court is compelled, in view of unambiguous language, to hold that such was the intention of the Legislature. Here the language used does not even tend to such an interpretation. In interpreting a fiscal statute, the court cannot proceed to make good deficiencies if there be any: the court must interpret the statute as it stands and in case of doubt in a manner favourable to the tax payer. But where as in the present case, by the use of words capable of comprehensive import, provision is made for imposing liability for penalty upon tax payers guilty of fraud, gross negligence or contumacious conduct, an assumption that the words were used in a restricted sense so as to defeat the avowed object of the Legislature qua a certain class will not be lightly made. Counsel for the appellant relying upon Mahankali Subbarao vs Commissioner of Income Tax (1), in which it was held that an order imposing penalty under section 28(1)(c) of the Indian Income Tax Act upon a Hindu Joint Family after it had disrupted, and the disruption was accepted under section 25A(1) is invalid, because there is a lacuna in the Act, submitted that a similar lacuna exists in the Act in relation to dissolved firms. But whether on the dissolution of a Hindu Joint Family the liability for penalty under section 28 which may be incurred during the subsistence of the family cannot be imposed does not fall for decision in this case: it may be sufficient to observe that the provisions of section 25A and section 44 are not in pari materia. In the absence of any such phraseology in section 25A as is used in section 44, no real analogy between the content of that section and section 44 may be assumed. Undoubtedly, (1) 772 by section 44, the joint and several liability which is declared is liability to assessment in respect of income, profits or gains of a firm which has discontinued its business, but if in the process of assessment of income, profits or gains, any other liability such as payment of penalty or liability to pay penal interest as is provided under section 25, sub section (2) or under section 18A sub sections (4), (6), (7), (8) and (9) is incurred, it may also be imposed, discontinuation of the business notwithstanding. In our view, Chief Justice Subba Rao has correctly stated in Mareddi Krishna Reddy 's case (supra) that: "Section 28 is one of the sections in Chapter IV. It imposes a penalty for the concealment of income or the improper distribution of profits. The defaults made in furnishing a return of the total income, in complying with a notice under sub section (4) of section 22 or sub section (2) of section 23 and in concealing the particulars of income or deliberately furnishing inadequate particulars of such income are penalised under that section. The defaults enumerated therein relate to the process of assessment. Section 28, therefore, is a provision enacted for facilitating the proper assessment of taxable income and can properly be said to apply to an assessment made under Chapter IV. We cannot say that there is a lacuna in section 44 such as that found in section 25A of the Act. We are unable to agree with the view expressed by the Andhra Pradesh High Court in the later Full Bench decision in Commissioner of Income Tax vs Rayalaseema Oil Mills (1), which purported to overrule the judgment in Mareddi Krishna Reddy 's case (supra). We are also unable to agree with the view expressed by the Madras High Court in section V. Veerappan Chettiar vs Commissioner of Income Tax, Madras (2). In the view taken by us, the appeal fails and is dismissed with costs. (1) Appeal dismissed.

The appellant who was carrying on business in food grains in partnership with another person submitted the returns of the income of the firm for the accounting years even after his partner 's death. It was found that certain income of the firm was concealed and the Income tax Officer not only assessed the firm to tax for the suppressed income but also imposed penalties for concealing the said income. Appeals to the higher income tax authorities failed and the appellant then applied to the High Court for a writ of certiorari quashing the orders of assessment and imposition of penalty on the ground inter alia that the firm was dissolved by his partner 's death and no penalty could be imposed after dissolution of the firm, The High Court rejected the petition. On appeal with the certificate of the High Court, Held, that by virtue of section 44 and other provisions of the Income Tax Act a partner of a dissolved partnership firm may not only be made liable to assessment for income tax for the accounting years but despite dissolution of the firm he may be made liable to pay penalty for concealing the income of the firm under section 28(1)(c) of the Act. The analogy of dissolution of a Hindu joint Family does not apply to dissolution of a partnership. Mareddi Krishna Reddy vs Income tax Officer, Tenali, , approved. Commissioner of Income tax vs Ravalaseema Oil Mills, and section V. Veerappan Chettiar vs Commissioner of Income tax, Madras, , disapproved. Mahankali Subbarao vs Commissioner of Income tax, , distinguished. The Legislature intended that the provisions of Ch. IV of the Act shall apply to a firm even after discontinuance of its business. In interpreting a fiscal statute the Court cannot proceed to make good deficiencies if there be any. In case of doubt it should be interpreted in favour of the tax payer. The expression "assessment" has different connotations an has been used in its widest connotation in Ch. IV and section 44 97 766 he Act. It is not restricted only to computation of tax but includes imposition of penalty on tax payers found in the process of assessment guilty of concealing income. Commissioner of Income tax, Bombay Presidency and Aden vs Khemchand Ramdas, , referred to. The Income tax Act provided a complete machinery for obtaining relief against improper orders passed by the Income tax Authorities and the appellant could not be permitted to abandon that machinery, and invoke the jurisdiction of the High Court under article 226 of the Constitution against the orders of the taxing authorities.

The respondent was carrying on business as an excise con tractor in the Civil and Military Station of Bangalore in the State of Mysore, called the retroceded area. The jurisdiction ' over this area was originally exercised by the Governor General in Council by virtue of an agreement with the Maharaja of Mysore, and the income tax law applicable was the Indian Income tax Act, 1922. On July 26, 1947, the retroceded area was given back to the State of Mysore but the income tax law in force in that area prior to that date continued to have effect and be operative till June 30, 1948, on which date was promulgated the Mysore Income tax Act and Excess Profits Tax (Application to the Retroceded Area) (Emergency) Act, 1948, the effect of which was that the Indian Income tax Act, 1922, stood repealed and the Mysore Income tax Act, 1923, came into force subject to certain saving provisions. On August 5, 1948, was promulgated the Retroceded Area (Application of Laws) Act, 1948. Between 1947 and 1950 there were political and constitutional changes which ultimately resulted in Mysore becoming a Part B State within the Constitution of India. The legal effect of these changes was that the income tax law applicable to the retroceded area till June 30, 1948, was the Indian Income tax Act, 1922 ; from July 1, 1948, the Mysore Income tax Act, 1923, became applicable except that the Indian Income tax Act continued to apply in respect of the total income chargeable to income tax in the retroceded area prior to July 1, 1948, and the provisions of that Act as in force in the retroceded area prior to that date applied to all proceedings relating to the assessment of such income upto the stage of assessment and determination of income tax payable thereon. This position continued till April 1, 1950, when the Finance Act, 1950, came into force and as a result the Indian Income tax Act, 1922, became applicable again to the retroceded area, subject to the saving provisions of section 13(1) of the former Act. In respect of the assessment for the four years between 1945 and 1949, the respondent was assessed to income tax under the law then in force in that area; subsequently, in 1954 the Income tax Officer served a notice on the respondent under section 34 of the Indian Income tax Act, 1922, for the purpose of assessing " escaped " or " under assessed " income chargeable to income tax for the said years. The respondent challenged the jurisdiction of the Income tax Officer to take proceedings under section 34 or to make an order of re assessment on the grounds inter alia (1) that section 34 Of the Indian Income tax Act, 1922, was not saved by section 13(1) of the Finance Act, 1950, because what was saved was the prior law " for the purposes of the levy, assessment and collection of income tax ", which expression did not include re assessment proceedings, (2) that the 787 financial agreement made between the President of India and the Rajpramukh of Mysore dated February 28, 1950, rendered the impugned proceedings unconstitutional and void, (3) that the Indian Income tax Act, 1922, as in force in the retroceded area stood repealed on June 30, 1948, by the Mysore Income tax and Excess Profits (Application to the Retroceded Area) (Emergency) Act, 1948, and the saving provisions in section 5(b) thereof or in para (2), sub para (b) of Sch. A to the Retroceded Area (Application of Laws) Act, 1948, did not save section 34 in so far as it permitted re assessment proceedings in respect of years in which there had been an assessment already, and (4) that after June 30, 1948, and until April 1, 1950, the Income tax Officer in the retroceded area could re open the assessment under section 34 Of the Mysore Income tax Act, 1923, within a period of four years specified therein, but there was no authority to re open the assessment under section 34 Of the Indian Income tax Act. Held : (1) that the expression " levy, assessment and collection of income tax " in section 13(1) Of the Finance Act, 1950, was wide enough to comprehend re assessment proceedings under section 34 Of the Indian Income tax Act, 1922, and that the financial agreement between the President of India and the Rajpramukh of Mysore, on a true construction of the recommendations of the Indian States Finance Enquiry Committee, did not render the impugned proceedings unconstitutional or void ; Lakshmana Shenoy vs The Incomc tax Officer, Ernakulam, [1959] S.C.R. 751, followed. (2) that the saving provisions in the Mysore Income tax and Excess Profits (Application to the Retroceded Area) (Emergency) Act, 1948, and the Retroceded Area (Application of Laws) Act, 1948, made the prior law available in all cases in which the income was assessed or was assessable according to that law before July 1, 1948, and, therefore, they saved section 34 of the Indian Income tax Act, 1922, with regard to re assessment proceedings ; City Tobacco Mart and Others vs Income tax Officer, Urban Circle, Bangalore, A.I.R. 1955 Mys. 49, overruled. Hirjibhai Tribhuwandas vs Income tax Officer, Rajnandgaon and another, A.I.R. 1957 M. P. 171, approved. (3) that the Income tax Officer had the authority to re open the assessments in the present case because the period of limitation was that laid down in section 34 of the Indian Income tax Act, as it was in force in the retroceded area prior to July 1, 1948.

The appellant who was the registered holder of 500 shares of a company executed a deed dated January 19, 1953, by which he assigned to his wife the right, title and interest to all dividends and sums of money which might be declared or might become due on account or in respect of those shares for the term of her natural life. During the accounting year which ended on March 31, 1953, the dividend declared on the shares amounted to Rs. 12,000, and in assessing the appellant for the assessment year 1953 54 the Income tax Officer included the said sum in his income under section 16(i)(c) and section 16(3) of the Indian Income tax Act, 1922. The appellant claimed that since the settlement was for the lifetime of his wife, the third proviso to section 16(i)(c) applied and the dividend which his wife received could not be deemed to be his income under section 16(i)(c), and that section 16(3) was not applicable because there was no transfer of the shares to his wife. Held, that on its true construction the deed dated January 19, 1953, was not a transfer of any existing property of the appellant namely, the shares held by him, but only a contract to transfer or make over in future every dividend and sum of money which may be declared or become due and payable on account or in respect of the shares, to his wife during her lifetime. Since the company could pay the dividend only to the registered shareholder or under his orders, the income continued to accrue to the appellant though applied subsequently towards payment to the wife under the terms of the contract. The income, therefore, was assessable in the hands of the appellant. Howrah Trading Co. Ltd. vs Commissioner of Income tax, Cal cutta, [1959] SUPP. 2 S.C.R. 448, relied on. Bacha F. Guzday vs Commissioner of Income tax, Bombay, ; , held not applicable. Bejoy Singh Dhudhuria vs Commissioner of Income tax, (1933) L.R. 60 I.A. 196, distinguished.

The appellants were assessees under the Income Tax Act under the jurisdiction of the Income Tax officer, Nellore since a number of years on 23 1 1973, the Central Board of Direct Taxes sent a notice to the appellants under section 127(1) of the Income Tax Act proposing to transfer their case files for facility of investigations" from the respective Income. Tax Officer Nellore to the Income Tax Officer 'B ' Ward, Special Circle. II, Hyderabad and called for objections, if any, to the proposed transfer within fifteen days of the receipt of the notice. Despite their representations objecting to the transfer, the Central Board ordered the transfer on 26 7 1973. The validity of the order was questioned before the Andhra Pradesh High Court by an application under Article 226 of the Constitution on the ground of violation of principles of natural justice inasmuch as neither the reasons were given. nor communicated in the said order. The writ petition was dismissed by a single Judge holding that mere failure to communicate the reasons which were found by him to have been recorded in the files, to the appellants was not fatal. The Letters Patent Appeal before the Division Bench failed. Allowing the appeal by special leave and rejecting the contentions of the Revenue. namely. (a) that the reasons given in the notice under section 127(1) calling for objections, namely, "facility for investigations can be read a part of the impugn ed order. (b) that recording of the reasons in the file, although not communicated to the assessee, fully meets the requirements of section 127(1) and (c) that the orders under section 127 (1) being "purely administrative in nature, it was not necessary to give the assessee, an opportunity to be heard and there was consequently no need to record reasons for the transfer, the Court ^ HELD:(1) Unlike section 5(7A) of the 1922 Act, section 127(1) of the Income Tax Act, 1961, requires reasons to be recorded prior to the passing of an order of transfer. Once an order is passed transferring the case file of an assessee to another area, the order has to be communicated. Communication of the order is an absolutely essential requirement since the assessee is then immediately made aware of the reasons which impelled the, authorities to pass the order of transfer. The Legislature has imposed the requirements of show cause notice and also recording of reasons to avoid a great deal of inconvenience and the monetary loss if a case file is transferred from the usual place of residence or office where originally assessments are made to a distant place. [888A, 889A B] (2) The reason for recording of reasons in the order and making these reasons known is to enable an opportunity to the assessee to approach the High Court under its writ jurisdiction under Article 226 of the Constitution or even the Supreme Court under Article 136 of the Constitution in an appropriate case for challenging the order, inter alia, either on the ground it is mala fide or arbitrary or that it is based on irrelevant and extraneous considerations, irrespective of the result of such a writ or special leave application. [889C D] 885 (3) Recording of reasons and disclosure thereof is not a mere formality. The requirement of recording reasons under section 127 (1) of the Income Tax Act is a mandatory direction under the law and non communication thereof is not saved by showing that the reasons exist in the files although not communicated to the assessee. [889 E] Pannalal Binjraj and Another vs The Union of India and Others, , applied. Sunanda Rani Jain vs Union of India and Others, , overruled. Shri Pragdas Umar Vaishya vs Union of India and others, [1967] 12 Madhya Pradesh Journal 868, discussed. (4) When law requires reasons to be recorded in a particular order affecting prejudicially the interest of any person, who can challenges the order in Court, it ceases to be a mere administrative order and the vice of violation of the principles of natural justice on account of omission to communicate the reasons is not expiated. [890 C] Kashiram Aggarwalla vs Union of India and others, , not applicable. section Narayanappa and others vs Commissioner of Income tax, Bangalore, , distinguished. (5) In the insant case, non communication of the reasons in the order passed under section 127(1) of the Income Tax Act, 1961 is a serious infirmity in the order and it is invalid. [890 G]

An air parcel declared by the consigner to contain rasogollas and other edibles was found to contain Rs. 51,000 worth of Indian currency notes. The parcel was booked to be sent from Calcutta to Hong Kong. The consignor 's name as given. on the parcel was found to be false and on investigation the suspicion of the customs authorities fell on the appellants two of whom were partners in a firm, the third being an employee of the firm. The office of the firm was searched. Certain incriminating documents including account slips and cash books of the firm were seized. In a complaint filed by the Assistant Collector of Customs against the appellants and their firm it was alleged that sending out money in Indian currency was prohibited by section 8(2) of the Foreign Exchange Regulation 7 of 1947 and any attempt to do the same was punishable under section 23B of the Act. The trial court acquitted the appellants but the High Court in appeal convicted them under section 23(1A). By special leave appeals were filed in this Court. Judgment was delivered on August 18, 1970. Thereafter review petition No. 37 of 1970, was filed. A further judgment in respect of the contention raised therein as to the interpretation of section 23C(i) was delivered on February 18, 1971. HELD : (i) The proposition that if an investigating officer conducts a search his evidence cannot be relied on unless it is corroborated is a novel one with no principle or authority to support it. It all depends on the facts of each case. In the present case there was the corroborative evidence of P.W. 8 who signed the search document and also the entries themselves in the account books and their tallying with the slips. [755 G] (ii) There was no substance in the argument that the account slips could not be taken into consideration because they were not evidence. These were part of the things discovered during search and if the entries therein were carried into the account books there was no reason why they could not be looked at [755 H] (iii) In the context of section 23C(1) a person 'in charge ' must mean that the person should be in over all control of the day to day business of the company or firm. The inference follows from the wording of section 23C(2). It mentions director who may be a. party to the policy being followed by 749 a company and yet not be in charge of the business of the company. Further it mentions manager who usually is in charge of the business not in over all charge. Similarly the other officers may be in charge of only some part of the business. [758 G 759 A] State vs section P. Bhadani, A.I.R. 1959 Pat. 9, R. K. Khandelwal vs State and Public Prosecutor vs R. K. Karuppian, A.I.R. 1958 Mad. 183, referred to. In the present case the appellant G had himself stated that he alone looked after the affairs of the firm. This meant that he was in charge within the meaning of the section though there may be a manager working under him [760 C D] When a partner in charge of a business proceeds abroad it does not mean that he ceased to be in charge, unless there is evidence that he gave up charge in favour of another person. Therefore it must be held that the appellant was in charge of the business of the firm within the meaning of section 23C(1). [760 E F]. In view of the fact that G was abroad at the time of contravention it was possible that the contravention took place without his knowledge or lack of diligence. He was being vicariously punished. In such a case a. sentence of imprisonment may not be imposed but a sentence of fine only would meet the ends of justice. [760 G] (iv) As regards appellant P the prosecution had been unable to prove by any reliable evidence that he took any active part in the conduct of the business of the firm. He must therefore be given the benefit of doubt and acquitted. [757 A] (v) The case was fit for review because at the time of arguments the attention of the court was not drawn specifically to sub section 23C(2) and the light it throws on the interpretation of sub s.(1). [761 A]

The respondent stocked 'bunker coal ' at Candle Island in the State of Madras. They sold the coal to steamers calling at the port of Cochin in the State of Travancore Cochin and delivered it there. The respondent was assessed to sales tax on such sales for the year 1951 52 and 1952 53. , The respondent contended that no sales tax could be levied on these sales since they were either sales ' in the course of export ' or in the course of inter State trade exempt from sales tax under sub cl. (1) (b) or cl. (2) of article 286 of the Constitution and in the alternative that they were exempt from tax under a notification dated February 5, 1954, issued by the appellant State under which sales failing within the Explanation to article 286(1)(a) made during the period 4 1 1951 to 31 3 1953 were exempted from liability to pay tax. Held that the sales were exempt from tax under the Government Notification. The coal was delivered to the actual consumer, i. e., the steamships in Travancore Cochin and they were at liberty to consume it :wherever they desired, either within the State or outside the choice depending on its convenience and necessity. The delivery was for consumption within the State and the sales fell within the Explanation to Aft. 286(1)(a). Though the sales were in the course of inter State trade which were covered by the ban on taxation imposed by article 286(2) the levy was validated by the Sales Tax Validation Act, 1956. M. P. V. Sundararamier & Co. vs The State of Andhra Pra desh; , , relied on. The sales were not made 'in the course of export and were not covered by the ban imposed by article 286(1)(b). For article 286(1)(b) to apply it was not sufficient that the goods merely moved out of the territory of India, but it was further necessary that the goods should be intended to be transported to a destination beyond India. The concept of 'export ' in article 286 postulated the existence of two termini between which the goods were intended to be transported. 220 Burmah Shell Oil Storage & Distributing Co. of India Ltd. vs The Commercial Tax Officer, C.A. 751 of 957 & C.A. 10 of 1958 (Unreported) followed.

In response to a show cause notice dated March 15, 1957, under section 28(1)(c) of the Income Tax Act, before imposing a penalty for deliberate concealment of its income, the appellant, through its authorised representative, voluntarily agreed to a slum of Rs. 15,000/ being treated as income of Hindu Undivided Family. The Income Tax officer, by his order dated March 20,1958, added a sum of Rs. 68,550/ to the income of the appellant and imposed on it a penalty of Rs. 26,000/ which on appeal was reduced to Rs. 15,000/ . Meanwhile, on March 19, 1957, the appellant filed an application under section 25A of the Act for an order recording partition of joint family property in definite portions from June 22, 1956, claiming that date to be the date of partition. The Income Tax officer, after due enquiries, accepted the disruption of the Hindu Undivided Family as claimed by his order dated March 26, 1962. This led the appellant to contend that, in view of ' the orders dated March 26, 1962, of the Income Tax officer, the imposition of the penalty by him on March 20, 1958 was bad in law and could not be sustained. The Tribunal uphold the contentions of the appellant resulting in a reference under section 66(1) of the Act to the High Court of Allahabad (Lucknow Bench), which reversed the decision or the Tribunal. However, the High Court granted a certificate of fitness for appeal to this Court. Dismissing the appeals the Court, ^ HELD: Sub section (3) of section 25A of the Income Tax Act embodies a legal fiction according to which a Hindu family which has been previously assessed as "undivided" is to be continued to be treated as "undivided" till the passing of the order under sub section (1) of section 25A. So long as no order under section 25(A)(1) 1 of the Act is recorded, the jurisdiction of the Income Tax officer to continue to assess as undivided despite a partition under personal law, a Hindu family which has hitherto been assessed in that status, remain unaffected. [508G H] Additional Income Tax Officer, Quddapah vs A. Thimmayya vs Commissioner of Income Tax, Gujrat , applied. Commissioner of Income Tax vs Sanchar Sah Bhim Sah section A. Raju Chattiar & Ors. vs Collector of Madras & Anr. ; Mahankali Subba Rao Mahankali Nageswara Rao & Anr. v, Commissioner of income Tax. Hyderabad and Commissioner of Income Tax, Punjab vs Mothu Ram Prem Chand , not applicable

The right of appeal is a matter of substantive right and not merely a matter of procedure, and this right becomes vested in a party when the proceedings are first initiated in, and before a decision is given by, the inferior Court and such a right cannot be taken away except by express enactment or necessary intendment. Section 22(l.) of the Central Provinces and Berar Sales Tax Act, 1947, provided that no appeal against an order of assessment should be entertained by the prescribed authority unless it was satisfied that such amount of tax as the appellant might admit to be due from him, had been paid. This Act was amended on the 25th November, 1949, and section 22(l) as amended provided that no appeal should ])a admitted by the said authority unless such appeal was accompanied by satisfactory proof of the payment of the tax in respect of which the appeal had been preferred. On the 28th of November, 1947, the appellant submitted a return to the Sales Tax Officer, who, finding that the turnover exceeded 2 lacs, submitted the case to the Assistant Commissioner for disposal and the latter made an assessment on the 8th April, 1950. The appellant preferred an appeal on the 10th May, 1950, without depositing the amount of tax in respect of which he had appealed. The Board of Revenue was of opinion that section 22(l.) as amended applied to the case as the assessment was made, and the appeal was preferred, after the amendment came into force, ' and rejected the appeal. Held, (i) that the appellant had a vested right to appeal when the proceedings were initiated, i.e., in 1947, and his right to appeal was governed by the law as it existed on that date ; (ii) that the amendment of 1950 cannot be regarded as a mere alteration in procedure or an alteration regulating the exercise of the right of appeal, but whittled down the right itself, and it had no retrospective effect as the Amendment Act of 1950 did not expressly or by necessary intendment give it retrospective effect, and the 988 appeal could not therefore be rejected for non payment of the tax in respect of which the appeal was preferred. Colonial Sugar Refining Co. Ltd. vs Irving , Nanabin Aba vs Sheku bin Andu (I.L.R. , Delhi Cloth and General Mills Co. Ltd. vs Income tax Commissioner, Delhi (54 I.A. 421), Kirpa Singh vs Rasaldar Ajaipal Singh (A.I.R. 1928 Lab. 627), Sardar Ali vs Dalimuddin (I.L.R. applied. Badraddin Abdul Rahim vs Sitaram Vinayak Apte (I.L.R. disapproved. In re Vasudeva Samiar (A.I.R. 1929 Mad. 381), Ram Singha vs Sankar Dayal (I.L.R. 50 All. 965), Radhakisan vs Sri Dhar (A.I.R. , Gordhan Das vs Governor General in Council (A.I.R. 1950 Punj. 103) and Nagendra Nath Bose vs Monmohan referred to.

Appeal No. 419 of 1958. Appeal by special leave from the judgment and order dated August 20, 1957, of the Calcutta High a Court in Income tax Reference No. 1 of 1956. Hardyal Hardy and D. Gupta, for the appellant. N. C. Chatterjee, Dipak Choudhri and B. N. Ghosh, for the respondent. November 28. The Judgment of the Court was delivered by KAPUR, J. This is an appeal by special leave against the judgment and order of the High Court of Judicature at Calcutta in a reference made by the Income tax Appellate Tribunal under section 66(1) of the Income tax Act. The following question was referred: "Whether in the facts and circumstances of this case, the Appellate Tribunal was right in holding that Rs. 61,818 spent by the assessee to train Indian boys as jockeys, did not constitute expenses of the business of the assessee allowable under section 10(2)(xv)?" which was answered in favour of the respondent. The Commissioner is the appellant before us and the assessee is the respondent. The respondent is an association of persons whose business is to hold race meetings in Calcutta on a commercial basis. It holds two series of race meetings during the two seasons of the year. The respondent does not own any horses and therefore does not employ jockeys but they are employed by owners and trainers of horses which are run in the races. It is a matter of some importance to the respondent that there should be jockeys available to the owners with sufficient skill and experience because the success of races to a considerable extent depends upon the experience and skill of a jockey who rides a horse in a race. Because it was of the opinion that there was a risk of the jockeys becoming unavailable and that such unavailability would seriously affect its business which might result in its closing 731 down the business, the respondent considered it expedient to remedy that defect. Therefore in 1948, it, established a school for the training of Indian boys as jockeys so that after their training they might be available for purposes of race meetings held under its auspices. The school, however, did not prove a success and after having been in existence for three years it was closed down. During the year ending March 31, 1949, the respondent spent a sum of Rs. 62,818 on the running of its school and claimed that amount as a deduction under section 10(2)(xv) of the Income tax Act and also in the assessment under the Business Profits Tax for the chargeable accounting period ending March 31, 1949. This claim was disallowed by the Income Tax Officer and on appeal by Appellate Assistant Commissioner and also by the Income tax Appellate Tribunal. At the instancc of the respondent the question already quoted was referred to the High Court and was answered in favour of the respondent. This appeal is brought by special leave against that judgment. The decision under the Business Profits Tax Act will be consequential upon the decision of the deduction under the Income tax Act. The Tribunal found that it was not the business of the respondent to provide jockeys to owners and trainers, that the jockeys trained in the respondent 's school were not bound to ride only in the races run by the respondent and that the benefit, if any, which accrued was of an enduring nature. It also found that the respondent had been conducting race meetings since long, that it was not the case of the assessee that if it did not train jockeys they would become unavailable and that the mere policy of producing efficient Indian jockeys was not a sufficient consideration for treating the expenditure as one incurred for the business of the respondent. For these reasons the expenditure was disallowed. Before the Appellate Assistant Commissioner, it was contended by the respondent, that the reason for incurring the expenditure was "to promote efficient Indian jockeys" and it was in the interest of the respondent to see that the races are not abandoned on 732 account of the scarcity of jockeys. In the order of the Tribunal it is stated that this was not the case of the respondent, and therefore when the respondent wanted paragraph 5 of the statement to be substituted by the following: "It was the case of the assessee that unless it trained Indian Jockeys, time may come when there may not be sufficient number of trained jockeys to ride horses in the races conducted by the assessee. " the Tribunal did not agree to do so. Counsel for the appellant raised three points before us; (1) The question as to whether an item of expenditure is wholly and exclusively laid out for the purposes of business or not is a question of fact; (2) the connection between an expenditure and profit earning of the assessee should be direct and substantial and not remote and (3) to be admissible as revenue expenditure it should not be in the nature of a capital expense, i.e., it should not bring into existence an asset of an enduring nature. As to the first question this court has held in Eastern Investments Ltd. vs Commissioner of Income tax, West Bengal (1) that "though the question must be decided on the facts of each case, the final conclusion is one of law". In Commissioner of Income Tax vs Chandulal Keshavlal & Co. (2), this Court said: "Another test is whether the transaction is properly entered into as a part of the assessee 's legitimate commercial undertaking in order to facilitate the carrying on of its business; and it is immaterial that a third party also benefits thereby. (Eastern Investment Ltd. vs Commissioner of Income Tax, (1951) 20 I.T.R. 1). But in every case it is a question of fact whether the expenditure was expended wholly and exclusively for the purpose of trade or business of the assessee. In the present case the finding is that it was laid out for the purpose of the assessee 's business and there is evidence to support this finding." But those observations must be read in the context. In that case the assessee firm was the Managing Agent of a Company and at the request of the Directors of (1) ; , 598. (2) , 610. 733 the latter agreed to accept a lesser commission for the year of account than it was entitled to. It was found, by the Appellate Tribunal there that the amount was expended for reasons of commercial expediency and was not given as a bounty but to strengthen the managed company so that if its financial position became strong the assessee would benefit thereby, and an the evidence the Tribunal came to the conclusion that the amount was wholly and exclusively for the purpose of such business. It was on this evidence that the expense was held to be wholly and exclusively laid out for the purpose of the assessee 's business and this was the finding referred to. In that case the Tribunal had not misdirected itself as to the true scope and meaning of the words "wholly and exclusively laid out for the purpose of the assessee 's business". In the present case the Income tax Appellate Tribunal had misdirected itself as to the true scope and meaning of these words. In our opinion, in the circumstances of this case, it cannot be said that the finding of the Tribunal was one of fact. The question as to whether the expenses of running the school for jockeys is deductible has to be decided taking into consideration the circumstances of this case. The business of the respondent was to run race meetings on a commercial scale for which it is necessary to have races of as high an order as possible. For the popularity of the races run by the respondent and to make its business profitable it was necessary that there were jockeys of requisite skill and experience in sufficient numbers who would be available to the owners and trainers because without such efficient jockeys the running of race meetings would not be commercially profitable. It was for this purpose that the respondent started the school for training Indian jockeys. , If there were not sufficient number of efficient Indian jockeys to ride horses its interest would have suffered, and it might have had to abandon its business if it did not take steps to make jockeys of the necessary calibre available. Therefore any expenditure which was incurred for preventing the extinction 93 734 of the respondent 's business would, in our opinion, be expenditure wholly and exclusively laid out for the purpose of the business of the assessee and would be an allowable deduction. This finds support from decided cases. In Commissioner of Income tax vs Chandulal Keshavlal & Co. (1), this Court held that in order to justify a deduction the disbursement must be for reasons of commercial expediency; it may be voluntary but incurred for the assessee 's business; and if the expense is incurred for the purpose of the business of the assessee it does not matter that the payment also enures to the benefit of a third party. Another test laid down was that if the transaction is properly entered into as a part of the assessee 's legitimate commercial undertaking in order to facilitate the carrying on of its business it is immaterial that a third party also benefits thereby. In British Insulated and Helsby Cables vs Atherton (2), Viscount Cave L. C. held that a Bum of money expended, not of necessity and with a view to a direct and immediate benefit to the trade, but voluntarily and on the ground of commercial expediency and in order indirectly to facilitate the carrving on of the business may yet be expended wholly and exclusively for the purpose of the trade. In a case more recently decided Morgan vs Tate & Lyle Ltd. (3) the assessee company was engaged in sugar refining business and it incurred expenses in a propaganda campaign to oppose the threatened nationalisation of the industry. It was held by the House of Lords by a majority that the object of the expenditure being to preserve the assets of the company from seizure and so to enable it to carry on its business and earning profits, the expense was an admissible deduction being wholly and exclusively laid out for the purpose of the company 's trade. Lord Morton of Henryton said: "Looking simply at the words of the rule I would ask:"If money so spent is not spent for the purpose of the company 's trade, for what purpose is it spent?" If the assets are seized, the company can no longer (1) , 610. (2) (3) 735 carry on the trade which has been carried on by the use of these assets. Thus the money is spent to preserve the very existence of the company 's trade". See also Strong & Co. vs Woodifield(1), the observations of Lord Davey; and Smith vs Incorporated Council of Law Reporting (2). Counsel for the appellant relied upon the judgment of the Privy Council in Ward & Co. Ltd. vs Commissioner of Taxes (3 ), but that decision proceeds on a different statute where the words were of a very restrictive character, the words being: ". . . . Expenditure or loss of any kind not exclusively incurred in the production of the assessable income derived from that source. . . This case was distinguished in Morgan vs Tate & Lyle(4) on the ground that the language of the Now Zealand statute was much narrower than the language of r. 3A in England. Reference was also made by the appellant to Boarland vs Kramat Pulai Ltd. (5). In that case Directors of three Companies engaged in tin mining in Malaya incurred expenditure on printing. and circulating to shareholders a pamphlet containing remarks of the Chairman of the Company. The pamphlet was an attack on the policy and acts of the Socialist Government and it was held that the question whether the money was wholly and exclusively laid out or expended for the purpose of trade within the meaning of rules applicable to the question was one of law but on a consideration of the question it was held that the expenditure was not solely incurred with that object. It is not necessary to discuss that case at any length because what was held in that case was that the pamphlet was not wholly and exclusively for the purpose of the company 's trade. Applying the law, as laid down in those cases, to the present case the conclusion is that the amount in dispute was laid out wholly and exclusively for the purpose of the respondent 's business because if the (1) ; (2) [19I4] 3 K.B. 674. (3) [1923] A.C 145. (4) (5) 736 supply of jockeys of efficiency and skill failed the business of the respondent would no longer be possible. Thus the money was spent for the preservation of the respondent 's business. As to the third point there is no substance in the submission that the expenditure was in the nature of a capital expense because no asset of enduring nature was being created by this expense. In our opinion the High Court has rightly held that the expenditure claimed was one which was wholly and exclusively laid out for the purpose of the respondent 's business. It was to prevent the threatened extinction of the business of the respondent. In the result this appeal is dismissed with costs. Appeal dismissed.

The business of the respondent club was to run race meetings on a commercial scale. The club did not own any horse, and therefore did not employ jockeys. it was a matter of some importance to the club that there were jockeys of requisite skill and experience in sufficient numbers who would be available to the owners and trainers because otherwise the running of the race meetings would not be commercially profitable and its interest would suffer and it might have had to abandon its business if it did not take steps to make jockeys of the necessary calibre available. Therefore it established a school for the training of Indian boys as jockeys and claimed the sums spent on the running of the school as deductable amount under section 10 (2)(XV) of the Indian Income Tax Act. The question was whether in the circumstances of the case the expenditure claimed was one which was wholly and exclusively laid out for the purpose of the respondent 's business. Held, that any expenditure which was incurred for preventing the extinction of a business would be expenditure wholly and exclusively laid opt for the purpose of the business of the assessee and would be an allowable deduction. In the instant case the amount in dispute was laid out wholly and exclusively for the purpose of the respondent 's business, because if the supply of jockeys of requisite efficiency and skill failed, the business of the respondent would no longer be possible. Eastern Investments Ltd. vs Commissioner of Income tax, West Bengal, ; and Commissioner of Income tax vs Chandulal Keshavlal & Co., ; relied on, British Insulated and Helsby Cables vs Atherton, [1926] A. C. 205, Morgan vs Tate & Lyle Ltd., and Boarland vs Kramat Pulai Ltd., , discussed. Strong & Co. vs Woodifield, ; and Smith vs Incorporated Council of Law Reporting, , referred to. Ward & Co. Ltd. vs Commissioner of Taxes, [1923] A. C. 145, distinguished.

The assessee was running a business of plying buses and during its previous year ending on August 16, 1959, the buses had been plied for part of the year but were sold thereafter. The Income tax Officer assessed the difference between the sale price of the buses and their written down value to tax as profit under the second proviso to section 10(2) (vii). In appeal, the Appellate Assistant Commissioner rejected the assessee 's contention that the business had been transferred as a whole and therefore the profit in question could not be taxed. The Tribunal also dismissed an appeal taking the view that the buses had been plied by the assessee for part of the previous yea.r and the profit on the sale of these buses was taxable under the said provision. However, the High Court, upon a reference, held that the amount in question was not assessable as profit under section 10(2)(vii) on the assumption that the whole of the bus service business had been wound up during the relevant period. On appeal to this Court. HELD: allowing the appeal: Even on the assumption that the sale of the buses was a closing down or a realization sale it would nonetheless be taxable since the sale was made after the amendment of the second proviso. section 10(2)(vii) by Act 67 of 1949. [533 F G] According to the law laid down by this Court the view of the High Court would have been sustainable if the sale in the present case had been effected during the assessment year prior to the amendment of the proviso by Act 67 of 1949. The critical words which were inserted by that proviso namely, "whether during the continuance of the business or after the cessation thereof", must be given their proper meaning. It is quite plain that if the building, machinery or plant is sold during the continuance of the business or after the business ceases, the sale proceeds would be liable to tax in accordance with the proviso. When the legislature clearly provided that the proviso would apply even if the sale was made, after the cessation of the business, it is difficult to conceive that it was intended to exclude from the ambit of the proviso a sale made for the purpose of closing down the business or effecting its cessation. [535 F H] Commissioner of Income tax, Madras Iv. Express Newspapers Ltd., Madras, , 195; Commissioner of Income tax, Kerala vs West Coast Chemicals and Industries Ltd. ; Commissioner of Income tax, Kerala vs R.R. Ramakrishna Pillai, and The Liquidators of Pursa Limited vs Commissioner of Income tax, Bihar; , ; distinguished. Commissioner of Income tax vs Ajax Products Ltd., ; ; referred LI 3Sup. CI/68 3 532

By an order dated 31st December, 1968, the sales tax officer found from the turnover of the respondent firm as revealed from the quarterly returns filed by the assessee that is disclosed an assessable income. He proceeded to make a provisional assessment in respect of the portion of the assessment year 1968 concerned purporting to act under section 7A of ' the U.P. Sales Tax Act. The respondent challenged the same before the High Court praying that the sales tax officer had no jurisdiction to make a provisional assessment, because the assessee had in fact filed a return. The High Court of Allahabad accepted the contention and quashed the order of the sales tax officer. The High Court hold that as conditions mentioned in section 7(3) did not apply to the facts of the case in as much as it was not a case in which the assessee had not filed a return at all, no assessment could have been made by the sales tax officer. Allowing the appeal by special leave, ^ HELD: Section 7A clearly authorises the assessing authority to make provisional assessment in respect of the assessment year to the best of his judgment, and does not contain any pre conditions at all. On the other hand it applies the provisions of the Act which includes the provisions of section 7(3) which is the provision that confers power on the assessing authority to make an assessment to the best of his judgment. It is true that sub rule (3) of rule 41 contains a provision that the provisional assessment to the best of the judgment can be made where no return is submitted, but this rule has to be read as supplemental to the provisions of the parent Act. What this rule implies is that whether the return is filed by the assessee or not, the assessing authority will have the power to make provisional assessment. There is no inconsistency between section 7A and rule 41(3) of the Rules framed under the Act. [778 A B, D F]

' Eldee ', one of the branches of the respondent had advanced a loan to another concern, 'Castle '. The respondent claimed under section 15C of the Income Tax Act, exemption from tax in respect of 6 % of the capital employed in 'Eldee ' as a newly established undertaking and sought to include in the computation of the capital so employed the amount advanced to Castle '. The Income tax Appellate Tribunal directed inclusion of the amount advanced to 'Castle ' in the computation of capital invested for the purpose of section 15C. The Commissioner 's application under section 66(1) of the Act to the Tribunal to refer a question which arose out of the order of the Tribunal was rejected and his petition under s 66(2) for an order directing the Tribunal to state the case and refer it to the High Court was also dismissed. The question in dispute before the Revenue Authorities was whether 'Castle ' was a branch of the assessee. The Appellate Assistant Commissioner thought that the same eight persons were partners in these two undertakings and that the constitution of both the undertakings being the same, 'Castle ' could not be regarded as a separate entity. The Tribunal disagreed with that view relying upon only one circumstance that in the assessment for the year 1951 52 the income from 'Castle ' had not been computed and included in the assessment of the respondent. Held : Under the Income tax Act it is for the Tribunal to decide all questions of fact: the High Court has the power merely to advise the Tribunal on questions of law arising out of the order of the Tribunal. In so advising the High Court must accept the findings of the Tribunal on matters of appreciation of evidence. But the refusal of the Tribunal to state a case for the opinion of the High Court, on the view that a question of law does not arise out of the order is not conclusive. The High Court has the power to call upon the Tribunal to state the case if in its view a question of law arises out of the order of the Tribunal, and also if the Tribunal has misdirected itself in law in arriving at its findings. It is not open to the court to discard the Tribunal 's finding of fact, if there is some evidence to support the finding of the Tribunal on a question of fact, even if on a review of the evidence the court might have arrived at a difficult conclusion. It must however appear that the Tribunal had considered evidence covering all the essential matters before arriving at its con 428 clusion. If the conclusion of the Tribunal is based upon some evidence ignoring other essential matters it cannot be regarded as a finding not giving rise to a question liable to be referred to the Court. (ii) The conclusion of the Tribunal suffers from a double infirmity: it assumed the only fact on which its conclusion was founded and ignored other relevant matters on which the Appellate Assistant Commissioner relied. The Tribunal had therefore misdirected itself in law in arriving at its finding, and in refusing to require the Tribunal to state the case and to refer it, the High Court was in error.

In Appeal No. 1347(N) 1977 by special leave against the interlocutory orders dated 21 4 1977 of the Company Judge of the Calcutta High Court in the company petition No. 85/75, filed by the respondents sections 397/398 of the Companies Act, '1956, complaining of oppression by majority and praying for certain reliefs against the appellants and also the orders dated 25 4 1977 of the Division Bench against that order, this Court made an order on 31 5 1977, in terms of an agreement reached between the par ties. By one such term the company was directed to purchase 1300 shares held by the respondents petitioners. The price of the shares was to be determined by Messrs. Price Water House and Peet, Chartered Accountants and Auditors, as on the date of the filing of the petition sections 397 398, on the basis of the existing as also contingent and anticipated debts, liabilities, claims, payments and receipts of the ' company. The Chartered Accountants were to determine the value of the shares after examining accounts and calling for necessary explanations and after giving opportunity to both the groups to be heard in the matter and the determination of the value by the Chartered Accountants was to be final and binding and not open to any challenge by either side on any ground whatsoever. After such determination of the value the company has to purchase the shares, and, on such purchase, the share capital of the company was to stand reduced protanto. The order made it ;fear that if the value of the shares is more than Rs. 65/ per share, the company will have to pay the balance, and, if it is less than Rs. 65/ per share, the respondents who have to sell the shares, will have to refund the difference between. the price of the shares calculated at the rate of Rs. 65/ per share and the rate determined by the Chartered Accountants and Auditors within four weeks from the date of determination. After the appeal was thus disposed of, the interveners, claiming to be the creditors of the company to the extent of 40 lakhs, in their petition dated 22 8 1977 requested the Court (i) to permit them to be heard and (ii) to postpone the purchase of shares by the company until such time as the company adopts proceedings in a competent court by following the procedure laid down by the , particularly in Sections 100 to 104 for reduction of the share capital. In the alternative they prayed for safeguarding their interests by modifying the Court 's order dated 31 5 1977. Rejecting the petition to interfere with its order dated 31 5 1977, the Court, after hearing the interveners, HELD : (i) Section 77 envisages that, on the purchase by a company of its own shares, reduction of its share capital may be effected and sanctioned in either of two different modes : (i) according to the procedure prescribed in Sections 100 to 104; or (ii) under section 402, depending upon the circumstances in which reduction becomes necessary. [427E F] (ii) Section 77 of the prohibits the company from buying its own shares unless the consequent reduction of capital is effected and sanctioned in pursuance of Sections 100 to 104 or Section 402. It places an embargo on the company purchasing its own shares so as to become its own member, but the embrago is lifted, if the company reduces its share capital protanto. [427E] 423 (iii) Section 77 leaves no room for doubt that reduction of share capital may have to be brought about in two different situations by two different modes. Undoubtedly, where the company has passed a resolution for reduction of its share capital and has submitted it to the Court for confirmation, the procedure prescribed by Sections 100 to 104 will have to be followed, if they are attracted. On the other hand, where the Court, while disposing of a petition under Ss. 397 and 398, gives a direction to the company to purchase shares of its own members, consequent reduction of the share capital is bound to ensue, and, before making such a direction it is not always necessary to give notice of the consequent reduction of the share capital to the creditors of the company. No such requirement is laid down by the Act. The two procedures ultimately bringing about reduction of the share capital are distinct and separate and stand apart from each other; and one or the other may be resorted to according to the situation. That is the clearest effect of the disjunctive 'or ' in section 77. [428H, 429AB] (iv) Where the reduction of share capital is necessitated by directions given by the Court in it petition under sections 397 and 398, the procedure prescribed in Sections 100 to 104 is not required to be followed in order to make the direction effective. [428G] (v) It would not be correct to say that, whenever it becomes necessary to reduce the capital of a company, the reduction can be brought about only by following the procedure prescribed in Ss. 100 to 104. Sections 100 to 104 specifically prescribe the procedure for reduction of share capital where the Articles of the company permit and the company adopts a special resolution which can only become effective on the Court according sanction to it. Reduction of share capital may also take pursuant to a direction of the Court requiring the company to purchase the shares of a group of members while granting relief u/s 402. Both the procedures, by which reduction of capital of a company may be effected, are. distinct and separate and stand apart from each other. [427F H] (vi) The scheme of Ss. 397 to 406 is to constitute a code by itself for granting relief to oppressed minority shareholders and for granting appropriate relief, a power of widest amplitude, inter alia, lifting the ban on company purchasing its share under Court 's direction, is conferred on the Court. When the Court exercises this power by directing a purchase of its shares by the company, it would necessarily involve reduction of the capital of the company. Such a power of the Court is not subject to a resolution to be adopted by the members of the company which, when passed with, statutory majority, has to be submitted to Court for confirmation. No canon of construction would permit such an interpretation in which the statutory power of the Court for its exercise depends upon the vote of the members of the company. [428C E] (vii) If reduction of share capital can only be brought about by resorting to the procedure prescribed in Ss. 100 to 104, it would cause inordinate delay and the very purpose of granting relief against oppression would stand self defeated. [428E F] (viii) When minority shareholders complain of oppression by majority and seek relief against oppression from the Court under Ss. 397 and 398 and the Court, in a petition of this nature, considers it fair and just to direct the com pany to purchase the shares of the minority shareholders to relieve oppression, if the procedure prescribed by Ss. 100 to 104 is required to be followed, the resolution will have to be first adopted by the members of the company, but that would be well nigh impossible because the very majority against whom relief is sought would be able to veto it at the threshold and the power conferred on the Court would be frustrated. That could never have been the intention of the Legislature. [428F H] (ix) The object_behind prescribing this procedure requiring, in special circumstances as contemplated in Section 101(3), the court to give notice to the creditors is that the members of the company may not unilaterally act to the detriment of the creditors behind their back. If such a procedure were not prescribed, the Court might, unaware of all the facts, be persuaded by the members to confirm the resolution and that might cause, serious prejudice to the creditors. But such a situation would not be likely to arise in a petition 424 under Ss. 397 and 398. In such a petition the Court would be in a better position to have all the relevant facts and circumstances before it and it would be the Court which would decide whether to direct purchase of shares of the members by the company. Before giving such a direction, the Court Would certainly, keep in view all the relevant facts and circumstances, including the interest of the creditors. Even if the petition is being disposed ' of on a compromise between the parties, yet the Court, before sanctioning the compromise, would certainly satisfy itself that the direction proposed to be given by it pursuant to the consent terms, would not adversely affect or jeopardise the interest of the creditors. Therefore, it cannot be said that merely because section 402 does not envisage consent of the creditors before the Court gives direction for reduction of share capital consequent upon purchase of shares of some of the members by the company. there is no safeguard for the creditors. [430EH] In the instant case, there is no scope for apprehension on behalf of the interveners that the reduction of share capital to be effected under the Court 's direction, without reference or notice to creditors, would adversly affect their interests because : (1) As per the order of the Court dated 31st May, 1977 while ascertaining the break up value of the shares on the date of filing the petition under Sections 397 and 398, the Chartered Accountants and Auditors will have to take into account the assets of the company as also the existing, contingent and anticipated debts, liabilities, claims, and demands etc., as revealed in the accounts of the company for the last five years, which would indisputably include the claims made by the interveners in the two suits filed by them to the extent to which they appear genuine and well founded and. (ii) the order of the Court did not fix any minimum price at which the shares shall be purchased by the company. [431A C, D] (x) A right to notice by reason of any rule of natural justice, which a party may establish, must depend for its existence upon proof of an interest which is bound to be injured by not hearing the party claiming to be entitled to a notice and to be heard before an order is passed. If the duty to give notice and to hear a party is not mandatory, the actual order passed on a matter must be shown to have injuriously affected the interest of the party which was to be given no notice, of the matter. [431G] In the instant case, after hearing the intervener , it was found that no interest of theirs has been injured by not hearing them before the order was passed. The order passed by this Court on 31st May, 1977, is not vitiated on the ground of non issue of notices to them under the inherent powers of the Court under Rule 9 of the Company (Court) Rules, 1959, even though there was no statutory duty to hear them. [431H. 432A] (xi) Undoubtedly, when a petition is made to the Court under Ss. 397 and 398, it is obligatory upon the Court to give notice u/s 400 of the petition to the Central Government and it would be open to the Central Government to make a representation and if any such representation is made, the Court would have to take it into consideration before passing the final order in the proceeding. But Section 400 does not envisage a fresh notice to be issued at the appellate stage. [432C D] (The Court directed to expedite the suit Nos. 729/74 and 933/76 filed by the interveners in the Bombay High Court and dispose off within a period of six months).

Respondents Nos. 2 to 14 were appointed to the cadre of Income tax Officers, Class I, against vacancies reserved for Scheduled Caste and Schedules Tribes, as a result of a competitive examination or test as envisaged by sub rule (3) of Rule 6. The Petitioner was similarly appointed to the same cadre but against a vacancy reserved under sub rule (1) of Rule 4 for certain officers of the Armed Forces of the Union. He was placed in the impugned seniority list below respondents Nos. 2 to 14. He made a representation against the seniority assigned to him on the ground that under sub rule (3) of Rule 6 he was entitled to rank immediately below candidates appointed against unreserved vacancies. The representation was rejected by a letter dated 16th March, 1979. The petitioner filed a petition under article 32 of the Constitution of India seeking the issuance of a writ quashing that letter. At the hearing it was not disputed that the petitioner was entitled to the benefit of reservation sub rule (1) of Rule 4 and to have his seniority determined in accordance with sub rule (3) of Rule 6. However, it was contended on behalf of the respondents Nos. 2 to 14, inter alia, that the rules of the service had been amended earlier to 1971, so as to place candidates covered by sub rule (1) of Rule 4 below those who had been appointed against reserved vacancies through a competitive examination. Accepting the petition, it was ^ HELD: (1) Sub rule (3) of Rule 6 is not ambiguous in any manner whatsoever and lays down in clear terms that the officers appointed against vacancies reserved under sub rule (1) of Rule 4 shall rank below candidates who were appointed against unreserved vacancies in the Services concerned through a competitive examination, etc. [40 F G] 2. Respondents Nos. 2 to 14 have been appointed against vacancies reserved for Scheduled Castes and Schedule Tribes. Clearly therefore, they must rank below the petitioner inasmuch as it cannot be said with any plausibility that they were appointed against unreserved vacancies. [41 A B] 3. The argument that the rules of the service in question had been amended to 1971, so as to place candidates governed by Rule 4(1) below those who had been appointed to reserved vacancies through a competitive examination has no substance and makes no difference to the interpretation which is given above to 39 sub rule (3) of Rule 6, Rule 8 of the Rules declares in no uncertain terms that all rules regulating the recruitment of persons to Central Civil Services and Posts, Class I, to which the Rules apply, shall be deemed to have been amended to the extent provided for in the Rules. Although the rules regulating the seniority of the petitioners and respondents Nos. 2 to 14 were so amended earlier to 1971 as to assign to the petitioner seniority below respondents Nos 2 to 14, the situation is wholly irrelevant to the present dispute because after the amendment brought about by Rule 8 of the Rules, the members of the service to which the contenting parties belong, have to be governed by the later amendment, of which sub rule (3) of Rule 6 forms a part. This is the inescapable consequence flowing from Rule 8 of the Rules. [41 G H, 42 A D] 4. The word 'recruitment ' is comprehensive enough to embrace the content of all the rules proceeding Rule 8 including the fitment of candidates recruited to the service vis a vis each other. [42 D E]

The then Satguru of the appellant Creed was assessed for the assessment years 1937 38, 1938 39 for the first time. He was a retired Govt. servant. His pension as well as the income from the institution were assessed together. On appeal, the Assistant Commissioner of Income tax confirmed the assessments made by the Income tax Officer. The Income tax Commissioner under reference made under section 66(2) of the Income tax Act, 1922 held that the offerings made to the assessee Satguru were offerings as held in trust and same were exempted under section 4(3)(1) of the Act. When an application under Section 35 of the Act was made for ratification, whether the offerings received by the assessee consisted of interest income, property income, and income derived from sale of books and photographs etc. to be excluded, the Commissioner directed deletion thereof. For the year 1939 40, though the Income tax Officer did not allow exemption u/s.4(3)(1) of the Act, the Appellate Assistant Commissioner allowed exemption. Till 1963 64 the appellant was not taxed and its refund applications were accepted by the respondent Revenue. For the assessment years 1964 65, 1965 66, 1966 67, 1967 68, 1968 69, 1969 70, the assessee appellant was as sessed, treating it to be an association of persons, and held that the donations and contributions received volun tarily had limited religious use. When the appellant assesses appealed, the appellate authority upheld the assessments. 313 Against the orders of the Appellate authority the asses see appealed before the Income tax Tribunal. The Tribunal allowing the appeals of the assessee, held that the assessee was entitled to the exemption claimed under Section 11 of the Income tax Act, 1961. On the question, referred to the High Court by the Tribunal, "Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that the income derived by the Radha Swami Satsang, a religious institution, was entitled to exemption under Sections 11 and 12 of the Income Tax Act, 1961?", the High Court answered the question in favour of the Revenuerespondent, holding that the trust deed was revocable and the conditions for exemption under Sections 11 and 12 of the Act were not satisfied. Allowing the appeals of the assessee, this Court, HELD: 1.01. Assessments are quasi judicial. Each assess ment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have al lowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. [320H, 321 A B] 1.02. No formal document is necessary to create a trust. The conditions which have to be satisfied to entitled one for exemption are: (a) the property from which the income is derived should be held under trust or legal obli gation, (b) the property should be so held for charitable or religious purposes which enure for the benefit of the pub lic. [317 E G] 1.03. The property was given to the Satguru for the common purpose of furthering the objects of the Sat Guru. The property was therefore subject to a legal liability of being used for the religious or charitable purpose of the Satsang. [319 E, F] 1.04. The Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under Sections 11 and 12 of the Income Tax Act, 1961. [321 D] Patel Chhotahhai and Ors. Janan Chandra Bask and Ors., AIR 314 1935 Privy Council 97; Acharya Jagdish Waranand Avadhuta & Ors. vs Commissioner of Police, Calcutta & Ant., , The Secretary of State for India in Council vs Radha Swami Sat Sang, ; All India Spinners 'Associ ation vs Commissioner of Income Tax, Bombay, ; TM.M. Sankaralinga Nadar & Bros. & Ors. vs Commissioner of Income tax, Madras, ; Hoystead & Ors. vs Commis sioner of Taxation, and Parashuram Pottery Works Co. Ltd. vs Income tax Officer, Circle 1, Ward A Rajkot, at p.10, referred to.

The appellant, a banking company incorporated in the United Kingdom, carries on banking business in India and is assessed under the Income Tax Act, 1961. The appellant filed a return of its income for the assessment year 1972 73. During the assessment proceedings the Income Tax Officer issued a notice under section 142(1) of the Income Tax Act requiring the appellant to produce certain account books and documents. The appellant applied against the notice to the High Court of Calcutta under Article 226 of the Constitution. The High Court construing the notice in specifically limited terms directed the appellant to comply with it. The appellant preferred an appeal in the High Court. Meanwhile, pursuant to the direction by the learned single judge, the Income Tax Officer made an assessment order on March 31, 1977. Thereafter the appeal was allowed by a Division Bench of the High Court by its judgment dated May 8 and 12, 1978, and the impugned notice under section 142(1) and the consequent assessment order were quashed. But while doing so, the Division Bench also directed the Income Tax Officer to make a fresh assessment. Aggrieved by that direction, the appellant applied for, and obtained special leave to appeal to this Court. Dismissing the appeal, the Court ^ HELD: 1. The High Court was competent to make the order directing a fresh assessment since the limitation for making the assessment had not expired and no valuable right to be assessed had thereby accrued to the appellant. [769 D E] The facts of the case make it clear that the assessment proceedings remained pending during the entire period from March 17, 1975 to March 31, 1977 by virtue of successive stay orders of the Court. If regard be had to clause (ii) of Explanation 1 to section 153 which provides that in computing the period of limitation for the purposes of section 153 the period during which the assessment is stayed by an order or injunction of any court shall be excluded, it is abundantly clear that the assessment order dated March 31, 1977 is not barred by limitation. In computing the period for making the assessment, the Income Tax Officer would be entitled to exclude the entire period from March 17, 1975, on which date there were fourteen days still left within the normal 766 operation of the rule of limitation. The assessment order was made on the very first day after the period of stay expired; it could not be faulted on the ground of limitation. [769 B D] 2. The character of an assessment proceeding of which the impugned notice and the assessment order formed part, being quasi judicial, the "certiorari" jurisdiction of the High Court under Article 226 was attracted. Ordinarily, where the High Court exercises such jurisdiction it merely quashes the offending order, and the consequential legal effect is that but for the offending order the remaining part of the proceeding stands automatically reviewed before the inferior court or tribunal with the need for fresh consideration and disposal by a fresh order. Ordinarily the High Court does not substitute its own order for the order quashed by it. It is, of course, a different case where the adjudication by the High Court establishes a complete want of jurisdiction in the inferior court or tribunal to entertain or to take the proceeding at all. In that event on the quashing of the proceeding by the High Court there is no revival at all. But although in the former kind of case the High Court, after quashing the offending order, does not substitute its own order it has power nonetheless to pass such further orders as the justice of the case requires. [769 F H, 770 A] 3. When passing such orders the High Court draws on its inherent power to make all such orders as are necessary for doing complete justice between the parties. The interests of justice require that any undeserved or unfair advantage gained by a party invoking the jurisdiction of the court, by the mere circumstance that it has initiated a proceeding in the court, must be neutralised. The simple fact of the institution of litigation by itself should not be permitted to confer an advantage on the party responsible for it. [770 A C] In the present case, the appellant would not have enjoyed the advantage of the bar of limitation if, notwithstanding his immediate grievance against the notice under section 142(1) of the Income Tax Act, he had permitted the assessment proceeding to go on after registering his protest before the Income Tax Officer, and allowed an assessment order to be made in the normal course. In an application under section 146 against the assessment order, it would have been open to him to urge that the notice was unreasonable and invalid and he was prevented by sufficient cause from complying with it and therefore the assessment order should be cancelled. In that event, the fresh assessment made under section 146 would not be fettered by the bar of limitation. Section 153(3)(i) removes the bar. But the appellant preferred the constitutional jurisdiction of the High Court under Article 226. If no order was made by the High Court directing a fresh assessment, he could contend that a fresh assessment proceeding is barred by limitation. That is an advantage which the appellant seeks to derive by the mere circumstance of his filing a writ petition. It will be noted that the defect complained of by the appellant in the notice was a procedural lapse at best and one that could be readily corrected by serving an appropriate notice. It was not a defect affecting the fundamental jurisdiction of the Income Tax Officer to make the assessment. The High Court was plainly right in making the direction which it did. [770 C G] Director of Inspection of Income Tax (Investigation) New Delhi and Anr. vs Pooran Mall and Sons and Anr. @ 395; followed. 767 Cachar Plywood Ltd. vs Income Tax Officer, 'A ' Ward, Karimganj Dist. Cachar and Anr., (1978) 114 ITR (Cal.); approved. Rajinder Nath etc. vs The Commissioner of Income Tax, Delhi, ; distinguished. Pickles vs Falsham, 9 Tax Cases, 261, 288; Anisminic Ltd. vs The Foreign Compensation Commission & Anr. [1969] 1 All E.L.R. 208; Bath and West Countries Property Trust Ltd. vs Thomas (Inspector of Taxes) ; distinguished.

Appeal No. 327 of 1959. Appeal from the order dated June 28, 1956, of the Bombay High Court at Nagpur in Misc. First Appeal No. 15 of 1954. 98 774 A. V. Viswanatha Sastri, Shankar Anand and A. G. Batnaparkhi, for the appellant. K. N. Rajagopal Sastri, as amicus curiae. November 29. The Judgment of the Court was delivered by SHAH, J. Ramachandra Dhondo Datar hereinafter referred to as the respondent was employed by the appellant company in its publications branch. By agreement dated March 23, 1943, the appellant company agreed to pay to the respondent as from April 1, 1943, remuneration per annum equal to 3 1/2% of the gross sales or Rs. 12,000 whichever was greater. The agreement was to remain in operation for ten years from April 1, 1943, in the first instance and was renewable at the option of the respondent for such period as he desired. By notice dated April 19, 1948, served on the respondent on April 22, 1948, the appellant company terminated the employment of the respondent. The respondent then filed a civil suit in the court of the Fifth Additional District Judge, Nagpur, for a decree for Rs. 1,30,000 being the amount of compensation for wrongful termination of employment, arrears of salary and interest. On July 17, 1953, the court after giving credit for the amount received by the respondent passed a decree for Rs. 42,359 (which was inclusive of Rs. 36,000 as compensation for termination of employment and Rs. 6,000 as salary in lieu of six months notice and interest) and costs and interest on judgment. The respondent then applied for execution of the decree and claimed Rs. 54,893 12 0 less Rs. 18,501 10 0 decreed against him in a cross suit filed by the appellant company. The Income Tax Officer, Nagpur, served a notice under section 46 of the Indian Income Tax Act upon the respondent and also gave intimation to the District Judge, Nagpur, that the appellant company be permitted to deduct at source and to pay into the Government Treasury Rs. 15,95613 0 as income tax, surcharge and super tax due on the sum of Rs. 50,972 2 0 awarded to the respondent. The appellant company also applied that the 775 executing Court do declare that the appellant company was entitled and in law bound to deduct the tax due on the amount. The learned Judge directed the appellant company to pay to the Income Tax Department Rs. 15,956 13 0 on account of income tax and super tax on the amount due to the respondent and directed it to pay the balance in court after filing a receipt for payment of tax from the Income Tax department. In appeal to the High Court of Judicature at Nagpur, the order passed by the District Judge was reversed and execution as claimed by the respondent was directed. The appellant company contends that under section 18(2) of the Income Tax Act, it was bound to deduct the tax computed at the appropriate rate on the salary payable to the respondent as the amount due under the decree represented salary. Section 18 sub section (2) of the Income Tax Act in so far as it is material provides that any person paying any amount chargeable under the head "salaries" shall at the time of payment deduct income tax and super tax at the rate representing the average of the rates applicable to the estimated total income of the assessee under the head "salary". Sub section (7) declares that a person failing to deduct the taxes required by the section shall be deemed to be an assessee in default in respect of such tax. The Legislature has, it is manifest, imposed upon the employer the duty to deduct tax at the appropriate rate on salary payable to the employee and if he fails to do so, the tax not deducted may be recovered from him. But the liability to deduct arises in law, if the amount is due and payable as salary. In this case, there has been no assessment of tax due by the Income Tax Officer on the amount payable to the respondent. Under section 46(5), any person paying salary to an assessee may be required by the Income Tax Officer to deduct arrears of tax due from the latter and the employer is bound to comply with such a requisition and to pay the amount deducted to the credit of the Government. But this order can only be passed if income tax has been assessed and has remained unpaid. It is undisputed that at the, material 776 time, no tax was assessed against the respondent; the Income Tax Officer had accordingly no authority to issue a notice under section 46(5). Nor could the Income Tax Officer claim to recover tax due by a proceeding in the nature of a garnishee proceeding by applying to the civil court to attach the Judgment debt payable by the company. The application submitted by the Income Tax Officer must therefore be ignored. Undoubtedly, the employer is by section 18 of the Act liable to deduct from the salary payable by him to his employee the amount of tax at the average rate appli cable to the estimated total income; but can it be said that as between the appellant company and the respondent the decretal amount represented salary? The respondent had filed a suit for a decree for arrears of salary, compensation for wrongful termination of employment and interest. The court having passed a decree on that claim, it became a judgment debt. It may have been open to the appellant company in the suit to apply to the court for making a provision in the decree for payment of income tax due by the respondent, but no such provision was made. We are not concerned to decide in this appeal whether in the hands of the respondent the amount due to him under the decree, when paid, will be liable to tax; that question does not fall to be determined in this appeal. The question to be determined is whether as between the appellant company and the respondent the amount decreed is due as salary payment of which attracts the statutory liability imposed by section 18. The claim decreed by the civil court was for compen sation, for wrongful termination of employment, arrears of salary, salary due for the period of notice and interest and costs, less withdrawals on salary account. The amount for which execution was sought to be levied was the amount decreed against which was set off the claim under the cross decree. A substantial part of the claim decreed represented compensation fir wrongful termination of employment and it would be difficult to predicate of the claim sought to be enforced what part thereof if any represented salary due. Granting that compensation payable to an 777 employee by an employer for wrongful termination of employment be regarded as in the nature of salary, when the claim is merged in the decree of the court, ' the claim assumes the character of a judgment debt and to judgment debts section 18 has not been made applicable. The decree passed by the civil court must be executed subject to the deductions and adjustments permissible under the Code of Civil Procedure. The judgment debtor may, if he has a cross decree for money, claim to set off the amount due thereunder. If there be any adjustment of the decree, the decree may be executed for the amount due as a result of the adjustment. A third person who has obtained a decree against the judgment creditor may apply for attachment of the decree and such decree may be executed subject to the claim of the third person: but the judgment debtor cannot claim to satisfy, in the absence of a direction in the decree to that effect the claim of a third person against the judgment creditor, and pay only the balance. The rule that the decree must be executed according to its tenor may be modified by a statutory provision. But there is nothing in the Income Tax Act which supports the plea that in respect of the amount payable under a judgment debt of the nature sought to be enforced, the debtor is entitled to deduct income tax which may become due and payable by the judgment creditor on the plea that the cause of action on which the decree was passed was the contract of employment and a part of the claim decreed represented amount due to the employee as salary or damages in lieu of salary. Counsel for the appellant company strongly relied upon the decision of the House of Lords in Westminster Bank Ltd. vs Riches (1). That was a case in which in an action brought by one R against the Westminster Bank trustee of the estate of one X R was awarded a decree for pound 36,255 principal and pound 10,028 as interest. The Bank thereafter brought an action for a declaration that it had satisfied the judg ment in the action by R by paying him the amount (1) 18 Tax Cases 159. 778 due less pound 5,014, the latter sum representing income tax on the interest awarded by the judgment. It was held by the House of Lords that pound 10,028 was "interest of money" within Schedule D and General Rule 21 of the Income Tax Act, 1918, and that income tax was deductible therefrom. In that case, the only argument advanced on behalf of the Bank is set out in the speech of Viscount Simon, L. C. at p. 187: "The appellant contends that the additional sum of pound 10,028 though awarded under a power to add interest to the amount of the debt, and though called interest in the judgment, is not really interest such as attracts Income Tax, but is damages. The short answer to this is that there is no essential incompatibility between the two conceptions. The real question, for the purposes of deciding whether the Income Tax Acts apply, is whether the added sum is capital or income, not whether the sum is damages or interest." The House of Lords in that case by a majority held that pound 10,028 awarded under the judgment represented not capital but interest and was liable to tax. In our view, ' this case has no application to the facts of the present case. In the case before us, there is a decree passed in favour of the respondent: under the scheme of the Civil Procedure Code, that decree has to be executed as it stands, subject to such deductions or adjustments as are permissible under the Code. There was no tax liability which the respondent was assessed to pay in respect of this amount till the date on which the appellant company sought to satisfy the alleged tax liability of the respondent. As between the appellant company and the respondent, the amount did not represent salary; it represented a judgment debt and for payment of income tax thereon, no provision was made in the decree. The Civil Procedure Code bars an action of the nature which was filed in Westminster Bank 's case (supra). The defence to the execution if any must be raised in the execution proceeding and not by a separate action. The amount payable by the appellant company to the respondent was not salary but a judgment debt, and before paying that debt the appellant company could not claim 779 to deduct at source tax payable by the respondent. Nor could the appellant company seek to justify its plea on the ground that the judgment creditor was indebted to a third person. The principle of the case in Manickam Chettiar vs Income Tax Officer, Madura (1), on which reliance was also sought to be placed by the appellant company has no application to this case. In Manickam Chettiar 's case (1), in execution of a money decree certain properties belonging to a judgment debtor were attached and sold and the sale proceeds were received by the court. The Income Tax Officer who had assessed the decree holder to tax payable by him on his other income applied to the court for an order directing payment to him out of the sale proceeds the amount of income tax due by the decree holder. It was held that the claim for income tax was entitled to priority in payment and the court had inherent power to make an order on the application for payment of money due as income tax. Tax had admittedly been assessed, and proceedings substantially for recovery of the tax so assessed were adopted by the Income Tax Officer. It was held in the circumstances that the court had jurisdiction to direct recovery of tax out of the amount standing to the credit of the decree holder. The principle of that case can have no application to the facts of the present case. The respondent had not appeared before us, but we have been assisted by Mr. Rajagopala Sastri and we are indebted to him for placing the evidence and the various aspects of the case on a true appreciation of which the question in issue fell to be determined. The appeal fails and is dismissed. As there was no appearance for the respondent, there will be no order for costs. Appeal dismissed. (1) VI I.T. R. 180.

In a civil suit the respondent obtained a decree against his employer the appellant company for a sum which included com pensation for wrongful termination of his service, arrears of salary, interest and costs of the suit, and then applied for execution of the decree. The Income tax Officer served a notice upon the respondent under section 46 of the Indian Income tax Act and applied to the District Judge that the appellant be permitted to deduct at source the income tax, surcharge and super tax on the sum awarded to the respondent and pay the same in the Government Treasury. The appellant company also moved the executing court for a declaration that they were entitled and bound to deduct the tax due on the amount. The District judge directed the appellant company to pay the income tax and super tax to the Income Tax Department and pay the balance in Court together with a receipt for the income tax paid. In appeal the High Court reversed the order of the District judge and directed the execution of the decree as claimed by the respondent. On appeal by the appellant company, Held, that as no tax was assessed against the respondent the Income Tax Officer could not issue a notice under section 46(5) requiring the appellant company to deduct tax from the decretal amount. A substantial part of the decretal amount did not represent salary" of the respondent: it consisted of compensation for wrongful termination of the respondent 's service, salary in lieu of six months ' notice, interest and costs of the suit. It was a judgment debt and no provision for payment of income tax was made in the decree which was liable to be executed as prayed by the respondent. The appellant company was not therefore entitled or bound to deduct income tax under section 18 sub section (2) of the Act.

The respondent was a company dealing in shares and securities and belonged to a group of companies all controlled by the same persons. In the year of account, corresponding to the assessment year 1951 52, the respondent sold the shares relating to Madhusudan Mills Ltd., which it had acquired sometime earlier, suffering a loss for which it claimed a set off against the profits in that year. The Income tax Officer found that the shares in question had been purchased by J, a company belonging to the group, at a price which was almost double the current market price, that it was so done with a view to removing the sellers from their managing agency and to securing for the respondent the purchasing and selling agency of the Mills, and that after the purchase J achieved the purpose in view of its controlling interest and the purchasing and selling agency of the Mills was given to the respondent, though the latter had done no more than give a loan to J. It was also found that soon after the purchase the shares in question came into the possession of the respondent and that when the shares were sold it was not in the market but at a loss to another company belonging to the same group. The Income tax Officer came to the conclusion that in getting the shares the respondent did not deal with them as stock in trade but was acquiring a capital asset of an enduring nature. Accordingly, he disallowed the claim holding the loss to be a a capital loss. The Appellate Tribunal, however, held in favour of the respondent on the view that a distinction must be made between the respondent company and J. The Commissioner of Income tax moved the Tribunal for a reference to the High Court, but it was dismissed on the ground that though it was barred only by one day and there was no negligence on the part of the Commissioner, the Tribunal had no power to extend time. An application to the High Court was also dismissed. The Commissioner of Income tax then applied for and got special leave to appeal against 866 the order passed by the Tribunal. When the appeal came on for hearing in due course the respondent raised an objection that the appeal was not maintainable because no appeal was filed against the order of the High Court, and relied on the decision in Chandi Prasad Chokani vs State of Bihar, ; ^ Held, that the appeal was maintainable because there was no question of by passing the order of the High Court which only related to the correctness of the decision of the Tribunal on the question of limitation which was not the subject of the present appeal. Held, further, that there were special circumstances which justified the grant of special leave. Baldev Singh vs Commissioner of Income tax , applied. Chandi Prasad Chokhani vs State of Bihar ; , distinghuished. Held, also, that, on the facts, the object was to purchase a large block of shares at a much larger price than the market value to acquire certain agencies of a profitable character, that the purchase of the shares by J was merely a device but the controlling interest was acquired by the respondent, and that the transaction must be regarded as one on the capital side. Ramanarain Sons (P.) Ltd. vs Commissioner of Income tax, ; and Oriental Investment Co. Ltd. vs Commissioner of Income tax, ; , applied. Salomon vs Salomon & Co. Ltd. ; , distinguished.

The appellant was employed in the service of the former Indian State of Hyderabad prior to the coming into force of the Constitution of India. On the coming into force of the Constitution of India, the said State became a part of the territory of India as a Part State and the Appellant continued in the service of that State, till he retired from service on January 21, 1956. The appellant claimed that he was entitled to be paid the salary of a High Court Judge from October 1, 1947 and also claimed that he was entitled to receive a pension of Rs. 1,000 a month in the Government of India currency being the maximum pension admissible under the rules. Both the aforesaid claims were negatived by the Government. The Appellant thereupon filed a writ petition in the High Court against the Respondent State of Andhra Pradesh, which was the principal successor State to the erstwhile State, which was contested under Regulation 6 of the Hyderabad Civil Service Regulations which were applicable in the case of the Appellant and that claim to pension was to be regulated by the rules in force at the time when the Government servant retired from the service of the Government. Under clause (b) of Regulation 313, the maximum pension ordinarily admissible for superior service to which the Appellant belonged was to be Osmania Sikka Rs. 1,000 a month. The Hyderabad Civil Service Regulations were replaced with effect from October 1, 1954 by the Hyderabad Civil Services Rules and under clause (b) of Rule 299 (which later became clause (b) of sub rule (1) of Rule 299) the maximum pension ordinarily admissible for superior service was to be Rs. 1,000 a month, 931 During the pendency of the writ petition, the Government by a Notification dated February 3,1971 amended clause (b) of sub rule (1) of Rule 299, with retrospective effect from October 1, 1954. The expression 'Rs. 1,000 a month in the said clause (b) was substituted by the expression 'Rs 857.15 a month". This amendment was made in exercise of the powers conferred by the proviso to Article 309 read with Article 313 of the Constitution of India. The Single Judge who heard the Appellant 's writ petition rejected the claim made by the Appellant with respect to salary on the ground that the said claim had been negatived by the Government as far back as 1955 and merely by making representations to the Government he could not keep the said claim alive. He however held that in view of the judgment of this Court in Deokinandan Prasad vs State of Bihar and Others [1971] Supp. S.C.R 634 the right to receive pension was property and was a fundamental right and that it had accrued to the Appellant on the date when he retired and could not be affected by a rule made subsequently under the proviso to Article 309, and allowed the writ petition to the extent that the Appellant was entitled to get his future pension at the rate of Rs. 1,000 a month in the Government of India currency from the date of filing of the said writ petition and arrears of pension at the same rate for a period of three years prior to the filing of the said writ petition. The Respondent State filed a Letters Patent Appeal, and the Division Bench held that this Court in Deokinandan Prasad 's case did not hold that a pensioner was entitled to any pension that he demanded but all that was done in the said case was to direct the State to consider properly the claim of the pensioner for payment of pension according to law, and relying upon its earlier decisions in State of Andhra Pradesh vs Ahmed Hussain Khan and State of Andhra Pradesh vs section Gopalan upholding the validity of the amendment made in clause (b) of Rule 299 (1) by the Notification dated February 3, 1971, allowed the appeal and dismissed the writ petition of the appellant. Allowing the Appeal to this Court, ^ HELD: The relevance placed by the Division Bench upon its earlier decision in the two writ appeals (Ahmed Hussain Khan and section Gopalan) was misconceived. The two appeals arose out of separate writ petitions filed by two Government servants who had joined the service of the former Indian State of Hyderabad and retired after the States Reorganization Act, 1956 had come into force. This Court allowed the two Appeals and reversed the said judgment of the Division Bench, held that the letter dated April 28, 1973 from the Joint Secretary to the Government of India, Cabinet Secretariat did not amount to a previous approval granted by the Central Government to the amendment made by the Notification dated February 3, 1971 to clause (b) of Rule 299 (1) and that, the Notification was invalid and inoperative so far as it concerned persons referred to in sub sections (1) and (2) of Section 115 of the States Reorganization Act, 1956. [936D G] In the instant case, the Appellant had retired prior to the appointed day, November 1, 1956. He therefore did not fall under either sub section (1) or 932 sub section (2) of section 115 and the proviso to sub section (7) of that section had no application to him. The amendment to the Rules, so far as he was concerned, did not, therefore, require any previous approval of the Central Government even though thereby the conditions of the service were being varied to his disadvantage. [937F G] 2. Pension being a fundamental right, it could only be taken away or curtailed in the manner provided in the Constitution, [938E] In the instant case, the fundamental right to receive pension according to the rules in force accrued to the Appellant when he retired from service. By making a retrospective amendment to the said Rule 299 (1) (b) more than fifteen years after that right had accrued to him, what was done was to take away the Appellant 's right to receive pension according to the rules in force at the date of his retirement or in any event to curtail and abridge that right. To that extent, the said amendment was void. [938H; 939A] 3. The Appellant was entitled to succeed in view of the judgment of this Court in Deokinandan Prasad 's case. The Division Bench of the High Court has misunderstood the ratio of that decision. It was held in that case that pension is not a bounty payable at the sweet will and pleasure of the Government but is a right vesting in a Government servant and was property under clause (1) of Article 31 of the Constitution and the State had no power to with hold the same by a mere executive order. It was also held that this right was also property under sub clause (f) of clause (1) of Article 19 of the Constitution and was not saved by clause (5) of that Article, and that this right of the Government servant to receive pension could not be curtailed or taken away, by the State by an executive order. [937H; 938A D] 4. The fact that sub clause (f) of clause (1) of Article 19 and Article 31 have been omitted from the Constitution by the Constitution (Forty fourth Amendment Act,) 1978 with effect from June 20, 1979 was immaterial because on the date when the said Notification was issued, these provisions were part of the Constitution. [939B C] 5, The Supreme Court reversed and set aside the Judgment of the Division Bench of the Andhra Pradesh High Court and restored the order passed by the Single Judge of that High Court. The Supreme Court directed the State of Andhra Pradesh to pay to the Appellant the amounts due to him according to the Judgment of the Single Judge of the High Court within one month and pay to him pension in future at the rate of Rs. 1000 per month in the Government of India currency. [939D E]

The appellant who was the registered holder of 500 shares of a company executed a deed dated January 19, 1953, by which he assigned to his wife the right, title and interest to all dividends and sums of money which might be declared or might become due on account or in respect of those shares for the term of her natural life. During the accounting year which ended on March 31, 1953, the dividend declared on the shares amounted to Rs. 12,000, and in assessing the appellant for the assessment year 1953 54 the Income tax Officer included the said sum in his income under section 16(i)(c) and section 16(3) of the Indian Income tax Act, 1922. The appellant claimed that since the settlement was for the lifetime of his wife, the third proviso to section 16(i)(c) applied and the dividend which his wife received could not be deemed to be his income under section 16(i)(c), and that section 16(3) was not applicable because there was no transfer of the shares to his wife. Held, that on its true construction the deed dated January 19, 1953, was not a transfer of any existing property of the appellant namely, the shares held by him, but only a contract to transfer or make over in future every dividend and sum of money which may be declared or become due and payable on account or in respect of the shares, to his wife during her lifetime. Since the company could pay the dividend only to the registered shareholder or under his orders, the income continued to accrue to the appellant though applied subsequently towards payment to the wife under the terms of the contract. The income, therefore, was assessable in the hands of the appellant. Howrah Trading Co. Ltd. vs Commissioner of Income tax, Cal cutta, [1959] SUPP. 2 S.C.R. 448, relied on. Bacha F. Guzday vs Commissioner of Income tax, Bombay, ; , held not applicable. Bejoy Singh Dhudhuria vs Commissioner of Income tax, (1933) L.R. 60 I.A. 196, distinguished.

The appellant who was residing at House No. 546 situated at Dhantoli area at Nagpur was evicted from the said prem ises on the ground of bona fide requirement of its landlord. Therefore he became an "evicted person" within the meaning of section 2(2) of the Central Province and Berar Letting of House and Rent Control Order, 1949. Being a Government employee he applied to the House Allotment Officer that he may be allotted House No. 406/1 under clause 24A of the said Control Order simultaneously indicating that he was an "evicted person" also. The premises came to his occupation on the orders passed by the House Allotment Officer in 1960. The appellant retired from service on 1.5.1978. On 10.9.1979 one Vijay Mude, one of the respondents, moved an application before the House Allotment Officer for vacating the appel lant from the premises on the ground that he has retired. The said application under clause 25 of the Rent Control Order was contested by the appellant that it was not ap plicable as he was an "evicted person" under clause 2(2) of the Control Order. Having lust before all courts, the appel lant came by way of special leave. Allowing the appeal, the Court, HELD: 1.1 On the scheme of the different clauses it was only when a person was granted an allotment as a government servant, then and then only can clause 25 be invoked for his eviction. In other cases, the clause 13 will be relevant. The summary procedure of clause 25 could only be available in case of recovery of possession given to a person as a government servant on his retirement. Indeed the provisions are peculiar. Even if a government servant goes on earned leave or is transferred even then he becomes disentitled to remain in possession of the premises in question and would be liable to be evicted by virtue of clause 25 of the said Rent Control Order. Being drastic in nature, therefore, one who seeks allotee 's eviction has to establish that the allotment to the person whose eviction is sought was made in the capacity 403 contemplated under clause 25. Clauses 23, 24A and 25 of the Rent Control Order deal with three independent categories of persons and the summary procedure on proper construction of clause 25 was applicable only where allotment is given to a tenant as a tenant. Clause 25 would not operate, if a Gov ernment servant happened to be an evictee and an allotment is made in that capacity. In the instant case, on a con struction of the various documents and the evidence adduced in this appeal under these proceedings, it is clear that allotment was given to the appellant as an evictee who happened to be at the relevant time a government servant. Therefore, on his retirement from the government service, he did not cease to be an evictee and did not come within the mischief of clause 25 of the said Control Order. [408G 409 A 409H 410B] 1.2 Even if allotment is made to a person who is both an evictee as well as a government servant then if one of the grounds of the order namely, that he was a government serv ant ceases to exist on retirement, the other reason operates i.e. he was an evictee and still continues to be an evictee then the allotment would continue. In this case even if it be held that it cannot be conclusively determined that the order of allotment was made in favour of the appellant only on the ground that the appellant was an evictee but it was made also on the ground that the appellant was a government servant, and after his retirement the other ground namely the allottee still being an evictee remained valid it can be sustained. [410 C, F] State of Maharashtra & Anr. B.K. Takkamore & Ors., ; , applied.

The respondent who was a District and Sessions Judge in the erstwhile State of Pepsu was removed from service on April 7, 1953 by an order passed by the President of India who was then in charge of the administration of the State. A representation made by the respondent on May 18, 1955, was considered by the Council of Ministers of the State as in the meantime the President 's rule had come to an end, and its views were expressed in the form of a Resolution dated September 28, 1955; but before taking any action it invited the advice of the Public Service Commission. On receipt of the report of the Public Service Commission, the Council of Ministers considered the matter again on March 8, 1956, and its views were recorded in the minutes of the proceedings. On August 11, 1956, the representation made by the respondent was considered over again by the Council and a final conclusion was reached in respect of it. In accordance with the said conclusion an order was passed which was communicated to the respondent to the effect that he might be re employed on some suitable post. On May 5, 1958, the respondent instituted a suit against the State of Punjab for a declaration that the removal of his service on April 7, 1953, was illegal, and filed an application under O. 14, r. 4, and O. 11, r. 14, of the Code of Civil Procedure for the production of certain documents, which included the proceedings of the Council of Ministers dated September 28, 1955, March 8, 1956, and August 11, 1956, and the report of the Public Service Commission. The State objected to the production of the said documents claiming privilege under section 123 of the , and the Chief Secretary of the State filed an affidavit giving reasons in support of the claim. The question was whether having regard to the true scope and effect of the provisions of sections 123 and 167 of the Act the claim of privilege raised by the State was sustainable. Held, that the documents dated September 28, 1955, March 8, 1956, and August II, 1956, which embodied the minutes of 372 the meetings of the Council of Ministers indicating the advice which the Council ultimately gave to the Rajpramukh, were expressly saved by article 163(3) of the Constitution of India and fell within the category of documents relating to " affairs of State " within the meaning of section 123 of the . Accordingly, they were protected under section 123, and as the head of the department, the Chief Secretary, did not give permission for their production, the Court cannot compel the State to produce them. Held, further (Subba Rao, J., dissenting), that the report of the Public Service Commission being the advice tendered by it, was also protected under section 123 of the Act. Held, also (Kapur, J., dissenting), that the words "records relating to affairs of State " in section 123 cannot be given a wide meaning so as to take in every document pertaining to the entire business of State, but should be confined only to such documents whose disclosure may cause injury to the public interest. The second clause of section 162 refers to the objections both as to the production and admissibility of the document and entitles the court to take other evidence in lieu of inspection of the document in dealing with a privilege claimed or an objection raised under section 123, to determine the validity of the objections. Case law reviewed. Per Sinha, C. J., Gajendragadkar and Wanchoo, jj. Though under sections 123 and 162 the Court cannot hold an enquiry into the possible injury to public interest which may result from the disclosure of the document in question, the matter being left for the authority concerned to decide, the Court is competent to hold a preliminary enquiry and determine the validity of the objection to its production and that necessarily involves an enquiry into the question as to whether the document relates to affairs of State under section 123. Where section 123 confers mide powers on the head of the department to claim privilege on the ground that the disclosure may cause injury to public interest, scrupulous care must be taken to avoid making a claim for such a privilege on the ground that the disclosure of the document may defeat the defence raised by the State. The apprehension that the disclosure may adversely affect the head of the department or the Minister in charge of the department or even the Government in power, or that it may provoke public criticism or censure in the Legislature, should not weigh in the mind of the head of the department and the sole test which should determine his decision is injury to public interest and nothing else. The privilege under section 123 should be claimed generally by the Minister in charge who is the political head of the department concerned ; if not, the Secretary of the department should 373 make the claim, and the claim should always be made in the form of an affidavit. When the affidavit is made by the Secretary, the Court may in a proper case, require an affidavit of the Minister himself. The affidavit should show that each document in question has been carefully read and considered, and the person making the affidavit is satisfied that its disclosure would lead to public injury. If there are series of documents included in a file it should appear from the affidavit that each one of the documents, whose disclosure is objected to, has been duly considered by the authority concerned. The affidavit should also indicate briefly within permissible limits the reason why it is apprehended that their disclosure would lead to injury to public interest. If the affidavit produced in support of the claim ' for privilege is found to be unsatisfactory a further affidavit may be called, and in a proper case the person making the affidavit whether he is a Minister or the Secretary should be summoned to face cross examination on the relevant points. The provisions of O. 11, r. 19(2), of the Code of Civil Procedure must be read subject to section 162 of the and where a privilege is claimed at the stage of inspection under O. 11, r. 19(2), of the Code, the Court is precluded from inspecting the privileged document in view of section 162 of the Act. Per Kapur, J. The words of section 123 of the Act are very wide and cover all classes of documents which may fall within the phrase " affairs of State ", some noxious and others inno cuous, and may even appear to be unduly restrictive of the rights of the litigant but if that is the law the sense of responsibility of the official concerned and his sense of fair play has to be trusted. Under that section discretion to produce or not to produce a document is given to the head of the department and the court has not the power to override the ministerial certificate against production. The words " or take other evidence to enable it to determine on its admissibility" in section 162 on their plain language do not apply to production and the taking of evidence must have reference to admissibility. The section does not entitle the court to take other evidence i.e., other than the document, to determine the nature of the document or the reasons impelling the head of the department to withhold the production of the document. It is permissible for the Court to determine the collateral facts whether the official claiming the privilege is the person mentioned in section 123, or to require him to file a proper affidavit or even to cross examine him on such matters which do not fall within the enquiry as to the nature of the document or nature of the injury. He may also be cross examined as to the existence of the practice of the department to keep documents of the class 374 secret but beyond that the ministerial discretion should be accepted and it should neither be reviewed nor overruled. Per Subba Rao, J. (1) " Records relating to affairs of State" in section 123 of the Act mean documents of State whose production would endanger the public interest; documents pertaining to public security, defence and foreign relations are documents relating to affairs of State; unpublished documents relating to trading, commercial or contractual activities of the State are not, ordinarily, to be considered as documents relating to affairs of State, but in special circumstances they may partake of that character and it is a question of fact in each case whether they relate to affairs of State or not in the sense that if they are disclosed public interest would suffer. (2) Under no circumstances can a court inspect such a docu ment or permit giving of secondary evidence of its contents. (3) Under section 162 the Court has overriding power to disallow a claim of privilege raised by the State, but in its discre tion, the court will exercise its power only in exceptional circumstances when public interest demands. The said claim shall be made by an affidavit filed by the Minister in charge of the department concerned describing the nature of the document in general and broadly the category of public interest its non disclosure purports to serve. Ordinarily, the court shall accept the affidavit of a Minister, but in exceptional circumstances, when it has reason to believe that there is more than what meets the eye, it can examine the Minister and take other evidence to decide the question of privilege. (4) The disclosure of the report of the Public Service Com mission may expose the Government if the latter ignores a good advice, but such an exposure is certainly in public interest and in a conflict between the administration of justice and the claim of privilege by the State, the claim must be overruled.

Respondent No. 1 a Private Limited Company, was sanctioned a loan of Rs.30 lakh by the Appellant Corporation for the setting up of a factory. To secure this loan a mortgage deed of certain properties was executed by the Company and Respondents 2 to 4 as its directors had executed a personal Surety Bond without any security for its repayment. After obtaining a part of the sanctioned loan, which was to be given in phases, the Company became disinterested in availing of the balance amount. Consequently the Corporation demanded back the amount ahead taken together with interest and on the company 's failure to do so, it took over the Industrial Concern under section 29 of the Act and initiated steps to realise its dues by putting the property to sale. Having failed to recover the amount as no adequate offer was forthcoming despite repeated advertisements, it filed a petition before the Bombay High Court under sections 31 and 32 of the Act both against the Company as well as its directors sureties praying for a decree in the sum of Rs. 15,87,391.20 to be passed against them jointly and severally. The respondents contested the petition contending (a) that a petition under sections 31 and 32 of the Act could be filed only before the City Civil Court and the High Court had no jurisdiction to entertain it, (b) that no money decree can be passed under sections 31 and 32 of the Act, and (c) that the provision in the Act relating to enforcement of the 481 liablity of surety were ultra vires of Article 149 of the Constitution. The learned single judge relying on an earlier decision of the Bombay High Court reported in 1987 Mah. L.J 243 held that the High Court had to entertain the petition but on merits took the view that no money decree could be passed under sections 31 and 32 even against the sureties and since in the instant case the sureties had not given any security except their personal guarantee, the same could be enforced only in the ordinary course and not under the special machinery provided under the Act. In view of his findings on the first two pleas no arguments were entertained on the last plea and accordingly the petition was dismissed. The Division Bench while dismissing the appeal not only upheld the finding of the single Judge on merits but also overruled the decision reported in and held that the High Court had no jurisdiction to entertain a petition under sections 31 and 32 of the Act. The Corporation came up in appeal before this court by special leave against this decision of the High Court of Bombay. The impugned judgement was assailed by the Appellant Corporation both on merites and on the plea of juridiction. The respondents in reply asserted that the findings of the High Court on both pleas were unassailable. Allowing the appeal, by a majority decision, HELD: A. By the Full Court (i)The extent of the liability stated in the application as contemplated by sub section (2) of section 31 of the Act would represent the value of the claim of the Corporation and if since value is upto Rupees Fifty Thousand, the application would lie in the City City Court and if it is more than that amount it would lie in the High Court. This interpretation would give meaning and relevance to the words "having jurisdiction" used in sub section (11) of section 32. A different interpretation would render superfluous or otiose not only the words "having jurisdiction" but also the words and in the absence such court, by the High Court, occurring in the said sub section (11) inasmuch as in a Presidency town, in terms of territorial jurisdiction, the jurisdiction of the City Civil Court and of the High Court is co terminus [495D F] (ii) In the instant case the extent of liability of the surety being more than Rupees fifty thousand, the application could only have been filed and was rightly filed in the High Court and the finding in the 482 judgment under appeal to the contrary for holding that the High Court had no jurisdiction to entertain the application cannot be sustained. [497A] B. Per N. D. Ojha, J. for himself and Ranganathan, J. (iii) There can be no doubt that the term, "any surety" used in clause (aa) in sub section (1) of section 31 of the Act, will include not only a surety who has given some security but also one who has given only a personal guarantee. In our opinion, in a case where the relief claimed in the application under section 31(1) of the Act is for enforcing the liability of a surety who has given only a personal guarantee, sub section 4(A) of section 32 where no cause is shown and clause (da) of sub section (7) where cause is shown, contemplate cutting across and dispensing with the provisions of the Code of Civil Procedure from the stage of filing a suit to the stage of obtaining a decree against the surety, the passing of an order which can straightaway be executed as if it were a decree against the surety which may be passed in the event of suit being filed. [498F, 499E] (iv) In the absence of any provision such as sub section (8) of section 32 of the Act applying the manner provided in the Code for the execution of a decree against a surety only "as far as practicable" the entire provision contained in this behalf in the Code shall be applicable. This would be so in view of the use of the expression "any other law for the time being applicable to an industrial concern" used in section 46B of the Act. That the Code is applicable to an industrial concern also is not in dispute and cannot be doubted. [50OH 501A] (v) Even in the absence of section 46B of the Act the provisions of the Code would have been attracted in the matter of enforcing the liability of a surety in view of the decision of this Court in National Sewing Thread Co. Ltd. vs James Chadwick & Bros. Ltd., ; inasmuch as the District Judge while exercising jurisdiction under sections 31 and 32 of the Act is not a persona designate but a court of ordinary civil jurisdiction. [501B D] (Per section C. Agrawal, J. Dissenting.) It cannot be comprehended that while making provision which would enable passing of an order in the nature of a money decree against a surety on an application under section 31 of the Act, Parliament would have refrained from making a corresponding provision prescribing the procedure for carrying into effect such an order. It 483 appears to be more in consonance with the scheme of the Act and the object underlying sections 31 and 32 that by introducing the amendments in sections 31 and 32 of the Act the Parliament intended to place the surety on the same footing as the principal debtor so as to enable the Financial Corporation to obtain relief against the properties of the principal debtor as well as the surety [515E G] If considered in this perspective, the expression "enforcing the liability of any surety" in clause (aa) of section 31(1) would mean enforcing the liability of a surety in the same manner as the liability of principal debtor is enforced, by attachment and sale of property keeping in view that the proceedings under sections 31 and 32 of the Act are akin to an application for attachment of property in execution of a decree at a stage posterior to the passing of the decree. The relief of a money decree sought against the sureties respondents 2 to 4 was not maintainable and the said relief could not be granted to the appellant in proceedings under section 31 of the Act. As a result, the petition filed by the appellant must be dismissed and for the same reason this appeal must fail. [515G 516A, 516D E] Munnalal Gupta vs Uttar Pradesh Financial Corporation & Anr. ,A.I.R. 1975 Allahabad 416; Thressiamma Varghese vs K. section F. Corporation, A.I.R. 1986 Kerala 222; Maharashtra State Financial Corporation vs Hindtex Engineers Pvt. Ltd., ; Kayastha Training & Banking Corporation Ltd vs Sat Narain Singh, All. 433; M. K. Ranganathan & Anr. vs Government of Madras & Ors. ,[1955] 2 S.C.R. 374; The Central Talkies Ltd., Kanpur vs Dwarka Prasad, ; , referred to. Maganlal V. MIS. Jaiswal Industries, Neemach & Ors., ; ; M/s. Everest Industrial Corporation & Ors. vs Gujarat State Financial Corporation, [1987] 3S.C.C. 597; Parkash Playing Cards Manufacturing Co. vs Delhi Financial Corporation, ; Gujarat State Financial Corporation V. Natson Manufacturing Co. Pvt. Ltd. & Ors., , distinguished. West Bengal Financial Corporation vs Gluco Series Pvt. Ltd. ,A.I.R. , approved.

For the academic year 1983 84, there was a vacancy for the post of Lecturer in Sanskrit, in the College managed by the appellant Trust. The said post was reserved for candidate from backward classes. The first Respondent, not belonging to any backward class, applied for the post, even before the appellant Trust issued an advertisement. An advertisement was issued later without mentioning the academic year for which the appointment was to be made, though admittedly it was for the academic year 1983 84. The advertisement specifically stated that the post was reserved for a backward class candidate and if no such candidate was available, a candidate from the non backward classes may be appointed for one year. Within a month, the advertisement was repeated and yet no application was received from any candidate from backward classes. Hence the appellant trust appointed the First Respondent, who had earlier applied, from 19.3.84 till 30.4.1984. Again, an advertisement was issued in 1984 for the academic year 1984 85. And there was no response from any candidate belonging to backward classes. The First Respondent was interviewed and appointed for one year, till 19.4.1985. For the academic year 1985 86, no advertisement was issued. The First Respondent was again appointment to the said post from July 10, 1985 to April 30, 1986. Thereafter her services were terminated after issue of notice. No appointment was made to the said post for the academic year 1986 87. However, on 1.5.1987, an advertisement was issued inviting applications for the said post from candidates belonging to all classes, 283 dereserving the post. Respondents 1 and 5 and another candidate, all belonging to non backward classes applied. The 5th Respondent was selected and appointed to the said post. Thereafter, in respect of non payment of salary for certain period and for setting aside her termination order, the First Respondent approached the College Tribunal. The Tribunal allowed her claim for salary for the relevant periods, but dismissed her claim for reinstatement, holding that her appointment was purely temporary and her claim that she should be deemed to have been confirmed because she had served for two academic years was not established in the circumstances of the case. Against the Tribunal 's decision, the First Respondent approached the High Court by way of a Writ Petition. The High Court allowed the Writ Petition holding that notwithstanding the break in her actual appointment, she was continuously in employment from March 19, 1984 to April 30, 1986, and hence entitled to the benefit of the resolutions of the State Government and the University directions which, according to the High Court, laid down that an employee who was appointed for two consecutive academic years must be deemed to have been on probation right from the time of the first appointment and, therefore, she should be confirmed in the post. The benefit of full back wages, seniority etc. was also ordered. Aggrieved by the Judgment of the High Court, the appellants preferred the present appeal, by special leave. Allowing the appeal, this Court, HELD: 1. The appellant Trust had violated the directions of the Government as well as of the University in the appointments in question as a result of which neither the appointment of the 1st respondent nor that of the 5th respondent can be said to have been validly made. Both the appointments were made without following the Government Resolutions and the University directions in the matter of reservation of seats for backward classes which are binding on the college. Unfortunately, these aspects of the matter which are evident from the record were lost sight of both by the Tribunal and the High Court. [287G H;288A] 2.1. Admittedly, the selection of the 5th respondent was made by a committee where neither the nominee of the Vice Chancellor nor the expert nominated by the University nor the nominee of the Director of 284 Education (Higher Education), i.e., the Director of Ayurveda, was present. The selection so made was, therefore, not valid. [289F] 2.2 There is nothing on record to show that when the appellant Trust forwarded its report on appointment of the 5th respondent, it apprised the University of the absence of the expert at the time of his selection. The University has not reserved the power to relax the rule and permit selection without the presence of the expert. There is nothing in the University 's letter to show why the University had condoned the absence of the expert. The approval given by the University being in ignorance of the true state of affairs and in breach of the rule, is legally ineffective and cannot validate the appointment. [289H,290A B] 3. Admittedly, the post was reserved for the academic year 1983 84. The Trust had not given three advertisements within six months for any of the academic years 1983 84, 1984 85 and 1985 86. On the other hand, for the academic year 1983 84, it issued only two advertisements. It is not known as to why even these two advertisements were not issued at the beginning of the said academic year. As regards the second academic year 1984 85, it issued only one advertisement, and no advertisement was issued for the academic year 1985 86. The initial appointment of the Ist respondent for the academic year 1983 84 and her continuation for the subsequent academic years, viz., 1984 85 and 1985 86 was thus in breach of the Government resolutions and the University direction and, therefore, illegal. Similarly, since the appointment of the 5th respondent was made without following the procedure prior to dereservation, viz., three advertisements repeated every year for all the three academic years for which the post was to be reserved, his appointment to the post, as if the post stood legally dereserved, was also illegal since the post could not have been dereserved to make it available for a non backward class candidate.[294B E] 4. Even assuming that her initial appointment and subsequent continuation of service was valid, the First Respondent would not be entitled to the benefit of the University direction of March 11, 1987 because her entitlement to the vacation salary does not extend her period of employment up to the end of the vacation. That is a perquisite which is conferred on every teacher who has served during the academic year. It has no connection with the continuation of the employment since even those teachers whose services are validly terminated before the beginning of the vacation period are given the benefit of the salary of the vacation period. [295E F] 285 5. The appellant Trust shall advertise the post three times sufficiently in advance and in any case within six months from the close of the present academic year, viz., 1990 1991 as a post reserved for the backward class candidate, and if no application is received from a suitable backward class candidate, the post will be deemed to have been dereserved. The Trust will then proceed to fill in the same by a candidate belonging to non backward classes. This fact may be made clear in all the three advertisements. The 5th respondent will be entitled to apply for the post notwithstanding the fact that he has become overaged. If he is selected on the basis of his other qualifications, the Selection Committee shall relax in his favour the condition with regard to the maximum age. If he is appointed to the post, his appointment will be a fresh one and his past service will not count for the probation period. The Trust shall constitute a proper Selection Committee according to the rules. [296D F] 6. To overcome the hardship to the students, the 5th respondent may be permitted to teach as a purely temporary teacher till the process is completed for the academic year 1991 92. [297C]

Appeal No. 650 of 1957. Appeal from the judgment dated July 13, 1956, of the Patna High Court in Miscellaneous Judicial Case No. 665 of 1954. R. Ganapathy Iyer and R. H. Dhebar, for the appellant. A. V. Viswanatha Sastri and R. C. Prasad, for the respondent. November 29. The Judgment of the Court was delivered by HIDAYATULLAH, J. This is an appeal by the Commissioner of Income tax with a certificate against the judgment and order of the High Court at Patna answering two questions of law referred to it under section 66(1) of the Income tax Act by the Tribunal, in the negative. Those questions were: "(1) Whether in the circumstances of the case assessment proceedings were validly initiated under section 34 of the Indian Income tax Act? (2) If so, whether in the circumstances of the case the amount received from interest on arrears of agricultural rent was rightly included in the income of the assessee ?" The assessee, the Maharaja Pratapsingh Bahadur of Gidhaur, had agricultural income from his zamindari for the four assessment years 1944 45 to 1947 48. In assessing his income to income tax, the authorities did not include in his assessable income interest received by him on arrears of rent. This was presumably so in view of the decision of the Patna High Court. When the Privy Council reversed the view of law taken by the Patna High Court in Commissioner of Income tax vs Kamakhya Narayan Singh (1), the Income tax Officer issued notices under section 34 of the (1) 762 Indian Income tax Act for assessing the escaped income. These notices were issued on August 8, 1948. The assessments after the returns were filed, were completed on August 26, 1948. Before the notices were issued, the Income tax Officer had not put the matter before the Commissioner for his approval, as the section then did not require it, and the assessments were completed on those notices. Section 34 was amended by the Income tax and Business Profits Tax (Amendment) Act, 1948 (No. 48 of 1948), which received the assent of the Governor General on Sep tember 8, 1948. The appeals filed by the assessee were disposed of on September 14 and 15, 1951, by the Appellate Assistant Commissioner, before whom no question as regards the validity of the notices under section 34 was raised. The question of the validity of the notices without the approval of the Commissioner appears to have been raised before the Tribunal for the first time. In that appeal, the Accountant Member and the Judicial Member differed, one holding that the notices were invalid and the other, to the contrary. The President agreed with the Accountant 'Member that the notices were invalid, and the assessments were ordered to be set aside. The Tribunal then stated a case and raised and referred the two questions, which have been quoted above. The High Court agreed with the conclusions of the majority, and the present appeal has been filed on a certificate granted by the High Court. Section 34, as it stood prior to the amendment Act No. 48 of 1948, did not lay any duty upon the Income tax Officer to seek the approval of the Commissioner before issuing a notice under section 34. The amending Act by its first section made sections 3 to 12 of the amending Act retrospective by providing "sections 3 to 12 shall be deemed to have come into force on the 30th day of March, 1948. . Section 8 of the amending Act substituted a new section in place of section 34, and in addition to textual changes with which we are not concerned, also added a proviso to the following effect : "Provided that 763 (1) the Income tax Officer shall not issue a notice under this sub section unless he has recorded his reasons for doing so and the Commissioner is satisfied on such reasons that it is a fit case for the issue of such notice. " The question is whether the notices which were issued were rendered void by the operation of this proviso. ' The Commissioner contends that section 6 of the , particularly cls. (b) and (c) saved the assessments as well as the notices. He relies upon a decision of the Privy Council in Lemm vs Mitchell (1), Eyre vs Wynn Mackenzie (2) and Butcher vs Henderson (3) in support of his proposition. The last two cases have no bearing upon this matter; but strong reliance is placed upon the Privy Council case. In that case, the earlier, action which had been commenced when the Ordinance had abrogated the right of action for criminal conversation, had already ended in favour of the defendant and no appeal therefrom was pending, and it was held that the revival of the right of action for criminal conversation did not invest the plaintiff with a right to begin an action again and thus expose the defendant to a double jeopardy for the same act, unless the statute expressly and by definite words gave him that right. The Privy Council case is thus entirely different. No doubt, under section 6 of the it is provided that where any Act repeals any enactment, then unless a different intention appears, the repeal shall not affect the previous operation of any enactment so repealed or anything duly done thereunder or affect any right, obligation or liability acquired, accrued or incurred under any enactment so repealed. It further provides that any legal proceedings may be continued or enforced as if the repealing Act had not been passed. Now, if the amending Act had repealed the original section 34, and merely enacted a new section in its place, the repeal might not have affected the operation of the original section by virtue of section 6. But the amending Act goes further than this. It (1) ; (2) (3) 764 repeals the original section 34, not from the day on which the Act received the assent of the Governor General but from a stated day, viz., March 30, 1948, and substitutes in its place another section containing the proviso above mentioned. The amending Act provides that the amending section shall be deemed to have come into force on March 30, 1948, and thus by this retrospectivity, indicates a different intention which excludes the application of section 6. It is to be noticed that the notices were all issued on August 8, 1948, when on the statute book must be deemed to be existing an enactment enjoining a duty upon the Income tax Officer to obtain prior approval of the Commissioner, and unless that approval was obstained, the notices could not be issued The notice were thus invalid. , The principle which was applied by this Court in Venkatachalam vs Bombay Dyeing & Mfg. Co. Ltd. (1) is equally applicable here. No question of law was raised before us, as it could not be in view of the decision of this Court in Narayana Chetty vs Income tax Officer (2), that the proviso was not mandatory in character. Indeed, there was time enough for fresh notices to have been issued, and we fail to see why the old notices were not recalled and fresh ones issued. For these reasons, we are in agreement with the High, Court in the answers given, and dismiss this appeal with costs. A appeal dismissed.

The appellant who had agricultural income from his Zamindari was assessed to income tax for the four assessment years, 1944 45, to 1947 48. The income tax authorities did not include in his assessable income, interest received by him on arrears of rent, in view of a decision of the Patna High Court, but subsequently this view of law was reversed by the Privy Council. On August 8, 1948, the Income tax Officer issued notices under section 34of the Indian Income tax Act, 1922, for assessing the escaped income. Before the notices were issued the Income tax Officer had not put the matter before the Commissioner for his approval as the section then did not require it and the assessments were completed on those notices. In the meantime, certain amendments were made to the Indian Income tax Act by Act 48 of 1948, which received the assent of the Governor General on September 8, 1948. The Amending Act substituted a new section in place of section 34, which among other changes, added a proviso to the effect that "the Income tax Officer shall not issue a notice. unless he has recorded his reasons for doing so and the Commissioner is satisfied on such reasons that it is a fit case for the issue of such notice", and also made it retrospective by providing that the new section "shall be deemed to have come into force on the 30th day of March, 1948". The question was whether the notices issued by the Income tax Officer on August 8, 1948, without the approval of the Commissioner, were rendered void by reason of the operation of the amended section 34. The Commissioner claimed that section 6 of the , saved the assessments as well as the notices. Held, that section 6 of the , was in applicable as the Amending Act of 1948 indicated a different intention within the meaning of that section, inasmuch as the amended section 34 of the Indian Income tax Act, 1922, provided that it shall be deemed to have come into force on March 30, 1948. Lemm vs Mitchell, ; , distinguished, 761 Held, further, that the notices issued by the Income tax Officer on August 8, 1948, and the assessments based on them were invalid. Venkatachalam vs Bombay Dyeing & Mfg. Co., Ltd., ; , applied.

An assessment order was passed in respect of the turn over of the appellant firm for the year 1975 76 by the Sales Tax Officer on 7.2.1979. Thereafter, the Sales Tax Officer issued a notice under s.21 of the Uttar Pradesh Sales Tax Act, 1948, proposing to make a reassessment on the ground that the mandi cess and arhat (commission) had escaped assessment and directed the appellant to appear along with its account books on 18.1. The Sales Tax Officer passed the order under s.21 on the same date holding that the appellant was not liable to pay any more tax. In the year 1982 the appellant filed four applications under s.22 for rectification of the mistakes in the assess ment orders for assessment years 1975 76, 1976 77, 1977 78 and 1978 79 on the ground that the turnover in respect of purchases made on behalf of Ex U.P. principals had been wrongly assessed to sales tax. All the four applications were rejected by the Sales Tax Officer on merits. The appellant preferred appeals and the Appellate Au thority allowed the appeals relating to the assessment orders for the assessment years 1976 77, 1977 78 and 1978 79 on merits but dismissed the appeal in respect of the assess ment order for the assessment year 1975 76 on the ground that the application for rectification had been filed beyond three years from the date of the original order of assess ment and was thus barred by limitation. The appellant filed second appeal before the Sales Tax Tribunal in respect of the assessment year 1975 76. The Department also preferred second appeals in respect of the orders of assessment for assessment years 1976 77, 1977 78 and 1978 79. The Tribunal allowed the appeal 141 of the appellant holding that the rectification application made in respect of the assessment order for the assessment year 1975 76 was within limitation as the original order dated 7.2.1979 had ceased to exist on the re opening of the assessment and the final order had been passed on 18.1. 1980 within three years from the date of the application for rectification which had been filed on 4.11.1982. However, the appeals of the Department were dismissed. Out of the four revision applications filed by the Department, the High Court dismissed three applications and allowed the revision application in respect of the applica tion for rectification of the assessment order for the assessment year 1975 76 holding that the application for rectification had been filed beyond three years from the date of the original order dated 7.2. 1979 and that the order dated 18. 1. 1980 had no effect on the question of limitation. In the appeal to this Court, on behalf of the appellant it was contended that on the issue of the notice under s.21 of the Act original assessment order ceased to be in force and that the only order of assessment in respect of assess ment year 1975 76 which should be taken into consideration for all purposes including the application for rectification of mistake is the order dated 18.1. On behalf of the State it was contended that since no order of reassessment had actually been passed in the in stant case on 18.1. 1980 but only an order discharging the notice issued under s.21 of the Act had been passed the original order of assessment passed on 7.2. 1979 continued to remain in force. Allowing the appeal, HELD: 1. The judgment of the High Court is set aside and the decision of the Tribunal restored. [150G] 2. Section 21 of the Uttar Pradesh Sales Tax Act, 1948, authorises the assessing authority to make an order of assessment or reassessment. It says that if the assessing authority has reason to believe that the whole or any part of the turnover of a dealer, for any assessment year or part thereof, has escaped assessment to tax or has been under assessed or has been assessed to tax at a rate lower than that at which it is assessable under the Act, or any deduc tions or exemptions have been wrongly allowed in respect thereof, the assessing authority may, after issuing notice to the dealer and making such inquiry as it may consider neces 142 sary assess or reassess the dealer or tax according to law. [149G H;150A B] 3. Section 21 of the Act does not require the assessing authority to pass an order deciding whether it is necessary to proceed with the inquiry under that section or not before passing an order of assessment or reassessment under that section. The only order which the assessing authority is required to make under s.21 after a notice is issued to the dealer under that section is an order of assessment or reassessment. [150C D] 4. Once a notice is issued for ,purposes of making reassessment the earlier proceedings become re opened and the initial order of assessment ceases to be operative. The effect of the re opening of the assessment is to vacate or set aside the initial order of assessment and to substitute in its place the order mode on reassessment and that the result of the re opening of the assessment is that a fresh order for reassessment would have to he made in respect of all matters including those matters in respect of which there is no allegation of the turnover escaping assessment. [148H;149A B] 5. Once an assessment order hod been rectified and it was sought to make a further rectification of that order the period of limitation for making such further rectification would commence not from the date of the original assessment order but from the date of the earlier rectification order. [148G H] Deputy Commissioner of Commercial Taxes vs H.R. Sri Ramulu; , ; Shinde Brothers etc. vs Deputy Commissioner, Raichur, A.I.R. 1967 S.C. 15 12; Commissioner of Income tax, Excess Profits Tax, Hyderabad, Andhra Pradesh V. Jagan Mohan Rao & Others, ; Commis sioner of Sales Tax, Madhya Pradesh vs M/s. H.M. Esufali, H.M. Abdulali, Siyaganj, Indore, ; and International Cotton Corporation (P) Ltd. vs Commercial Tax Officer, HubIi & Ors., [1975] 2 S.C.R. 345, followed. The order dated 18.1. 1980 is an order of reassess ment notwithstanding the fact that a regular order of reas sessment has not been passed. The order passed on 18.1. 1980 should be construed as a fresh order of assessment passed under s.21 of the Act and the initial order of assessment dated 7.2.1979 should be deemed to be the order passed again on 18.1.1980. [149E F] 7. If the assessee is able to show any error apparent on the record from the order of assessment dated 7.2. 1979 the appellant is entitled to 143 succeed in its application for rectification provided it is made within the prescribed time, i.e., three years from the date of the order passed under s.21 of the Act. [149E F] Deputy Commissioner of Commercial Taxes vs H.R. Sri Ramulu, ; , referred to. It should be held that the assessing authority had adopted the earlier order dated 7.2.1979 as the order of assessment passed at the conclusion of the proceedings under s.21 of the Act. The period of limitation for the applica tion for rectification should, therefore, be calculated from the date of the order under s.21 of the Act, i.e. 18.1.1980. [150F]

In respect of the assessment for the assessment year 1974 75, the appellant assessee preferred an appeal before the Appellate Assistant Commissioner. During the hearing of the appeal, the assessee raised an additional ground as regards its liability to Purchase Tax and claimed a deduc tion of Rs.11,54,995. After giving an opportunity of hearing to the Income Tax Officer, the Appellate Assistant Commis sioner allowed the said claim. The Revenue preferred an appeal before the Income Tax Appellate Tribunal. The Tribunal held that the Appellate Assistant Commissioner had no jurisdiction to entertain any additional ground not raised before the Income Tax Officer and set aside the order of the Appellate Assistant Commis sioner. The assessee 's application for making reference to the High Court was refused by the Tribunal. The High Court also rejected the assessee 's application for calling the state ment of the case and reference from the Tribunal. Hence, this appeal by special leave. Disposing of the appeal, the Court, HELD: 1.1 The declaration of law is clear that the power of the Appellate Assistant Commissioner is co terminus with that of the Income Tax Officer. If that be so, there appears to be no reason as to why the appellate authority cannot modify the assessment order on an additional ground even if not raised before the Income Tax Officer. No exception could be taken to this view as the Act does not place any restric tion or limitation on the exercise of appellate power. Even otherwise an Appellate Authority while hearing appeal against the order of a subordinate authority has all the powers which the original 341 authority may have in deciding the question before it sub ject to the restrictions or limitation if any prescribed by the statutory provisions. In the absence of any statutory provisions to the contrary the Appellate Authority is vested with all the plenary powers which the subordinate authority may have in the matter. [155G H; 156A B] 1.2 If the Appellate Assistant Commissioner is satisfied he would be acting within his jurisdiction in considering the question so raised in all its aspects. Of course, while permitting the assessee to raise an additional ground, the Appellate Assistant Commissioner should exercise his discre tion in accordance with law and reason. He must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The satisfac tion of the Appellate Assistant Commissioner depends upon the facts and circumstances of each case and no rigid prin ciples or any hard and fast rules can be laid down for this purpose. [157D F] Commissioner of Income Tax vs Mc Millan & Co., ; ; Commissioner of Income Tax, U.P. vs Kanpur Coal Syndicate,, ; Kedarnath Jute Mfg. Co. Ltd. vs Commissioner of Income Tax (Central), Calcutta, ; relied on. Commissioner of Income Tax, Bombay vs Shapporji Patton Ji Mistry, ; Addl. Commissioner of Income Tax Gujarat vs Gurjargravures ?. Ltd., ; distinguished. Rai Kumar Srimal vs Commissioner of Income Tax, West Bengal 111, , approved. Narrondas Manordass vs Commissioner of Income Tax, [1957] 31 referred to. 2. In the instant case, the assessee was assessed to Purchase Tax. The appellant disputed the demand and filed an appeal before the Appellate Authority and obtained stay order. The assessee thereafter claimed deduction for the amount of Rs.11,54,995 towards his liability to pay Purchase Tax as deduction for the assessment year 1974 75. The asses see had not actually paid the Purchase Tax as it had ob tained stay from the Appellate Authority; nonetheless its liability to pay tax existed, and it was entitled to deduc tion of Rs. 11,54,995. [158B C] 3. Since the view taken by the Income Tax Appellate Tribunal is 342 not sustainable in law, the order of the Tribunal is set aside and the matter is remitted to the Tribunal to consider the merit of the deduction permitted by the Appellate As sistant Commissioner. If the Tribunal thinks it necessary, it may remand the matter to the Appellate Assistant Commissioner (Deputy Commissioner of Appeals) for hearing [158F H]

The appellant encashed high denomination currency notes of the value of Rs. 87,5oo and was called upon by the Incometax Officer to submit a return for the relevant year. The appellant made three statements, discrepant in material particulars, at different stages as to how he received the amount. The Income tax Officer held that the true nature of the receipt had not been disclosed, treated it as income from an undisclosed source and assessed him accordingly. The Assistant Commissioner of Income tax upheld that order on appeal. On a further appeal, the Appellate Tribunal reviewed the facts, considered the discrepancies in the appellant 's case and affirmed the order of assessment. An application for a reference to the High Court having been made under section 66 of the Indian Income tax Act, the Tribunal held that no question of law arose from its order and dismissed the same. The High Court thereafter summarily dismissed the application made by the appellant under section 66(2) of the Act. Against that order of summary dismissal special leave to appeal was obtained from this court and the sole question for determination in the appeal was whether the order of the Tribunal on the face of it disclosed any question of law and if the High Court was right in summarily dismissing the application under section 66(2) of the Act. Held, that no question of law arose from the order of the Tribunal and the appeal must fail. In order to decide whether the principles laid down by this court in Dhirajlal Girdharilal vs Commissioner of Income tax, Bombay, and Omar Salay Mohamed Sait vs Commissioner of Income tax, Madras, (1959) 37 I.T.R. 151, applied to a particular case, it was necessary to read the order of the Tribunal as a whole for determining whether or not it had properly considered the material facts and the evidence, for and against, in coming to its final conclusion and whether any irrelevant consideration or matter of prejudice had vitiated such conclusion. Those decisions do not require that the order of the Tribunal must be examined sentence by sentence so as to discover a minor lapse here or an incautious opinion there and rest a question of law thereon. 771 Dhirajlal Girdharilal vs Commissioner of Income tax, Bombay, and Omar Saley Mohamed Sait vs Commis sioner of Income tax, Madras, , explained. Although a mere rejection of an explanation given by the assessee does not invariably establish the nature of a receipt. , where the circumstances of the rejection are such as to properly raise the inference that the receipt is an income, the assessing authorities are entitled to draw that inference. Such an inference is one of fact and not of law.

The United Provinces Agricultural Income tax Act, 1949, authorised imposition of a tax on agricultural income within the State, and the agricultural income tax and super tax were charged on the total agricultural income of the previous year of the assessee. For the purposes of the Act the Collector and the Assistant Collector were declared to be the assessing authorities within their respective revenue jurisdiction and the expression " Collector " was to have the same meaning as in the United Provinces Land Revenue Act, 1901. Under the rules framed by the government under section 44 of the Act an assessee having agricultural income in the jurisdiction of more than one assessing authority was to be assessed by the Collector of the district in which he permanently resided. The State Government of Uttar Pradesh appointed Mr. K. C. Chaudhry under subS. 1 of section 14(A) of the United Provinces Land Revenue Act, 1901 to be the Additional Collector in District Bahraich and authorised him to exercise all the powers and perform all the duties of a Collector in all classes of cases ". Claiming to exercise the 83 powers of a Collector under section 14 of the United Provinces Agricultural Income tax Act of 1949 he assessed the net agricultural income of the assessee who owned landed property in two districts, namely, Bahraich and Kheri in the State of Uttar Pradesh, at 12,81,110 10 0 and ordered him to pay Rs. 1,36,390 2 0 as agricultural income tax and super tax. The validity of this order was challenged by the assessee in the High Court by an application under article 226 of the Constitution and the High Court quashed the order of the Additional Collector holding that he had no " extra territorial " jurisdiction which was exercised by the Collector as the assessing authority in cases where the property of the assessee was situate in several districts and as such the proceeding taken by him for assessing agricultural income tax was unauthorised. After the judgment of the High Court was delivered the State Legislature amended the United Provinces Agricultural Income tax Act, 1949, by Act XIV of 1956, giving retrospective operation to the amending provisions. The Amendment Act enacted that the assessment proceedings held by an Additional Collector who was invested with the powers of a Collector under Act III of 1901 should be deemed always to have been properly taken. The State Government submitted before the High Court an application under section 11 of the amending Act for review of its judgment but it was dismiss ed. On appeal by the State Government by special leave, Held, that the Additional Collector was competent to assess the liability of the assessee to pay agricultural income .tax and super tax under the United Provinces Agricultural Income tax Act, 1949. A Court of appeal must give effect to the law as it stood at the time of hearing of the appeal if at any stage anterior to the hearing the law had been amended with retrospective effect conferring on an authority or tribunal from the order whereof the appeal is filed, jurisdiction which it originally lacked. The power of the appellate court to deal with the appeal in accordance of the amended law is not affected by a provision for review as contained in section 11 of the Amending Act.

The respondent was a company incorporated in the former Patiala State with its registered office in the territory of Pepsu, a Part B State. For the assessment years 1948 49 and 1949 50 in respect of the amounts of income tax and super tax which it failed to deduct from out of the remuneration paid to its managing agents, the Income tax Officer took action under the provisions of section 18 of the Patiala Income tax Act. The Act did not provide for an appeal against the orders of the Income tax Officer under that section and the question for determination was whether an appeal lay under the provisions of the Indian Income tax Act, 1922, which was extended to all Part B States with effect from April 1, 1950, by section 13 of the Finance Act, 1950, and section 2(14A) of the Indian Income tax Act, 1922: Held, that the result of the extension of the Indian Income tax Act, 1922, to Part B States was that that Act was applicable to the assessment years 1950 51 and subsequent years and that for the assessment years 1948 49 and 1949 50 the law applicable was the Patiala Income tax Act. Accordingly, an appeal against the order of the Income tax Officer in question was not competent. The Union of India vs Madan Gopal Kabra, ; and D. R. Madhavakyishnaiah vs The Income Tax Officer, ; , followed.

The appellant company, a registered partnership firm, filed its income tax returns for the years 1956 57 and also for 1957 58 respectively showing a total income of ' Rs. 7,44,551/ , after claiming a deduction of a sum of Rs. 43,116/ , being the amount of interest paid by the assessee on the debts incurred for the partnership business along with the balance sheet in support of the said deductions. The Income Tax officer accepted the claim on the basis of the balance sheet. When the assessee filed his return for the year 1958 59, the Income Tax officer discovered that the deduction claimed by the appellant was not correct and called upon the assessee to prove its plea. But, the assessee did not lead any evidence before him. The Income Tax officer finding that the deduction of interest claimed was utilised for giving interest free loans to the partners for clearing their income tax dues and, as such, it could not be said to be a loan incurred for the expenses of the partnership firm, not only disallowed the deduction claimed for that assessment year, but also issued a notice under section 34 (1) (b) for the re opening of the original assessment of the previous years on the ground that the deduction having been wrongly allowed, taxable income escaped assessment. Accordingly, the Income Tax officer re assessed him by including Rs. 43,116 to the total income. The appeal to the Appellate Assistant Commissioner failed. However, on second appeal, the Income Tax Appellate Tribunal "B" Bench, Calcutta, set aside the order of the reassessment opining that the information resulting in the reassessment notice under section 34(1)(b) was not based on any fresh facts, but was derived from the materials on the record of the original assessment amounting to a change of opinion and, as such, was not sufficient to attract the provisions of section 34(1)(b). On the application of the respondent Revenue, the Tribunal made a reference under section 66(1) of the Act framing a question, namely, "Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the reassessment made by the Income Tax officer under section 34(1)(b) of the Indian Income Tax Act (1922) was incompetent ?" to the High Court, which answered it in the negative and held that the case squarely fell within the ambit of section 34(1)(b) of the Act inasmuch as the information on the basis of which the Income Tax officer sought to reopen the original assessment, was based on subsequent facts ' as also on the materials of the original assessment revealed by more careful and closer circumspection of these materials. Negativing the following three contentions of the assessee appellant, namely, (i) The information relied upon by the Income Tax officer not having been derived from external sources, it amounted to a mere change of opinion on the very facts and materials that were present on the record of the original assessment not attracting the provisions of section 34(1)(b) of the Act. 967 (ii) It was not open to the Income Tax officer to have reopened the original assessment merely because he took a different view of the matter in the assessment year 1958 59. (iii) That the High Court has not appreciated the ratio laid down by the Supreme Court in Commissioner of Income tax, Gujarat vs A. Raman and Company, , and dismissing the appeal by special leave, the Court ^ HELD: (1) section 34(1) contemplates two categories of cases for reopening the previous assessment (1) where there has been an omission or failure on the part of the assessee to make a return of his income under section 22 or to disclose fully and truly all materials facts necessary for his assessment; and (ii) where there has been no such omission on the part of the assessee but the Income Tax officer, on the basis of the information in his possession, finds that income chargeable to tax has escaped assessment for any year. The first category deals with cases where an assessee is himself in default and the second category deals with cases where there is an default on the part of the assessee but where the income chargeable to tax has actually escaped assessment for one reason or the other and the Income Tax officer comes to know about the same[1971 E F] (2) The word "information" which has not been defined in the Act is of the widest amplitude and comprehends a variety of factors. Nevertheless, the power under section 34(1)(b), however, wide it may be, is not plenary because the discretion of the Income Tax officer is controlled by the words "reason to believe". [973 C & E] Bhimraj Pannalal vs Commissioner of Income tax, Bihar and Orissa, an Bhimraj Panna Lal vs Commissioner of Income tax, Bihar & Orissa, , followed. (3) Since the Income Tax officer was to see that the tax collecting machinery is made as perfect and effective as possible so that the tax payer is not allowed to get away with escaped income tax, in view of the difficulty in laying down any rule of universal application, the following tests and principles would apply to determine the applicability of section 34(1)(b) to the following categories of cases: (i) Where the information is as to the true and correct state of law derived from relevant judicial decisions; (ii) Where in the original assessment the income liable to tax has escaped assessment duel to oversight, inadvertence or a mistake committed by the Income Tax officer on the principle that the tax payer would not be allowed to take advantage of an oversight or mistake committed by the taxing authority; (iii) Where the information is derived from an external source of any kind. Such external source would include discovery of new and important matters or knowledge of fresh, facts which were not present at the time of the original assessment; and (iv) Where the information may be obtained even from the record of the original assessment from an investigation of the materials on the record or the facts disclosed thereby or from other enquiry or research into facts of law. If these conditions are satisfied, then the Income Tax officer would have complete jurisdiction to reopen the original assessment. It is obvious that where the Income Tax officer gets no subsequent information, but merely proceeds to reopen the original assessment without any fresh facts or materials or without any enquiry into the materials which from part of the original assessment, section 34(1)(b) would have no application. [973 C, D, 976 A E] Maharaj Kumar Kamal Singh vs The Commissioner of Income tax, Bihar & orissa [1959] Supp. (1) S.C.R. 10; Commissioner of Wealth tax, West Bengal vs Imperial Tobacco Company of India Ltd. [1966] Supp. S.C.R. 174; Commissioner of Income tax. Excess Profits Tax. Hyderabad, Andhra Pradesh vs V. Jagan Mohan Rao and ors. and Commissioner of Income tax Gujarat vs A. Raman and Company, , discussed. 968 (4) In the instant case the subsequent information was the discovery by the Income Tax officer the deduction was wrongly claimed and the consequent disallowance of that deduction and the conduct of the assessee itself in not adducing any evidence or materials to prove its stand that the claim was validly made which led to the issue of the notice under section 34(1)(b) for reopening the assessment [978 H] (5) The case really fell within the tests and principles laid down in A. Raman Company 's case and within the ambit of section 34(1)(b) inasmuch as the Income Tax officer proceeded on the basis of the information which came to him after the original assessment, by fresh facts revealed in the assessment for the year 1958 59 and consisted of the conduct of the assessee in not adducing any evidence to support its plea. It was not a case of a mere change of opinion by the Income Tax officer on the materials which were already on record. [1979 B C] Commissioner of Income tax, Gujarat vs A. Raman and Company, , applied. Bankipur Club Ltd. vs Commissioner of Income tax, Bihar and Orissa, , 834, distinguished. [On the question "Whether it is open to the I.T.O. to change his opinion subsequently on the same materials and reopen the original assessment" which arose in the decision in Commissioner of Income Tax, Bombay City 2 vs H. Holck Larsen, , 479, relied on by the appellant assessee and also on the contention that in fact the amount sought to be deducted was paid towards the income tax liabilities of the partners, the Court applied "Non liquet"]

For the assessment years 1956 57 and 1957 58, the appellant was, assessed to sales tax in respect of Vanaspati and oil under the U.P. Sales Tax Act, 1948. By a notification issued on March 31, 1956 under section 3 A(2), the rate of tax on Vanaspati was fixed at one anna per rupee at the point of sale by the manufacturer. The appellant and section P. Bhasin, a shareholder of the company, filed a writ petition in the High Court challenging the validity of the U.P. Sales Tax Validation Act, 1958 and also prayed for the quashing of the assessment order dated October 15, 1960 and the order dated February 1, 1961, of the Sales Tax Judge (Appeals), Meerut, in connection with the assessment of tax on the sale of Vanaspati and other articles both on the ground that the sale tax was assessed at a higher rate than was permissible under a valid law and that the tax had been assessed at the rate of one anna and not at 6 Naya Paisa per rupee. The writ petition was dismissed by a single Judge of the High Court and the Letters Patent Appeal was also dismissed by High Court. The appellant came to this Court by special leave. The only point urged before this Court was that the tax should have been calculated at the rate of 6 Naya Paisa per rupee and not at the rate of one anna per rupee as laid down in the relevant provisions of the U.P. Sales Tax Act and the notice issued under its provisions. Dismissing the appeal, Held (per P, B. Gajendragadkar, C.J., M. Hidayatullah, K. C. Das Gupta and Raghubar Dayal, JJ.): The High Court was right in construing the provisions of sub section (3) of section 14 of Indian to mean that references to values in any enactment, notification, rule or order under any enactment or in any contract, deed or instrument, expressed in old coins should be construed to be references to values expressed in new coins by converting the old values at the rate of16 annas, 64 pice and 192 pies to 100 Naya Paisa. The values expressed in new coins must be absolutely equivalent to the value of the, old coins. Per Shah, J. The liability for sales tax after the amendment of the will be at the rate of 6 new coins for every rupee of sale price and not one anna. By the notification issued on March 31, 1956, the liability for payment of sales tax was to be computed at the rate of one anna in a rupee of the turnover. By virtue of section 14(3), for an anna mentioned in the notification, 6 1/4 new coins are to be substituted. As the substituted rate involves a fraction, by the process of rounding off at the rate specified in section 14(2), the fraction of new coins has to be omitted and the nearest new coins, i.e., 6 new coins are to be deemed to be substituted in the statute. J. K. Jute Mills Co. Ltd. vs State of Uttar Pradesh, ; , Ram Kishan Sunder Lal vs State of Uttar Pradesh, 13 S.T.C. 923, 315 M/s. Mangalore Ganesh Beedi Works vs State of Mysore, [1963] Supp. 1 S.C.R. 275, referred to.

Appeal No. 55 of 1950. Appeal by special leave from the Judgment and Order dated March 18. 1949, of the High Court of Judicature at Bombay (Chagla C. J. 178 and Ten dolkar J.) in Income tax Reference No. 5 of. 1948, arising out of order dated September 27, 1947, of the Income tax Appellate Tribunal, Bombay Bench 'A ', in I.T.A. No. 2205 of 1946 47. C. K. Daphtary, Solicitor General for India, (K. T. Desai and A.M. Mehta, with him) for the appellant. M. C. Setalvad, Attorney General for India, (G. N. Joshi, with him) for the respondent. November 3. The Judgment of the Court ,Was delivered by Bose, J. This is an appeal from the High Court at Bombay in an Income tax Reference under section 66 (1) of the Indian Income tax Act of 1922. The reference was made to the Bombay High Court by the Bombay Bench of the Income tax Appellate Tribunal in the following circumstances. The appellant assessee is a company known its the Raghuvanshi Mills Ltd., of Bombay. The assessment year with which we are concerned is 1945 46. 'The assessee had insured its buildings, plant and machinery with various insurance companies and also took out, besides those policies, four policies of a type known as a "Consequential Loss Policy. " This kind of policy insures against loss of profit, standing charges and agency commission. The total insured against under, the latter heads was Rs. 37,75,000 account of loss.of profits and standing charges, and Rs. 2,26,000 account of agency commission, making a total of Rs. 40,00,000. On the 18th of January, 1944, a fire. broke out and the mill were completely destroyed. The various insurance companies therefore paid the assessee company an aggregate of Rs. 14,00,000 account in the year with which we are concerned under these policies. This was paid in two sums as follows: Rs. 8,25,0.00 8th September, 1944, and Rs. 5,75,000 22nd December, 1944. These payments have been treated as part of the assessee 's 'income and the 179 company has been taxed accordingly. The question is whether these sums are or are not liable to tax. Before we set out the question referred, it will be necessary to state that the whole of this Rs. 14,00, 000 has been treated as paid account of loss of profits. The learned Solicitor General, who appeared for the ) appellant assessee, contended that that was wrong because the portion of it assignable to standing charges and agency commission could not any construction be liable to tax. This contention is new and involves questions of fact and travels beyond the scope ' of the question referred. We are consequently not, able to entertain it. It has been assumed throughout the proceedings, tight up to this Court, that the whole of the Rs. 14,00,000 was assignable to loss of profits. There is nothing the record to show that it was ever split up among the other heads or that it was ever treated &a having been split up,either by the insurance com panies or by the assessee, nor is there any material which we would be able to apportion it. Our decision therefore proceeds the assumption that the whole sum is assignable to loss of profits and we make it clear that we 'decide nothing about other moneys which may be distributable among other heads. The question has been referred in these terms: "Whether in the circumstances of the case, the sum of Rs. 14,00,000 was the assessee company 's income within the meaning of Section 2(6C) of the Indian Income tax Act and liable to pay income tax under the Indian Income tax Act. " We are concerned in this case with four policies of insurance with four different insurance companies. The clauses relevant to the present matter are the same in all four cases though the sum insured against by. each insurance company differs. They are as follows "POLICY NO. C.L. 110018. . . 180 Rupees X Lacs only Loss of Profits, Standing Charges and Agency Commission of the above Co. 's Mills, situate at Haines o Road, Mahaluxmi; Bombay, following . . The total amount declared for insurance is Rs. 40,00,000 and for 18 months ' benefits only as under: Rs. 37,75,000 Loss of Profits and Standing Charges. Rs. 2,25,000 Agency Commission. Rs. 40,00,000 Out, of which this policy covers Rs. X lacs only. Schedule attached to and forming part of Po licy No. C. L. 10018. The company will pay to the assured: The loss of Gross Profit due to (a) Reduction in Output and (b@) increase in Cost of Working and the, amount payable as indemnity hereunder shall. . Definitions of those two terms follow. We need not reproduce talent. Then come the following definitions: "Gross profit. The sum produced by adding to the Net Profit the amount of the Insured Standing Charges, or if there be no Net Profit the amount of the Insured Standing Charges, less such a proportion of any net trading loss as the amount of the Insured Standing Charges bears to all the Standing Charges of the business. Net profit. The net trading profit (exclusive of all capital receipts and accretions and all outlay properly chargeable to capital) resulting from the business of the Insured at the premises after due provision has been made for all Standing 'and other charges including depreciation. Insured standing charges. Interest Loans and Bank Overdrafts, Rent Rates and Taxes, Salaries to Permanent Staff and Wages to Skilled Employees, 181 Directors ' Fees, Auditor 's Fees, Travelling Expenses, Insurance Premiums, Advertising and Agency Commission. Period of indemnity. The period beginning with the occurrence of the fire and ending not later than eighteen consecutive calendar months thereafter during which the results of the business shall be affected in consequence of the fire. Rate of Gross Profit. The rate of gross profit per unit earned the output during the financial year immediately before the date of the fire. . to which such adjustments shall be made as may be necessary to provide for the trend of the business and for variations in or special circumstances affecting the business either before or after the fire or which would have affected the business had the fire not occurred so that the figures thus adjusted shall represent as nearly as may be reasonably practicable the result which, but for the fire, would have been obtained during the relative period after the fire. " The underlined words show that the insurance in respect of profits was to represent as 'nearly as possible the profits which would have been made, had the mills been working in its normal way. We turn next to the Income tax Act. Under section 3 the "total income of the previous year" is liable to tax subject to the provisions of the Act. Section 4 defines the total income to include "all income, profits and gains from whatever source derived. " There are certain qualifications but they do not concern us here. It will be seen that the taxable commodity, "total income", embraces three elements, "income", "profits" and "gains". Now though these may overlap in many cases, they are nevertheless separate and severable, and the simple question is whether the Rs. 14 lacs Here italicised. 24 182 fall under any one or more of those heads. In our opinion, it is "income" and so is taxable. It was argued behalf of the assessee that it can not be called profits because the money is only pay able if and when there is a loss or partial loss and that something received from an outside source in circumstances like these is not money which is earned in the business and if there are no earnings and no profits there cannot be any income. But that only concentrates the word " ' profits". This may not be a "profit" but it is something which represents the profits and was intended to take the place of them and is therefore just as much income as profits or gains received in the ordinary way. Section 4 is so widely worded that everything which is received by a man and goes to swell the credit side of his total account is either an income or a profit or a gain. No attempt has been made in the Act to define "income" except to say in section 2 (6C) that it includes certain things which would possibly not have been regarded as income but for the special definition. That however does not limit the generality of its natural meaning except as qualifided in the section itself. The words which follow, namely, "from a whatever source derived", show how wide the net is spread. So also in section 6. After setting out the various heads of taxable income it brings in the all embracing phrase "income from other sources. " There is however a distinction between "income" and "taxable income". The Act does not purport to subject all sources of income to tax, for the liability is expressly made subject to the provisions of the Act and among the provisions are a series of exceptions and limitations. Most of them are set out in section 4 itself but none of them apply here. The nearest approach for present purposes is section 4 (3) (vii): "Any receipts. . not being receipts arising from business. . which are of a casual and non recurring nature. " 183 But the sting, so far as the assessee is concerned, lies in the words "not being receipts arising from business. " The assessee is a business company. Its aim is to make profits and to insure against loss. In the ordinary way it does this by buying raw material, manufacturing goods out of them and selling them so that balance there is a profit or gain to itself. But it also has other ways of acquiring gain, as do all prudent businesses, namely by insuring against loss of profits. It is indubitable that the money paid in such circumstances is a receipt and in so far as it represents loss of profits, as opposed to loss of capital and so forth, it is an item of income in any normal sense of the term. It is equally clear that the receipt is in separably connected with the ownership and conduct of the business and arises. from it. Accordingly, it is not exempt. This question was considered by the Supreme Court of Canada which decided that a receipt of this nature is not a "profit" and so is not taxable [B. C. Fir and Cedar Lumber Co. vs The King(1)]. But the Court did not examine the wider position whether it is "income" and in any event the decision was reversed appeal to the Privy Council(1). Their Lordships held it is "income". This was followed later by the Court of Appeal in England and endorsed by the House of Lords in Commissioners of inland Revenue vs William 's Executors(1) In so far as these decisions do not turn the special wording of the Acts with which they are respectively concerned and deal with the more general meaning of the word "income", we prefer the view taken in England. It is true the Judicial Committee attempted a narrower definition in Commissioner of income tax vs Shaw Wallace & Co.(1), by limiting income to "a periodical monetary return 'coming in ' with some sort of regularity, or expected regularity, from definite sources" but, in our opinion, those remarks must be (I) [1931] Canada L.R. 435. (2) [I932] A. C. 441 at 448. (3) (I944) (4) (1932) 59 I.A. 206. 184 read with reference to the particular facts of that case. The non recurring aspect of this kind of receipt was considered by the Privy Council in The King vs B. C. Fir and Cedar Lumber Co.(1), and we do not think $their Lordships had in mind a case of this nature when they decided Shaw Wallace & Company 's case (2). The learned Solicitor General relies strongly a clause which appears in three of the four policies with which we are concerned. That is a clause which states that the insured must do all he can to minimise the loss in profits and until he makes an endeavour to re start the business the moneys will not be paid. This, he argued, shows that the money was paid as an indemnity against the loss of profits and was niether income nor profits, nor was it a gain within the meaning of the section. We are unable to see how these receipts cease to be income simply because certain things must be done before the moneys can be claimed. In our opinion, the High Court was right in holding that the Rs. 14,00,000 is assessable to tax. The appeal fails and is dismissed with costs. Appeal dismissed. (1) [1032] A.C. 441, at 448. (2) [1932] 59 I.A. 206.

The appellant mills had insured its building, plant and machinery with various insurance conapanies against fire and had also taken out some policies of the type known. as " consequential loss policies " which insured against loss of profits, standing charges and agency commission. The mills were completely destroyed by fire and the appellant received certain sums of money under the consequential loss policies. Held, that sums of money received under these policies were "income" within the meaning of section 2 (60) of the Indian Income tax Act, and as they were inseparably connected with the ownership and conduct of the business of the company and arose I from it, they were not exempt under section 4 (3) (vii), and were therefore assessable to income tax under the Indian Income tax Act. [Their Lordships, made it clear that they proceeded the assumption that the whole sum was assignable to loss of profits and that they decided nothing about other moneys which may be distributable amongst other beads, e.g., standing charges or agency commission.] The definition of "income" in Shaw Wallace & Co. 's case [(1932) 59 I.A. 206] as a "periodical monetary return 'coming in ' with some sort of regularity, or expected regularity, from definite sources " must be read with reference to the particular facts of that case and is not applicable to receipts, of this nature. The King vs B.C., Fir and Cedar Lumber Co. and Commissioners Of Inland Revenue vs Wi WiIliams 's Executors applied. Commissioner of Income tax, Bengal vs Shaw Wallace & Co. (1932) 59 I.A. 206, commented upon. Judgment o f the Bombay High Court affirmed.

There was a cash credit in November 13, 1947, in the capital, account of the Appellant assessee whose accounting period was from November 13, 1947 to November 1, 1948. The Income tax Officer assessed the said credit as income from undisclosed sources in the assessment for the assessment year 1949 50. The Appellate, Assistant Commissioner relying on C.I.T. vs Darolia & Sons. held that the amount was not taxable in the assessment year 1949 50. The Income tax Officer thereupon assessed the amount in 1948 49 after having issued in November 1958 a notice under section 34(1) (a) of the Indian Income ' tax Act, 1922. He rejected the appellant 's contention that notice under the said section was timebarred. In appeal the Appellate Assistant Commissioner held that in the earlier appeal there was no finding that the credit represented the assessee 's income or that it should be assessed in the year 1948 49 and that consequently the notice under section 34 issued in November 1958, was not saved by the second proviso to section 34(3) of the Act. The appeal filed by the Revenue was allowed by the Tribunal and in reference the Madras High Court relying on its own ruling in A.S. Khader Ismail vs Income tax Officer, upheld the order of the Tribunal. The appellant came to this Court and relied on this Court 's decision in Income Tax Officer A Ward Sitapur vs Murlidhar Bhagwandas in which the aforesaid Madras decision had been overruled. The Revenue urged that in answering the reference the effect of section 2 of the Income tax (Amendment) Act 1959 must be taken into consideration. To this the appellant objected that the point was outside the scope of the questions of law referred by the Appellate Tribunal to the High Court. HELD:(i) The view taken by the Madras High Court as to the scope of the word 'finding ' in A. section Khader Ismail 's case and followed by it in the present case had been overruled, by this Court. Accordingly the department could not take advantage of the second proviso to section 34(3). [20E F] Income Tax Officer, A Ward Sitapur vs Murlidhar Bhagwan Das, , applied (ii)However, the impact of section 2 of the Amending Act of 1959 had to be considered before the reference could be properly answered. Although the question had not been raised before the Tribunal or the High Court it was only an aspect of the question of limitation which had been referred. All that section 66(1) requires is that the question of law which is referred to the High Court and which the High Court is to decide must be the question which was in issue before 18 the Tribunal. When the question itself was under issue there is no further limitation imposed by the section that the reference should be limited to those aspects of the question which had been argued before the Tribunal and it will be an over refinement of the position to hold that each aspect of a question is itself a distinct question for the purpose of section 66(1) of the Act. [22B D] C.I.T. Bombay vs Scindia Steam Navigation Co. Ltd. 42 I.T.R. 589, applied. Onkarmal Mehraj vs C.I.T., Bombay 1, , and section C. Prashar vs Vasantsen Dwarkadas, ; , referred to. [On the above view the case was remanded to the High Court for examining the question of law referred to it after considering the impact of the Amendment Act of 1959.]

In respect of the assessment year 1949 50, the appellant while submitting his return disclosing his turnover of the sale of oil, included therein the value of the hydrogenated oil that he sold and claimed a deduction under r. 18 of the Turnover and Assessment Rules in respect of the value of the groundnuts which had been utilised for conversion into hydrogenated oil on which he had paid tax at the point of their purchase. The sales tax authorities rejected the claim on the ground that hydrogenated groundnut oil was not groundnut oil within that rule. This view was upheld by the High Court on February 11, 1955, in the Tax Revision Case No. 120 of 1953 filed by the appellant, but, on application, the High Court granted a certificate of fitness under article 133(1) of the Constitution of India on the ground that substantial questions of law arose for decision in the case. For the assessment years 1950 51, 1951 52 and 1952 53, the same question as to whether hydrogenated groundnut oil was raised and decided against the appellant by the sales tax authorities and the High Court. The appellant then applied for a certificate of fitness under article 133(1) of the Constitution, but the High Court dismissed the petition on September 4, 1959, stating: "The judgment sought to 175 be appealed against is one of affirmance. We do not think that it involves any substantial question of law . . . nor do we regard this as a fit case for appeal to the Supreme Court. " On November 23, 1959, applications for review were filed under 0. 47, r. 1, of the Code of Civil Procedure but they were dismissed. The appellant then applied for special leave under article 136 of the Constitution against the orders dismissing the applications for review and leave was granted after notice to the respondent. When the appeal came on for hearing in the Supreme Court, the respondent raised a preliminary objection that the special leave granted to the appellant should be revoked. The grounds for revoking the special leave were not urged by the respondent at the time of the hearing of the applications under article 136, nor were they set out in the statement of case filed by the respondent under O.XVIII of the Supreme Court Rules, 1950. Held (i) that where notice is given to the respondent before the hearing of the application for grant of special leave, no objection to the maintainability of the appeal or to the granting of special leave would be permitted to be urged at any stage after the grant of it, except possibly where the ground urged happens to arise subsequent to the grant of leave or where it could not be ascertained by the respondent at that date notwithstanding the exercise of due care. (ii) that the statement in the order dated September 4, 1959, that the case did not involve any substantial question of law,was an "error apparent on the face of the record" within the meaning of 0. 47, r. 1, of the Code of Civil Procedure inasmuch as this was a case where without any elaborate argument one could point to the error and say that here was a substantial point of law which stared in the face.

The appellant took lease of an open land for construction of buildings suitable for residential, business, industrial or office purposes. The appellant brought suits in the City Civil court, Bombay, for the recovery of arrears of rent in respect of premises built on the said open land, all within the city of Bombay thus in the area specified in Schedule I of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947. The appellant stated in the Plaint itself that the Bombay Rent Control Act, 1947, did not apply to the dcmiscd premises. The defendants pleaded that the Rent Act applied and the City Civil Court had no jurisdiction to try the suit. The trial judge held that part II of the Rent Act applied to the premises and consequently only the special courts specified in section 28 of the Rent Act had jurisdiction to entertain the suit and ordered the plaints in the suits to be returned to the plaintiff, for presentation to the proper court. The Bombay High Court summarily dismissed the appeals from the said orders. The point at issue for decision was whether "when a lessee takes lease of open land for the purpose of constructing on it buildings intended to be used for residence or for business, this amounts to "Letting for residence" or "letting for business". The appellants ' contention was that as open land not intended to be used, as it is, for residence or business but for construction of buildings for residence or business was taken on lease the land was not being let for residence or business. Held, that the words "let for residence, education, business or storage" in s.6 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, are wide enough to include a letting for the achievment of these purposes by construction of buildings as also without construction of buildings. Held, further, that on the facts of the present case, in each of these cages, the lease was taken with a view to construct, buildings thereon for residential, business, industrial or office purposes and the land let was therefore 'premises ' to 929 which under section 6(1) of the Bombay Rent Act, the provisions of Part II of the Act applied. Vinayak Gopal v Laxman Kashinath I. L. R. , approved.

The appellant was a public limited company doing the business of jute and manufacturing of jute goods. It followed the mercantile system of accounting. Before the Income tax Officer in connection with the assessment year 1955 56 the appellant claimed a deduction on account of assessed sales tax. The demand of sales tax waS contested by the appellant before the higher sales tax authorities but before the matter was finalised the Income tax Officer completed the assessment. He disallowed appellant 's claim for deduction of sales tax on the ground that the liability, to pay sales tax had not been accented by the appellant and no provision had been made in its books with regard to payment of the assessed amount. The authorities Linder the Act dismissed the appeals. The High Court in reference was of the opinion that unpaid and disputed sales tax liability could not form the basis of a claim for deduction In appeal by special leave to this Court the appellant submitted that sales tax paid or unpaid would be admissible deduction under s.10(2)(xv) as well as section 10(1) of the Income tax Act, 1922, and that where the mercantile system of accounting was observed the deduction would be permissible in the year to which the liability relates irrespective of the point of time when the liability has been actually discharged. HELD: Under all sales tax laws including the statute applicable to the present case the moment a dealer makes either purchase or sales which are subject to taxation, the obligation to pay tax arises and taxability is attracted. Although that liability cannot be enforced till the quantification is effected by assessment proceedings, the liability for payment of tax is independent of the assessment. In the present case the liability had even been quantified. The liability could not cease to be one merely because the assessee had taken proceedings before higher authorities. An assessee that follows the mercantile system of accounting is entitled to deduct from the profits and gains of the business such liability which had accrued during the period for which the profits and gains were being computed even though it had to be discharged at a future date. [281B F] Commissioner of Income tax West Bengal II vs Royal Boot House, and Pope The King Match Factory vs Commissioner of Income tax Madras, , applied. 278 The contention that since the assessee had failed to debit the liability in its books of accounts, it was debarred from claiming the same as deduction either under s.10(1) or s.10(2)(xv) of the Act could not be accepted. Whether the assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the assessee might take of his rights nor can existence or absence of entries in the books of accounts be decisive or conclusive in the matter. [282 C E] The appeal must accordingly be allowed.

An assessment order was passed in respect of the turn over of the appellant firm for the year 1975 76 by the Sales Tax Officer on 7.2.1979. Thereafter, the Sales Tax Officer issued a notice under s.21 of the Uttar Pradesh Sales Tax Act, 1948, proposing to make a reassessment on the ground that the mandi cess and arhat (commission) had escaped assessment and directed the appellant to appear along with its account books on 18.1. The Sales Tax Officer passed the order under s.21 on the same date holding that the appellant was not liable to pay any more tax. In the year 1982 the appellant filed four applications under s.22 for rectification of the mistakes in the assess ment orders for assessment years 1975 76, 1976 77, 1977 78 and 1978 79 on the ground that the turnover in respect of purchases made on behalf of Ex U.P. principals had been wrongly assessed to sales tax. All the four applications were rejected by the Sales Tax Officer on merits. The appellant preferred appeals and the Appellate Au thority allowed the appeals relating to the assessment orders for the assessment years 1976 77, 1977 78 and 1978 79 on merits but dismissed the appeal in respect of the assess ment order for the assessment year 1975 76 on the ground that the application for rectification had been filed beyond three years from the date of the original order of assess ment and was thus barred by limitation. The appellant filed second appeal before the Sales Tax Tribunal in respect of the assessment year 1975 76. The Department also preferred second appeals in respect of the orders of assessment for assessment years 1976 77, 1977 78 and 1978 79. The Tribunal allowed the appeal 141 of the appellant holding that the rectification application made in respect of the assessment order for the assessment year 1975 76 was within limitation as the original order dated 7.2.1979 had ceased to exist on the re opening of the assessment and the final order had been passed on 18.1. 1980 within three years from the date of the application for rectification which had been filed on 4.11.1982. However, the appeals of the Department were dismissed. Out of the four revision applications filed by the Department, the High Court dismissed three applications and allowed the revision application in respect of the applica tion for rectification of the assessment order for the assessment year 1975 76 holding that the application for rectification had been filed beyond three years from the date of the original order dated 7.2. 1979 and that the order dated 18. 1. 1980 had no effect on the question of limitation. In the appeal to this Court, on behalf of the appellant it was contended that on the issue of the notice under s.21 of the Act original assessment order ceased to be in force and that the only order of assessment in respect of assess ment year 1975 76 which should be taken into consideration for all purposes including the application for rectification of mistake is the order dated 18.1. On behalf of the State it was contended that since no order of reassessment had actually been passed in the in stant case on 18.1. 1980 but only an order discharging the notice issued under s.21 of the Act had been passed the original order of assessment passed on 7.2. 1979 continued to remain in force. Allowing the appeal, HELD: 1. The judgment of the High Court is set aside and the decision of the Tribunal restored. [150G] 2. Section 21 of the Uttar Pradesh Sales Tax Act, 1948, authorises the assessing authority to make an order of assessment or reassessment. It says that if the assessing authority has reason to believe that the whole or any part of the turnover of a dealer, for any assessment year or part thereof, has escaped assessment to tax or has been under assessed or has been assessed to tax at a rate lower than that at which it is assessable under the Act, or any deduc tions or exemptions have been wrongly allowed in respect thereof, the assessing authority may, after issuing notice to the dealer and making such inquiry as it may consider neces 142 sary assess or reassess the dealer or tax according to law. [149G H;150A B] 3. Section 21 of the Act does not require the assessing authority to pass an order deciding whether it is necessary to proceed with the inquiry under that section or not before passing an order of assessment or reassessment under that section. The only order which the assessing authority is required to make under s.21 after a notice is issued to the dealer under that section is an order of assessment or reassessment. [150C D] 4. Once a notice is issued for ,purposes of making reassessment the earlier proceedings become re opened and the initial order of assessment ceases to be operative. The effect of the re opening of the assessment is to vacate or set aside the initial order of assessment and to substitute in its place the order mode on reassessment and that the result of the re opening of the assessment is that a fresh order for reassessment would have to he made in respect of all matters including those matters in respect of which there is no allegation of the turnover escaping assessment. [148H;149A B] 5. Once an assessment order hod been rectified and it was sought to make a further rectification of that order the period of limitation for making such further rectification would commence not from the date of the original assessment order but from the date of the earlier rectification order. [148G H] Deputy Commissioner of Commercial Taxes vs H.R. Sri Ramulu; , ; Shinde Brothers etc. vs Deputy Commissioner, Raichur, A.I.R. 1967 S.C. 15 12; Commissioner of Income tax, Excess Profits Tax, Hyderabad, Andhra Pradesh V. Jagan Mohan Rao & Others, ; Commis sioner of Sales Tax, Madhya Pradesh vs M/s. H.M. Esufali, H.M. Abdulali, Siyaganj, Indore, ; and International Cotton Corporation (P) Ltd. vs Commercial Tax Officer, HubIi & Ors., [1975] 2 S.C.R. 345, followed. The order dated 18.1. 1980 is an order of reassess ment notwithstanding the fact that a regular order of reas sessment has not been passed. The order passed on 18.1. 1980 should be construed as a fresh order of assessment passed under s.21 of the Act and the initial order of assessment dated 7.2.1979 should be deemed to be the order passed again on 18.1.1980. [149E F] 7. If the assessee is able to show any error apparent on the record from the order of assessment dated 7.2. 1979 the appellant is entitled to 143 succeed in its application for rectification provided it is made within the prescribed time, i.e., three years from the date of the order passed under s.21 of the Act. [149E F] Deputy Commissioner of Commercial Taxes vs H.R. Sri Ramulu, ; , referred to. It should be held that the assessing authority had adopted the earlier order dated 7.2.1979 as the order of assessment passed at the conclusion of the proceedings under s.21 of the Act. The period of limitation for the applica tion for rectification should, therefore, be calculated from the date of the order under s.21 of the Act, i.e. 18.1.1980. [150F]

The Income tax Officer, Madura, issued notice under section 18A (1) of the Indian Income Tax Act, 1922, for payment of advance tax. R, the then manager of the Hindu Undivided family availed of the option to submit a revised estimate for the years 1946 47 and 1948 49. The assessment of these two years were completed respectively in November, 1950 and February, 1951, as the total income assessed far exceeded the estimate submitted by R, the Income tax Officer ordered the respondent, the legal representative of R, to pay the interest under section 18A (6) of the Act. On appeal, the Income tax Appellate Tribunal reduced the income and the Income tax Officer in giving effect to the said order reduced the interest and called upon the respondent to make payment. The respondent asked the Income tax Officer not to levy interest under section 18A (6), submitting that the levy was illegal and unjustified, alternatively he requested that the interest be waived by virtue of the powers vested on the Income tax Officer under proviso 5 to section 18A (6) which was added by section 13 of Act 25 of 1953, with retrospective effect from April 1952. The Income tax Officer and the Inspection Assistant Commissioner declined to accede to the request. The respondent then moved the High Court at Madras for a writ under article 226 cancelling the levy of interest on the ground among others that refusal by the Revenue authorities to cancel the levy was arbitrary and not based on any judicial exercise of the discretion vested by the Act. The High Court upheld the plea, ordered the Income tax Officer to decide whether the respondent had made out a case for the exercise of the discretion. The only question in the appeal before the Supreme Court was whether benefit of the said 5th proviso to section 18A (6) may be granted in respect of assessments of income which were completed by the Income tax officer before April 1952. 614 ^ Held, that the jurisdiction under 5th proviso of section 18A (6) of the Income tax Act may be exercised by the income tax Officer in all cases which were pending on April 1, 1952 before him or any superior authority having under the Act power to modify the assessment of income.

The appellant company purchased machinery worth Rs.2,81,741 in the year 1957 and gave it on hire to another company which insured the machinery. In the year 1966, a fire broke out in the lendee company causing extensive damage to the machinery of the appellant. On a settlement of the insurance claim the lendee company paid to the appellant a sum of Rs.6,32,533 on account of the destruction of its machinery. The difference between the actual cost of the machinery and its written down value worked out to Rs.2,62,781 which the appellant (the asses I see) showed in its income tax return for the relevant year as profit chargeable to tax under section 41(2) of the Income Tax Act. The lncomeTax Officer subjected to tax also the additional amount of Rs.3,50,792 the difference between the amount of insurance claim and the original cost of the machinery treating the same as capital gains chargeable under section 45 of the Act, and rejected the case of the appellant that the capital gains tax was not attracted to the amount received on account of the insurance claim since there was no transfer of capital asset as was contemplated by section 45 read with section 2(47) of the Act. The appeal of the assessee was dismissed by the Appel late Assistant Commissioner, but its claim was accepted by the Income Tax Appellate Tribunal which held that the amount was not received on account of transfer of the capital asset but on account of damage to it and that section 45 was attracted only when there was a transfer of the capital asset. The reference at the instance of the revenue was an swered by the High Court against the assessee. Aggrieved the assessee filed the appeal before this Court on a certificate granted by the High Court. On the question: whether the money received towards the insurance claim on account of the damage to. or destruction of the capital 578 asset was so received on account of the transfer of the asset within the meaning of section 45 of the Act and was, there fore, chargeable to the capital gains tax under the said section, Allowing the appeal, this Court, HELD: 1.1 The money received under the insurance policy is by way of indemnity or compensation for the damage, loss or destruction of the property. It is not in consideration of the transfer of the property for the transfer of any right in it in favour of the insurance company. It as by virtue of the contract of insurance or of indemnity, and in terms of the conditions of the contract. [584C D] 1.2 In the case of damage, partial or complete, or destruction for loss of property there is no transfer of it in favour of a third party. The fact that while paying for the total loss of or damage to the property, the insurance company takes over such property or whatever is left of it, does not change the nature of the insurance claim which is indemnity or compensation for the loss. The payment of insurance claim is not in consideration of the property taken over by the insurance company, for. one is not consid eration for the other. The insurance claim is not the value of the damaged property. The claim is assessed on the basis of the damage sustained by the property or the amount neces sary to restore it to its original conditions. It is not a consideration for the damaged property. [584C, F G] 1.3 In the instant case, the amount received by the assessee was the one received by it as damages on account of the loss of its machinery. The lendee company, as a bailee, had insured the machinery hired from the assessee, since it was liable to make good the loss of the machinery to the assessee. This was implied under a contract of bailment unless it was provided to the contrary. The lendee company paid the insurance amount pro rata to the assessee. [587D G] 1.4 The insurance was on reinstatement basis which meant that the property was to be restored to the condition in which it was, before the fire. The insurance company paid the amount for the restoration of the machinery which had to be on the basis of its value at the time of the fire. The machinery in question was purchased in the year 1957 and the fire broke ' out on. August 11, 1966. Taking into considera tion the ordinary course of events, it was legitimate to presume that the cast of machinery had gone up during the intervening period and the assured and, therefore, the assessee, was entitled to recover on the basis of the 579 increased value of the machinery. [584H; 585A B] Halsbury 's Laws,of England, Fourth Edition, Vol. 25, re ferred to. 2.1 The capital gains is attracted by transfer and not merely by extinguishment of right howsoever brought about. The transfer may be effected by various modes and one of the modes is the extinguishment of right on transfer of the asset itself or on account of the transfer of the right or rights in it. The extinguishment of right or rights must in any case be on account of its or their transfer in order to attract the provisions of Section 45 which speaks about capital gains arising out of "transfer" of asset and not on account of "extinguishment of right" by itself. [583G H; 584A] If extinguishment of right or rights is not due to transfer and is on account of the destruction or loss of the asset, it is not a transfer and does not attract the provi sions of section 45 which relate to transfer and not to mere extinguishment of right but to one by transfer. Hence an extinguishment of right not brought about by transfer is outside the purview ors. [584A B] Whatever the mode by which a transfer is brought about, the existence of the asset during the process of transfer is a pre condition. Unless the asset exists in fact, there cannot be a transfer of it. [583E] Transfer presumes both the existence of the asset and of the transferee to whom it is transferred. [584C] 2.2 When an asset is destroyed there is no question of transferring it to others. The destruction or loss of the asset, no doubt, brings. about the destruction of the right of the owner or possessor of the asset, in it. But it is not on account of transfer. It is on account of the disappear ance of the asset. The extinguishment of right in the asset on account of extinguishment of asset itself is not a trans fer of the right but its destruction. By no stretch of imagination, the destruction of the right on account of the destruction of the asset can be equated with the extinguish ment of right on account of its transfer. [583E G] 3.1 Although the definition of "transfer" in Section 2(47) of the Act is inclusive, and, therefore, extends to events and transactions which may not otherwise be "trans fer" according to its ordinary, popular and natural sense, yet it also mentions such transactions as 580 sale, exchange etc. to which the word "transfer" would properly apply in its popular and natural import. Since those associated words and expressions imply the existence of the asset and of the transferee, according to the rule of noscitur a sociis, the expression "extinguishment of any rights therein" would take colour from the said associated words and expressions, and will have to be restricted to the sense analogous to them. [585C E] If the legislature intended to extend the definition to any extinguishment of right, it would not have included the obvious instances of transfer, viz. sale, exchange etc. Hence the expression "extinguishment of any rights therein" will have to be confined to the extinguishment of rights on account of transfer and cannot be extended to mean any extinguishment of right independent of or otherwise than on account of transfer. [585E F] 3.2 The High Court, was not correct in reading the expression " 'extinguishment of any rights" in the assets as any extinguishment of right whether it resulted in or was on account of transfer nor was it right in assuming that for "transfer" within the meaning of Section 45 the asset need not exist. It erred in ignoring the basic postulate that Section 45 does not relate to extinguishment of right but to transfer. Having concentrated its attention on the words "extinguishment of right" rather than on "transfer", the High Court, misdirected itself and proceeded on the basis that every extinguishment of right whether by way of trans fer or not, is attracted by Section 45. [585F G; 584B] Commissioner of Income Tax vs Madurai Mills Co. Ltd., and Commissioner of Income Tax vs Mohanbhai Pamabhai, , referred to. Whether the lendee company had insured assessee 's machinery as bailees or as agents of the assessee would make no difference. The insurance policy contained the ' rein statement clause requiring the insurer to pay the cost of the machinery as on the date of the fire. [587G H; 588A] 5. In an insurance policy with the reinstatement clause, the insurer is bound to pay the cost of the insured property as on the date of destruction of loss, and it matters very little if the amount so paid by the insurance company is invested for purchasing the destroyed asset or for any other purpose. [588A B] C. Leo Macho do vs Commissioner of Income Tax, , approved. 581 Income tax Commissioner vs J.K. Cotton Spinning & Weaving Mills Co. Ltd., , disapproved.

Appeal No. 93 of 1959. Appeal by special leave from the Award dated May 13, 1957, of the Industrial Tribunal, Bombay, in Reference (I.T.) No. 166 of 1955. R. J. Kolah, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the appellants. K. B. Chaudhury and Janardan Sharma, for the respondents Nos. 1 and 2. 379 1960. March 24. The Judgment of the Court was delivered by WANCHOO, J. This appeal by special leave raises two questions, namely, (i) bonus for the year 1952 and (ii) retrospective operation of the order of the Industrial Tribunal relating to increase in wages. The appellant is a company manufacturing barrels and drums at Bombay. There was a dispute between the appellant and its workmen about a number of matters, which was referred to the tribunal by the Government of Bombay on November 17, 1955. In respect of the two matters which are now raised in appeal the workmen claimed (i) four months wages including dearness allowance as bonus for the year 1952 and (ii) retrospective operation of the wage scale to be fixed by the tribunal from March 1, 1952. So far as the increase in wages, is concerned, the appellant agreed to the scale suggested by the tribunal but it opposed the grant of the increased scale retrospectively and also wanted that the increased wages should be linked to some guaranteed production. The reason for this was that the appellant felt that there had been deliberate slowing down of production by the workmen in the previous years. The tribunal was of opinion that there was some justification in the appellant 's contention that there had been considerable go slow which had affected production. Taking that into account it ordered that retrospective effect should be given to its order which was passed on May 13, 1957 from June 1, 1956. As to the linking of the increased wages to a certain guaranteed production it found it difficult to lay down any norm itself; but it made it clear that the increase in wages was made by it on the basis that the workers would give a certain reasonable production and noted that the workers were agreeable to do that. It, however, recommended that immediately after the. award had been given, an expert should be appointed by agreement, if possible, to go into this question. It also said that in case it was not possible to appoint an expert by agreement it would be open to the appellant to appoint one. 380 The appellant 's contention before us is that the tribunal having found some justification in its contention that there had been considerable go slow should not have given retrospective effect at all to the order relating to the increase in wages. This matter has been considered fully by the tribunal and it came to the conclusion that increase in wages should be granted from June 1, 1956. This could hardly be called retrospective considering that the reference was made in November 1955 ; in any case the tribunal rejected the claim of the workmen for retrospective operation for the period of over four years from March 1952 to May 1956 and a good deal of go slow was practised during this period. In the circumstances we see no reason for interference with the order of the tribunal fixing the date as June 1, 1956, from which the increased wages should come into force. This brings us to the next question relating to bonus. The tribunal has awarded five months ' basic wages by way of bonus. The first contention in this connection is that the workmen had only claimed four months ' basic wages and the tribunal could not have awarded anything more than what the workmen claimed. This in our opinion is incorrect. The workmen had claimed four months ' wages including dearness allowance as bonus. Five months ' basic wages which the tribunal has allowed are admittedly less than the claim put forward (namely, four months ' wages including dearness allowance). In the circumstances the tribunal certainly had jurisdiction to award what it has awarded to the workmen. The next question is whether the tribunal was justified in awarding as much as five months ' basic wages on the basis of the Full Bench formula, which is generally applied to these matters. The gross profit found by the tribunal is not challenged, namely, Rs. 5.05 lacs. The tribunal has then allowed Rs. 1.36 lacs as depreciation, leaving a balance of Rs. 3.69, lacs. Deducting income tax from this at seven annas in a rupee (i.e. Rs. 1.61 lacs), we are left with a balance of Rs. 2.08 lacs. Six per cent. per annum interest on the paid up capital along with four per cent. interest on the working capital comes to Rs. 16,000, leaving an available 381 surplus of Rs. 1.92 lacs. Out of this, the tribunal has allowed five months ' basic wages as bonus which according to its calculations comes to Rs. 91,000, leaving Rs. 1.01 lacs. There will be a rebate of Rs. 40,000 on this sum, leaving a total of Rs. 1.41 lacs with the appellant. On these figures, the bonus awarded by the tribunal cannot be interfered with. The appellant, however, draws our attention to two circumstances in this connection. In the first place it urges that the tribunal has not taken into account anything for rehabilitation. But it may be mentioned that the appellant had proved no rehabilitation amount as such. What it had done was to appropriate Rs. 3.16 lacs towards depreciation, which of course was not the proper amount of notional normal depreciation, which is allowable under the formula. Our attention is drawn, however, to the figures filed by the workmen in exhibit U 4 in which Rs. 40,000 has been allowed towards rehabilitation. Even accepting this concession by the workmen and deducting it from the figures given by us above, the appellant would still be left with Rs. 1.01 lacs after paying five months ' basic wages as bonus. There is thus no reason to interfere with the award of bonus on this ground. Lastly it is urged that according to the income tax assessment which was actually made in this case sometime after the order of the tribunal, the appellant has been assessed to income tax amounting to Rs. 2.35 lacs. The appellant claims that it should be allowed this entire amount and not the notional figure calculated by us, namely, Rs. 1.61 lacs as income tax. We are of opinion that for the purpose of the Full Bench formula, the income tax payable has to be deducted on the figures worked out according to the formula and it is immaterial what the actual income tax paid is whether more or less. In this particular case, the income tax appears to be more because certain items which were challenged by the workmen but were allowed as proper expense by the tribunal have apparently not been allowed as proper expense by the income tax department. The industrial tribunal, however, is not concerned directly with what the income 49 382 tax authorities assess as actual income tax in a particular year; it is concerned with working out the Full Bench formula in accordance with its notional calculations and this is what has been done in this case. There is no ground therefore for interference with the award of bonus for this reason either. We therefore dismiss the appeal, but in the circumstances pass no order as to costs. Appeal dismissed.

The workmen of the appellant company claimed four months, wages including dearness allowance as bonus for the year 1952, and retrospective operation of the increased wage scale to be fixed by the Industrial Tribunal from March 1, 1952. The appellant agreed to the increased wage scale suggested by the Tribunal but wanted that it should be linked to some guaranteed production, and opposed its operation retrospectively on the ground that there had been eliberate slowing down of production by the workmen in the previous years. The Tribunal found that there was some justification in the appellant 's contention that there was considerable go slow which had affected production and ordered that retrospective effect should be given to its order relating to increase in wages which was passed on May 13, 1957, from June 1, 1956, and not March 1, 1952, as claimed by the workmen, The increased wages were not linked to any guaranteed production but it was made clear that the workers would give certain reasonable production to which the workmen agreed. The Tribunal granted five months basic wages by way of bonus on the basis of the Full Bench formula which is generally applied to these matters. On appeal by the Appellant company by special leave : Held, that there was no reason for interference with the order of the Tribunal fixing the date as June 1, 1956, from which the increased wages should come into force and that the Tribunal had jurisdiction to award five months ' basic wages by way of bonus. For the purpose of the Full Bench formula, the incometax payable has to be deducted on the figures worked out according to the formula and it is immaterial what the actual income tax paid is whether more or less.

The appellant firm was assessed to sales tax under the pro visions of the Bihar Sales Tax, 1944, for three periods commencing from October 1, 1947, and ending on March 31, 1050. Its claim for certain deductions was disallowed, and its applications in revision under section 24 Of the Act to the Board of Revenue, Bihar, were dismissed by three orders dated August 20, 1953, September 3, 1953 and April 30, 1954. Under section 25(1) of the Act the appellant applied to the Board to state a case to the High Court of Patna on certain questions of law, but the applications were dismissed by order dated August 30, 1954, on the ground that no questions of law arose. The appellant then moved the High Court for requiring the Board to state a case on the said questions of law. The High Court dismissed the applications in respect of the first two periods of assessment, but by order dated November 17, 1934, directed the Board to state a 277 case in regard to the third period on one of the questions of law which only, in its opinion, arose. By its judgment dated January 21, 1957, the High Court answered the question against the appellant. On February 17, 1955, the appellant made applications to the Supreme Court for special leave to appeal against the orders of the Board of Revenue dated August 20, 953, and September 3, 1953, in respect of the first two periods; and on April 12, 1955, it similarly applied for special leave in respect of the third period. Leave was granted in respect of all the three applications by order dated December 23, 1955, the leave granted in regard to the third period being confined to the order of the Board dated August 30, 1954. When the appeals came up for hearing the question was raised as to whether the appeals were maintainable in view of the fact that no applications for leave to appeal were filed against the orders of the Board of Revenue and the High Court subsequent to the orders of the Board in respect of which only special leave had been granted. Held, that though the words of article 136 of the Constitution of India are wide, the Supreme Court has uniformly held as a rule of practice that there must be exceptional and special circumstances to justify the exercise of the discretion under that Article. Pritam Singh vs The State, ; , V. Govinda rajulu Mudaliar vs The Commissioner of Income tax, Hyderabad, A.I.R. 1959 S.C. 248 and Messrs Chimmonlall Rameshwarlal vs Commissioner of Income tax (Centyal), Calcutta, , relied on. Dhakeswari Cotton Mills Ltd. vs Commissioner of Income tax, West Bengal, ; and Baldev Singh vs Commis sioner of Income tax, Delhi and Ajmer, , explained. Held, further, that in the circumstances of the present case the appellant was not entitled to a grant of special leave against the orders of the Board of Revenue where the result would be to by pass the High Court by ignoring its orders. Held, also, that though special leave might have been granted on an application made under article 136, the Court is not precluded from coming to a conclusion at the time of the hearing of the appeal that such leave ought not to have been granted. Baldota Brothers vs Libra Mining Works, A.I.R. 1961 S.C.C. 100, followed.

Under an award in an industrial dispute, it was held that the appellants workmen were entitled to half wages from a certain date to the date they resumed duty. After the final disposal of the companies ' appeal, the workmen were allowed to resume duties. Thereafter, a dispute arose as to the amount to which the workmen were entitled. The workmen, by separate applications, applied to the Second Labour Court, West Bengal for determination of the amounts due to them under section 33C(2) of the . The companies challenged the jurisdiction of the Second Labour Court on the ground that the court had not been specified for the purpose of determining the amount at which the benefit claimed by the workmen was to be computed in terms of money under section 33C(2) of the Act. The preliminary objection was accepted by the Second Labour Court, against which the workmen filed a writ petition. This petition was accepted by the High Court, but in appeal, the High Court dismissed the petition. HELD: The appeal must fail. The mere fact that a Labour Court has been constituted under section 7(1) of the Act, for the purpose of adjudication of Industrial Disputes as well as for performing other functions that may be assigned to it under the Act does not mean that the court is automatically specified as the Court for the purpose of exercising jurisdiction under section 33C(2) of the Act. Section 33C(2) confers jurisdiction only on those Labour Courts which are specified in this behalf, i.e., such Labour Courts which are specifically designated by the State Government for the purpose of computing the money value of the benefit claimed by a workman. The Second Labour Court, West Bengal, was never specified by any order of the State Government as one of those Labour Courts which was to exercise the powers or discharge the functions under section 33C(2). [10OC E]. Though the Civil Courts are constituted under section 13 of the Bengal, Agra and Assam Civil Courts Act, the power of those courts to take cognizance of civil suits, and decide them is conferred by the Code of Civil Procedure. It is not by virtue of their constitution under section 13 of the Bengal, Agra and Assam Civil Courts Act that the Courts take cognizance (of civil suits and decide them. Section 33C (2), in the matter of applications made by individual workmen, is therefore, not comparable with section 13(2) of the Bengal, Agra and Assam Civil Courts Act, but in fact, lays down the requirement which must be satisfied before the Labour Court can take cognizance of the matter raised before it by the applications of the workman section 33C(2) would, thus, serve the purpose in the case of Labour Courts which is served by the provisions of the Code of Civil Procedure re lating to cognizance in respect of Civil Courts. [102B D] 98

The appellant carries on the business of metal process ing i.e. beat treatment of metals. In 1963 it established a factory with about 32 workmen called "No. I Unit". In the year 1975 another factory called "No. II unit" was estab lished for carrying on the same kind of business employing about 75 workmen about 200 yards away from the No. 1 Unit. Both the Units had independent location, separate factory licences and separate municipal licences. The two Units had separate stores and maintained separate accounts and balance sheets. The workmen of both the units were also employed independently and there was a separate muster roll in re spect of each of the two units. There was no rule or condi tion regarding the inter transferability of the workmen. However, there was by mistake the name of one workman by name Kishore Ram of Unit 1 entered in the muster roll of the II Unit in October 1980 and it had been scored out later. On finding that the workmen of No. 1 Unit were wilfully slacking their work and that there was growing indiscipline among them, the appellant decided in the year 1981 82 to reduce the three shifts working previously to two shifts. The indiscipline and the lack of production continued and on it becoming impossible for the appellant to carry on 415 with even the two shifts as reduced, the appellant came to the unhappy conclusion that it had no alternative left but to close down the No. 1 Unit altogether with effect from 15.2.82 and closure compensation was offered to the entire staff of 32 workmen. The workmen of the I Unit raised through their Union, namely, Association of Engineering Workers, Bombay an indus trial dispute reference (IT) No. 218 of 1982. In the state ment of claim filed by the workmen it was urged; (i) that the two units which were being run by the appellant had functional integrality and were for all purposes parts of one establishment and that the workmen were mutually trans ferable from one unit to the other; (ii) that the reasons given by the management for closing down Unit No. 1 is false, the action of the management was arbitrary and was colourable exercise of the management 's power of closure; (iii) the impugned action was by way of victimisation for the trade union activities of the said workmen in Unit No 1 and the principle of "last come, first go" while terminating the services of the workmen having not been followed as required by section 25 G of the Act, the termination was illegal. The Tribunal rejected the case of the workmen that the closure was in retaliation to the trade union activities of workmen and found that there was no victimisation of the workmen and the workmen concerned were not entitled to be reinstated as the closure of the 1 Unit had become legally effective from 15.12.1982 and passed its award to that effect on September 6, 1983. Aggrieved by the Award passed by the Tribunal, the workmen filed a petition under Article 226 of the Constitution of India before the High Court of Bombay challenging the legality of the Award. The learned Single Judge, before whom the writ petition came up for consideration, reversed the Award of the Tribunal and re manded the proceedings back to the Tribunal for afresh disposal. By the time, the decision was rendered, there were only 14 workmen, who were interested in the dispute, and therefore, the learned Single Judge directed the Tribunal to consider whether the termination of services of any of the 14 workmen, whose claim for reinstatement still subsisted, was done in violation of the principles laid down under section 25 G of the Act. Aggrieved by the judgment of the learned Single Judge, the appellant preferred an appeal before the Division Bench of the High Court. That appeal having been dismissed the appellant has come by way of special leave to the Supreme Court. Allowing the appeal, the Court, HELD: 1. The existence of the unity of ownership, supervi sion 416 and control in respect of the two units, the fact that the conditions of the service of the workmen of the two Units were substantially indentical, the fact that both the units are situate at a distance of 200 meters and that the busi ness of heat treatment processing in the two Units are the same are not by themselves sufficient in the eye of law for holding that there was functional integrality between the two Units. This is a clear case of closure of an independent unit and not of a part of an establishment. [422D E] Workmen of the Straw Board Manufacturing Co. Ltd. vs M/s Straw Board Manufacturing Company Ltd., followed. S.G. Chemicals and Dyes Trading Employees ' Union vs S.G. Chemicals and Dyes Trading Ltd. & Anr., ; distinguished. The question of application of section 25 G of the Act arises only when the services of the workmen are re trenched within the meaning of section 25F and not when sections 25FF, and 25FFF are applicable. If the case is one of genuine closure then the question of applying section 25 G of the Act which is applicable to a case of retrench ment would not arise. It is not the case of the workmen in the present case that the II Unit could not continue to function after the closure of the I Unit. In fact the II Unit is continuing to function as usual even now notwith standing the stoppage of the activities at the I Unit. [423C E] Santosh Gupta vs State Bank of Patiala, ; , relied on. It is not necessary that in the order to effect closure of business the management should close down all the branches of its business. A genuine closure of a Unit even though it did not amount to closure of the business could not be interfered with by an industrial Tribunal. The clo sure was stoppage of part of the activity or business of the management and such stoppage is an act of management which is entirely in the discretion of the management. No Indus trial Tribunal could interfere with the discretion exercised in such a matter. [423F H; 424A B] Management of Hindustan Steel Ltd. vs The Workmen & Ors., ; ; Workmen of the Indian Leaf Tobacco Development Co. Ltd. Guntur vs Management of the Indian Leaf Tobacco Development Co. Ltd., Guntur ; fol lowed. 417 4. The two factors; namely: (i) the provident fund accounts of the employees and the Employees ' State Insurance accounts of the two units had common numbers with the au thorities concerned and (ii) settlements containing similar terms had been entered into in 1974 between the management and the workmen of the two units are not sufficient for holding that the two units were one and the same notwith standing the fact that the nature of the business carried on in them was the same. [424B D] 5. On a consideration of the entire material it is clear that (i) the Tribunal had not committed any error in record ing the findings which called for interference at the hands of the High Court under Article 226 of the Constitution; (ii) this case is one of bona fide closure of an independent unit of business and not a case of termination of services of workmen requiring consideration on remand, by the Tribu nal in the light of s.25 G of the Act; (iii) it was a case where the judgment of the High Court if maintained would result in a wholly unjust situation in which a corresponding number of workmen in the II Unit would be prejudicially affected even though they had nothing to do with the 1st Unit. [424E H] Indian Cable Co. Ltd. vs Its Workmen, , followed.

The respondents assessees were engaged in the manufacture of mild steel rods, bars or rounds. They claimed that as the articles manufactured by them fell under item 1 of the list set out in the Fifth Schedule, they were entitled to a higher rate of development rebate specified in section 33(1) (b) (B) (i) (a) and to relief under section 80 1 of the Income Tax Act, 1961. The Income Tax Officer rejected the claim of the assessees, whereas the Appellate As sistant Commissioner, the Tribunal and High Court accepted their claim. Hence the Revenue filed appeals before this Court. The contentions of the appellant Revenue were that iron and steel ceased to be a metal when it came out of the furnace in the primary steel mills in the form of ingots. In the next stage the ingots became semi finished products in the shape of billets, blooms and slabs. It was said to be the stage where the raw materi als were converted into. In different form or shape; that the expression "iron and steel (metal)" meant the iron and steel as it emerged in the form of billets, blooms and slabs from the steel mill and that all subse quent products whether in the form of rails, rods (including wire rods), bars, angles, channels, tees, sees, pipes, tubes, sheets, strips, plates and coils would constitute articles made of iron and steel, and that rolling mills making bars and rods were not covered by item 1 of the Fifth Schedule. 188 On the other hand, the respondents asses sees contended that in the steel industry the manufacture of ingots, billets, blooms, etc. represented only an intermediate stage at which the iron and steel metal became semi finished steel. When the semi finished steel was converted into plates, bars or rods, they became finished steel. The bars, rods and rounds, which were continued to be iron and steel in a finished form, were used to manu facture the products of iron and steel by various processes, such as, rolling, cutting, shearing, forging, hammering, etc. and that the products of iron and steel were different from that of iron and steel (metal). Dismissing the appeals filed by the Revenue, this court, HELD: 1. In interpreting the provisions in S.33(1)(b)(B)(i)(a), S.80 I of the Income Tax Act, 1961, the Court would do well to keep in mind the background in which concessions to certain basic industries were introduced in the Income Tax Act. The historical background reflects the intention of the legislature to grant progressively certain exemptions, re liefs and concessions for certain types of industries, which were considered important for national development. The industry in iron and steel and other metals figured in all the lists. [199 C, 200 B] 2. The incentive concession or relief granted under the provisions has to be con strued in a broad and comprehensive manner so as to cover all manufacturing activities legitimately pertaining to the specified core industry with no limitation save what may be called for by the wording of a particular entry. So far as items 1 and 2 are concerned, the wording points to a distinction between the metal which is used as the base and other articles manufactured therefrom. Pig iron and iron scrap are fed into furnaces to produce ingots, billets and blooms. But both are iron and steel in different forms, the latter being referred to as "semi finished steel". Like wise, the bars, rods, rounds, wire rods and the like constitute the second stage in which one gets only "finished" forms of iron and steel. Having regard to the nature and weight of the metal, it has to be "finished" to assume these forms before manufacturers of iron and steel articles can take over and proceed to manufacture articles from them by drawing wires or converting them into rails or shaping them into tees, zees, pipes, tubes and the like. [200 C E] 3. Whether the article produced is the raw material 01, an article made of iron and steel has to be decided on the basis of the 189 nature of the article and not the kind of mill which turns it out. It is significant that these items do not draw distinction between basic steel mills, integrated steel mills and the various other types of mills that are used in the industry. [200 G] 4. The departmental instructions that machinery and plant in "rolling mills" will not be eligible for the higher development rebate would not seem to be justified if it intends to draw a distinction between the same machinery and plant when used in rolling mills and when used in other mills in the industry. If machinery and plant installed in steel mills where the process includes not merely the production of ingots, billets and the like but also the production of bars and rods are eligible for the higher development rebate, it is difficult to see why the same, plant and machinery, when installed in rolling mills which proceed, from the stage of ingots or billets, to manufacture bars and rods should not be eligible for the higher rate of devel opment rebate. [200 G 201 B] 5. In considering the issue, the court should not be carried away be classifications of stages of manufacture that may be relevant for other purposes. What the court should examine is not the nature of the mill which yields the article but the nature of the article or thing that is manufactured and ask the question whether such articles or things can be considered as raw material for manufac ture of other articles made of the metal or is it itself an article made of the metal. [201 B C] 6. The goods in the present case fail in the former category. The mild steel rods, bars or rounds which are manufactured by the asses sees are only finished forms of the metal and not articles made of iron and steel. They only constitute raw material for putting up arti cles of iron and steel such as grills or windows by applying to them processes, such as cutting or turning. The rod or the wire rods are likewise not products of iron and steel but only certain finished or refined forms of the metal itself. [201 C D] 7. Forging and castings are not covered by item 1 being articles made of iron and steel but that since the legislature definite ly intended to give relief even in respect of such articles, item 11 and also item 21 were introduced. Even if MS steel rods, bars and rounds cannot be taken as iron and steel (metal), they would fail under the category of "forgings and castings" referred to in item 11. [201 G H] 190 8. The conclusion drawn by the High Court that the assessee was entitled to the higher development rebate, though, it produced arti cles only from iron scrap, does not call for any interference. [202 C, D] C.I. T. vs Mittal Steel Re tolling and Allied Industries (P) Ltd., ; CI. West India Steel Co. Ltd., (Kerala); Addl. Commissioner of Income Tax vs Trichy Steel Rolling Mills Ltd., ; C.I.T.v. Krishna Copper Steel Roll ing Mills, & Har yana); CI.T.v. Ludhiana Steel Rolling Mills, & Haryana) and Singh Engineering Works Pvt. Ltd. vs CI.T., , approved. Indian Steel and Wire Products Lid vs Commissioner of Income tax, and Commissioner of Income Tax vs Kay Charan Pvt. Ltd., ; over ruled. State of Madhya Bharat vs Hira Lal, (1966) 17 STC 313 (S.C.) Devi Dass Gopal Krishnan vs State of Punjab, (1967) 20 STC 430 (SC); Hindustan A1uminium Corporation Ltd. vs State of (U.P., (1981) 48 STC 411 (S.C.) State of Tamil Nadu vs Pyarelal Malhotra, (1976) 37 STC 319 (SC); C.I.T.v. Rashtriya Metal Industries Co. Ltd., ; Indian A1uminium Co. Ltd vs C.I.T, Cal. and Cal; Jeewanlal vs CI.T., ; C.I.T vs Fitwell Caps P. Ltd., ; Hindustan Wire Products vs CI.T 1 ; Indian Steel and Wire Products Lid vs C.I.T. ; C.I.T.v. Tensile Steel Lid, and CI. Ludhiana Steel Rolling Mills, & H) referred to. Speci 'fication and Glossary By Expert Products Sectional Committee of Bureau of India Standards, New Encyclopedia Brittanica Macropaedia, 15th Edn. Vol.21; Websters, Third New International Dictionary; Encyclopaedia of Chemical Technology By Kirk Othmer, 3rd. Vol.21;// Book on Small Scale Steel Making By R.D.Walker, The Budget Speech of the Finance Minister, (1968) 48 ITR [Statutes] 34; (1965) 55 ITR [Statutes] 57 and 122 referred to.

The respondent assessee built up a factory for the manufacture of paper and paper boards, which started production on 7.5.1964. The respondent claimed that the duty in respect of the paper boards manufactured in the factory during the period 7.5.1964 to June 1966 was payable at the concessional rates allowed by the Government of India notification dated 1st March, 1964. The claim was however rejected by the Revenue on the ground that the factory had not come into existence on or before the 9th day of November, 1963 as stipulated in clause (a) of Proviso (3) of the said notification. The respondent 's writ application before the High Court was allowed by the Single Judge and the appellant 's Letters Patent appeal was dismissed in limine. The High Court has accepted the respondent 's contention that the date '9th of November, 1963 ' mentioned in the notification was arbitrary. On behalf of the Revenue it was contended that the date (9.11.1963) was selected because an earlier notification bearing No. 110 had required applications to be made on or after 9.11.1963. It was further contended that a statutory provision had necessarily to be arbitrary in the choice of date and it could not be challenged on that ground. On behalf of the respondent it was contended that the said date did not have any significance whatsoever and did not bear any rational relationship to the object sought to be achieved by the notification. PG NO 1051 PG NO 1052 Dismissing the appeal, it was HELD: 1. A rule which makes a difference between past and present cannot be condemned as arbitrary and whimsical. [1056D] 2. In cases where choice of the date is not material for the object to be achieved. the provisions are generally made prospective in operation. [1056D] 3. The Revenue has not been able to produce notification No. l 10. Unless the nature and contents of notification No. 110 and its relevance with reference to the present notification are indicated, it is futile to try to defend of the choice of the date in clause (a) on its basis. [1055A;1056E] 4. In the present case, the benefit of concessional rate was bestowed upon the entire group of assesses referred therein and by clause (a) of Proviso (3) the group was divided into two classes without adopting any differentia having a rational relation to the object of the Notification. [1057F] 5. Clause (a) of the Proviso (3) of the Notification was ultra vires and the benefit allowed by the Notification would be available to the entire group including the respondent. [1057G] Union of India vs M/s. P. Match Works [1975]2 SCR 573 Jagdish pandey vs The chancellor, University of Bihar. [19681 I SCR 237 and U.P. M. T. S.N.A. Samiti, Varanasi vs State of U.P.,[1987]2 SCR 453, distinguished. Dr .Sushma Sharma vs State of Rajasthan, [1985] Supp. SCC 45; and D.S. Nakara vs Union of lndia, [1983] I SCC 365 referred to.

An Industrial Dispute arose between the appellant and its workmen in respect of the claim made by the workmen (respondents) for bonus for the year 1959. The respondents claimed that they were entitled to get bonus equivalent to three months ' salary including dearness allowance, The appellant claimed deductions on the basis of the Full Bench 16 Formula. The appellant claimed deduction of Rs. 60,000 by way of notional remuneration for Mr. K. R. Podar, one of the Directors of the company. According to the appellant K. R. Podar devoted the whole of his time to the supervision and management of the appellant concern, and so, he was entitled to charge remuneration at the rate of Rs. 5,000 a month. The appellant also made a claim for rehabilitation. On these facts the Tribunal directed the appellant to pay to the respondents bonus at the rate of half month 's basic wages excluding allowances and overtime for the said year. It is against this award that the appellant has come to this Court. Held:(i) that in a concern like the appellant 's if one of the Directors spends his time in supervising and managing the affairs of the concern, he would be entitled to charge a reasonable remuneration. But in the present case Mr. Podar did not actually charge any remuneration. The working of the Full Bench Formula is no doubt notional in some respects, but it would not be permissible for the employer to make it still more notional by introducing claims for prior charges on purely hypothetical and almost fictional basis. The Tribunal did not feel justified in allowing the claim for deduction made by the appellant in regard to the notional remuneration of Mr. Podar on the ground that Mr. Podar had not been paid remuneration regularly and it had not been duly shown in the books of account. Gujarat Engineering Co. vs Ahmedabad Misc. Industrial Workers ' Union, and Kodaneri Estate vs Its Work men, , relied on. (ii)It is not the correct legal position that a second hand machinery should be rehabilitated only by second hand machinery. But in the present case the finding of the Tribunal in respect of the claim for rehabilitation is based on its appreciation of the evidence led by the appellant and that cannot be disturbed having regard to the material which is available on the record. SouthIndia Millowners"Association vs Coimbatore District Textile Workers 'Union, , relied on. (iii)It would be erroneous to assume that this Court approved of or affirmedthe ad hoc basis adopted by the Tribunal in the case of South India Millowners ' Association. (iv)It would be unreasonable to suggest that if the employer does not adduce sufficient evidence to justify his claim for rehabilitation and the Tribunal is inclined to reject the evidence which has been adduced, the Tribunal must nevertheless award some rehabilitation on a purely hypothetical and imaginary ad hoc basis. In the present case the employer adduced evidence for rehabilitation and that was rejected by the Tribunal. (v)It has been consistently held by this Court that in bonus calculations the employer is entitled to claim a deduction of the Income tax as well as wealth tax; but in the present case, there is, no material 17 to determine what the amount of wealth tax charged or paid is, and so, no relief can be granted to the appellant on that account.

The appellant, a real estate company, was engaged in the business of letting out its property on lease, Besides it was also rendering various services to its tenants such as electricity and water supply, washing and cleaning, lift services, electrical and sanitary repairs on payment basis. For rendering these services the appellant company employed a number of workmen. A dispute arose between the employees and the appellant company with regard to wages, scales of pay, dearness allowance and gratuity. The State Government re ferred the disputes to Industrial Tribunal for adjudication. The appellant company contested the reference before the Tribunal by raising a preliminary objection that the alleged dispute was not an industrial dispute and that the reference was barred by Section 19 of the since there was an earlier binding award, based on settlement with the Union, which was not terminated by either parties. 934 By an order dated August 24, 1968 the Tribunal overruled the preliminary objection and gave the award dated March 3. 1969 enhancing the dearness allowance of the employees. The Tribunal also framed a revised gratuity scheme but did not fix any grades and pay scales of workmen for want of con vincing evidence. The appellant company filed a writ petition in the High Court challenging the Tribunal 's order dated August 24, 1968 as well as the Award dated March 7, 1969 contending: (i) that the Award was without jurisdiction because the appel lant company was not carrying on 'industry ' and the alleged dispute was not an 'Industrial Dispute ' and that the previ ous Award was not terminated and was still subsisting; (ii) that no dispute was raised between the workmen and the appellant prior to the reference before the Tribunal; and (iii) that the Tribunal did not consider the appellant 's capacity to pay dearness allowance to the workmen. A single judge of the High Court dismissed the writ petition by rejecting all the contentions. The appellant filed an appeal against the judgment of the single judge before a Division Bench of the High Court which was also dismissed. Against the decision of the Division Bench of the High Court the appellant company filed an appeal to this Court, contending: (i) that the High Court was in error in holding that the appellant was an 'industry ' under Section 2(j) of the Act; (ii) that the Tribunal was not competent to make the Award since the earlier Award, which was in the nature of a settlement under Section 2(p), was not terminated in accordance with section 19(2) by giving a formal written notice; (iii) that there was non compliance with the provi sions of Section 19(7) of the Act; and (iv) that the Indus trial Tribunal was in error in making the Award in relation to Dearness Allowance without examining the capacity to pay the additional amount and that the High Court should have remanded the matter to the Tribunal for considering this issue in the light of the documents which were submitted by the appellant before the High Court. Dismissing appeal, this Court, HELD: 1. The activity carried on by the appellant compa ny falls within the ambit of the expression "industry" defined in Section 2(j) of the . The Award of the Industrial Tribunal cannot, there fore, be assailed on the basis that the appellant is 935 not carrying on an 'industry ' under the Act. [943E] Bangalore Water Supply & Swerage Board v .R. Rajappa and Ors., ; , applied. Management of Safdar jung Hospital vs Kuldip Singh Sethi, ; ; State of Bombay vs Hospital Mazdoor Sabha, ; ; D.N. Banerjee vs P.R. Mukherjee, ; and Corporation of the City of Nagpur vs Its employees; , , referred to. 2. It is not the requirement of Section 19(2) of the that there should be a formal notice terminating a settlement, and notice can be inferred from the correspondence between the parties. [944B] Indian Link Chain Manufacturers Ltd. vs Their Workmen, [1972] I SCR 790, applied. 2.1 In view of the finding of the Division bench that the letter of employees Union dated November 24, 1966 was a notice under section 19(6) as well as section 19(2) of the and that the said letter contained a clear intimation of the intention of the employ ees to terminate the Award, the High Court was justified in holding that the earlier award had been validly terminated before the passing of the order of reference. [943H; 944A B ] 3. The High Court was right in taking the view that while exercising its jurisdiction under Article 226 of the Constitution the High Court should generally consider the materials which were made available to the Tribunal and fresh or further materials which were not before the Tribu nal should not normally be allowed to be placed before the Court. [944F G] 3.1 In the instant case the appellant has not been able to show why the documents relied on by it were not produced before the Tribunal. Therefore there is no justification for accepting the plea of the appellant for reconsideration of the Award of the Tribunal in the light of the documents submitted by the appellant during the pendency of the appeal before High Court. [944G H] 4. A question raised for the first time in the Supreme Court involving an inquiry into questions of fact cannot be allowed to be agitated. [944E] 936

Appeal No. 650 of 1957. Appeal from the judgment dated July 13, 1956, of the Patna High Court in Miscellaneous Judicial Case No. 665 of 1954. R. Ganapathy Iyer and R. H. Dhebar, for the appellant. A. V. Viswanatha Sastri and R. C. Prasad, for the respondent. November 29. The Judgment of the Court was delivered by HIDAYATULLAH, J. This is an appeal by the Commissioner of Income tax with a certificate against the judgment and order of the High Court at Patna answering two questions of law referred to it under section 66(1) of the Income tax Act by the Tribunal, in the negative. Those questions were: "(1) Whether in the circumstances of the case assessment proceedings were validly initiated under section 34 of the Indian Income tax Act? (2) If so, whether in the circumstances of the case the amount received from interest on arrears of agricultural rent was rightly included in the income of the assessee ?" The assessee, the Maharaja Pratapsingh Bahadur of Gidhaur, had agricultural income from his zamindari for the four assessment years 1944 45 to 1947 48. In assessing his income to income tax, the authorities did not include in his assessable income interest received by him on arrears of rent. This was presumably so in view of the decision of the Patna High Court. When the Privy Council reversed the view of law taken by the Patna High Court in Commissioner of Income tax vs Kamakhya Narayan Singh (1), the Income tax Officer issued notices under section 34 of the (1) 762 Indian Income tax Act for assessing the escaped income. These notices were issued on August 8, 1948. The assessments after the returns were filed, were completed on August 26, 1948. Before the notices were issued, the Income tax Officer had not put the matter before the Commissioner for his approval, as the section then did not require it, and the assessments were completed on those notices. Section 34 was amended by the Income tax and Business Profits Tax (Amendment) Act, 1948 (No. 48 of 1948), which received the assent of the Governor General on Sep tember 8, 1948. The appeals filed by the assessee were disposed of on September 14 and 15, 1951, by the Appellate Assistant Commissioner, before whom no question as regards the validity of the notices under section 34 was raised. The question of the validity of the notices without the approval of the Commissioner appears to have been raised before the Tribunal for the first time. In that appeal, the Accountant Member and the Judicial Member differed, one holding that the notices were invalid and the other, to the contrary. The President agreed with the Accountant 'Member that the notices were invalid, and the assessments were ordered to be set aside. The Tribunal then stated a case and raised and referred the two questions, which have been quoted above. The High Court agreed with the conclusions of the majority, and the present appeal has been filed on a certificate granted by the High Court. Section 34, as it stood prior to the amendment Act No. 48 of 1948, did not lay any duty upon the Income tax Officer to seek the approval of the Commissioner before issuing a notice under section 34. The amending Act by its first section made sections 3 to 12 of the amending Act retrospective by providing "sections 3 to 12 shall be deemed to have come into force on the 30th day of March, 1948. . Section 8 of the amending Act substituted a new section in place of section 34, and in addition to textual changes with which we are not concerned, also added a proviso to the following effect : "Provided that 763 (1) the Income tax Officer shall not issue a notice under this sub section unless he has recorded his reasons for doing so and the Commissioner is satisfied on such reasons that it is a fit case for the issue of such notice. " The question is whether the notices which were issued were rendered void by the operation of this proviso. ' The Commissioner contends that section 6 of the , particularly cls. (b) and (c) saved the assessments as well as the notices. He relies upon a decision of the Privy Council in Lemm vs Mitchell (1), Eyre vs Wynn Mackenzie (2) and Butcher vs Henderson (3) in support of his proposition. The last two cases have no bearing upon this matter; but strong reliance is placed upon the Privy Council case. In that case, the earlier, action which had been commenced when the Ordinance had abrogated the right of action for criminal conversation, had already ended in favour of the defendant and no appeal therefrom was pending, and it was held that the revival of the right of action for criminal conversation did not invest the plaintiff with a right to begin an action again and thus expose the defendant to a double jeopardy for the same act, unless the statute expressly and by definite words gave him that right. The Privy Council case is thus entirely different. No doubt, under section 6 of the it is provided that where any Act repeals any enactment, then unless a different intention appears, the repeal shall not affect the previous operation of any enactment so repealed or anything duly done thereunder or affect any right, obligation or liability acquired, accrued or incurred under any enactment so repealed. It further provides that any legal proceedings may be continued or enforced as if the repealing Act had not been passed. Now, if the amending Act had repealed the original section 34, and merely enacted a new section in its place, the repeal might not have affected the operation of the original section by virtue of section 6. But the amending Act goes further than this. It (1) ; (2) (3) 764 repeals the original section 34, not from the day on which the Act received the assent of the Governor General but from a stated day, viz., March 30, 1948, and substitutes in its place another section containing the proviso above mentioned. The amending Act provides that the amending section shall be deemed to have come into force on March 30, 1948, and thus by this retrospectivity, indicates a different intention which excludes the application of section 6. It is to be noticed that the notices were all issued on August 8, 1948, when on the statute book must be deemed to be existing an enactment enjoining a duty upon the Income tax Officer to obtain prior approval of the Commissioner, and unless that approval was obstained, the notices could not be issued The notice were thus invalid. , The principle which was applied by this Court in Venkatachalam vs Bombay Dyeing & Mfg. Co. Ltd. (1) is equally applicable here. No question of law was raised before us, as it could not be in view of the decision of this Court in Narayana Chetty vs Income tax Officer (2), that the proviso was not mandatory in character. Indeed, there was time enough for fresh notices to have been issued, and we fail to see why the old notices were not recalled and fresh ones issued. For these reasons, we are in agreement with the High, Court in the answers given, and dismiss this appeal with costs. A appeal dismissed.

The appellant who had agricultural income from his Zamindari was assessed to income tax for the four assessment years, 1944 45, to 1947 48. The income tax authorities did not include in his assessable income, interest received by him on arrears of rent, in view of a decision of the Patna High Court, but subsequently this view of law was reversed by the Privy Council. On August 8, 1948, the Income tax Officer issued notices under section 34of the Indian Income tax Act, 1922, for assessing the escaped income. Before the notices were issued the Income tax Officer had not put the matter before the Commissioner for his approval as the section then did not require it and the assessments were completed on those notices. In the meantime, certain amendments were made to the Indian Income tax Act by Act 48 of 1948, which received the assent of the Governor General on September 8, 1948. The Amending Act substituted a new section in place of section 34, which among other changes, added a proviso to the effect that "the Income tax Officer shall not issue a notice. unless he has recorded his reasons for doing so and the Commissioner is satisfied on such reasons that it is a fit case for the issue of such notice", and also made it retrospective by providing that the new section "shall be deemed to have come into force on the 30th day of March, 1948". The question was whether the notices issued by the Income tax Officer on August 8, 1948, without the approval of the Commissioner, were rendered void by reason of the operation of the amended section 34. The Commissioner claimed that section 6 of the , saved the assessments as well as the notices. Held, that section 6 of the , was in applicable as the Amending Act of 1948 indicated a different intention within the meaning of that section, inasmuch as the amended section 34 of the Indian Income tax Act, 1922, provided that it shall be deemed to have come into force on March 30, 1948. Lemm vs Mitchell, ; , distinguished, 761 Held, further, that the notices issued by the Income tax Officer on August 8, 1948, and the assessments based on them were invalid. Venkatachalam vs Bombay Dyeing & Mfg. Co., Ltd., ; , applied.

Rangi Lal and his son Chander Sen constituted a Hindu undivided family. They had some immovable property and the family business. By a partial partition the HUF business was divided between the two and thereafter it was carried on by a partnership consisting of the two. The house property of the family continued to remain joint. The firm was assessed to income tax as a registered firm and the two partners were separately assessed in respect of their share of income. The mother and wife of Rangi Lal having pre deceased him, when he died he left behind him his only son Chander Sen and his grandsons. On his death there was a credit balance of Rs.1,85,043 in his account in the books of the firm. In the wealth tax assessment for the assessment year 1966 67, Chander Sen, who constituted a joint family with his own sons, filed a return of his net wealth by including the property of the family which u on the death of Rangi Lal passed on to him by survivorship and, also the assets of the business which devolved upon him on the death of his father. The sum of R.S. l ,85,0 13 standing to the credit of Rangi Lal was, however, not included in the net wealth of the assessee family. Similarly, in the wealth tax assessment for the assessment year 1967 68 a sum of Rs.1,82,742 was not included, in the net wealth of the assessee family. It was contended that these amounts devolved on Chander Sen 255 in his individual capacity and were not the property of the assessee family. The Wealth tax officer did not accept this contention and held that these sums also belonged to the assessee family. A sum of Rs.23,330 was also credited to the account of late Rangi Lal on account of interest accruing on his credit balance. In the proceedings under the Income Tax Act for the assessment year 1367 68 this sum was claimed as deduction on the same ground. The Income tax officer disallowed the claim on the ground that it was a payment made by Chander Sen to himself. On appeal, the Appellate Assistant Commissioner of Income tax accepted the assessee 's claim in full and held that the capital in the name of Rangi Lal devolved on Chander Sen in his individual capacity and as such was not to be included in the wealth of the assessee family. The sum of Rs.23,330 on account of interest was also directed to be allowed as deduction. The Income tax Appellate Tribunal dismissed the appeals filed by the Revenue and its orders were affirmed by the High Court. On the question: "Whether the income or asset which a son inherits from his father when separated by partition should be assessed as income of the Hindu Undivided Family consisting of his own branch including his sons or his individual income", dismissing the appeals and Special Leave Petition of the Revenue, the Court, ^ HELD: 1. The sums standing to the credit of Rangi Lal belong to Chander Sen in his individual capacity and not the Joint Hindu Family. The interest of Rs.23,330 was an allowable deduction in respect of the income of the family from the business. [268C D] 2.1 Under section 8 of the , the property of the father who dies intestate devolves on his son in his individual capacity and not as Karta of his own family. Section 8 lays down the scheme of succession to the property of a Hindu dying intestate. The Schedule classified the heirs on whom such property should devolve. Those specified in class I took simultaneously to the exclusion of all other heirs. A son 's son was not mentioned as an heir under class I of the Schedule, and, therefore, he could not get any right in the property of his grandfather under the provision. [265F G] 256 2.2 The right of a son 's son in his grandfather 's property during the lifetime of his father which existed under the Hindu law as in force before the Act, was not saved expressly by the Act, and therefore, the earlier interpretation of Hindu law giving a right by birth in such property "ceased to have effect". So construed, section 8 of the Act should be taken as a self contained provision laying down the scheme of devolution of the property of a Hindu dying intestate. Therefore, the property which devolved on a Hindu on the death of his father intestate after the coming into force of the Hindu Succession Act, 1356, did not constitute HUF property consisting of his own branch including his sons. [265G H; 266A C] 2.3 The Preamble to the Act states that it was an Act to amend and codify the law relating to intestate succession among Hindus. Therefore, it is not possible when the Schedule indicates heirs in class I and only includes son and does not include son 's son but does include son of a predeceased son, to say that when son inherits the property in the situation contemplated by section 8, he takes it as Karta of his own undivided family. [267C D] 2.4 The Act makes it clear by section 4 that one should look to the Act in case of doubt and not to the pre existing Hindu law. It would be difficult to hold today that the property which devolved on a Hindu under section X of the Act would be HUF in his hand vis a vis his own son; that would amount to creating two classes among the heirs mentioned in class I, the male heirs in whose hands it will be joint Hindu family property and vis a vis sons and female heirs with respect to whom no such concept could be applied or contemplated. [267E G] 2.5 Under the Hindu law, the property of a male Hindu devolved on his death on his sons and the grandsons as the grandsons also have an interest in the property. However, by reason of section 8 of the Act, the son 's son gets excluded and the son alone inherits the properly to the exclusion of his son. As the effect of section 8 was directly derogatory of the law established according to Hindu law, the statutory provisions must prevail in view of the unequivocal intention in the statute itself, expressed in section 4(1) which says that to the extent to which provisions have been made in the Act, those provisions shall override the established provisions in the texts of Hindu Law. [264G H; 265A B] 2.6 The intention to depart from the pre existing Hindu law was again made clear by section 19 of the Hindu Succession Act which stated that 257 if two or more heirs succeed together to the property of an intestate, they should take the property as tenants in common and not as joint tenants and according to the Hindu law as obtained prior to Hindu Succession Act two or more sons succeeding to their father 's property took a joint tenants and not tenants in common. The Act, however, has chosen to provide expressly that they should take as tenants in common. Accordingly the property which devolved upon heirs mentioned in class I of the Schedule under section 8 constituted the absolute properties and his sons have no right by birth in such properties. [266F H] Commissioner of Income tax, U. P. vs Ram Rakshpal, Ashok Kumar, ; Additional Commissioner of Income tax, Madras vs P.L. Karuppan Chettiar, 114 I.T.R. 523; Shrivallabhdas Modani vs Commissioner of Income Tax, M.P I., and Commissioner of Wealth Tax A.P. II vs Mukundgirji , approved. Commissioner of Income tax, Gujarat l vs Dr. Babubhai Mansukhbai (Deceased), , overruled.

The appellant who was carrying on business in food grains in partnership with another person submitted the returns of the income of the firm for the accounting years even after his partner 's death. It was found that certain income of the firm was concealed and the Income tax Officer not only assessed the firm to tax for the suppressed income but also imposed penalties for concealing the said income. Appeals to the higher income tax authorities failed and the appellant then applied to the High Court for a writ of certiorari quashing the orders of assessment and imposition of penalty on the ground inter alia that the firm was dissolved by his partner 's death and no penalty could be imposed after dissolution of the firm, The High Court rejected the petition. On appeal with the certificate of the High Court, Held, that by virtue of section 44 and other provisions of the Income Tax Act a partner of a dissolved partnership firm may not only be made liable to assessment for income tax for the accounting years but despite dissolution of the firm he may be made liable to pay penalty for concealing the income of the firm under section 28(1)(c) of the Act. The analogy of dissolution of a Hindu joint Family does not apply to dissolution of a partnership. Mareddi Krishna Reddy vs Income tax Officer, Tenali, , approved. Commissioner of Income tax vs Ravalaseema Oil Mills, and section V. Veerappan Chettiar vs Commissioner of Income tax, Madras, , disapproved. Mahankali Subbarao vs Commissioner of Income tax, , distinguished. The Legislature intended that the provisions of Ch. IV of the Act shall apply to a firm even after discontinuance of its business. In interpreting a fiscal statute the Court cannot proceed to make good deficiencies if there be any. In case of doubt it should be interpreted in favour of the tax payer. The expression "assessment" has different connotations an has been used in its widest connotation in Ch. IV and section 44 97 766 he Act. It is not restricted only to computation of tax but includes imposition of penalty on tax payers found in the process of assessment guilty of concealing income. Commissioner of Income tax, Bombay Presidency and Aden vs Khemchand Ramdas, , referred to. The Income tax Act provided a complete machinery for obtaining relief against improper orders passed by the Income tax Authorities and the appellant could not be permitted to abandon that machinery, and invoke the jurisdiction of the High Court under article 226 of the Constitution against the orders of the taxing authorities.

The assessee was incorporated as a Private Limited Company in March, 1947 with G as its Managing Director and it took over the business of the trading company carried on by 'D ' in Delhi. D was the brother in law of G and was placed in charge of the management of the business of the Delhi Branch of the assessee and he was paid a salary of Rs. 1000 per month, commission at the rate of 1 per cent on the sales of the Delhi Branch and bonus equivalent to three months salary. The assessments of the assessee for the years 1949 50 to 1959 60 were finalised on the basis of the decisions of the Income Tax Tribunal and the amounts paid to the Managing Director and the other Directors including D by way of salary, commission and bonus were allowed in full as permissible deductions and so was the interest paid on the credit balances in their respective accounts. On the 28th March, 1968, the Income Tax Officer issued a notice under Section 148 of the Income Tax Act, 1961 seeking to reopen the assessment of the assessee for the assessment year 1959 60 on the ground that the income of the assessee had escaped assessment at the time of the original assessment. The Income Tax Officer, however, did not state the reasons which had led to the belief that the income of the assessee had escaped assessment by reason of omission or failure to disclose material facts nor did he give any reasons though requested by the assessee. The assessee 's writ petition challenging the validity of the notice was allowed by a Single Judge and the notice issued by the Income Tax Officer was quashed. It was held that there was no omission or failure on the part of the 565 assessee to disclose material facts relating to his assessment and that there was no reason to believe that any part of the income of the assessee had escaped assessment at the time of the original assessment by reason of wrong allowance of the remuneration paid to D as a permissible deduction. The Division Bench allowed the appeal, holding that the Income Tax Officer had reason to believe that the remuneration paid to D had been wrongly allowed as a permissible deduction by reason of omission or failure on the part of the assessee to disclose the material facts and the notice issued by the Income Tax Officer was justified. Allowing the appeal to this Court, ^ HELD: 1. (i) Neither of the two conditions necessary for attracting the applicability of Section 147(a), was satisfied. The notice issued by the Income Tax Officer is therefore without jurisdiction. [574 G] (ii) It is not possible to sustain the conclusion that the assessee omitted or failed to disclose fully and truly any material facts relating to his assessment. [574 F] 2. (i) Before the Income Tax Officer can assume jurisdiction to issue notice under Section 147(a), two distinct conditions must be satisfied. First, he must have reason to believe that the income of the assessee has escaped assessment and secondly, he must have reason to believe that such escapement is 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. If either of these conditions is not fulfilled, the notice issued by the Income Tax Officer would be without jurisdiction. [571 F] (ii) The important words under Section 147(a) are "has reason to believe" and these words are stronger than the words "is satisfied.". The belief entertained by the Income Tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The Court, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income Tax Officer, in coming to the belief, but the Court can examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the Income Tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid. [571 G 572 C] 3. Even a close relative who is in management and charge of a business on a full time basis is entitled to be paid remuneration and, in fact, it would be wholly unreasonable to expect him to work free of charge. [573 C] 566 In the instant case D was the brother in law of G the Managing Director of the assessee but this circumstance cannot lead to an inference that the payment of remuneration to D who was solely managing and looking after the business of the Delhi Bench of the assessee was sham and bogus. There is nothing unusual in D giving a loan to his brother in law, the Managing Director or making gifts to the son, wife and daughter in law of the Managing Director who were his close relatives. Any inference that the payment of remuneration to D was sham and bogus cannot be drawn merely from the manner in which he expended the amount of remuneration received by him, particularly when the persons to whom he gave a loan and made gifts were his close relatives. [573 E 574 B] 4. The statements of account of D with the assessee for the relevant accounting year as also the previous years were with the Income Tax Officer at the time of the original assessment and these statements of account clearly showed that out of the amount of remuneration credited to his account, he had made gifts to the sons of G on 31st July, 1957 and given a loan to G on the 25th August, 1958 and the Income Tax Officer was fully aware that G was the Managing Director of the assessee. The assessee could not therefore be said to be under an obligation to disclose to the Income Tax Officer in the course of its assessment as to how the director who was in sole charge of the management of the business of the assessee, and who was being paid remuneration for the services rendered by him to the assessee, had utilised the amount of remuneration received by him. [574 C F]

After negotiations in 1953 with the concerned Department of the Government of India and the Reserve Bank, a Company, incorporated in U.K. advanced large sums by way of loans to its subsidiary in India, namely the assessee, for subscribing for shares in some Indian Companies. The correspondence showed that the U.K. Company had the right to acquire at any time the shares at par, in satisfaction of the loans. In 1961, the assessee transferred the shares when called upon by the U.K. Company to do so. The Income tax Officer applied section 52 of the Income tax Act, 1961, and assessed the assessee to capital gains tax, which was not in existence in 1953 but was Reintroduced in the Finance Bill of 1959. The Income tax Officer held that the object of the transfer was to avoid or reduce the assessee 's liability to capital gains tax. The Appellate Assistant Commissioner however, held that the assessee was not liable to capital gains tax, and the Appellate Tribunal, after an elaborate discussion of the correspondence, confirmed the order, holding that the transfer was not effected with that object. The Department applied to the Tribunal to refer the questions, (i) whether certain documents were not properly construed, (ii) whether the Tribunal ignored evidence on essential matters, (iii) whether the finding of the Tribunal was perverse, and (iv) whether section 52 was not applicable, as arising out the Tribunal 's order. The Tribunal rejected the application. The Department then moved the High Court and the High Court directed the Tribunal to state a case in relation to the four questions, but the High Court did not give any reasons for doing so. Allowing the appeal to this Court, HELD : The High Court can exercise its jurisdiction in the matter of reference, (a) when the point for determination is a pure question of law, such as, the construction of a statute or a document of title; (b) when the point for determination is a mixed question of law and fact (While the findings of the Tribunal on the facts are final, its decision as to the legal effect of the findings is a question of law. Where, however, the finding is one of fact, the fact that it is an inference from other basic facts will not alter its character as one of fact); and (c) when a finding on a question of fact is perverse. [147C E] The necessary ingredients of section 52 are : (i) there should be a direct or indirect connection between the person who acquires a capital asset and the assesee; (ii) the income tax officer should have reason to believe that the transfer was effected with the object of avoidance or reduction of the liability of the assessee to capital gains; and (iii) if the first two conditions 139 are satisfied then the full value of consideration for the transfer may be taken to be the fair market value of the capital asset on the date of the transfer. The intention with which a particular transfer is made and the object which is to be achieved by such transfer are essentially questions of fact, the conclusion relating to which, are to be arrived at on a consideration of relevant material; that is, before the income tax officer can have any reason to believe that a transfer was effected with the object mentioned in the section facts, must exist showing that the object was to avoid or reduce the liability to capital gains. [141 H; 142 A D] In the present ease, the orders of the Tribunal show that there was no dispute as to the construction of any expression in any letter or document, that no relevant evidence was overlooked, that the inference was drawn from other facts and, that no question was raised on the construction of section 52. When the Tribunal found, as a fact, that before there was any proposal to reimpose the capital gains tax which had remained abolished for some time, the scheme between the assessee and the U.K. Company bad been fully evolved, the applicability of section 52 could not be attracted. The findings of the Tribunal that the object mentioned in the section could not be held to be established from the mere absence of a formal agreement between the assessee and the U.K. Company, is not perverse, but is supported by evidence and is eminently reasonable. in view of the clear, cogent and precise findings and conclusions of the Tribunal, the High Court, should at least have recorded a speaking order showing how the questions of law of the nature sought to be referred arose from the order of the Tribunal. [146 B D; 141 A C, F; 148 C.D] Shree Meenakshi Mills Ltd. vs C.I.T., Madras, , followed.

The assessee firm applied for renewal of its registration under s.26A, Income Tax Act, 1922, in May 1958, stating that the income of the previous year, which ended on March 31, 1958, had been divided among the partners. The Department Tribunal and the High Court did not believe that the previous year 's income had been divided and rejected the application. Dismissing the appeal to this Court, HELD : From a reading of the section and rules 2, 3 and 6 of the In,come tax Rules and the forms prescribed, it is clear that in the case of an application for renewal, it is incumbent on the part of the assessee to have divided the previous year 's profits before the application for renewal is made. The fact that the interpretation may cause hardship to the assessee is irrelevant when the language is plain. [81 G] Surajmal vs Commissioner of Income tax, Madras, 43 I.T.R. 491 and Ganesh Lal Laxmi Narain vs Commissioner of Income Tax, U.P. , approved. Khanjan Lal Sewak Ram vs Commissioner of Income tax, U.P., , referred to.

During the course of the hearing of an appeal against an assessment order made under the Wealth Tax Act for the assessment year 1964 65, the respondent who was the assessee, claimed deduction of an amount in the computation of net wealth which inter alia included the income tax and wealth tax liabilities created in consequence of certain rectification orders made under section 154 of the Income Tax Act and section 35 of the Wealth Tax Act. The rectification order related to assessment of income tax/wealth tax for the previous years and had been made after the completion of the assessment proceedings under the Wealth Tax Act for the assessment year 1964 65. The deduction claimed was allowed by the Appellate Assistant Commissioner and his decision was upheld by the Appellate Tribunal and the High Court. Dismissing the appeal, ^ HELD: The rectification of an assessment must be treated on the same basis as an original assessment for the purpose of a claim to deduction in the computation of the assessee 's net wealth. The rectification merely quantifies the true tax liability which had already been crystalized and become a debt on the last day of the previous year in the case of income tax liability, and, on the valuation date in the case of a wealth tax liability. [484 C D] Commissioner of Wealth Tax, Gujarat vs Shri Vadilal Lallubhai (C.A. Nos. 1524 to 1527 of 1973 decided on 21.10.1983) referred to. When an appeal is filed against an assessment order before the Appellate Assistant Commissioner, the assessment case is thrown open and the appellate proceeding constitutes a continuation of the assessment proceeding. Even if the tax liabilities, of which a deduction is claimed, are created by rectification orders or by assessment orders made after the date of the wealth tax assessment order under appeal, the law requires the claim to deduction being considered on the same basis as if it had been made in the original wealth tax assessment proceeding. [483 F H] 481 In the instant case, it is true that the rectification orders related to tax liabilities which were not claimed by the assessee in the course of the original assessment proceeding before the Wealth Tax officer but as the Appellate Assistant Commissioner permitted the claim to be made during the hearing of the appeal, there is no reason why the assessee should be denied consideration of his claim. [483 H; 484 A]

The respondent firm was assessed to income tax for the assessment years 1947 48, 1948 49 and 1949 50 under section 23(3). The Income tax Officer renewed the registration of the firm under section 26A of the Income tax Act and passed an order under section 23(6) allocating the shares of the various partners. The respondent preferred appeals against the orders of assessment to the Appellate Assistant Commissioner. Oil November 4, 1950, the Appellate Assistant Commissioner partly accepted the appeals in respect of the assessment years 1947 48 and 1948 49 but the appeal in respect of the assessment year 1949 50 was still pending. Meanwhile after issuing notice to the parties and hearing them the Commissioner, acting under section 33B(1), passed an order on June 5, 1952, cancelling the registration granted under section 26A on the ground that one of the partners of the firm was a minor, and directed the Income tax Officer to make fresh assessments for the three years. The respondent preferred appeals to the Appellate Tribunal which were allowed. On the application of the appellant the Tribunal referred, under section 66(1) of the Act, three questions to the High Court of Bombay. In regard to the assessment years 1947 48 and 1948 49 the High Court held that the orders of the Income tax Officer granting registration had merged in the appellate orders of the Assistant Appellate Commissioner and the revisional power of the Commissioner under section 33B(1) could not be exercised in respect of them. With regard to the renewal of registration for the year 1949 50 the High Court held that the Commissioner could not exercise his revisional power as the propriety of this order was open to consideration by the Appellate Assistant Commissioner in the respondent 's appeal pending before him. The appellant obtained special leave and appealed: Held, that the Commissioner had the authority under section 33B(1) to set aside the orders of registration made by the Income tax Officer. An order of the Income tax Officer granting registration was not appealable before the Appellate Assistant Commissioner. Such an order could be cancelled by the Commissioner in exercise of his revisional powers under section 33B(1) ; but it could not be cancelled by the Appellate Assistant Commissioner even in the exercise of his appellate jurisdiction when dealing with an appeal by an assessee. The theory that the order of a tribunal merges in the order of the appellate authority did not apply to the order of registration passed by the Incometax Officer. Commissioner of Income tax, Bombay North vs Tejaji Farasram Kharawala, , referred to. Durgabati and Narmadabala Gupta vs Commissioner of Income tax, , disapproved. But the Commissioner has no power while exercising his revisional jurisdiction under section 33B(1) of the Act to set aside the assessment orders. The Commissioner, in the present case, did 715 not really intend to set aside the assessment orders but merely to direct the Income tax Officer to make suitable consequential amendments in regard to the machinery or procedure. to be adopted to recover the tax payable by the respondent. The registration or non registration of a firm does not at all affect the computation of taxable income; it merely governs the procedure to be adopted in recovering the tax found due. Shapurji Pallonji vs Commissioner of Income tax, Bombay, , referred to.

Appeals Nos. 490 and 491 of 1958. Appeals from the judgment and decree dated February 18, 1955, of the Madras High Court in Second Appeals Nos. 2038 and 2039 of 1950. N. R. Raghavachariar, M. R. Krishnaswami and T. V. R. Tatachari, for the appellant. R. Ganapathi Iyer and D. Gupta, for the respondent. November 29. The Judgment of the Court was delivered by KAPUR, J. Two suits were brought by the appellants for a declaration against the levy of sales tax by the State of Madras and an injunction was also prayed for. Both the suits were decreed by the Subordinate Judge of Salem and the decrees were confirmed on appeal by the District Judge of Salem. Two appeals were taken to the High Court by the State of Madras against those decrees and by a judgment dated February 18, 1955, the decrees were set aside by a common judgment. Against these decrees the appellants have brought these appeals by a certificate of that Court. The appellants are merchants dealing in cotton yarn. They obtained a license under section 5 of the Madras General Sales Tax Act (Act IX of 1939), hereinafter referred to as the 'Act '. This license exempted 738 them from assessment to sales tax under section 3 of the Act on the sale of cotton yarn and on handloom cloth "subject to such restrictions and conditions as may be prescribed including conditions as to license and license fees". The license was issued on March 31,1941, and was renewed for the following years. On September 20, 1944, the Commercial Tax Authorities made a surprise inspection of the premises of the appellants and discovered that they were maintaining two separate sets of account on the basis of one of which the appellants submitted their returns to the Department. Because the other set of account books showed black market activities of the firm Balakrishna Chetty was prosecuted and sentenced to six months ' imprisonment for an offence connected with the breach of Cot. ton Yarn Control Order. During the pendency of those proceedings the Deputy Commercial Tax Officer made assessments for the years. 1943 44 and 1944 45, the tax for the former was Rs. 37,039 and for the latter Rs. 3,140. The appellants unsuccessfully appealed against these assessments and their revisions also failed. On August 24, 1945, the appellants brought a suit for a declaration and injunction in regard to the first assessment alleging that the assessment was against the Act. On September 2, 1946, a similar suit was brought in regard to the second assessment. It is out of these suits that the present appeal has arisen. The controversy between the parties centres round the interpretation of the words "subject to" in section 5 of the Act. The High Court has held that on a true interpretation of the provisions of the Act and the rules made thereunder, the observance of conditions of the license was necessary for the availability of exemption under section 5; that as the appellants had contravened those conditions they were liable to pay tax for both the years notwithstanding the license which had been issued to them under section 5 of the Act. it will be convenient at this stage to refer to the provisions of the Act which are relevant for the purpose of this appeal. section 2(b) " dealer" means any person who carries on the business of buying or selling goods;" 739 section 2(f) " "prescribed" means prescribed by rules made under this Act;". section 3(1) "Subject to the provisions of this Act, every dealer shall pay in each year a tax in accordance with the scale specified below: (a). . . . . . (b) if his turnover ex One half of I per ceeds twenty cent of such turn thousand rupees. over". section 5 "Subject to such restrictions and conditions as may be prescribed, including the conditions as to licenses and license fees, the sale of bullion and specie, of cotton, of cotton yarn and of any cloth woven on handlooms and sold by persons dealing exclusively in such cloth shall be exempt from taxation under Section 3". section 13 "Every dealer and every person licensed under section 8 shall keep and maintain a true and correct account showing the value of the goods sold and paid by them; and in case the accounts maintained in the ordinary course, do not show the same in an intelligible form, he shall maintain a true and correct account in such form as may be prescribed in this behalf.". The following rules are relevant for the purpose of this appeal and we quote the relevant portions: R. 5 "(1) Every person who (a). . . . . (b) deals with cotton and/or cotton yarn, (c). . . . . . (d). . . . . . (e) shall if he desires to avail himself of the exemption provided in sections 5 and 8 or of the concession of single point taxation provided in section 6, submit an application in Form I for a licence and the relevant portion of Form III is as follows: "Form III Cotton Licence to a dealer in Cotton yarn cloth woven on handlooms 740 See rule 6(5). Licence No. dated having paid a licence fee of Rs. (in words) hereby licensed as a dealer in Cotton/Cotton yarn Cotton woven on handlooms for the year ending at (place of business) subject to the provisions of the Madras General Sales Tax Act, 1939, and the rules made thereunder and to the following conditions:". R. 8 "Every licence granted or renewed under these rules shall be liable to cancellation by the Deputy Commercial Tax Officer in the event of a breach of any of the provisions of the Act, or of the Rules made thereunder or of the conditions of the licence. " The contention raised on behalf of the appellants was that as long as they held the licence it was immaterial if they were guilty of any infraction of the law and that they were not liable to any assessment of sales tax under the provisions of the Act and the only penalty they incurred was to have their licence cancelled and/or be liable to the penalty which under the criminal law they had already suffered. The contention comes to this that in spite of the breaches of the terms and conditions of the licence, having a licence was sufficient for the purpose of exemption under the Act. This contention, in our opinion, is wholly untenable. Section 3 is the charging section and section 5 gives exemption from taxation but that section clearly makes the holding of a licence subject to restrictions and conditions prescribed under the provisions of the Act and the rules made thereunder because the opening words of that section are "subject to such restrictions and conditions as may be prescribed." Under B. 13 an important condition imposed under the Act is the keeping by the dealer and every person licensed of true and correct accounts showing the value of the goods sold and paid by him. Next there is r. 5 of the General Sales Tax Rules which provided 741 that if any person desired to avail himself of the exemption provided in section 5, he had to submit an application in Form I for a licence and the Form of the licence shows that the licence was subject to the provisions of the Act and the rules made thereunder which required the licensee to submit returns as required and also to keep true accounts under section 13. This shows that the giving of the licence was subject to certain conditions being observed by the licensee and the licence itself was issued subject to the Act and the rules. But it was contended that the words "subject to" do not mean "conditional upon" but "liable to the rules and the provisions" of the Act. So construed section 5 will become not only inelegant but wholly meaningless. On a proper interpretation of the section it only means that the exemption under the licence is conditional upon the observance of the conditions prescribed and upon the restrictions which are imposed by and under the Act whether in the rules or in the licence itself ; that is, a licensee is exempt from assessment as long as he conforms to the conditions of the licence and not that he is entitled to exemption whether the conditions upon which the licence is given are fulfilled or not. The use of the words "subject to" has reference to effectuating the intention of the law and the correct meaning, in our opinion, is "conditional upon". The appellants have been found to have contravened the provisions of the Act as well as the rules and therefore it cannot be said that they have observed the conditions upon which the exemption under the licence is available. In that view of the matter, it was rightly held that they were not exempt from assessment under the Act. The appeals are therefore dismissed with costs. Appeals dismissed.

The appellants, who were dealers in Cotton yarn, obtained a license under the Madras General Sales Tax Act, 1939 (IX of 1939). Section 5 of that Act exempted such dealers from pay ment of sales tax under section 3 of the Act subject to such restrictions and conditions as might be prescribed, including the conditions as to licenses and license fees. Section 13 required a licensee to keep and maintain true and correct accounts of the value of the goods sold and paid by him. Rule 5 of the General Sales Tax Rules provided that any person seeking exemption under section 5 of the Act must apply for license in Form 1 which made the license subject to the provisions of the Act and the rules made thereunder. The appellants on surprise inspection were found to maintain two separate sets of accounts, on the basis of one of which they submitted their returns and the other 737 showed black market activities. The question for determination in the appeal was whether the appellants who had been refused exemption and were assessed to tax, could claim exemption under the Act. Held, that the question must be answered in the negative. Section 5 of the Madras General Sales Tax Act, 1939, pro perly construed, leaves no manner of doubt that an exemption from assessment thereunder is clearly conditional upon the observance by the assessee of the conditions and restrictions imposed by the Act, either in the rules or in the license itself, and the words 'subject to ' used by the section means "conditional upon". It was not correct to say that licensee was exempt from assessment so long as he held the license notwithstanding any breach of the provision of the law and that the only penalty he could be subjected to was the cancellation of his license or criminal prosecution.

By a notification dated April 15, 1948 .the Government of India extended the Assam Sales Tax Act, 1947 to the Administered Area in Shillong under section 4 of the Extra Provincial Jurisdiction. Act, 1947. The instrument of accession by which the administration of the Indian Princely State, of Mylliem in the Shillong Administered Area was transferred to the Central Government was accepted by the Governor General of India on August 17, 1948. Under section 30 of the Assam Sales Tax Act, as amended by Act 6 of 1958, a dealer may appeal against an order of assessment or penalty, but the appeal shall not be entertained by the appellate authority unless he was satisfied that the amount of tax assessed or penalty levied, if not otherwise directed by him, had been paid. The sales 'tax authorities assessed the appellant to sales tax and imposed penalties for Various periods. Though some of the; assessment periods were before April 1, 1958 when the Amending Act 6 of 1958 came into force, all the orders of assessment and penalty were passed after April 1, 1958. The appellant did not pay the tax assessed or the penalty but filed petitions along with its appeals praying that it may be allowed to furnish security in lieu of payment of cash on account of its financial condition. The petitions were rejected and the appeals were consequently dismissed. Writ petitions flied by the 'appellant in the High Court, to quash the orders of dismissal of the appeals, were also dismissed. In appeal to this Court, it was contended that; (1) After August 15, 1947 the State of Mylliem became an independent State and since the Central Government could exercise extra provincial jurisdiction under the Extra Provincial Jurisdiction Act, only if the Central Government exercised ' such jurisdiction under a treaty, agreement, or by other lawful means, the Central Government in the present case, could not exercise such jurisdiction till August 17, 1948 when the instrument of accession was acCepted; and therefore, the notification dated April 15, 1948 was not validly issued and hence the Assam sales Tax Act was not operative in the Shillong Administered Area; (2) As the Amending Act of 1958 came into force on April 1, 1958 it could not be given retrospective effect so as to apply to assessment periods anterior to that date; and (3.) The authorities were not right in holding that there was no provision in the Act empowering them to accept security in lieu of cash payment. 262 As the material on the record was not sufficient to enable the Court to determine the question whether the Dominion of India was entitled to exercise extra provincial jurisdiction over the Shillong Administered Area on April 15, 1948 this Court under section 6 of the Extra Provincial Jurisdiction Act, forwarded to the Union Government the questions: (a) whether the Dominion of India exercised such jurisdiction on April 15, 1948, and (b) whether the Dominion of India had such jurisdiction to extend the Assam Sales Tax Act to, the Area After receiving the answers, HELD: (1) The answers submitted by the Union Government showed that prior to April 15, 1948, the British Government had exercised jurisdiction over the Area under the Indian (Foreign Jurisdiction) Order in Council, 1902, as amended by the Order in Council of 1937 that on the withdrawal of British rule the jurisdiction continued to be exercised with the consent of the Siem (ruler) of Mylliem State by the Dominion of India, that the Jurisdiction was retained thereafter by the instrument of accession signed by the Siem, and that the exercise of the jurisdiction by the British Government and the Dominion of India several Acts were extended to the Shillong Administered Area. Since under section 6(2) of the Extra Provincial Jurisdiction Act the answer of the Central Government is conclusive evidence of the matter therein the Union Government was entitled to exercise such jurisdiction over the Shillong Administered Area on April 15, 1948 and therefore, the Assam Sales Tax Act was properly extended to the Area. [269 F H, 270 B C] (2) The assessments for periods anterior to April 1, 1958 were completed after the Amending Act came into force and the appeals were also filed thereafter. Therefore the Amending Act of 1958 was applicable to the appeals before the appellate authority and was not given retrospective effect. [271 C D] (3) The expression 'otherwise directed ' only means that the appellate authority can ask the assessee to deposit a portion of the amount and not the whole but the section gives no power to the appellate authority to permit the assessed to furnish security in lieu of the cash amount of tax. [271 D E]

The appellant used to invest his cash surplus in shares and securities and maintained an account book called Book No. 1 relating thereto. During the period from 1930 to 1941 42 he purchased a large number of shares and securities which by the accounting year 1941 42 were of a value Rs. 1491 lacs. He sold certain shares and securities of the value of several lacs and made certain amount of profit on those sales. In 1940 the appellant borrowed a large amount of money from his brother, the Maharaja of Darbhanga and opened a new account named account No. 2 which contained all entries regarding shares purchased and sold out of the money borrowed from the Maharaja. In the assessment year 1944 45 to 1948 49 the profits made by the (1) ; 288 appellant from purchase and sale of shares amounted to several lacs and the Income tax Officer held those to be liable to income tax as business profits. The Appellate Assistant Commissioner upheld the assessments but excluded the profits for the years 1944 45. On appeal by both the parties the Appellate Tribunal held on the evidence that the appellant was to be regarded as a dealer in shares and securities and therefore the profits were assessable to income tax. The High Court stated the following two questions under section 66(2) of the Income tax Act and answered them in the affirmative: "(1) Whether in the circumstances of the case, there is material to support the finding of the Appellate Tribunal that the assessee was a dealer in shares and securities with respect to each of the account and, therefore, liable to be taxed? (2)Whether having regard to the finding of the Appellate Tribunal in respect of 1941 42 assessment, it was open to the Appellate Tribunal in the present case to hold that the profits and transactions of sale and purchase of shares and securities amounted to profits of business and so liable to be taxed?" On appeal by special leave the appellant contended inter alia, that being a Zamindar the buying and selling of shares was not his normal activity and he did not carry on any such business but his purchases and sales were in the nature of investments of his surplus monies and therefore the excess amounts received by sales were capital receipts being merely surplus and not profits. Held, that on the materials produced and on the facts proved the appellant must be held to have been rightly assessed. The principle applicable to such transactions is that when an owner of an ordinary investment chooses to realise it and obtains a higher price for it than the original price paid by him, the enhanced price is not a profit assessable to income tax, but where as in the present case what is done is not merely a realisation or a change of investment but an act done in what is truly the carrying on of a business the amount recovered as appreciation will be assessable. G.Venkataswami Naidu & Co. vs The Commissioner of Income tax, [1959] Supp. 1 S.C.R. 464, Oriental Investment Company Ltd. vs The Commissioner of Income tax, ; , Raja Bahadur Kamakshya Narain Singh vs Commissioner of Income tax, Bihar and Orissa, (1943) L.R. 70 I.A. 180, discussed. The substantial nature of the transactions, the manner in which the books were maintained, the magnitude of the shares purchased and sold and the ratio between the purchases and sales and the holding justified tile Tribunal to come to the conclusion that the appellant was dealing in shares as business. The High Court could not interfere with those findings and it rightly answered the questions in the affirmative. There is no such thing as res judicata in income tax matters 289 and it was quite open to the Appellate Tribunal to give the finding that it did.

The appellants who carry on the business in vegetable ghee purchased vegetable ghee from outside U. P. in the name of four fictitious firms. In their return of sales tax they did not include the sale proceeds of these transactions on the ground that they had purchased from the four firms and that under a notification made under section 3A of the U. P. Sales Tax Act, tax was leviable only at a single point on the sale by the outside suppliers to these four firms. In support of this the appellant No. 1 made a false statement before the Sales tax Officer and also filed forged bill,. before him. The return was accepted by the Sales Tax Officer with the result that the sales covered by these transactions were not taxed. The appellants were tried and convicted for offence under section 471 Indian Penal Code for using forged documents and under section 14(d) of the Act for fraudulently evading payment of tax due under the Act. The appellants contended that the trial for the offence under section 471 was illegal as no complaint had been made by the Sales Fax Officer as required by section 14 (d) of the Act was not made out as no tax was payable under 'section 3A because the notification issued thereunder was invalid. Held, that the Sales Tax Officer was not a Court within the meaning of section 195 Code of Criminal Procedure and it was not necessary for him to make a complaint for the prosecution of the Appellants under section 471 Indian Penal Code. A Sales Tax Officer was merely an instrumentality of the State for purposes of assessment and collection of tax and even if he was required to perform certain quasi judicial functions, he was not a part of the judiciary. The nature of the functions, of a Sales Tax Officer and the manner prescribed for their 851 performance showed that he could not be equated with a Court. Nor could he be said to be a Revenue Court. Though the definition of Court in section 195 of the Code Was enlarged by the substitution of the word "include" for the word "means" by the amendment of 1923, it did not change the definition of "Revenue Court. " Smt. Ujjam Bai vs The State of U. P. (1963) 1 S.C.R. 778), Shell Co. of Australia Ltd. vs Federal Commissioner of Taxation and Brajnandan Sinha vs Jyoti Narain ' ; , applied. Krishna vs Gocerdhanaiah, A. I. R. , approved. In re: Punamchand Maneklal (1914) 1. L. R. and State vs Nemchand Pashvir Patel, (1956) 7 section T. C. 404 not approved. In re : R. Nataraja Iyer (1914) 1. L. R. and Shri Virender, Kumar Satyawadi vs The Sate of Punjab,[1955] 2 section C. R. 1013 referred to. Held, further that the appellants were rightly convicted under section 14 (d) of the Act. Sales tax was payable under s.3 of the Act in respect of all sales. But under s.3A it was leviable only at a single point if the Government issued a notification declaring the point at which tax was payable and it was so prescribed by the rules. Under the notification issued by the Government tax was payable only by the dealer who imported the goods and sold them. The appellants having imported the ghee were liable to pay the tax on the sales of this ghee which they fraudulently evaded. Though the notification was ineffective as no rules were made under the Act prescribing the single point, it did not help the appellants, as the only effect of this was that section 3A did not come into play. In trying to get the benefit of the ineffective notification under section 3 A the appellants evaded payment of tax under section 3 which they were liable to pay.

The petitioners who were building contractors in the State of Punjab were assessed to tax by the sales tax authorities on the supply of materials in construction works treating it as a sale, acting under the provisions of the East Punjab General Sales Tax Act, 1948. The petitioners challenged the legality of the assessment proceedings on the grounds, inter alia, that the legislature of the Province of Punjab had, under Entry 48 in List II of Sch. I 'll to the Government of India Act, 1935, no power to impose tax on the supply of materials in construction works as there was no sale in fact or in law of those materials, and that the provisions of the Act which sought to do it were ultra vires. The assessing authorities contended that on a true construction of the building contract entered into by petitioners with the Government it comprised a distinct agreement for the sale of materials and particularly relied on r. 33 of printed General Conditions of Contracts issued by the Government : Held, that there was no sale as such of the materials used in the constructions by the petitioners and that no tax could be levied thereon. 439 Rule 33 which provides that the materials brought to the site shall become the property of the Government but that when the works are finally completed the surplus materials shall revert and become the property of the contractor, has for its object that materials of the right sort are used in the construction and has not the effect of converting what is a lump sum contract for construction of buildings into a contract for the sale of materials used therein. State of Madras vs Gannnon Dunkerley & Co. (Madras) Lid. , ; , followed. Tripp vs Armitage, ; and Reid vs Macbeth

The petitioner, a merchant, carrying on business in "bullion and specie" and gold and silver ornaments was a registered 'dealer ' under the Orissa Sales Tax Act, 1947. The Government purporting to exercise its authority under section 6 of the said Act issued a notification on July 1, 1949 exempting certain articles from the operation of the charging section of that Act. Under the notification gold ornaments were ordered to be exempted from sales tax when the manufacturer selling them charges separately for the value of gold and the cost of manufacture. The petitioner filed his returns before the Sales tax Officer and claimed exemption of sales tax under the said notification. Up to June 1952, the claim for exemption was upheld. Subsequently, however, these assessments were reopened under section 12(7) of the Act and it was claimed that the deductions made on certain sale transactions of gold ornaments were not justified and the petitioner had escaped assessment. The petitioner pleaded that lie was entitled to exemption, because he belonged to the class of manufacturers to which the notification referred. The Sales tax Officer disallowed the petitioner 's contention. The petitioner then challenged the said decision by preferring appeals, but the said appeals were also dismissed. Pending these appeals, similar assessments made in respect of other dealers including the petitioner were challenged by writ petitions before the High Court. The High Court upheld the petitioner 's case and issued writs directing the Sales tax Officer to allow the petitioners ' claim for exemption. After this judgement was pronounced, the impugned Act was passed by the legislature on August 1, 1961 and was published on September 18, 1961, containing one operative provision in section 2. It provided that notwithstanding anything contained in any judgement, decree or order of any court, the word 'manufacturer ' occuring against item 33 in the schedule to the notification of the Government dated July 28, 1947 as amended by another notification of the 1st July, 1949 shall mean and shall always be deemed to have meant a person who by his own labour works up materials into suitable forms and a person who owns or runs a manufactory for the purpose of business with respect to the articles manufactured therein. The validity of this section was challenged in the present writ petition. 186 It was urged (i) that since the exemption was granted by the State Government by virtue of the Powers conferred on it by section 6, it was not open to the legislature to take away that exemption retrospectively; (ii) that the provision in section 2 of the impugned Act was discriminatory and as such contravened the equality before the law guaranteed by article 14 and (iii) that the retrospective operation of the impugned section should be struck down as unconstitutional, because it imposes an unreasonable restriction on the petitioner 's fundamental right under article 19 (1) (g) Held: (i) What the legislature had purported to do by section 2 of the impugned Act, was to make the intention of the notification clear. And, if the State Government was given the power either to grant or withdraw the exemption, that could not possibly affect the legislature 's competence to make any provision in that behalf either prospectively or retrospectively. (ii) The notification as interpreted by section 2 of the impugned Act benefits the artisans who produce ornaments themselves and who run manufactories. That is why the main object of granting exemption can be said to be achieved by holding that ,manufacturer ' means either a manufacturer properly so called or one who engages artisans to manufacture gold ornaments. In the present case the petitioners were not directly concerned with the production of ornaments, and admittedly, they did not produce the said ornaments themselves. Therefore, the persons who get the benefit of the exemption notification as a result of the provisions of section 2 of the impugned Act cannot be said to belong to the same class as that of the petitioners. The two categories are distinct and there is no sameness or similarity between them, and if that is so, the main argument on the basis of article 14 does not subsist. (ii) It would be difficult to accept the argument that because the retrospective operation may operate harshly in some cases, therefore, the legislation itself is invalid. In the circumstances of the present case it would not be possible to hold that by making the provision of section 2 of the impugned Act retrospective the legislature has imposed a restriction on the petitioner 's fundamental rights under article 19(1) (g) which is not reasonable and is not in the interest of the general public.

In 1944 the respondent instituted a suit for the recovery of money due under an award dated July 31, 1935, whereby the appellant and his brother were directed to pay a certain amount to the respondent. The suit was dismissed by the trial Court 238 but on appeal the High Court passed a decree on March 9, 1951. During the pendency of the appeal in the High Court the Madras Agriculturists Relief Act, 1938, was amended by Act XXIII of 1948, which inter alia by adding sub section (2) to section 19 of the main Act enabled decrees passed after the commencement of the Act to be scaled down under the provisions of the Act. By cl. (ii) to section 16 of the amending Act, which came into force on January 25, 1949, it was provided that " that the amendments made by this Act shall apply to. . all suits and proceedings instituted before the commencement of the Act, in which no decree or order has been passed before such commencement ". On October 5, 1951, the appellant made an application to the trial court for scaling down the decremental debt under section 19(2) Of the Madras Agriculturists Relief Act, 1938, as amended, but the application was dismissed on the ground that the trial court had no jurisdiction to act under that sub section as the decree sought to be scaled down had been passed by the High Court. The appellant preferred an appeal to the High Court and also made a separate application for scaling down the decretal debt under section 19(2) Of the Act. The High Court took the view that section 19(2) was controlled by section 16 of the amending Act and that cl. (ii) of section 16 was applicable to the case, but that as the appellant whose appeal was pending at the commencement of the amending Act did not apply for scaling down before the decree was passed although he had the opportunity to do so, his application subsequent to the decree was barred by the principle of Yes judicature. Held, that the High Court erred in its view that in order to get relief under section 19(2) Of the Act, read with cl. (ii) of section 16 of the amending Act, the appellant must have made the application when the appeal was pending and before a decree had been passed. For the application of cl. (ii) of section 16 of the amending Act, the true test is whether the suit or proceeding was instituted before January 25, 1949, and whether no decree or order for repayment of a debt had been passed before that date, and it is not necessary that the suit or proceeding should be pending on the date of the application under section 19(2) Of the Act. In cases covered by that clause a party can ask for relief under the Act at two stages before a decree for repayment of the debt bad been passed, and also after such a decree had been passed, and since section 19(2) of the Act in express terms enables a debtor to claim a relief under the provisions of the Act after a decree had been passed, the appellant is entitled to the benefit of section 19(2) of the Act read with section i6, cl. (ii), of the amending Act. While cl. (ii) of section i6 applies to suits and proceedings which were instituted before January 25, 1949, but in which no decree or order had been passed, or the decree or final order passed had not become final, before that date, cl. (iii) applies to decrees or orders, which, though they had become final before January 25, 239 1949, were still in the state of unfinished execution and at the stage at which satisfaction had not been fully received. Venkataratnam vs Seshatnma, 1. L. R. , approved. The question whether cl. (ii) refers to decrees and orders of a declaratory nature, which are not executable but which have become final before January 25, 1949, left open. The opinion expressed in jagannatham Chetty vs Parthasarathy Iyengar, A.I.R. 1953 Mad. 777, that the word 'proceedings ' in section i6 of the amending Act must relate to proceedings instituted for repayment of a debt and not to execution proceedings which are for enforcement of a decree or order, doubted and the question left open.

The Income tax Officer found that the respondents ' books of accounts were unreliable and after assessing income for Fasli year 1357, corresponding to the year 1946 47, issued notice to the respondents on December 22, 1949, under section 40 of the Hyderabad Income tax Act to show cause why penalty should not be levied in addition to the tax and by an order dated October 31, 1951, directed payment of the said penalty. The State of Hyderabad merged with the Indian Union during the pendency of the proceedings before the Income tax Officer and by section 13 of the Finance Act, 1950, the Hyderabad Income tax Act ceased to have effect from April 1, 1950, but the operation of that Act in respect of levy, assessment and collection of income tax and super tax in respect of periods prior thereto for which liability to income tax could not be imposed under the Indian Income tax Act, was saved. The question was whether (a) the Income tax Officer had power on October 31, 1951, to impose a penalty under section 40(1) of the Hyderabad Income tax Act and (b) whether the assessee had a right to appeal against the order of the Income tax Officer imposing penalty and whether the Appellate Assistant Commissioner had jurisdiction to hear appeals or whether his order was a nullity. Held, that the power of the Income tax Officer to impose a penalty under section 40(1) of the Hyderabad Income tax Act in respect of the year preceding the date of the repeal of the Hyderabad Income tax Act was not lost because by section 13 of the Finance Act, 1950,,for the operation by the Hyderabad Income tax Act in respect of levy, assessment and collection of income tax and super tax in respect of periods prior to April, 1951, for which liability to income tax could not be imposed under the Indian Income tax Act, was saved and so the proceedings for imposing the penalty could be continued after the enactment of section 13(1) of the Indian Finance Act, 1950. Held, that the appeal against the order of the Income tax Officer on the ground that he was not competent to pass the order did lie to the Appellate Assistant Commissioner, whose jurisdiction was not made conditional upon the competence of the 924 Income tax Officer to pass the. orders made appealable; as a court of appeal he had jurisdiction to determine the soundness of the conclusions of the Income tax Officer both on the question of fact and law and even as to his jurisdiction to pass the order appealed from, and his order was not a nullity.

Appeal No.232 of 1960. Appeal from the Judgment and Order dated October 6, 1958, of the Bombay High Court in Income Tax Reference No. 10 of 1958. R. J. Kolah, Dwaraka Das, section N. Andley, Rameshwar Nath, J. B. Dadachanji and P. L. Vohra for the Appellants. Hardyal Hardy and D. Gupta for the Respondent. November 29. The Judgment of J. L. Kapur and J. C. Shah, JJ., was delivered by Kapur, J. M. Hidayatullah, J., delivered a separate Judgment. KAPUR, J. This is an appeal pursuant to a certificate of the High Court of Bombay against the judgment and order of that Court in Income tax Reference No. 10 of 1958, answering the question referred to it against the assesses whose legal representatives are 744 the appellants before, us, the respondent being the Commissioner of Income tax. The facts which have given rise to the appeal are that the late Mr. Annantrai P. Pattani, hereinafter called the assessee was, by Hazur Order dated December 10, 1937, appointed the Chief Dewan of Bhavnagar State. On January 15, 1948, the Maharaja of Bhavnagar introduced responsible Government in his State and appointed the assessee as the Chairman of the Bhavnagar Durbar Bank but he received no salary for that post. On the same date by another Hazur Order the Maharaja granted a monthly pension of Rs. 2,000 to the assessee. The order was in the following terms: "He looked after us well in our childhood and rendered valuable services sincerely and with single minded loyalty to us and our State during extremely difficult period of the last war and thereafter, which has enhanced the prestige and prosperity of the State and given the State and the people a place of pride in India. In appreciation of this, it is (hereby) decided to grant him a monthly pension of Rs. 2,000 two thousand which is the monthly salary he is drawing at present. Date 22 1 1948. " On May 31, 1950, the Maharaja directed Messrs. Premchand Roychand & Sons, Bombay, with whom he had an account "to pay by cheque to Mr. A.P. Pattani Rs. 5 lacs out of the amount lying to the credit of my account with you." This sum was paid to the assessee on June 12, 1950. It is stated that the accountant of the Maharaja asked for instructions as to how that amount of Rs. 5 lacs was to be adjusted in the accounts and on December 27, 1950, the Maharaja made the following order: "In consideration of Shri Annantrai P. Pattani the Ex Diwan of our Bhavnagar State having rendered loyal and meritorious services Rs. 5,00,000 (Rupees Five Lacs) are given to him as gift. Therefore, it is ordered that the said amount should be debited to our Personal Expense Account." On March 1, 1948, Bhavnagar State was merged in the United States of Saurashtra and the Maharaja ceased to be the ruler of the said State as from that 745 date. The assessability of this sum of Rs. 5 lacs was raised in the course of the assessment proceedings for the assessment year 1951 52 and at the request of the ' assessee which is stated to be oral the Maharaja wrote on March 10, 1953, the following: "I confirm that in June 1950, 1 gave you a sum of rupees five lacs (Rs. 5,00,000) which wag a gift as a token of my affection and regard for you and your family. This amount was paid to you by Premchand Roychand & Sons according to my letter of 31st May, 1950, from moneys in my account with them. " On these facts the Income tax Officer held that Rs. 5,00,000 received on June 12, 1950, was liable to income tax under section 7(1) read with explanation (2) of that section as it stood before the amendment by the Finance Act, 1955. The assessee took an appeal to the Appellate Assistant Commissioner which was dismissed. Against that order an appeal was taken to the Income tax Appellate Tribunal but the Tribunal also dismissed the appeal. The Tribunal held that looking to the circumstances they would attach more importance to the "contemporaneous document, i.e., the order of the 27th December, 1950"; which clearly mentioned why the sum of Rs. 5,00,000 was paid to the assessee. The Tribunal was not inclined to "believe in the contents of that letter and would leave the matter at that. " The reference is to the letter of the Maharaja dated March 10, 1953. The Tribunal further held that there was no distinction between the Maha raja and the State and "assuming for a moment that this view of ours is not found to be correct, still it is clear from the Huzur Order No. 13 dated 22 1 1948 (vide para 2 above) that the assessee rendered services not only to the State, if it is distinct from. the Maharaja but to the Maharaja as well; for that Huzur Order clearly refers to assessee rendering "valuable services sincerely and conscientiously to us and our State". We would, therefore, hold that the amount of Rs. 5 lacs is a taxable receipt falling under Section 7(1) read with Explanation 2. " At the instance of the assessee the following question of law was referred to the High Court: 746 "Whether the sum of Rs. 5 lacs has been properly ,brought to tax in the hands of the assessee for the assessment year 1951 52?" and a further question as to the applicability of section 4(3) (vii) of the Income tax Act was not referred on the ground that it did not arise out of the order of the Tribunal. The High Court, on the findings given by the Tribunal came to the conclusion that section 7(1) explanation (2) of the Income tax Act applied. It held that it was not possible to regard the receipt of this sum of money by the assessee as a windfall nor as a personal gift of the nature of a testimonial; that the gift was not made in appreciation of the personality or character of the assessee nor was it symbolical of its appreciation of his personal qualities; that the consideration for the gift was in terms stated to be past services and therefore it could not be treated as a mere gift by an employer to an employee when the Court did not know what motivated the making of that gift. On the facts of the case the High Court reached the conclusion, though with some reluctance, that the case fell within the ambit of section 7(1), Explanation (2). The High Court also held that this sum could not be exempted from tax on the ground that it was merely a casual or nonrecurring receipt because once connection with the employment was established there was no question of considering the recurring or the casual nature of the receipt. During the pendency of the proceedings in the High Court the assessee died and his heirs and legal representatives were brought on the record and hence they are the appellants. It was argued on behalf of the appellants that the facts showed that the sum paid cannot fall within section 7(1), Explanation (2), of the Income tax Act. By Hazur Order dated January 22, 1948, the Maharaja had compensated the assessee for valuable services rendered and single minded loyalty to the Maharaja and to his State during the difficult period of the war and thereafter, which had added to the prestige and prosperity of the State and in appreciation of that the 747 Maharaja had granted to the assessee a monthly pension of Rs. 2,000, which was paid to the assessee even after the merger and of the establishment of the. United States of Saurashtra from out of the public revenue. At the time when Rs. 5,00,000 were paid, the State of Bhavnagar as such had ceased to exist. The Maharaja was no longer a Ruling Chief but was the Governor of the State of Madras. The order by which Messrs. Premchand Roychand & Sons, Bombay, were directed to pay the sum of Rs. 5,00,000 out of the account of the Maharaja does not mention any reason for payment. When as is alleged an accountant of the Maharaja asked as to how that amount of Rs. 5,00,000 was to be adjusted in the accounts, the Maharaja wrote on December 27, 1950, what is described as an order and directed that the sum should be debited to his Personal Expense Account. It also stated, why it is not clear, that that sum was to be given to the assessee in consideration of the assessee 's loyal and meritorious services as a gift. When asked later to clarify the reasons for making this gift the Maharaja made it clear that the gift was as a token of affection and regard for the assessee and his family and that the amount was paid by Messrs. Premchand Roychand & Sons from out of the private monies of the Maharaja with that firm. The Income tax Appellate Tribunal took into account the two documents the first of which has been described as an order of December 27, 1950, which was treated as a "contemporaneous document" and the other the letter of March 10, 1953, which was about two years later. The Tribunal did not accept the correctness of what was stated in the letter but attached a great deal of importance to the document of December 27, 1950, which the Tribunal thought was a con temporaneous document. It appears to us that the Tribunal was in error in treating the document of December 27, 1950, as a contemporaneous document and because of this erroneous approach the finding that it has given cannot be treated as a finding of fact which should bind the court in its decision. It is obvious that the reason why the 748 Tribunal attached all this importance to the document of December 27, 1950, was that it was contemporaneous. It would be difficult to accept that a document written six months after the fact of payment could be termed as contemporaneous document particularly when the object of that document was only to instruct an accountant as to how he should make a particular entry. The letter which was written by the Maharaja on March 10, 1953, was rejected because of the circumstances of the case one of which was the contemporaneous document. It does not appear to us that the Tribunal gave sufficient or any consideration to the fact that the Maharaja had already passed an order of a liberal and almost generous grant of a pension of Rs. 2,000 per mensem which was in lieu of the services rendered by the assessee both to the State as well as to the Maharaja and his family and that pension was ordered before the merger of the State and when the employment of the assessee as the Dewan terminated. According to what was stated in the letter of the Maharaja dated March 10, 1953, the sum of Rs. 5,00,000 was given as a gift in token of Maharaja 's affection and regard for the assessee and the assessee 's family. There is no reason shown why the Maharaja should have aided and abetted the assessee in escaping income tax. The only reason stated by the Tribunal is based on a wrong assumption as. to the nature of the document of December 27, 1950. The payment of Rs. 5,00,000 was sought to be brought within the purview of section 7(1) of the Act read with explanation (2). This section at the relevant time provided: section 7(1) "The tax shall be payable by an assessee under the head "Salaries" in respect of any salary or wages, any annuity, pension or gratuity and any fees, commissions, perquisites or profits in lieu of, or in addition to, any salary or wages, which are due to him from; whether paid or not or are paid by or on behalf of. . . any private employer. . . . . Explanation 2: A payment due to or received by 749 an assessee from an employer or former employer or from a provident or other fund, is to the extent to, which it does not consist of contributions by the ', assessee or interest on such contributions a profit received in lieu of salary for the purpose of this subsection, unless the payment is made solely as compensation for loss of employment and not by way of remuneration for past services;. . . . Counsel for the appellants contended that the payment did not fall within this section because it was a gift made on account of personal qualifications and was a testimonial unconnected with any service rendered. The submission was that the assessee had already been compensated for his services to the Maharaja personally and the State and this sum of Rs. 5 lacs was a gift in token of affection and regard and not as a payment in consideration of the services already rendered to the State or the Maharaja or both. It will not be inappropriate to mention that in the document dated December 27, 1950, it is stated that Rs. 5,00,000 was paid to the assessee as ex Dewan of Bhavnagar State in consideration of his having rendered loyal and meritorious services to Bhavnagar State. There is no mention in the document of December, 1950, of any services rendered to the Maharaja and it does not seem to have been considered by the Tribunal as to why the Maharaja should make out of his personal account the gift of such a large amount for something which was not done for the Maharaja specifically, particularly when the services to the State and to the Maharaja and his family had already been well compensated. This lends support to the submission of the appellants that the amount was paid merely as a gift in token of Maharaja 's affection and regard for the assessee. Mr. Kolah for the appellants relied on several cases in support of his contention that the amount was not liable to tax under section 7. In Beynon vs Thorpe (1) the assessee resigned his position as a Managing Director of the Company; did no work for the company; did (1) 95 750 not attend any Board meetings and received no remuneration as a Director of the Company. It was, however, a custom of the company to give to its retiring employees voluntary pension or allowance and the company voted a pension of pound 5,000 a year to the assessee but this resolution was rescinded and by another resolution pound 5,000 was voted to the assessee" not as or because he is a Director but as a personal gift". The assessee was assessed under Schedule 'E ' in respect of both the pension and the final payment but these assessments were discharged on appeal by the Special Commissioners who decided that the allowances were gifts of personal nature only. It was hold that the payments were not income assessable to income tax in the hands of the assessee. Rowlatt, J., said at p. 14: "Now the question is whether this ceases to be a mere gift because what has led to it is a past employment, an employment which has ceased. It has been. made abundantly clear by the Court in Scotland in Duncan 's case(1) that this sort of sums received by a person cannot possibly be put as receipts from his office or in respect of his office or employment, and they said in terms of that kind in a case like this that these emoluments cannot be taxed under Schedule 'E ', and I am bound to say I think that goes a very long way to conclude this case. But it is said that nevertheless they are in respect of the employment. Well, it seems to me that is a complete fallacy. It is nothing but a gift moved by the remembrance of past services already efficiently remunerated as services in them. selves; it is merely a gift moved by that sort of gratitude or that sort of moral obligation if you please: it is merely a gift of that kind. In this ease it happens to be very large; in many cases it is very small, but in all the cases it seems to me, whether it is large gift like this or whether it is a small gift to a humble servant they are exactly on the same footing as gifts which are made to a child or gifts which are made to any other person whom the giver thinks he ought to supply with funds for one reason or another; and as the (1) 751 Lord President in Scotland points out it is only a matter of history that the feeling between the parties which has generated the gift arises out of an employment." Mr. Kolah also relied on Reed vs Seymour (1). In that case a committee of a Cricket Club granted a benefit match to a professional cricketer in their service. Out of the profits of the benefit match the beneficiary, who was the assessee purchased a farm and assessment was made on him under Schedule 'E ' in respect of the proceeds of the benefit match but this was discharged by the General Commissioner on appeal. This sum was held to be in the nature of a personal gift and not assessable *to income tax. Viscount Cave in his speech posed the question which Rowlatt, J., put, i.e., "is it in the end a personal gift or is it remuneration"; if the latter it is subject to tax, if the former it is not. In that case the test applied by Viscount Cave was that the terms of the assessee 's employment did not en title him to a benefit; the purpose for which the amount was paid was to express gratitude of the employers and of the cricket loving public for what he had done and in their appreciation of his personal qualities. It was also stated that if the benefit had taken place after Seymour 's retirement no one would have sought to tax the proceeds as his income and the circumstance that it was given before but in contemplation of, retirement does not alter its quality and the whole sum was a testimonial and not a perquisite and therefore it was not a remuneration for services but a personal gift. Counsel also relied on Moorehouse vs Dooland (2). In that case a cricket professional was employed under a contract in which it was provided that collections shall be made for any meritorious performance by him in accordance with the rules for the time being of the employing Cricket League Club. The assessee played twenty matches and on eleven occasions collections were made on his behalf under the rules of the Club and a total sum of pound 48 15s. was collected. This was sought to be taxed as fees, wages perquisites or profits (1) [1927] XI T.C. 625. (2) 752 arising from his employment. It was held that (1) the test of liability to tax on voluntary payments from the standpoint of the person who receives it was that it accrued to him by virtue of his office or employment, i.e., byway of remuneration of his services; (2) that if the assessee 's contract of employment entitled him to receive voluntary payments and (3) that the payment was of a periodic and recurring character. On the other hand if a voluntary payment was made in circumstances which showed that it was given by way of a present or a testimonial on grounds personal to the recipient, the proper conclusion was that the payment was not profit accruing to the recipient by virtue of his office or employment but a gift to him as an individual paid and received by reason of his personal needs or by reason of his personal qualities. Applying these principles the proceeds were by the terms of the contract of employment received by way of remuneration and were liable to tax. In that case the payment was treated as being subject to tax because it was substantially in respect of services and accrued to the assessee by reason of his office. It is quite clear that had the gift been as a testimonial or a contribution for specific performance peculiarly due to the personal qualities of the recipient, it would have been treated as a mere present. The next case relied upon was David Mitchell vs Commissioner of Income tax (1) where the test laid was whether the payment was made in appreciation of .the personality and character of the assessee or in appreciation of the professional services rendered by him in order to give him an extra profit over and above the share of profit he might get from the firm for the services rendered. Counsel for the respondent argued that the gift made by the Maharaja was not in respect of personal qualities of the recipient but was relatable to his office although made by an ex employer and was therefore taxable; that the gift was voluntary is clear but it is not quite clear how the amount can be said to be relatable to the office held by the recipient. Even (1) 753 according to the case of the respondent the amount was paid about two years after the assessee had ceased to be an employee of the Maharaja or the State and immediately on his ceasing to be the Dewan of Bhavnagar State, the Maharaja had granted him a pension from out of the public funds for his services to the State as Dewan and for services rendered to the Maharaja and his family a handsome and a generous monthly pension of Rs. 2,000 per mensem. Apart from the fact that the Tribunal relied upon a document which was not contemporaneous, it seems to have overlooked the fact that there was a gap of two years before the amount of Rs. 5,00,000 was paid by the Maharaja out of his personal funds. Counsel for the respondent relied upon a judgment of this Court in P. Krishna Xenon vs The Commissioner of Income tax, Mysore, Travancore Cochin and Coorg, Bangalore (1). In that case the assessee was a teacher who taught his disciples Vedanta philosophy without any motive or intention of making any profit. One of the disciples made gifts of money to him on several occasions and it was contended by the assessee that he was not liable to tax on the amounts received from his disciple as he was not carrying on any vocation. But it was held that in teaching Vedanta philosophy the assessee was carrying on a vocation and that the payments made by the disciple were received by the recipient from his vocation. It was also held that if the voluntary payments had been made for reasons purely personal to the donee and not connected with his office or vocation, they would not be taxable but if they were made because of the office they would be taxable. The question was not what the donor thought he was doing but why the donee received it. The first thing to notice about that case is that those gifts were not made by the disciple as a gift to mark his esteem and affection for his preceptor but as was stated by the disciple in his affidavit he had paid those amounts because he had obtained the benefit of the teachings by the preceptor on Vedanta. It was found in that case and the disciple admitted (1) [1959] Supp. 1 S.C.R. 133. 754 that he had received benefit from the teaching of his preceptor and that the gifts that he had made, even though as a mark of esteem and affection, were the result of teaching imparted by the preceptor and because the amounts were paid to the preceptor as preceptor and the imparting of the teaching was the causa causans of the making of the gift,; it was not merely causa sine qua non. The payments were repeated and came with some regularity as the disciple visited the preceptor for receiving instructions. It was in these circumstances that this court held the payments to the preceptor as payments because of the imparting of the teaching and therefore they were income arising from the vocation of the recipient as a teacher of Vedanta philosophy. In our opinion the sum of Rs. 5,00,000 was not paid to the assessee in token of appreciation for the services rendered as a Dewan of Bhavnagar State but as a personal gift for the personal qualities of the assessee and as a token of personal esteem. The appeal is therefore allowed and the order of the High Court set aside and the reference is answered against the Commissioner of Income tax. The appellants will have their costs throughout. HIDAYATULLAH, J. I have had the advantage of reading the judgment just delivered by my brother, Kapur, J. I regret very much my inability to agree that the appeal should be allowed and the order of the High Court set aside. In my opinion, the High Court had correctly answered the question referred to it. The facts of the case have been stated in detail in the judgment of my learned brother, and I need not repeat them but refer only to some of them briefly. On June 12, 1950, a sum of Rs. 5 lakhs was given by the Maharaja of Bhavnagar to the predecessor of the appellants, who was an ex Dewan of the State. This was paid by Messrs. Premchand Roychand & Sons, Bombay, with whom the Maharaja had an account. There is no contemporaneous record to show why this payment was made; but it appears that when the accountant of the Maharaja enquired how the amount 755 was to be entered in the books of account, the Maharaja issued an order on December 27, 1950, to the following effect: "In consideration of Shri Annantrai P. Pattani the Ex Diwan of our Bhavnagar State having rendered loyal and meritorious services Rs. 5,00,000 (Rupees Five lacs) are given to him as gift. Therefore, it is ordered that the said amount should be debited to our Personal Expense Account." After the assessment proceedings had commenced in this case, the original assessee produced a letter written by the Maharaja on March 10, 1953, as follows: "I confirm that in June, 1950, I gave you a sum of rupees five lacs (Rs. 5,00,000) which was a gift as a token of my affection and regard for you and your family. This amount was paid to you by Premchand Roychand & Sons according to my letter of 31st May, 1950, from moneys in my account with them. " The question in this case was whether section 7(1) of the Income tax Act read with Explanation 2 to that section as it stood prior to the amendment in 1955, applied to this payment. That section, so far as it is material, is as follows: "7(1). The tax shall be payable by an assessee under the head 'Salaries ' in respect of any salary or wages, any annuity, pension or gratuity and any fees, commissions, perquisites or profits in lieu of, or in addition to, any salary or wages, which are allowed to him by or are due to him, whether paid or not, from, or are paid by or on behalf of any private employer;. . . . . Explanation 2. A payment due to or received by an assessee from an employer or former employer or from a provident or other fund, is to the extent to which it does not consist of contributions by the assessee or interest on such contributions a profit received in lieu of salary for the purpose of this subsection, unless the payment is made solely as compensation for loss of employment and not by way of remuneration for past services;. . .". To determine whether the second Explanation applies 756 to the facts in this case, it has to be found if this pay ment was received by the assessee from a former employer by way of remuneration for past services. The Tribunal did not accept the letter of the Maharaja, and observed as follows: "In support of the latter view Mr. Tricumdas strongly relied upon the letter dated 10 3 1953 addressed by the Maharaja to the assessee, vide para 2 above. We have already indicated the circumstances in which that letter came to be written and would merely observe that we find it difficult to bring ourselves to believe in (sic) the contents of that letter and would leave the matter at that. " This, in my opinion, is a finding upon the evidentiary .value of the letter of the Maharaja, and though the order of the Tribunal is worded mellifluously, the Tribunal 's decision is quite clearly that it was not per suaded to accept it. Indeed, of the two documents, greater worth has to be attached to one which was issued before the controversy started and was written not to the assessee but to the Maharaja 's accountant who enquired how the account was to be adjusted. The use of the word 'contemporaneous ' to describe the order to the accountant meant no more than this that it was earlier in time and very soon after the amount was given. The Tribunal did not rely on any extra neous evidence in reaching its conclusion, but on something which had proceeded from the Maharaja himself. The motive of the Maharaja may be irrelevant, because what has to be seen is not why the payment was made but for what the assessee had received it. The Maharaja no doubt had been generous in fixing the pension at Rs. 2,000 per month. But the payment of such a large sum was not just bounty but to reward the past services, which judged from the scale of the pension had not adequately been paid for in the past. In this connection, the words of the Maharaja himself (and what better evidence can there be?) were that the amount was paid "in consideration of Shri Annantrai P. Pattani the Ex Dewan of our Bhavnagar State having rendered loyal and meritorious services Rs. 5,00,000 are given to him as gift". 757 The word gift ' does not alter the nature of the payment. The Maharaja indeed made a gift, as he had stated over again; but this order quite clearly disclosees that it was by way of remuneration for past services. The case, therefore, falls within the ruling of the a Supreme Court reported in P. Krishna Menon vs The Commissioner of Income tax, Mysore, Travancore Cochin and Coorg, Bangalore (1), and is indistinguishable from it. In the earlier case of this Court, the person who gave the money did not even mention any past services; but this Court found that because the recipient had taught him Vedanta philosophy, the payment was really in the nature of remuneration for past services. The facts in P. Krishna Menon 's case (1) were that the assessee was teaching his disciples Vedanta philosophy without any motive or intention of making a profit out of such activity. One J. H. Levy who used to go to Travancore from England at intervals attended his teachings. Levy had an account with Lloyd 's Bank at Bombay, and on December 31, 1944, Levy transferred the entire amount of Rs. 2,41,103 11 3 to the credit of an account which Levy got the assessee to open in his ' own name. Levy made further remittances and by August 19, 1951, had paid about Rs. 4,50,000. It was held by this Court that the assessee was carrying on a vocation. In deciding the question whether the amounts were assessable to tax, this Court observed as follows: ". it seems to us that the present case is too plain to require any authority. The only point is, whether the moneys were received by the appellant by virtue of his vocation. Mr. Sastri contended that the facts showed that the payments were purely personal gifts. He drew our attention to the affidavit of Levy where it is stated 'all sums of money paid into his account by me have been gifts to mark my esteem and affection for him and for no other reason '. But Levy also there said, 'I have had the benefit of his teachings on Vedanta '. It is important to remember however that the point is not what the donor (1) [1959] Supp. 1 S.C.R. 133. 96 758 thought he was doing but why the donee received it". Sarkar, J., then referred to the dictum of Collins, M. R., in Herbert vs Mc Quade (1), which may be quoted here: "Now that judgment, whether or not the particular facts justified it, is certainly an affirmation of a principle of law that a payment may be liable to income tax although it is voluntary on the part of the persons who made it, and that the test is whether, from the standpoint of the person who receives it, it accrues to him in virtue of his office; if it does, it does not matter whether it was voluntary or whether it was compulsory on the part of the persons who paid it. That seems to me to be the test; and if we once get to this that the money has come to or accrued to, a person by virtue of his office it seems to me that the liability to income tax is not negatived merely by reason of the fact that there was no legal obligation on the part of the persons who contributed the money to pay it." The learned Judge also referred to the observations of Rowlatt, J., in Reed vs Seymour (2) and of Viscount Cave, L. C., in Seymour vs Reed (3), and observed that the real question was, is the payment in the nature of a personal gift or is it a remuneration?, and quoted as the reply the words of the Lord Chancellor "If the latter, it is subject to the tax; if the former, it is not." Sarkar, J., also referred to the observations of Lord Ashbourne in Blakiston vs Cooper (4), which were: "It was suggested that the offerings were made as personal gifts to the Vicar as marks of esteem and respect. Such reasons no doubt played their part in obtaining and increasing the amount of the offerings, but I cannot doubt that they were given to the vicar as vicar and that they formed part of the profits accruing by reason of his office.", and concluded as follows: "We have no doubt in this case that the imparting (1) (3) (2) (4) [1909] A.C. 104. 759 of the teaching was the causa causans of the making of the gift; it was not merely a causa sine qua non. The payments were repeated and came with the same regularity as Levy 's visits to the appellant for receiving instructions in Vedanta. We do not feel impressed by Mr. Sastri 's contention that the first payment of Rs. 2,41,103 11 3 was too large a sum to be paid as consideration. In any case, we are not concerned in this case with that payment. We are concerned with payments which are of much smaller amounts and as to which it has not been said that they were too large to be a consideration for the teaching. And one must not forget that these are cases of voluntary payments and the question of the appraisement of the value of the teaching received in terms of money is not very material. If the first payment was too big to have been paid for the teaching received, it was too big to have been given purely by way of gift. " In my opinion, the case of this Court concludes the matter, and the Tribunal was within its rights in accepting one piece of evidence in preference to another, and the finding on the evidentiary value of the letter of the Maharaja was a matter essentially for the Tribunal to decide finally. I thus agree with the High Court in the answer which it gave, in agreement on facts with the Tribunal, and the reasons for which the answer was given. I would, therefore, dismiss the appeal with costs. BY COURT: In view of the majority judgment of the Court, the appeal is allowed with costs throughout. Appeal allowed.

A who was the Dewan of the State of Bhavnagar before responsible government was introduced in the State, was granted a monthly pension of Rs. 2,000 by the Maharaja of the State by an order dated January 15, 1948. On March 1, 1948 the State of Bhavnagar was merged in the United States of Saurashtra and the Maharajah ceased to be the Ruler of the State. Subsequently on May 31, 1950, the Maharaja directed his banker in Bombay to pay A a sum of Rs. 5 lakhs out of the amount lying to his credit and when he was asked for instructions as to how that sum was to be entered in the books of account he passed an order on December 27, 1950, to the effect that in consideration of A having rendered loyal and meritorious services the said sum was given to him as a gift and that the amount should be debited to his personal expense account. The liability of the above sum for income tax was raised during the course of the assessment proceedings of A for the year 1951 52, and the assessee produced a letter dated March 10, 1953, written by the Maharajah at the request of the former, as follows: "I confirm that in June 1950, I gave you a sum of Rs. 5 lakhs which was a gift as a token of my affection and regard for you and your family. . The Income tax Officer held that the amount was liable to income tax under section 7(1), read with explanation (2), of the Indian Income tax Act, 1922. The Appellate Tribunal took into account the two documents dated December 27, 1950, and March 10, 1953, written by the Maharajah and considered that the first which clearly mentioned why the said sum was paid to the assessee, was more reliable for the reason that it was contemporaneous, than the second which was written more than 2 years later and the correctness of which they were not inclined to accept. The Tribunal agreed with the Income tax Officer that the amount was a taxable receipt. Held, (per Kapur and Shah, JJ.; Hidayatullah, J., dissenting), that on the facts of the case the sum of Rs. 5 lakhs was given to the assessee not as a payment in consideration of the services already rendered by him as the Dewan of the State, but merely as a gift in token of the Maharajah 's affection and regard for the assessee, and, therefore, was not liable to be assessed to tax 743 under section 7(1), explanation (2), of the Indian Income tax Act,1922. The Tribunal was in error in treating the document dated December 27, 1950, 'as a contemporaneous document while as a matter of fact it was written six months after the fact of payment, and because of this erroneous approach as a result of which the second letter had been rejected, the finding given by the Tribunal could not be treated as binding on the Court. P. Krishna Menon vs The Commissioner of Income tax, Mysore, Travancore Cochin and Coorg, Bangalore, [1959] Supp. 1 S.C.R. 133, distinguished. Per Hidayatullah, J. The use of the word "contemporaneous" to describe the order to the banker meant no more than this that it was earlier in time and very soon after the amount was given. The word "gift" did not alter the nature of pay ment; the Maharaja indeed made a gift, as he had stated over again, but the order disclosed that it was by way of remuneration for past services. The Tribunal was within its rights in accepting one piece of evidence in preference to another, and the finding on the evidentiary value of the letter of the Maharaja was a matter essentially for the Tribunal to decide finally. The decision in P. Krishna Menon vs The Commissioner of Income tax, Mysore, Travancore Cochin and Coorg, Bangalore, [1959] Supp. 11 S.C.R. 133, was applicable and concluded the present case.

The Income tax Officer, Bangalore commenced a proceeding under section 34 of the Mysore Income tax Act for reassessment of the income of the respondents for the assessment year 1949 50 and served a notice in that behalf in March 1951, on the respondents. The Income tax Officer determined the total income of the respondents in May 1954, but the order was set aside by the Appellate Assistant Commissioner in November 1961, and the Income tax Officer was directed to make a fresh inquiry, When the Income tax Officer commenced inquiry, the respondents applied to the High Court for a writ of prohibition and the High Court passed an order restraining the Income tax Officer on the ground that the assessment proceeding was barred because of the expiry of the period of limitation. In appeal to this Court, Held: The High Court was in error, because, though the Appellate Assistant Commissioner vacated the Income tax Officer 's assessment order of 1954 and remanded the case for further inquiry, the Appellate Assistant Commissioner did not set aside the notice of March 1951 served on the respondents, If a proper notice was served within the period provided by the section (four years from the close of the assessment year) the proceeding could be completed even after the expiry of four years for the Act prescribes no period for completion of the proceeding. [8E G]

This appeal by special leave was directed against the order of the High Court asking the Income tax Appellate Tribunal under section 66(4) Of the Income tax Act to submit a supplementary ' statement of case on points, which were never raised by the parties nor decided by the Income tax Authorities or the Tribunal. The only question canvassed before them was whether certain cheques, which were received by the assessee at Bhavnagar having been cashed in British India, the monies in respect of them could be said to have been received in British India. The Tribunal held that the monies related back to the receipt of the cleques and were as such received at Bhavnagar. The question was whether the receipt of the cheques at Bhavnagar amounted to receipt of the sale proceeds at Bhavnagar. ' The High Court held that the mere receipt of the cheques by post at Bhavnagar was not conclusive in absence of a further finding as to whether the cheques were sent by post without any request, express or implied, having been made by the assessee and observed as follows " But we cannot shut out the necessary inquiry which even from our own point of view is necessary to be made in order that we should satisfactorily answer the question raised in the Reference. It must not be forgotten that under sec. 66(4) of the Income tax Act we have a right independently of the conduct of the parties to direct the Tribunal to state further facts so that we may properly exercise our advisory jurisdiction. " Held, that the High Court had misconceived its powers under section 66(4) of the Act and its decision must be set aside. Section 66(4) of the Indian Income tax Act, which must be read with sections 66(1) and 66(2) Of the Act, did not empower the High Court to raise a new question of law which did not arise out of the Tribunal 's order or direct the Tribunal to investigate new and further facts necessary to determine the new question which had not been referred to it under s 66(1) or section 66(2) of the Act and direct the Tribunal to submit supplementary statement of case. Such additions and alterations in the statement of case as section 66(4) of the Act empowered the High Court to direct, could 250 relate only to such facts as already formed part of the record but were not included by the Tribunal in the statement of the case. Craddock (H. M. Inspector of Taxes) vs Zevo Finance Co. Ltd., ; Commissioner of Income tax, West Bengal vs State Bank of India, ; Industrial Development and Investments Co., Ltd. vs Commissioner of Excess Profits Tax, Bombay, [1957] 31 I.T.R. 688; Vadilal Ichhachand vs Commissioner of Income tax, Bombay North, Kutch and Saurashtra, Ahmedabad, and Commissioner of Income tax vs Bhurangya Coal Co. [195S] , referred to. Commissioner of Income tax, Bihar & Orissa vs Visweshwar Singh, and Sir Sunder Singh Majithia vs Commissioner of Income tax, C. P. and U. P. [1942] 10 I.T.R. 457, considered.

The appellant company filed a suit against the respondents in the court of the Senior Subordinate Judge, Gurgaon, for the specific performance of an agreement for the purchase of ' certain land by the company from the respondents. Part of the land in question became the subject of proceedings under the Land Acquisition Act, 1894, and dispute relating to compensation was referred to the Court of the District Judge. The court fixed the compensation at over Rs. 2 Iakhs. A dispute as to apportionment of the compensation was also. referred under section ' 30 of the Land Acquisition Act to the court but the proceedings were stayed by the Additional District Judge, pending decision of the suit for specific performance by the Senior Subordinate Judge. The suit was dismissed and thereupon the respondents applied to the Additional District Judge for continuation of proceedings under section 30 and for payment of compensation to them. The appellant company resisted the application on the ground that it had filed an appeal in the High Court against the decree of the Senior Subordinate Judge. The Additional District Judge after hearing both parties stayed the proceedings under section 30 pending disposal of the company 's appeal by the High Court. On a revision application under section 115 C.P.C. filed by the respondents, the High Court ordered on March 18, 1969 that a sum of not more than Rs. 1,78,000 out of the compensation for the acquired land be paid to the respondents who must undertake not to sell the rest of the land during the pendency of the appeal. The Additional District Judge after hearing the parties judicially interpreted the order to. mean that Rs. 1,78.000 were to be paid to the respondents after the conclusion of the proceedings under ' section 30. The respondents again moved the High Court with an application under section 151/141 C.P.C. for a clarification of its earlier order whereupon by order dated May 8, 1969 the High Court ordered immediate payment. The company challenged the High Court 's orders dated March 18, 1969 and May 8, 1969 in an appeal before this Court. It was contended on its behalf that in making its first order the High Court exceeded its jurisdiction u/s 115 C.P.C. and in making the clarificatory order ex parte it violated the rules of natural justice. HELD: (i) The position is firmly established that while exercising its jurisdiction under section 115, it is not competent to the High Court to correct errors of fact however gross or even errors of law unless the errors have relation to the jurisdiction of the Court to try the dispute itself. Clauses (a) and (b) o.f this section on their plain reading quite clearly did not cover the present case because it had not been shown that the learned Additional Sessions Judge had either exercised a jurisdiction not vested in him by law or had failed to exercise a jurisdiction so vested in him in recording the order that the proceedings under reference be stayed till the decision of the appeal by the High Court in the proceedings for specific performance of the agreement in question. Clause (c) of the section also did not apply 369 to the present case. The words "illegally" and "with material irregularity" as used in this clause do not cover either errors of fact or of law; they do not refer to the decision arrived at but merely to the manner in which it is reached. The errors contemplated by this clause may relate either to breach of some provision of law of to material defects of procedure. affecting the ultimate decision, and not to errors of either fact or of law, after the prescribed procedure has been complied with. [375 D G] The High Court had not adverted to the limitation imposed on its power under section 115 of the Code and had treated the revision as if it was an appeal. Merely because the High Court would have felt inclined, had it dealt with the matter initially, to come to a different conclusion on the question of continuing stay of the reference proceedings pending decision of the appeal could hardly justify interference on revision under section 115 of the Code when there was no illegality or material irregularity committed by the Additional Sessions Judge in his manner of dealing with the question. The order of the High Court dated March 18, 1964 had therefore to be set aside. [375 F H] Rajah Amir Hassan Khan vs Sheo Baksh Singh, I I Indian Appeals 237: Balakrishna Udayar vs Vasudeva Aiyar, 44 Indian Appeals 261; Keshav Deo vs Radha Kissan. ; applied. (ii) The ex parte order dated May 8 1969 was equally difficult to sustain. The High Court had proceeded to make an order virtually and in effect reversing the judicial order made by the learned Additional Judge in favour of the appellant. This could, more appropriately be done only on appeal or revision after notice to the party affected and not on an application under sections 151/141 C.P.C. Such an application in the. circumstances was misconceifed. [376 C, F]

Assistant Sales Tax Officers serving in connection with the affairs of the former States of Madhya Pradesh and Hyderabad, on the appointed date, were allocated to the new State of Bombay under section 115 of the (Act No. XXXVII) with effect from November 1, 1956. The Assistant Sales Tax officers from the former States of Madhya Pradesh and Hyderabad were superior to the Sales Tax Inspectors in their respective States and the posts of Assistant Sales Tax officer in those States was a promotion post. In the former State of Bombay, there was no similarly constituted cadre of Assistant Sales Tax officers, but there were posts of Sales Tax Inspectors. On November 16,1957, the State Government by its resolution directed that the ASTOs from Madhya Pradesh and Hyderabad should continue in their respective pay scales until such of them were not appointed as STOs Grade III, and Notes 3 and 6 appended to the Resolution provided that for purposes of promotion their inter se seniority be Fixed on the basis of their service as STOs and ASTOs. On February 3, 1960, the State Government substantially modified rule 7 of the Allocated Government Servants (Absorption, Seniority, Pay and Allowances) Rules, 1957 and a new rule 7 was substituted which provided that the seniority of an allocated Government servant in the post or cadre of absorption shall, as on November 1, 1956 be determined by the length of continuous service etc. Since 666 there were no comparable posts of ASTos in the former State of Bombay, the Central Government directed that the ASTos from Madhya Pradesh and Hyderabad should not be equated with the post of STIs but should be continued in an isolated category and their seniority should be fixed above the persons in the next lower grade. The State Government by its resolution dated September 10, 1960 modified Notes 3 and 6 and directed that the seniority as on November 1, 1956 of ASTOs from Madhya Pradesh and Hyderabad be fixed above all persons absorbed as STIs and that the inter se seniority of STOs from Madhya Pradesh and Hyderabad be fixed on the basis of their continuous service as ASTOs, and that the service rendered by the ASTOs from Madhya Pradesh as Excise Inspec tors or Assistant District Excise Officers in the Excise Department be counted as equivalent service. On August 17,1962, the State Government prepared a fresh provisional gradation list of ASTOs and STIs and invited objections. None of the respondents raised any objection. Upto and until August 8, 1960, departmental examinations for promotion to the post of STOs were conducted under the three different sets of rules applicable to the former States of Bombay, Madhya Pradesh and Hyderabad. The Departmental Examination Rules for Sales Tax officers 1954 framed by the former State Government of Bombay were made applicable to the Assistant Sales Tax officers allocated from Madhya Pradesh and Hyderabad from August 8,1960, as the provisions of the Bombay Sales Tax Act, 1959 were extended to the whole of the State, the CP and Berar Sales Tax Act 1947 and the Hyderabad General Sales Tax 1950 having been repealed. The ASTOs from Vidarbha and Marathwada regions of Madhya Pradesh and Hyderabad were called upon to appear at the examinations prescribed from the STOs of the old Bombay region, and some of the ASTOs from Madhya Pradesh and Hyderabad who had been promoted as STos Grade Ill were reverted to the post of ASTOs due to their failure to pass the said examination. The Government by its Resolution dated June 13, 1964 directed that the ex Hyderabad ASTOs even though they had not passed the prescribed depart mental examination should be confirmed on the basis of confidential records, efficiency and seniority: and by its Memorandum dated November 21,1964 order ed that all the ASTOs and STIs who had been allocated from the old M.P. and Hyderabad States should be considered eligible for promotion without passing the STos examination if they are otherwise fit for promotion. On representation made by the ASTos from Madhya Pradesh and Hyderabad, the Government of India, by its letter dated March 9, 1965 to the State Government directed that the Bombay Departmental Examination Rules, 1954, could not be made applicable to the allocated ASTOs from Madhya Pradesh and Hyderabad as it would amount to changing their conditions of service to their disadvantage. It accordingly directed that all the ASTOs from Madhya Pradesh and Hyderabad who were compelled to appear for the said examination and who had failed to pass the same be reinstated as STOs. This directive resulted in Respondents I and 2 who had been promoted to officiate as STO, Grade 111 being reverted as STIs. The State Government in view of this change reviewed the cases of all the ASTOs, and STIs from the three regions and those who were otherwise found 667 suitable were according to their seniority promoted to the post of STO, Gr. III even though they had not passed the STOs examination. On January 6,1966 the State Government published a revised gradation list of ASTOs and STIs and invited objections. Only Respondent 4 filed objections which was considered by the Government and rejected. The writ petition filed by Respondents 1 to S who were STIs in the State of Bombay and had passed the prescribed departmental examination for promotion as STOs Gr. III was allowed by the High Court which struck down the various resolutions and orders passed by the State Government from time to time relating to integration of service under sub section (7) of section 115 of the Act. In the appeals by the State to this Court on the questions whether (I) the State Government could by an executive order without framing a rule under the Proviso to article 303 of the Constitution alter the rules relating to departmental promotion of ASTOs from Madhya Pradesh and Hyderabad which constituted their conditions of service to the prejudice of the STIs of Bombay without the prior approval of the Central Government under the proviso to sub section (7) of section 115 of the Act, and (2) the State Government while integrating the services could unilaterally alter the seniority list of the allocated ASTOs and place the ASTOs from Madhya Pradesh and Hyderabad in an isolated category over the STIs from Bombay while determining their inter se seniority. Allowing the appeal, ^ HELD :1 (i). The matter of equation of posts is purely an administrative function under section 115 of the States Re organisation Act, 1956. Under sub section (5) of section 115 the Central Government is the sole repository of the power to effectuate the integration of services in the new States. It has been left entirely to the Central Government as to how it has to deal with these questions. The Central Government established an Advisory Committee for purposes of assisting in proper consideration of the representations made to it for the work of integration of services, the Central Government could take all manner of assistance from the State Government including the preparation of provisional gradation lists, The Central Government exercises general control in regard to the integration of services, and the ultimate integration was done with the sanction and approval of the Central Government. The provisional gradation lists prepared by the State Government were not, therefore, open to challenge. [679 A E] Union of India and Anr. vs P.K. Roy and Ors. ; referred to. In the instant case, not only had the Central Government laid down the principles for integration but also considered the representation made and passed the final orders thereon. The provisional gradation lists were prepared by the State Government under the direction and with the sanction of the Central Government. The Assistant Sales Tax officers from the former States of Madhya Pradesh and Hyderabad allocated to the new State of Bombay, could not be equated with the Sales Tax Inspectors. In the former State of Bombay, there was no similarly constituted cadre of Assistant Sales Tax officers, but there were 668 posts of Sales Tax Inspectors. The Assistant Sales Tax officers from Madhya Pradesh and Hyderabad were superior to Sales Tax Inspectors in their respective States and the post of Assistant Sales Tax officer in these State was a promotion post. It would have been inequitable and unfair to equate Assistant Sales Tax officers from Madhya Pradesh and Hyderabad with Sales Tax Inspectors from Bombay having regard to the nature of their posts, the powers and responsibilities, and the pay scales drawn by them. In addition, Assistant Sales Tax officers in these States were assessing authorities and they enjoyed statutory powers of their own to assess tax and levy penalties, whereas the Sales Tax Inspectors in Bombay had no such powers to assess tax or levy penalty but had merely to scrutinise returns and generally act in a subordinate capacity to Sales Tax officers. [679 F 680 C] (ii) The principle adopted by the State Government for determining the relative inter se seniority was obviously wrong, being contrary to the principles settled at the Chief Secretaries Conference. The Government of India, on re presentation by the affected Assistant Sales Tax Officers from Madhya Pradesh and Hyderabad in consultation with the Central Advisory Committee, directed that the inter se seniority should be fixed taking into account continuous service in the equated grade only subject to the inter se seniority of the Officers, coming from the several integrating regions. Upon that basis, the State Government by its Resolution dated September 10, 1960 rightly modified Notes 3 and 6 of its 1957 Resolution and directed that the seniority as on November 1, 1956 of ASTOs from Madhya Pradesh and Hyderabad be fixed above the persons in the cadre of STIs and that the inter se seniority of ASTOs from Madhya Pradesh and Hyderabad be fixed on the basis of their continuous service as ASTOS in their respective States. [680 E.G] 2. There was a difference between the Departmental Examination Rules framed by the former State Governments of Bombay, Madhya Pradesh and Hyderabad regulating the appointment of STOs. In the former State of Bombay, eligibility for the promotion of STIs to the post of STO Gr. Ill depended upon their passing the departmental examination for the non gazetted staff of the Sales Tax Department under rule I (b) (ii) of the Recruitment Rules for the STOs Gr. III, i. e. it was condition precedent. In the former States of Madhya Pradesh and Hyderabad there was no such condition attached. Under the Rules for Departmental examination, the ASTOs who were promoted as STOs were required to pass the departmental examination within two or three years from the date of their promotion i.e. it was a condition subsequent. The Departmental Examination Rules framed by the former State Governments of Madhya Pradesh and Hyderabad for promotion to the post of STOs formed part of the conditions of service of ASTOs from Madhya Pradesh and Hyderabad and they could not be altered to their disadvantage without the prior approval of the Central Government under section 115 (7) of the Act. Since no examination admittedly had been held there was no question. Of their reversion as ASTOs. [685 B C; E G; 683 B F; 685F] 3(i) The Resolution dated June 13, 1964 and the Memorandum dated November 24,1964 do not have the status of a rule framed under the Proviso to Article 309 of the Constitution. They merely conveyed the decision of the State Government that the allocated ASTOs from Madhya Pradesh and Hyderabad 669 should be considered eligible for promotion to the post of STO, Gr. III without passing the departmental examination for STOs Gr. The State Government had not by its Resolution or Memorandum brought about a change in the conditions of service by an executive order. All that was done was to rectify a mistake that had been committed in the past in subjecting the ASTOs from Madhya Pradesh and Hyderabad to the Departmental Examination Rules framed by the former State Government of Bombay i.e. to a rule which did not form part of conditions of their service and, therefore, was not applicable to them. There is, therefore, no infirmity in these two documents. [681 F H] (ii) Mere chances of promotion are not conditions of service and the fact that there was reduction in the chances of promotion did not tantamount to a change in the conditions of service. A right to be considered for promotion is a term of service, but mere chances of promotions are not. [683 C] (iii) The State Government 's Resolution dated June 13, 1964 and its Memorandum of November 21, 1964 clarifying that the ASTOs from Madhya Pradesh and Hyderabad were entitled for promotion to the post of STO Gr. III without passing the departmental examination. placed STI from Bombay at a disadvantage. To ensure 'fair and equitable treatment the State Government rightly dispensed with the requirement of passing the departmental examination in the case of STIs from the former State of Bombay. The State Government acted with the best of intentions. It endeavoured to strike a balance between the competing claims to relative seniority. When sub section (5) of section 115 of the Act speaks of 'fair and equitable treatment ', it envisages a decision which is fair and equitable to all. [686 A D]

The respondent, a Central Government officer was trans ferred from Calcutta to Jaipur by an order dated 14th March, 1985 and relieved of his duty the next day. He, however, filed a writ petition before the High Court and obtained an interim injunction. The writ petition was subsequently transferred to the Central Administrative Tribunal, which held that the order of transfer was not mala fide or unfair, and there was no ground for interfering with it. It, however, directed the appellants to pay all arrears of salary with allowances to the respondent and not to issue the release order unless all his emoluments were paid. Allowing the appeal, HELD: The Tribunal having recorded positive findings that the transfer order was legal and valid and it was not vitiated by any unfairness or mala fide, should have dis missed the writ petition. It had no jurisdiction to issue further directions regarding the release order and the payment of emoluments. [398H] The respondent had already been relieved from the Cal cutta office with effect from 15th March, 1985. Therefore, there was no question of issuing any fresh release order. [399A]

The appellant was the Mahant of the Asthal Estate in Bihar which was in the management of a Receiver appointed by the Civil Court in a suit relating to the estate. On appeal the question that arose for decision in this Court was whether the appellant Mahant was liable to be assessed under the Bihar Agricultural Income tax Act, 1948, to pay agricultural income tax for the year in which the estate was in the management of the Court Receiver. Held, that the income though collected by the Receiver was the income of the appellant. By virtue of the provisions of sections 2, cl. (m) and 13 of the Bihar Agricultural Income tax Act it was open to the taxing authorities to treat the Receiver as the assessee because he held the property from which income was derived, but on that account the income in the hand of the owner was not exempt from liability to assessment of tax. Section 3 of the Act provides for charging agricultural income of every person " as defined in section 2, cl. (m) which includes a receiver and section E3 merely provides a machinery for recovery of tax from "Persons" including receivers and is not by itself a charging section.

Under the Madhya Bharat Municipalities Act, 1954, the Municipal Corporation determined the house lax payable by the appellant in respect of his house with effect from April 1, 1954. On appeal by the appellant regarding assessment, the Additional District Judge remanded the case to the Corporation for a fresh decision after due enquiry. Ulti mately, by a notice dated October 12, 1965 issued under section 146 of the Madhya Pradesh Municipal Corporation Act, 1956 (as amended in 1961) the Corporation revised the amount of tax payable but maintained the date of liability for payment of tax as April 1, 1954. On appeal by the appellant, the additional District Judge held that the tax was payable with effect from April 1, 1965 and not April 1, 1954 for the reason that the tax was finally fixed after the notice dated October 12, 1965. The Revision Petition of the Corporation was allowed by the High Court holding that tax was payable from April 1, 1954 because the proceedings were started even before the 1956 Act came into force. In appeal to this Court the appellant contended that (1 ) as the fresh notice was issued under section 146 of the 1956 Act on October 12, 1965 after remand of the case by the District Judge, house lax could be imposed only with effect from April 1, 1965 and not retrospectively and (2) the order of the District Judge being final under section 149(2) of the 1956 Act the High Court had no jurisdiction to interfere with that order and in any event the High Court exceeded its power under section 115, C.P.C. Dismissing the appeal. HELD: The proceeding relating to the house tax was a continuous proceeding relating to the tax payable from April 1, 1954 and the notice issued by the Corporation after remand by the District Judge did not amount to notice of fresh assessment or re assessment. [874 E F] 1. There is no force in the contention .that under the 1956 Act the municipality had no power to pursue the pro ceedings regarding the levy of tax for an earlier period. The notice issued by the Corporation to the appellant made it clear that the Commissioner was proceeding to fix the value in pursuance of the remand. The appellant 's plea that the Commissioner was not authorised to determine the value and impose the tax for any period before the date of issue of the notice ignores the fact that the valuation and deter mination of tax from 1954 was pending and the proceedings related to that period. Section 3(3) of the 1956 Act pro vides that all rates, taxes and sums of money due to the Municipalities when this Act was made applicable shall be deemed to be due to the Corporation and sub section (4.) states that all suits and other legal proceedings instituted by or against a Municipality may be continued by or against the Corporation. The proceedings in the instant case were originally taken under the Madhya Bharat Municipalities Act, 1954 and the proceedings regarding the levy of the house tax were not concluded when under the new Act the Corporation became entitled to pursue the proceedings. [874F C, 875A D] 2. (a) Under section 115, C.P.C. the High Court has power to revise the order passed by Courts subordinate to it. The District Court being subordinate to 872 the High Court, is liable to the revisional jurisdiction of the High Court. Moreover, the question of want of jurisdic tion of the High Court was not raised before that Court and cannot be allowed to be raised in this Court for the first time. [875 F G] (b) The principles governing interference by the High Court trader section 115, C.I.C. have been laid down by this Court in a catena of decisions, the last of which is The Municipal Corporation of Delhi vs Suresh Chandra Jaipuria & Anr. (A.I.R. [875H, 876A B] Baldevdas Shivlal & Anr. vs Filmistan Distributors (India) (P) Ltd. & Ors. ; , M/s. D.L.F. Housing and Construction Co. (P) Ltd. vs Sarup Singh and Ors. A.I.R. 1971 S.C. 2324, The Managing, Director (MIG) Hindustan Aeronautics Ltd. Balanagar, Hyderabad and Ant. vs Ajit Prasad Tarway, Manager (Purchase and Stores) Hindu stan Aeronautics Ltd. Balanagar, Hyderabad, A.I.R. 1973 S.C. 76 and The Municipal Corporation of Delhi vs Suresh Chan dra Jaipuria and Anr. A.I.R. 1976 S.C. 2621 referred to.

Appeals Nos. 98 and 99 of 1957. Appeals from the judgment and order dated August 31, 1954, of the Madhya Pradesh High Court in Civil Misc. Case No. 9 of 1953. R. Ganapathi Iyer and D. Gupta, for the appellant in C. A. No. 98 of 1957 and respondents in C. A. No. 99 of 1957. section K. Kapur and Naunit Lal, for the respondents in C. A. No. 98 of 1957 and appellant in C. k. No. 99 of 1957. November 30. MUDHOLKAR, J. These are cross appeals from two judgments of the erstwhile High Court of Madhya Bharat. Both of them arise out of a writ petition presented by the Gwalior Sugar Company Ltd., who are respondents in C. A. 98 of 1957, in which they challenged the validity of the levy of a cess on sugarcane purchased by the respondents. The grounds on which the validity of the cess is challenged are two. The first ground is that it was not levied under any law and the second ground is that it is discriminatory against the respondents. In order to appreciate these contentions it is necessary to set out certain facts. In the year 1940 in pursuance of an agreement entered into between the Government of Gwalior State and Sir Homi Mehta and others a sugar factory was established at Dabra. The name of that factory is The Gwalior Sugar Co., Ltd. On June 20, 1946, the Maharaja Scindia, the ruler of Gwalior State constituted a Committee to consider the desirability of imposing a "cane cess on the lines of the United Provinces or Bihar and to recommend a procedure for fixation of sugar prices within the terms of the agreement subsisting between the Government and the factory". The Report of the 621 Committee was submitted to the Maharaja by the Chairman on July 23, 1946. In their report the Committee observed that in order to put the industry on a sure and stable footing it was absolutely necessary to develop the cane area and yield in the shortest possible time. For this purpose the Committee recommended that it was essential to levy a cane cess of one anna per maund on all sugar cane purchased by the respondent factory. At the foot of this report the Maharaja made the following endorsement "Guzarish sanctioned, J. M. Scindia, 27 7 46". It may be mentioned that the Committee also recommended the establishment of a Cane Development Board. This recommendation was also accepted by the Ruler. On August 26, 1946, the Economic Adviser to the Government of Gwalior wrote a letter to the Manager of the respondent factory. It will be useful to reproduce the text of that letter as it will have some relevance on the second ground on which the cess is challenged. The letter runs thus: "Dear air, With a view to expand cane area and cane yield in the Harsi commanded area so that the Gwalior Sugar Co., Ltd., be put on a sound and stable basis, the Gwalior Government have decided to impose a cane cess of one anna per maund on all sugarcane purchased by your factory. The operation of this cess will start from the coming sugarcane crushing season. The proceeds of the cess have been earmarked for cane development work in the Harsi region that will be undertaken by a Cane Development Board constituted for the purpose. The Cane Development Board expects your co operation in this development work, which is proposed to be undertaken as soon as possible. Yours sincerely, Secretary, Cane Development Board. " The respondent factory protested against this levy. After the formation of the State of Madhya Bharat, 79 622 the respondent made a representation to the Government of Madhya Bharat against the levy of the cess. That representation was, however, rejected. They, then, paid the cess for the years 1946 to 1948 amounting to Rs. 1,17,712 8 2. The Government of Madhya Bharat made a demand from the respondents for a sum of Rs. 2,79,632 14 9 for the years 1949 to 1951. The respondents challenged the demand upon the two grounds set out above and presented a petition before the High Court of Madhya Bharat for quashing the demand. The petition was opposed on behalf of the State of Madhya Bharat which was the successor State of the former Gwalior State. The High Court granted the petition partially by holding that the State of Madhya Bharat was not entitled to recover the cess due from the respondents after January 26, 1950. It may be mentioned that it was conceded on behalf of the respondent company before the High Court that the State was entitled to recover the cess prior to January 26, 1950. Later, however, the respondents preferred a review petition to the High Court in which they sought relief even in respect of the cess for the period prior to January 26, 1950. The review petition was dismissed by the High Court upon the ground that no such petition lay. The respondents are challenging the view of the High Court in C. A. No. 99 of 1957. After the coming into force of the States Reorganization Act, 1956, the State of Madhya Pradesh has been substituted for the State of Madhya Bharat and they are shown as appellants and respondents respectively in the two appeals. The High Court struck down the cess upon the ground that the order dated July 27, 1946, of the Gwalior Durbar was only an executive order and not a law under article 265 of the Constitution and that, therefore, there was no authority for the imposition of the cess after January 26, 1950. This point is covered by the decision of this Court in Madhaorao Phalke vs The State of Madhya Bharat and Another (1) decided on October 3, 1960. In the course of the judgment of this Court delivered by Gajendragadkar, J., he pointed out: (1) ; 623 "It would thus be seen that though Sir Madhya Rao was gradually taking steps to associate the public with the government of the State and with that object he was establishing institutions consistent with the democratic form of rule, he had maintained all his powers as a sovereign with himself and had not delegated any of his powers in favour of any of the said bodies. In other words, despite the creation of these bodies the Maharaja continued to be an absolute monarch in whom were vested the supreme power of th e legislature, the executive and the judiciary. "In dealing with the question as to whether the orders issued by such an absolute monarch amount to a law or regulation having the force of law, or whether they constitute merely administrative orders, it is important to bear in mind that the distinction between executive orders and legislative commands is likely to be merely academic where the Ruler is the source of all power. There was no constitutional limitation upon the authority of the Ruler to act in any capacity he liked; he would be the supreme legislature, the supreme judiciary and the supreme head of the executive, and all his orders, how ever issued, would have the force of law and would govern and regulate the affairs of the State including the rights of the citizens. "It is also clear that an order issued by an absolute monarch in an Indian State which had the force of law would amount to an existing law under article 372 of the Constitution." From these observations it would be quite clear that the endorsement of the Maharaja on the Guzarish whereby he accepted the recommendation of the Committee about imposing a cess on the sugarcane crushed by the factory amounted to a law, however informal that endorsement may appear to be. Since it was a law enacted by the Maharaja then, with the coming into force of the Constitution, it became an existing law under article 372 and thus it satisfies the requirements of article 265 of the Constitution. 624 Disagreeing with the High Court we therefore hold that the cess was imposed by authority of law. What remains to be considered is whether this cess violates the guarantee of equal protection contained in article 14 of the Constitution. What was urged Ltd. before the High Court and what was also urged before us was that this is the only sugar factory in the present State of Madhya Pradesh which is liable to pay the cess whereas other sugar factories are exempt therefrom. The result of this is that those other sugar factories do not have to pay this cess and are thus better placed in the matter of carrying on their business of manufacturing and marketing of sugar than the respondents and so there is discrimination against the respondents in that respect. It seems to us, however, that this cannot be regarded as discrimination at all, even after the formation of the State of Madhya Pradesh. The reason is that the difference arises out of the historical background to the imposition of this cess. It has recently been held by this Court in M. K. Prithi Rajji vs The State of Rajasthan & Ors (1) decided on November 2, 1960, that geographical classification based upon certain historical factors is a permissible mode of classification. In our opinion, the principle underlying that decision would also apply to the present case. In view of the decision, Mr. Kapur the learned counsel for the respondents sought to rest his argument on a somewhat different ground. That ground is that under the order of June 27, 1946, the respondent factory alone was made liable to pay cess and that no similar liability was imposed upon any other factory in Gwalior. It would, however, appear that at that time no other sugar factory was at all in existence in the Gwalior State. The respondent factory was the first to be established and for all we know is even today the only sugar factory in the area which formerly constituted the State of Gwalior. We have already quoted the letter written by the Economic Adviser to the Gwalior Government addressed to the Management of the Gwalior Sugar Co., Ltd. From that letter it would (1) C.A. NO. 327 of 1956. 625 appear that the cess was imposed for a definite purpose and that was to expand the cane area in the Harsi commanded region so that the Gwalior Sugar Co., Ltd., that is, the respondent factory would be put on a sound and stable basis. It will, therefore, be clear that far from discriminating against the factory, the whole object of the cess was to do something for the benefit of the factory and for the benefit of the sugar industry in the State which was at that date in its infancy. Apart from the fact that in the matter of taxation the legislature enjoys a wide discretion, it should be borne in mind that a tax cannot be struck down as discriminatory unless the Court finds that it has been imposed with a deliberate intention of differentiating between an individual and an individual or upon grounds of race, religion, creed, language or the like. There was no question of doing anything like this in the year 1946 when no other sugar factory existed in the State of Gwalior. The cess was thus good in law when enacted and it has not been rendered void under article 13 by reason of the coming into force of the Constitution on the ground that it violates article 14. In our opinion, therefore, both the grounds on which the validity of the cess is challenged are ill conceived and the cess is a perfectly valid one. It would, therefore, be competent to the State of Madhya Pradesh to realise that cess from the respondent factory. Upon the view we have taken in the matter in C. A. No. 98 of 1957 nothing remains to be considered in C. A. No. 99 of 1957. Accordingly we allow the appeal by the State and dismiss that of the respondents. The costs of the appeal will be borne by the respondents in C. A. No. 98 of 1957. As both the appeals were argued together, there will be only one set of hearing fees. Appeal No. 98 allowed. Appeal No. 99 dismissed.

In order to put the sugar industry on a stable footing, for which it was necessary to develop the cane area, the Ruler of the erstwhile Gwalior State by an order dated 27 7 1946 sanctioned the levy of cess of one anna per maund on all sugar cane purchased by the respondent company. When the Government of Madhya Bharat, which was the successor state of the former Gwalior State, made a demand for payment of the cess, the respondent filed a petition before the High Court of Madhya Bharat challenging the legality of the levy on the grounds (1) that the order dated 27 7 1946 was only an executive order and not a law under article 265 of the Constitution of India and that, therefore, there was no authority for the imposition of the cess after January 26, 1950, and (2) that the levy was discriminatory and violated article 14 inasmuch as while the respondent was made liable to pay the cess the other sugar factories in the State were exempt. It was found that at the time when cess was first levied there was no sugar factory in existence in the Gwalior State other than that of the respondent. Held, that (i) the Ruler of an Indian State was an absolute monarch in which there was no constitutional limitation to act in any manner be liked, he being the supreme legislature, the supreme judiciary and the supreme head of the executive. , Consequently, the order dated 27 7 1946 issued by the Ruler of Gwalior State amounted to a law enacted by him and became an existing law under article 372 of the Constitution of India. The levy of cess was therefore by authority of law within the meaning of article 265; Madhaorao Phalke vs The State of Madhya Bharat, ; , followed. (2) the levy of cess did not contravene article 14 because (a) the object was cane development in the particular area and a geographical classification based upon historical factors was a permissible mode of classification, and (b) a tax could not be struck down as discriminatory unless it was found that it was imposed with a deliberate intention of differentiating between 620 an individual and individual; and particularly, in the instant case, where when cess was first sought to be levied, there was no other sugar factory existing in the State.

The respondents in the above appeals are owners of certain lands which are to be compulsorily acquired udder Madras Lignite (Acquion of Land) Act, 1953. This Act came into force on August 20, 53 before article 31 of the Constitution was amended by the Constituion (Fourth Amendment) Act, 1955. By the said Act substantially o provisions which are material to the present appeals were made. ,e first was that compensation for acquisition of lignite bearing lands der the Land Acquisition Act is to be assessed on the market value the land prevailing on August 28, 1947 and not on the date on which notification is issued under section 4(1) of the Land Acquisition Act. condly it was provided that in awarding compensation the value of non agricultural improvements commenced since April 28, 1947 win not taken into consideration. In accordance with the above provisions, after issuing the notices as acquired under sections 4(1) and 6 of the Land Acquisition Act the Land acquisition Officer made awards regarding the lands of the respondents. he respondents thereupon filed petitions under article 226 of the Constition before the High Court of Madras challenging the validity of the ward on the ground that the provisions of the Act relating to the ward of compensation violate article 31(2) of the Constitution [as it food before the Constitution (Fourth Amendment) Act, [955]. The High Court upheld the contention. In appeal, Held: (i) The validity of the Act impugned in the present appeal ,is to be examined in the light of the provisions of article 31 of the constitution as they stood before the Constitution (Fourth Amendment) Act, 1955. Chiranjit Lai Chowdhuri V. Union of India, [1950] S.C.R. 869, State of West Bengal vs Subodh Gopal Bose, ; , and State of lest Bengal vs Mrs. Bela Banerjee, ; , relied. 937 (ii) The principle laid down in Bela Banerjee 's case, that the ceiling on the compensation without reference to the value of the land at the time of the acquisition is arbitrary and cannot be regarded as due compensation in letter and spirit within the requirement of article 31(2), would apply to the impugned Act. Fixation of compensation for compulsory acquisition of land notified many years after that date on the market value prevailing on the date on which lignite was discovered is wholly arbitrary and inconsistent with the letter and spirit of article 31(2) as it stood before the Constitution (Fourth Amendment) Act, 1955. (iii) Any principle for determination of compensation denying to the owner all increments in value between a fixed date and the date of issue of the notice under section 4(1) of the Land Acquisition Act must prima facie, be regarded as denying him the true equivalent of the land which is ex propriated and it is for the State to show that fixation of compensation on the market value on an anterior date does not amount to a violation of the Constitutional guarantee. In the present appeals no materials have been placed by the State which would support any such case. (iv) Denial of compensation for the value of non agricultural improvements would be denying to him just compensation for the loss suffered by him on account of compulsory acquisition of his holding and would amount to infringement of article 31(2) of the Constitution.

For the purpose of protecting the smaller manufacturers from the cometition of larger manufacturers, the Government of India, by a notification dated 21 July 1967, amended by notification dated 4 September, 1967, declared a concessional rate of duty to those manufacturers who had filed a declaration before 4 September 1967 that their estimated annual clearance would be less than 75 million match sticks. This Court in Union of India vs Parameswaran Match Works etc. ; setting aside the judgment of the High Court holding that classification was invalid, held the classification founded on a particular date to be reasonable; and the concessional rate would be availed of even by those manufacturers who came to the field after 4 September, 1967 if they satisfied the condition in clause (d) of the notification regarding quantity of matches and are recommended by the Khadi and Village Industries Commission for exemption. The respondent filed declarations on 22 December, 1967 that they would not produce more than 75 million match sticks during the year 1969 70 and claimed to be entitled to the concessional rate of excise duty. In appeal to this Court the respondents sought to support the judgment of the High Court on the grounds (i) that they were entitled to the exemption on the basis of clause (d) of the notification; and (ii) that the Khadi and Village Industries Commission was not competent to make any recommendation. Allowing the appeal, ^ HELD: (1) The appeals are covered by the decision of this Court in Parameswaran Match Works case and no case is made out by the respondents on the basis of exemption under cl. (d) of the notification. There is no allegation in the petition that the respondents came into the field after 4 September 1967 or that they started manufacturing the matches after 4 September, 1967 or that they were recommended by the Khadi and Villages Industries Commission mission. [871 D & B] (2) Under section 15(h) of the the Commission may take steps in ensuring the genuineness of, and for granting certificates to producers of, or dealers in, Khadi or the products of any village industry. Therefore, the Commission is competent to recommend for exemptions under cl. (d) of the Notification.

The States of Orissa, Bihar and Madhya Pradesh levied a cess which was based on the royalty derived from mining lands. The cess was levied by these States under their respective statutes viz. Orissa Cess Act, 1962, Bengal Cess Act, 1880 (as applicable to the State of Bihar), Madhya Pradesh Upkar Adhiniyam 1981 and Madhya Pradesh Karadhan Adhiniyam, 1982. The assesses challenged the constitutional validity of the cess by filing various petitions in the High Courts of Orissa declared the cess unconstitutional on the ground that it was beyond the legislative competence of the State Legislatures, but rejected the prayer of the assessees for a direction to the State to grant refund of the cess collected from the assessees. Against the decision of the Orissa High Court the assessees have filed appeal in this Court whereas the State of Orissa has filed a cross appeal. The High Court of Madhya Pradesh also declared the levy of cess unconstitutional on the ground that it was beyond the legislative competence of the State legislature. Against the decision of the Madhya Pradesh High Court the State of Madhya Pradesh has filed an appeal in this Court. On the other hand the High Court of Patna dismissed the writ petition of the assessee. Against the decision of the Patna High Court the assessee has filed an appeal in this court. In appeal to this court, it was contended on behalf of the State of Orissa; that (i) the levy of cess being referable to Entries 45, 49 and 50 of the State List of the Seventh Schedule of the Constitution the impugned legislation was within the legislative competence of the State legislature; (ii) the limitations imposed in the statute on the modes of utilisation of cess supports a view that the cess is fee on which the State legislature is competent to legislate under Entry 23 read with Entry 66 of the State List; (iii) since the impugned Act was concerned with the raising of funds to enable panchayats and Samithis to discharge their responsibilities of local administration and take steps for proper development of the area under their jurisdiction, the impugned legislation was referable to Entry 5 of State List; and (iv) the enactment of the Central Legislation viz. has not denuded the State legislation of its competence to enact the impugned legislation since the scope and subject matter of the two legislations are entirely different and the impugned State Legislation does not encroach upon the field covered by the Central Legislation i.e. 1957 Act. 107 On behalf of the assessees it was contended inter alia that (i) all the State levies were ultra vires for the reasons given by this Court in the India Cement case; (ii) the State cannot seek to sustain the levy under the Bengal Cess Act 1880 by relying on Article 277 of the Constitution; and (iii) the levy being unconstitutional the Court should direct the States to refund the cess collected from the assessees because (a) a refund is the automatic and inevitable consequence of the declaration of invalidity of tax and (b) the States have given undertakings before this Court that they would refund the amount collected in case the levy is declared invalid by this Court. Disposing of the appeals, this Court, HELD: 1. The levy of cess under sections 5 to 7 of the Orissa Cess Act, 1962 is beyond the competence of the State Legislature. [169B] 1.1. A royalty or the tax thereon cannot be equated to land revenue. Therefore the cess cannot be brought under Entry 45 of List II. [142D] India Cement & Ors. vs State of Tamil Nadu & Ors., , followed. 1.2 A tax on royalties cannot be a tax on minerals and is outside the purview of Entry 50 of List II. Even otherwise, the competence of the State Legislature under the said Entry is circumscribed by "any limitations imposed by Parliament by law relating to mineral development". The is a law of Parliament relating to mineral development and Section 9 of the said Act empowers the Central Government to fix, alter, enhance or reduce the rates of royalty payable in respect of minerals removed from the land or consumed by the lessee, Sub Section (3) of Section 9 in terms States that the royalties payable under the Second Schedule to that Act shall not be enhanced more than once during a period of three years. This is a clear bar on the State legislature taxing royalty so as, in effect, to amend the Second Schedule to the Central Act. This is exactly what the impugned Act does. Therefore the validity of the impugned Act cannot be upheld by reference to Entry 50 of List II. And if the cess is taken as a tax falling under Entry 50 it will be ultra vires in view of the provisions of the Central ACt. [144B, 153B D, 168D] India Cement & Ors. vs State of Tamil Nadu & Ors. , [1990] 1 S.C.C.12, followed. 108 Hingir Rampur Coal Co. Ltd. & Ors. vs State of Orissa & Ors. , [1961] 2 S.C.R.537, Justice Wanchoo 's dissent explained. 1.3 There is a difference in principle between a tax on royalties derived from land and a tax on land measured by reference to the income derived therefrom. A tax on buildings does not cease to be such merely because it is quantified on the basis of the income it fetches. But in the impugned legislation the levy is not measured by the income derived by the assessee from the land, as is the case with lands other than mineral lands. The measure of the levy is the royalty paid, in respect of the land, by the assessee to his lessor which is quite a different thing. The impugned statute only purports to levy a cess on the annual value of all land. There is a clear distinction between tax on land and tax on income arising from land. The former must be one directly imposed on land, levied on land as a unit and bearing a direct relationship to it. A tax on royalty cannot be said to be a tax directly on land as a unit. Hence the cess is outside the purview of Entry 49 List II. [148H, 149A D] Ajay Kumar Mukherjea vs Local Board of Barpeta, [1965] 3 Ss. C.R. 47; Ralla Ram vs The province of East Punjab, [1948] F.C.R.207; Buxa Dooars Tea Co. vs State, [1989] 3 S.C.R.211; Bhagwan Dass Jain vs Union of India, ; and R.R. Emgomeeromg Co. vs Zila Parishad, ; , referred to. Union of India vs Bomnbay Tyre International, [1984] 1 S.C.R.347; Re: A reference under the Government of Ireland Act, 1920 and Section 3 of the Finance Act (Northern Ireland), 1934, (1963) 2 All E.R.III, cited. If the levy in question cannot be described as a tax on land, it cannot be described as fee with regard to land either. [169A] 2.1 Section 10 of the Orissa Cess Act, 1962 earmarks the purposes of utilisation of only fifty per cent of the proceeds of the cess and that, too, is limited to the cess collected in respect of "lands other than lands held for carrying on mining operations". Therefore the levy cannot be correlated to any services rendered or to be rendered by the State to the class of persons from whom the levy is collected. Accordingly the levy cannot be treated as a fee which the State legislature is competent to legislate for under entry 66 of the State List. [153E F] 2.2 Even assuming that the levy is a fee, the State legislature can impose a fee only in respect of any of the matters in the State List. The 109 entry relied upon for this purpose i.e. Entry 23 is itself "subject to the provisions of List I with respect to regulation and development" of mines and minerals under the control of the Union. Under Entry 54 of List I, regulation of mines and mineral development is in the field of parliamentary legislation "to the extent to which such regulation and development under the control of the Union is declared by Parliament by law to be expedient in the public interest". Such a declaration is contained in Section 2 of the . The validity of the impugned Act cannot be upheld by reference to Entry 23 List II. [153G H, 154A, 168D] 3. There is a difference between the 'object ' of the Act and its 'subject '. The object of the levy may be to strengthen the finances of local bodies but the Act has nothing to do with municipal or local administration. Accordingly State 's reliance on Entry 5 of List II is plainly too tenuous. [164D] 4. The answer to the question whether the State Legislature was denuded of its competence to enact the impugned legislation because of the Parliament having enacted the depends on a proper understanding of the scope of the Act and an assessment of the encroachment made by the impugned State legislation into the field covered by it. [161D] 4.1 The mere declaration of a law of Parliament that it is expedient for an industry or the regulation and development of miners and minerals to be under the control of the Union under Entry 52 or entry 54 of List I does not denude the State legislatures of their legislative powers with respect to the fields covered by the several entries in List II or List III. Particularly, in the case of a declaration under Entry 54, this legislative power is eroded only to the extent control is assumed by the Union pursuance to such declaration as spelt out by the legislative enactment which makes the declaration. The measure of erosion turns upon the field of the enactment framed in pursuance of the declaration. [161E F] 4.2 In assessing the field covered by the Act of Parliament in question, one should be guided not merely by the actual provisions of the Central Act or the rules made thereunder but should also take into account matters and aspect which can legitimately be brought within the scope of the said statute. Viewed in this light and in the Light of the provisions of the Bihar Cess Act the conclusion seems irresistible that the State Act has trespassed into the field covered by the Central Act 110 viz. Mines and Minerals (Regulation and Development)Act, 1957.[163F] 4.3 The impugned legislation which stands impaired by the Parliamentary declaration under Entry 54, can hardly be equated to the law for land acquistion or municipal adminstration which are traceable to different specific entries in List II or List III [163G H] Hingir Rampur Coal Co. Ltd. & Ors. vs State of Orissa & Ors. ; ; State of Orissa vs M.A. Tulloch & Co., ; and Indian Cement & Ors vs State of Tamil Nadu & Ors., [1990]1 S.C.C. 12 followed. State of Haryana vs Chanan Mal, ; ; Ishwari Khatan Sugar Mills (P) Ltd vs State of U.P. ; and Western Coalfields Ltd. vs Special Area Development Authority. , [1982] 2 S.C.R.1,distinguished. Indian tobacco Co. Ltd. vs Union, [1985] Supp. 1 S.C.R. 145; State of West Bengal vs Union [1964] 1. S.C.R. 371; Central Coalfields vs State of M.P., A.I.R. (1986) M.P.33; M. Karunanidhi vs Union of India, ; ; State of Tamil Nadu vs Hind Stone etc. ; , ; I.T.C. vs State of Karnataka, ; Bharat Coking Coal vs State of Bihar, ; ; Kannan Dewan Hills Co. vs State of Kerala, [1973] 1. S.C.R. 356; Baijnath Kedia vs State of Bihar ; ; H.R.S. Murthy vs Collection of Chittoor & Ors. [1964] 6 S.C.R.; Ch. Tika Ramji & Ors. vs State of U.P.,[1956] S.C.R. 393; Laxmi Narayan Agarwala vs State, A.I.R. 919830 Ori.210; Bherulal vs State, A.I.R. (1965) Raj. 161; Sharma vs State A.I.R. (1969) P&H 79 and Saurashtra Cement & Chemical Industries Ltd. vs Union , referred to. Trivedi & Sons vs State of Gujarat. [1986] Suppl. S.C.C. 20, cited. Section 6 of the Bengal Cess Act, 1880 specifically enacts that the cess will be on royalty from mines and quarries and on the annual net profit of railways and tramways. The further amendments to Section 6 have not changed this basic position. Though the Section referees also to the value of the mineral bearing land, that furnishes only the maximum upto which the cess, based on royalty, could go. Therefore, the cess is levied directly on royalties from mines and quarries. The different notifications issued by the State of Bihar under section 6 111 of the Act determining the rate of cess on the amount of rayalty of all minerals of the State place the matter beyond all doubt. The levy is a percentage or multiple of the royalty depending upon the kind of mineral and in the case of iron ore the method of extraction and nature of the process employed. There are no clear indications in the statute that the amounts are collected by way of fee and not tax. Section 9 indicates that only a small percentage goes to the district fund and the remaining forms part of the consolidated fund of the State " for the constrution and maintenance of other works of public utility". However, the proviso does require at least ten percent to be spent for purposes relating to mineral development. Even the assumption that the levy can be treated, in part, as a fee and, in part, as a tax will not advance the case of the respondents. Therefore, the levy of cess sunder the Bengal Cess Act, 1880 is declared invalid. [169C F,H,170A] Indian Cement & Ors. vs State of Tamil Nadu & Ors., followed. Central Coalfields Ltd. vs State (CWJC 2085/89 decided on 6.11.90 by Patna High Court, referred to. 5.1 The attempt to sustain the tax under the Bengal Cess Act 1880 on the basis of Article 277 cannot also succeed.[171C] Ramkrishna Ramanath vs Janpad Sabha, [1962]Suppl. 3.S.C.R. 70; Town Municipal Committee vs Ramachandra ; , referred to. The levy of cess under section 11 of the Madhya Pradesh Upkar Adhiniyam, 1981 is not covered by Entry 49 or Entry 50 of List II and is therefore, ultra vires. , [172B] M.P. Lime Manufacturers ' Association vs State, A.I.R. (1989) M.P. 264 referred to. 6.1 Under Section 9 of Madhya Pradesh Karadhan Adhiniyam, 1982 the proceeds of the cess are to be utilised only towards the general development of mineral bearing areas. Although there is no provision for the constitution of a separate fund for this purpose as is found in relation to the cesses levied under Part II or Part III of the Act yet this consideration alone does not preclude the levy from being considered as a fee. The clear ear marking of the levy for purposes connected with development of mineral areas was rightly considered by 112 the High Court, as sufficient to treat it as a fee. The High Court was also right in holding that such a fee would be referable to item 23 but out of bounds for the State Legislature, after the enactment of the . [171F H] Srinivasa Traders vs State, ; , referred to. The grant of refund is not an automatic consequence of a declaration of illegality i.e. where the levy of taxes is found to be unconstitutional, the Court is not obliged to grant an order of refund. Therefore a finding regarding the invalidity of a levy need not automatically result in direction for a refund of all collections thereof made made earlier. The declaration regarding the invalidity of a provision and the determination of the relief that should be granted in consequence thereof are two deferent things and, in the latter sphere, the Court has, and must be held to have, a certain amount of discretion. Once the principle that the Court has a discretion to grant or decline refund is recognised, the ground on which such discretion should be exercised is a matter of consideration for the Court having regard to all the circumstances of the case. The Court can grant, would or restrict the relief in a manner most appropriate to the situation before it is such a way as to advance the interests of justice. The Court is entitled to refuse the prayer for good and valid reasons. Laches or undue delay or intervention of third party rights would clearly be one of those reasons. Unjust enrichment of the refundee may or may not be another. Also there is no reason why the vital interest of the State should not be a relevant criterion for deciding that a refund should not be granted. [185H, 186A C, D & E 181D E] 7.1 In the instant case though the levy of the cess is unconstitutional, yet there shall be no direction to refund to the assessees of any amounts of cess collected until the date on which the levy in question has been declared unconstitutional. This, in regard to the Bihar cases, will be the date of this judgment i.e. 4.4.1991. In respect of Orissa and Madhya Pradesh cases the relevant date will be the date on which the concerned High Court has declared the levy unconstitutional i.e.22.12.1989 in case of Orissa and 28.3.1986 in case of Madhya Pradesh. The dates of the judgments of the appropriate High Court, may not constitute a declaration of law within the scope of Article 141 of the Constitution, but it cannot be gainsaid that the State cannot, on any ground of equity, be permitted to retain the cess collected on and after the date of the High Court 's judgment. Accordingly the State should refund the amounts of cess collected after the relevant dates to assesses directly or in the Coalfields from whom they were collected, with 113 interest at the rate directed by this Court or mentioned in the undertaking from the date of the relevant judgment to the actual date of repayment. The Coalfields, when they get the refunds, should pass on the same to their customers, the assessees. [186F G, 187B C] India Cement & Ors. State of Tamil Nadu & Ors, [1990] 1 S.C.C.12, followed. Linkletter, 14 L Ed. (2d) 601; Sunburst. 77 L.Ed.310; Mahabir Kishore & Ors. vs Stte of Madhya Pradesh, [1989] 4 S.C.C. 1; Chhotabhai Jethabhai Patel & Co. vs Union of India, ; ; State of Madhya Pradesh vs Bhailal Bhai & Ors., ; ; Tilok Chand Motichand vs Munshi, [1969] 2 S.C.R> 824; Ramchandra Shankar Deodhar vs State of Maharashtra, ; ; Shri Vallabh Glass Works Ltd. vs Union of India, [1984] 3 S.C.R> 180; State of M.P. vs Nandlal Jaiswal, [1986] 4 S.C.C.566 ' D. Cawasji & Co. vs State of Mysore, [1975] 2 S.C.R.511; Salonah Tea Co. Ltd. vs Superintendent of Taxes, ; and Lakshmi Narain Agarwala vs State, A.I.R. (1983_ Orissa 210, referred to. Behram Khursheed Pesikaka vs State of Bombay, [1955] 1 S.C.R.613; R.M.D. Chamarbaugwala vs Union of India, ; ; M.P.V. Sundararamier & Co. vs State of Andhra Pradesh & Anr. , ; ; West Ramnad Electric Distribution Co. vs State of Madras, ; ; M.L.Jain vs State of U.P., [1963] suppl. ; K.T. Moopil Nayar vs State of Kerala & Anr., [1961] 3 S.C.R.77; Balaji vs I.T.O. Special Investigation Circle, ; ; Raja Jagannath Bakshi Singh vs State of U.P., ; ; Prem Chand Garg vs Excise Commissioner, U.P. Allahabad, [1963] Suppl. 1 S.C.R. 885 and I.C. Golaknath & Ors.v. State of Punjab & Ors. ,[1967] 2 S.C.R. 762, cited. The undertaking given by the parties or interim directions given by the Court cannot be understood in such a manner as to conflict with the Court 's final decision.

The petitioner was at one time the Ruler of an erstwhile princely State which ceded to the Dominion Government in 1948. A Jagirdar, who was the owner of a half share in a Jagir of villages contained in that princely State, became entitled to compensation for the trees standing thereon under the provisions of the Bombay Merged Territories and Areas (Jagirs Abolition) Act, 1953. Upon an application filed by the Jagirdar, the Jagir Abolition Officer awarded Rs.18,258 as compensation for all the trees standing on the jagir and directed that half of it was payable to the Jagirdar and that the other half would go to the former Ruler. In appeal, the Gujarat Revenue Tribunal determined the total value of all the trees at Rs.68,039, of which half was payable to the Jagirdar. In a writ petition the High Court held on July 23, 1975 that the total market value of the trees was Rs.1,70,540 and the Jagirdar would be entitled to the half share with interest thereon from August 1, 1954. The petitioner never made any application for compensation on the abolition of the jagir and was not a party to the proceedings before the Jagir Abolition Officer and the Gujarat Revenue Tribunal. During the pendency of the appeal by special leave by the State in this Court the application made by the petitioner to be impleaded as a respondent was allowed. That appeal was disposed of in view of the decision in State of Gujarat & Ors. vs Gujarat Revenue Tribunal & Anr. 100 ; The petitioner, thereafter, unsuccessfully persisted with the State authorities for payment to him of the half share in the compensation and ultimately filed the present Miscellaneous Petition claiming a sum of Rs.4,80,487.10. It was contended for the State that the mere fact of being impleaded as a respondent in this Court did not entitle the petitioner to any part of the compensation awarded by the High Court, that there was no adjudication that the other half share belonged to the petitioner, and that since the jagir now stood vested in the State of Gujarat, the half share passed into the ownership of the State. Dismissing the Miscellaneous Petition, the Court ^ HELD: 1. The order impleading the petitioner as a respondent in the appeal did not amount to adjudication on the question whether he was the owner of the other half share of the compensation. His presence in the array of respondents could not vest any right in him to any part of the compensation, for the special leave petition was filed by the State against the order of the High Court in a writ petition preferred by the Jagirdar, to which the petitioner was not a party. There was no adjudication by High Court on any claim of the petitioner. The entire controversy before it was between the Jagirdar and the State. [105B D] 2. When the valuation of the Jagirdar 's half share was determined by the High Court, the valuation of the other half share stood automatically determined, but there was nothing in that order determining the ownership of the other half share. [105A B] 3. The order disposing of the appeal did not confer any right on the petitioner in respect of the compensation payable on the abolition of the jagir. If that appeal had been allowed in terms of the relief sought by the State, it would have resulted in a reduction of the quantum of compensation awarded to the Jagirdar and had it been dismissed, the quantum of compensation determined by the High Court would have stood affirmed. [105D E] 4. The petitioner will have to establish his title to a half share of the compensation in some other proceedings. [105G]

In the State of Uttar Pradesh, sugarcane was produced by the sugar mills through the 'hydraulic process ' and by the power crushers through the 'open pan process '. Both the mills as also the crushers drew their raw material, namely sugarcane from sugarcane growers. In order to facilitate production by the sugar mills, most of which were controlled by the State, reserved area of the fields growing sugarcane was fixed through out the State. With a view to removing nation wide shortage of sugar, enhancing sugar production and achieving an equitable distribution of the commodity so as to make it available to consumers at reasonable rates, the Cane Commissioner in exercise of the powers conferred under clause (8) of the Sugarcane (Control) Order, 1966 issued a notification dated 9th October, 1980 which directed that no power crusher other than vertical power crushers manufacturing gur or rab from sugarcane grown on their own fields or a Khandsari unit or any agent of such owner in the reserved area of a mill could be worked until December 1, 1980. The petitioners who were owners of power crushers of Khandsari units and had taken out regular licences under the Uttar Pradesh Khandsari Sugar Manufacturers Licensing Order 1967, assailed the notification which limited the ban to work power crushers for a period of one month and a half i.e. from October 9. 1980 to December 1, 1980 in writ petitions to this Court. They contended: (1) The notification, as also the Control Order under which it was passed are violative of Article 19(1)(g) and the restrictions contained therein do not contain the quality of reasonableness. (2) Clause 8 of the Control Order under which the notification had been issued suffers from the vice of excessive delegation of powers and is, therefore, violative of Article 14 of the Constitution. The Notification seeks to establish a monopoly in favour of the sugar mills at the cost of the petitioners, and must be struck down as being violative of Article 14. (3) There is no rational nexus between the prohibition contained in the Notification preventing the crushers of petitioners from working them and the object sought to be achieved by it. (4) Clause 8 of the Control Order does not contemplate a complete prohibition of the production of an article but envisages only a regulation of the period of hours of working. (5) The Notification violates the principles of natural justice inasmuch as it was passed without hearing the petitioners whose rights were curtailed as they were put completely out of production. (6) The impugned Notification by imposing a prohibition against the working of the power crushers amounts to a partial revocation of the licences granted to the petitioners under clause 3 of the 93 Licensing Order and is, therefore violative of clause 11. (7) The impugned Notification goes against the very spirit and object of the Act of 1955 and in fact, frustrates the equal distribution and production of sugar which was the objective of the Notification. On behalf of the respondent State it was submitted that: (1) An order passed under clause 8 of the Control Order is of a legislative character and therefore the question of the application of the principles of natural justice, does not arise. (2) The notification does not violate Article 14 or Article 19 because it is in public interest and aimed at maintaining and securing proper and equitable distribution of sugar. (3) The Notification is justified by the fact that the recovery of sugar from sugarcane in case of Khandsari units run by power crushers is between 4 to 6 per cent whereas in the case of sugar factories it ranges between 9 1/2 to 11 1/2 per cent, so that utilisation of sugarcane in the case of mills is double of that of the power crusher. (4) The Khandsari produced by the crushers has got a very narrow sphere of consumption as it is used mostly by halwais or villagers, whereas sugar produced by the sugar mills is consumed in far larger quantities by the public. The action taken in order to protect national interest and distribution of sugar to the entire country on rational basis cannot be said to be an unreasonable restriction. (5) There is a marked difference between the quality of Khandsari and that of sugar produced by the mills in their character, specification, etc. (6) The question of natural justice does not arise because the crusher owners were fully aware of the situation and had also knowledge of the considerations which prevailed with the Government in stopping crushers for a short period in order to boost production by the sugar mills and fix support price for the sugarcane supplied to the mills. (7) Clause 8 of the Control Order uses the words period or working hours ' which are wide enough to embrace within their ambit a fixed period of time covering more than a day as also hours of work on any working day. Dismissing the writ petitions and appeals, ^ HELD: The impugned Notification cannot be said to contain the quality of unreasonableness but is per se fair and reasonable. In so far as the word 'vertical ' used in the Notification is concerned, it must be struck down as being violative of Article 14. This, however, does not render the entire Notification void because the word 'vertical ' is clearly severable from the other portions of the Notification. All that has to be done is to read the Notification void because the word 'vertical ' as a result of which the exemptions from the ban will include all owners of power crushers whether vertical or horizontal which manufacture Gur or rab from sugarcane grown on their fields. As the Notification has already spent its force, if any order is passed in future, the Government will see that such an invidious discrimination is not repeated. [134F; 124H 125B] 1(i) Where a citizen complains of the violation of fundamental rights contained in any of sub clauses (a) to (g) of Article 19 the onus is on the State to prove or justify that the restraint or restrictions imposed on the fundamental rights under clauses 2 to 6 of the Article are reasonable. [104 C] Saghir Ahmed vs The State of U.P. and Ors. ; and Mohammed Faruk vs State of Madhya Pradesh and Ors. 94 (ii) Fundamental rights enshrined in Part III of the Constitution are neither absolute nor unlimited but are subject to reasonable restrictions which may be imposed by the State in public interest under clauses 2 to 6 of Article 19. What are reasonable restrictions would naturally depend on the nature and circumstances of the case, the character of the statute, the object which it seeks to serve, the existing circumstances, the extent of the evil sought to be remedied as also the nature of restraint or restriction placed on the rights of the citizen. No hard or fast rule of universal application can be laid down, but if the restriction imposed appear to be consistent with the Directive Principles of State Policy they would have to be upheld as the same would be in public interest and manifestly reasonable. [105D E, G] (iii) Restrictions may be partial, complete, permanent or temporary but they must bear a close nexus with the object in the interest of which they are imposed. Sometimes even a complete prohibition of the fundamental right to trade may be upheld if the commodity in which the trade is carried on is essential to the life of the community and the said restriction has been imposed for limited period in order to achieve the goal. Freezing of stocks of food grains in order to secure equitable distribution and availability on fair prices have been held to be a reasonable restriction. [105 106A, C] Narendra Kumar and Ors. vs The Union of India and Ors. ; , M/s. Diwan Sugar and General Mills (P) Ltd. and Ors. vs The Union of India, [1959] 2 Supp. S.C.R.123 and The State of Rajsthan vs Nath Mal and Mitha Mal, ; referred to. (iv) In determining the reasonableness of restrictions imposed by law in the field of industry, trade or commerce, the mere fact that some of the persons engaged in a particular trade may incur loss due to the imposition of restrictions will not render them unreasonable because it is manifest that trade and industry pass through periods of prosperity and adversity on account of economic, social or political factors. In a free economy, controls have to be introduced to ensure availability of consumer goods, like food stuffs, cloth or the like at a fair price and the fixation of such a price cannot be said to be an unreasonable restriction. [107 A B] (v) Where restrictions are imposed on a citizen carrying on a trade or commerce in an essential commodity, the aspect of controlled economy and fair and equitable distribution to the consumer at a reasonable price leaving an appreciable margin of profit to the producer is undoubtedly a consideration which does not make the restriction unreasonable. [107 C] State of Madras vs V.G. Row, ; , Mineral Development Ltd. vs The State of Bihar and Anr. , , Collector of Customs, Madras vs Nathella Sampathu Chetty and Anr. [1962]3 S.C.R. 786 and M/s. Diwan Sugar and General Mills (P.) Ltd. and Ors. vs U.O.I. [1959] 2 Supp. S.C.R. 123 referred to. (vi) A restriction on the right of a trader dealing in essential commodities, or fixation of prices aimed at bringing about distribution of essential commodities keeping the consumers interests as the prime consideration cannot be regarded as unreasonable. [110 C] In the instant case, the Petitioners by rushing to Court the moment the Notification was issued, deprived the State as also themselves of the actual con 95 sequences of the notification and the prejudice which it really may have caused. They did not at all show any patience in waiting for a while to find out if the experiment functioned successfully and in the long run paid good dividends. As the petitioners obtained stay orders the experiment died a natural death and the Notification remained ineffective. [111D E] Prag Ice and Oil Mills and Anr. vs Union of India; , , referred to. (vii) In the case of essential commodities like sugar the question of the economic production and distribution thereof must enter the verdict of the Court in deciding the reasonableness of the restrictions. In such cases even if the margin of profit left to the procedure is slashed that would not make the restriction unreasonable. The reason is that such a trade or commerce is subject to rise and fall in prices and other diverse factors, and if any measure is taken to strike a just balance between the danger sought to be averted and the temporary deprivation of the right of a citizen to carry on his trade, it will have to be upheld as reasonable restriction. [112 G 113A] Shree Meenakshi Mills Ltd. vs U.O.I. [1974] 2 S.C.R. 398 and Saraswati Industrial Syndicate Ltd. vs U.O.I.[1975] 1 S.C.R. 956 referred to. (viii) The restriction imposed by the Notification in stopping the crushers for the period 10th October to 1st December, 1980 is in public interest and bears a reasonable nexus to the object which is sought to be achieved, namely, to reduce shortage of sugar and ensure a more equitable distribution of this commodity. Taking an overall picture of the history of sugar production it cannot be said that the stoppage of sugar crushers for a short period is more excessive than the situation demanded. Madhya Bharat Cotton Association Ltd. vs Union of India and Anr. A.I.R. 1954 S.C. 634 referred to. 2(i) The Control Order has been passed under the authority of section 3 of the Act of 1955 which has been held to be constitutionally valid and not in any way discriminatory so as to attract Article 14. The Control Order itself contains sufficient guidelines, checks and balances to prevent any misuse or abuse of the power. The Central Government under clause 8 on whom the power is conferred is undoubtedly a very high authority who must be presumed to act in a just and reasonable manner. [119 E F] Chinta Lingam and Ors. vs Government of India and Ors. ; and V.C. Shukla vs State (Delhi Admn.), ; (ii) There was no question of creating any monopoly to benefit the mills. A very large majority of the mills were controlled by the State or co operative societies and only a small fraction of them were working in the private sector. In view of the low working cost of the crushers they sought to outcompete the mills and deprive them of the requisite amount of sugarcane which they should have got. It was not only just but also essential to boost the production of the factories so that while sugar may be produced on a large scale and sugarcane may not be wasted which would have been the case if most of the sugarcane went 96 to the crusher. The recovery of sugarcane juice by the mills is double that by the crushers and if the latter were allowed to operate the wastage would have been almost 50 per cent which could have been avoided if sugarcane was allowed to be utilised by the mills. [121 E G] (iii) If in the larger public interest it becomes necessary to compel the sugarcane growers to supply sugarcane to the mills at a particular rate in order to meet a national crisis, no person can be heard to say that his rights are taken away in an unjust or discriminatory fashion. Personal or individual interests must yield to the larger interests of community. This was the philosophy behind the passing of the Act of 1955. [123 F G] 3. It has not been proved that there is any real distinction between a vertical and a horizontal power crusher. Both are regarded as falling in the same class. The Notification by exempting vertical power crushers and prohibiting horizontal power crushers is clearly discriminatory and the discrimination is not justified by any rational nexus between the prohibition and the object sought to be achieved. [124 G] 4. (i) Clause 8 used the words 'period or hours to be worked '. A plain reading of this expression reveals that the words 'period ' and 'hours ' have been used to connote to different aspects. Clause 8 contemplates regulation of working of the sugar by two separate methods (1) Where only hours of work per day are to be regulated or fixed, and (2) the word 'period ' which has nothing to do with the hours to be worked but it refers to another category of regulation, namely, whether a crusher is to run or not for a particular period of time. [125 D E] In the instant case, the Notification has resorted to the first category, viz. the 'period ' of the working of the crushers, that is about one and a half month, and has not at all touched or impinged upon the working hours of the crushers. If, however, the notification had fixed certain hours of the day during which only the crushers could work, then the Notification would have resorted to the alternative mode of regulation, which obviously has not been done. The impugned Notification is, therefore, wholly consistent with the provisions contained in clause 8 of the Control Order. [125 G 126A] 5. (i) Two prominent features exclude the rules of natural justice in the instant case. Section 3 of the Act of 1955 under which the Control Order was passed really covers an emergent situation so as to meet a national crisis, involving the availability or distribution of any essential commodity which may make it necessary to restrict or control the business carried on by a citizen. There was an acute shortage of sugar which was not made available to consumers at reasonable rates and the situation caused serious dissatisfaction among the people. Nothing short of immediate and emergent measures taken to solve this crisis would have eased out the situation. If hearing was to be given to so may owners of power crushers, it would have completely defeated and frustrated the very object not only of the Notification but also of the Act of 1955 and created complications which may have resulted in a further deterioration of an already serious situation. If the rules of natural justice were not applied in such an emergent case, the petitioners cannot be heard to complain. Afterall, the Notification directed stoppage of operation only for a very short period and the petitioners would have had an opportunity of recouping their loss after they were allowed to function because the proportion of consumption of Khandsari Sugar was limited. 97 The petitioners were, therefore, not seriously prejudiced but have rushed to this Court rather prematurely. [128 B C; F 129 A] Mohinder Singh Gill and Anr. vs The Chief Election Commissioner, New Delhi and Ors. , Maneka Gandhi vs U.O.I. [1978] 2 S.C.R. 621, S.L. Kapoor vs Jagmohan; , and Prag Ice and Oil Mills and Anr. vs U.O.I. ; , referred to. (ii) The impugned Notification is a legislative measure. The rules of natural justice therefore stand completely excluded and no question of hearing arises. The passing of the notification was a trial and error method adopted to deal with a very serious problem. [129 G H, 130 F] Chairman, Board of Mining Examination and Anr. vs Ramjee; , , Joseph Beauhernais vs People of the State of Illinois, ; at 930 and Bates vs Lord Hailsham of St. Marylebone and Ors. ; at 1378 referred to. A revocation of licence means that the licence has not been suspended but cancelled for all times to come entailing civil consequences and complete abolition of the right for the exercise of which the licence was granted. A temporary suspension of the working of the crushers owned by the petitioners cannot amount to a revocation, either complete or partial. The proviso to sub clause (2) of clause 11 of the Control Order does not at all envisage a partial or periodical revocation of a licence. The proviso comes into play only if a licence is revoked or cancelled once for all. The proviso is wholly inapplicable to the facts of the instant case. [132 C D] State of Maharashtra vs Mumbai Upnagar Gramodyog Sangh, ; 7. The Notification ex facie cannot be said to have been passed without due care and deliberation. The impugned Notification having been passed under section 3 of the Act it fulfils all the conditions contained therein, viz. it is expedient for maintaining or increasing the supply of an essential commodity, namely sugar which is included in clause (e) of the section 3 of the Act of 1955 and it regulates the supply and distribution of the essential commodities of the trade and commerce. Neither the Control Order nor the impugned Notification is against the tenor and spirit of section 3. It is manifestly clear from the circumstances disclosed that it is in pursuance of the aim and object for which section 3 was enshrined in the Act of 1955 that the Control Order and the Notification were promulgated. [133E; H 134 C] 8. In case Government decides to impose a ban in future on the power crushers or other units, a bare minimum hearing not to all the owners of Khandsari units but to only one representative of the Association representing them, and getting their views, would help the Government in formulating its policy. Even if an emergent situation arises, a representation against the proposed action may be called for from such Association and considered after giving the shortest possible notice. [135A B] 9. Whenever any steps for banning production is taken, the Government has to evolve some procedure to detect the defaulters and ensure compliance of the baning order. [136 C] 98

The Government of West Bengal referred under section 10(1) of the , five issued for adjudication by the Industrial Tribunal. The dispute was between the respondents workmen working at the Barkeeper branch of the appellant company 's workshop. All the shares of the appellant are owned by the Central (Government. and its Memorandum and Articles of Association point out the vital role and control of the Central Government in the matter et carrying on of the industry. The Tribunal granted relief with respect to three issues. In appeal to this Court, the competency of the Government to make the reference was challenged on the ground that the appropriate Government to make the reference was either the Central Government, because the industry was under the authority of the Central Government, or the State of Karnataka, since the works of the Barkeeper branch is under the Banglore Divisional office of the Company. Rejecting the contention, but allowing the appeal to this Court on merits, ^ HELD: l (a) the submission regarding the competency of the Central Government is identical to the one made before this Court and repelled by this Court in the case of Heavy Engineering Mazdoor Union vs The Sate of Bihar [233C] (b) The fact that the Government company in the Heavy Engineering Mazdoor Union ease was carrying on an industry where Private Sector Undertakings were also operating, whereas, in the instant case, the Government alone was entitled to carry on to the exclusion of private operators. would not make any difference. [234B] (c) The definition of "appropriate Government" in section 2(a)(1) of the his been amended from time to time and certain statutory corporations were incorporated in the definition to make the Central Government the appropriate Government ' in relation to the industry carried on by them. But no public company, even if the shares were exclusively owned by the Government, was brought within the definition. [234C] (2) Assuming that the Barkeeper branch was under the control of the Bangalore Division of the Company, it was a separate branch working as a separate unit. The workers were receiving their pay at Barkeeper, were under the control of the officers of the Company stationed there, their grievances were their own and the cause of action in relation to the industrial dispute arose there. If there was any disturbance of industrial peace at Barrackpore, the appropriate Government concerned in its maintenance was the West Bengal Government, [234D F] M/s. Lipton Limited and another vs Their employees ; distinguished. (3) On the first issue relating to allowance for the education l employees ' children the Tribunal directed the appellant to pay Rs. 12/ per month to each employees to meet the educational expenses of his children. This direction is in elect a revision of the pay structure of the Barrackpore employees and the Tribunal had no jurisdiction to change the ware structure in the garb of allowing educational expenses, [235A C] 232 (4) On the issue regarding revision of lunch allowance, the award of the Tribunal was unnecessary because all members of the staff were getting such lunch allowance. [235E F] (5) As regards the directions of the Tribunal that certain canteen employees should be made permanent. it was not justified because those workman were casual workmen appointed temporarily. The workmen could be made permanent only against permanent vacancies and not otherwise, and there was no direction by the Tribunal for the creation of any new post. [235 H]

The Government of U. P. appointed a Court of enquiry under sections 6 and 10 of the United Provinces , and referred to it the present dispute. The Court of enquiry submitted its report to the Government, whereupon the Government issued a notification in July, 1950, directing the various sugar factories to pay bonus to their workmen for the years 1948 49 as well as to pay certain amounts as bonus for the years 1947 48. 331 Court against the Government, prohibiting it from enforcing the notification. The State Government came up in appeal, urging, that the provisions of cl. (b) of section 3 of the United Provinces , were wide enough to permit it to issue such a direction to the employer because by doing so the State Government would be imposing a condition of employment in future. The respondents, inter alia, contended that (1) clause (b) of section 3 of the Act does not operate retrospectively ; (2) bonus could only be a term of employment by agreement and could not be imposed by statute ; (3) where there was an industrial dispute cl. (d) and not cl. (b) of section 3 of the Act would apply and (4) if cl. (b) was applicable it was ultra vires being discriminatory and violative of article 14 of the Constitution and also violative of article 19(i) of the Constitution as it confers arbitrary powers on the State Government. Held, that (i) though cl. (b) of section 3 of the United Provinces , could not be given a retrospective effect, yet there was nothing therein which prohibited the State Government from giving a direction with regard to the payment of bonus and by giving such a direction the State Government was not giving retrospective effect to the provisions of that clause nor did it add a new term or a condition for a period which was over, it merely required the employer to pay an additional sum of money to their employees as a term and condition of employment in future; (ii) though normally wage is a term of contract it can be made a condition of employment by statute, and it was open to the State Government under cl. (b) of section 3 to make the payment of bonus to workmen a condition of their employment in future; (iii) where the employees bargained in their collective capacity, the fact that the personnel of the factory when the order for the payment of bonus was made by the Government and in the year to which dispute related were not the same, did not affect the power of the Government as the order would apply only to those employees who had worked during the period in question and not to new employees ; (iv) the normal way of dealing with an industrial dispute would be to have it dealt with judicially and not by resort to executive action, but cl. (b) of section 3 empowers the Government to act promptly in case of an emergency and arms it with additional powers to deal with such an emergency in the public interest; (v) when the Government had made an executive or per under cl. (b) of section 3 on the ground that it was in the public interest to do so it was open to the aggrieved party to move the Government to refer the industrial dispute for conciliation or adjudication under cl. (b) of section 3 of the Act. 332 (vi) the provisions of cl. (b) of section 3 are not in any sense alternative to those of cl. (d) and the former could be availed of by the State Government only in an emergency and as a temporary measure. The right of the employer or the employee to require the dispute to be referred for conciliation or adjudication would still be there and could be exercised by them by taking appropriate steps; (vii) clause (b) of section 3 of the Act is not violative of the provisions of article 19(1)(g) of the Constitution as it permits action to be taken thereunder by the Government only in an emergency and in the public interest. The restriction placed upon the employer is only a temporary one and having been placed in the public interest falls under cl. (6) of article 19 of the Constitution. Ram Nath Koeri and Anr. vs Lakshmi Devi Sugar Mills and Ors., , approved. L. D. Mills vs U. P. Government, A.I.R. 1954 All. 705, overruled.

15 of 1959, 14 of 1960 and 21 of 1959. Petitions under article 32 of the Constitution of India for enforcement of Fundamental Rights. Frank Anthony and J. B. Dadachanji, for the petitioners (In Petns. Nos. 15 and 21 of 1959). 612 H. J. Umrigar, O. P. Rana and A. G. Ratnaparkhi, for the petitioners (In Petn. No. 14 of 1960). L. K. Jha and section P. Varma, for the respondent (In Petn. No. 15 of 1959). C. K. Daphtary, Solicitor General of India, M. Adhikari, Advocate General for the State of Madhya Pradesh and I. N. Shroff, for the respondent (In Petn. No. 14 of 1960). H. N. Sanyal, Additional Solicitor General of India and C. P. Lal, for the respondent (In Petn. No. 21 of 1959). November 23. The Judgment of the Court was delivered by section K. DAS, J. These three writ petitions have been heard together, as they raise common questions of law and fact. They relate, however, to three different enactments made by the Legislatures of three different States Bihar in writ petition No. 15, Uttar Pradesh in writ petition No. 21, and Madhya Pradesh in writ petition No. 14. The petitioners in the several petitions have challenged the 'validity of a number of provisions of the enactments in question and, in some cases, also of the rules made thereunder. The impugned provisions are similar in nature, but are not exactly the same. Therefore, we shall first state in general terms the case of the petitioners and then consider in detail and separately the impugned provisions in each case. But before we do so, it is necessary to refer to some background history of the legislation under consideration in these cases. In the year 1958 this Court had to consider the validity of certain provisions of three Acts: (1) The Bihar Preservation and Improvement of Animals Act, (Bihar Act II of 1956); (2) the Uttar Pradesh Prevention of Cow Slaughter Act, 1955 (U. P. Act 1 of 1956); and (3) the Central Provinces and Berar Animal Preservation Act, 1949 (C. P. and Berar Act LII of 1949). The Bihar Act put a total ban on the slaughter of all 613 categories of animals of the species of bovine cattle. The U. P. Act put a total ban on the slaughter of cows and her progeny which included bulls, bullocks, heifers and calves. The C. P. and Berar Act placed a total ban on the slaughter of cows, male or female calves of cows, bulls, bullocks, and heifers, and the slaughter of buffaloes (male or female, adults or calves) was permitted only under a certificate granted by the proper authorities. These three Acts were enacted in pursuance of the directive principle of State policy contained in article 48 of the Constitution. The petitioners who challenged the various provisions of the aforesaid Acts in 1958 were engaged in the butcher 's trade and its subsidiary undertakings; they challenged the constitutional validity of the Acts on the ground that they infringed their fundamental rights under articles 14, 19(1)(f) and (g) of the Constitution. In the decision which this Court gave in Mohd. Hanif Quareshi vs The State, of Bihar (1), it held (i) that a total ban on the slaughter of cows of all ages and calves of cows and of she buffaloes, male or female, was quite reasonable and valid; (ii) that a total ban on the slaughter of she buffaloes or breeding bulls, or working bullocks (cattle as well as buffaloes) so long as they were capable of being used as milch or draught cattle was also reasonable and valid; and (iii) that a total ban on slaughter of she buffaloes, bulls and bullocks (cattle or buffalo) after they ceased to be capable of yielding milk or of breeding or working as draught animals was not in the interests of the general public and was invalid. In the result this Court directed the respondent States not to enforce their respective Acts in so far as they were declared void by it. This led to some amending or new legislation, and we are concerned in these three cases with the provisions of these amending or new Acts and the rules made thereunder. In Bihar (Writ Petition No. 15 of 1959) the impugned Act is called the Bihar Preservation and Improvement of Animals (1) ; 78 614 (Amendment) Act, 1959 which received the assent of the Governor on January 13, 1959. in Uttar Pradesh (Writ Petition No. 21 of 1959) the impugned Act is called the Uttar Pradesh Prevention of Cow Slaughter (Amendment) Act, 1958 and in Madhya Pradesh (Writ Petition No ' 14 of 1960) a new Act was passed called the Madhya Pradesh Agricultural Cattle Preservation Act, 1959 (Act 18 of 1959) which received the assent of the President on July 24, 1959 and came into force on January 15, 1960. The rules made there under are called the Madhya Pradesh Agricultural Cattle Preservation Rules, 1959. The general case of the petitioners, who are several in number in each of the three cases, is that they are citizens of India and carry on their profession and trade of butchers; they allege that the various provisions of the impugned legislation infringe their fundamental rights in that they, for all practical purposes, have put a total ban on the slaughter of she buffaloes, bulls or bullocks, even after such animals have ceased to be useful, and have virtually put an end to their profession and trade. It is pointed out that the age up to which the animals referred to above cannot be slaughtered (20 or 25 years) has been put so high that the practical effect is that no animals can be slaughtered, and the amending or new legislation has put in other restrictions so arbitrary and unreasonable in nature that in effect they amount to a prohibition or destruction of the petitioner 's right to carry on their trade and profession. The following allegations quoted from one of the petitions (Writ Petition No. 15 of 1959) give a general idea of the nature of the case which the petitioners have put forward: "That there is good professional authority for the view that even in countries where animal husbandry is organised on a highly progressive and scientific basis, cattle seldom live beyond 15 or 16 years. That there is also good authority to the effect that even pedigree breeding bulls are usually discarded at the age of 12 or 14 years. , That in India bulls and bullocks and she buffaloes rarely live even up to the age of 15 years; draught bullocks begin to age after eight years, 615 That the raising of the age limit from 15 to 20 years is arbitrary, unreasonable and against the general public interests and is repugnant to and infringes the, fundamental rights of the, petitioners under Article 19 (1)(f) and (g) of the Constitution. That section 3 of the amending Act is a mala fide, colourable exercise of power, repugnant to the fundamental rights of the petitioners under Article 19 (1)(f) and (g). That this arbitrary raising of the age limit will be against the public interests For the following among ' other reasons: (i) That there will, in fact, be no bulls or bullocks or she buffaloes available for slaughter as few, if any, of such animals survive in India up to the age of 15 years; (ii) that the profession, trade and occupation of millions of Muslims will be permanently and irreparably injured; (iii) that millions of members of the minority communities such as Christians, Scheduled Castes, Scheduled Tribes and Muslims, for whom cattle beef is a staple item of their diet, will be deprived of this diet; (iv) that the menace of the rapidly increasing uneconomic cattle population in such matters as the destruction of crops, being a public nuisance, will be accentuated by this arbitrary age limit, and in effect will ensure that bulls and bullocks cannot be slaughtered; (v) that the menace of the rapidly increasing population of uneconomic cattle to the fodder and other animal food resources of the country will be accentuated. (vi) that the competition between the rapidly increasing cattle population, a large percentage I of which is uneconomic and useless, add the human population for available land will be accentuated; (vii) that this piece of legislation will ensure the steady increase of useless bulls and bullocks and must react disastrously against any attempt to improve milk production, bullock power or animal husbandry generally." 616 Similar allegations have been made in the other two petitions also. The correctness of these allegations has been con. tested on behalf of the respondent States, which through some of their officers have filed affidavits in reply. We shall presently examine at greater length the averments made in these affidavits, but we may indicate here in broad outline what their general effect is. In Bihar the age below which the slaughter of she buffaloes, bulls and bullocks is prohibited is 25 years. The respondent State has taken the plea that the usefulness or longevity of live stock for breeding and other purposes depends to a very great extent on (a) better animal husbandry facilities like feeding and management and (b) control of animal diseases, and as these facilities are now available in a greater measure, the legislature came to the conclusion that a bull or bullock or a she buffalo below 25 years of age continues to remain useful; if a bull, bullock or shebuffalo is permanently incapacitated below that age the impugned provision permits its slaughter and therefore the legislation which is challenged conforms to the decision of this Court and does not violate any fundamental right. In Uttar Pradesh the age is 20 years as respects bulls or bullocks, with a further restriction to be referred to later. The reply of the res pondent State is that bulls or bullocks do not become unfit at the age of 12 or 14 years as alleged by the petitioners; on the contrary, they continue to be useful and at no time they become entirely useless. It is then stated in the affidavit: "As a matter of fact, the age up to which the animals can live and are serviceable depends upon the care and attention they receive and the quality of the grass on which they are grazed. . . . . .According to a high authority the average age of an ox under favourable conditions would be between 15 to 20 years. Even under conditions prevailing in Uttar Pradesh, bulls can live upto 20 years or more as would appear from an analysis of a survey report of the animal husbandry department. " 617 On these averments the respondent State contends that the legislation is valid. In Madhya Pradesh also the age is 20 years. The Under Secretary to the( State Government in the Agricultural Department ' has made the reply affidavit in which it has been stated inter alia that conditions in Madhya Pradesh are different from conditions in other States. The affidavit then states: "The State of Madhya Pradesh has a total area of 107,589,000 acres, out of which total cropped area is 43,572,000 acres. Forest area is 33,443,000 acres, area not available for cultivation is 11,555,000 acres, uncultivated land is 18,405,000 acres and fallow land is 5,834,000 acres. It will thus be seen that this State has a large forest area and plenty of grass land for pasturage. As the forests supply the greater part of the fuel needs of the human population, the dung of animals is largely available as manure. The legislature considered that bulls, bullocks and buffaloes are useful in this State till they are well past twenty years of age and that they should not be slaughtered till they are past that age and are also unfit for work or breeding. The problem of animals dying of slow starvation or of worthless animals depriving useful animals of fodder needs no consideration in this State. The agricultural community in the State benefits by the existence of animals as long as they are useful. " There are also further averments as to the shortage of breeding bulls, working bullocks and she buffaloes in Madhya Pradesh. On these averments the contention of the respondent State is that the cattle in that State are useful up to the age of 20 years. We have indicated above in general terms the case of the petitioners and the reply which the respondent States have given. We proceed now to a detailed consideration of the impugned legislation in each case. (1) We take up first the Bihar Preservation and Improvement of Animals (Amendment) Act, 1959 and the rules made under the main Act of 1955. Section 3 of the Act as amended reads: "section 3.

In Mohd. Hanif Quareshi vs The State of Bihar the Supreme Court held that a total ban on the slaughter of bulls, bullocks and she buffaloes after they had ceased to be useful was not in the interests of the general public and was invalid. Thereafter, the Bihar Legislature passed the Bihar Preservation and Improvement of Animals (Amendment) Act, 1958, the Uttar Pradesh Legislature passed the U. P. Prevention of Cow Slaughter (Amendment) Act, 1958 and the Madhya Pradesh Legislature passed a new Act, the M. P. Agricultural Cattle Preservation Act, 1959. Section 3 of the Bihar Act prohibited the slaughter of a bull, bullock or she buffalo except when it was over 25 years of age and had become useless. Rule 3 of the Bihar Preservation and Improvement of Animals Rules, 1960 prescribed that the certificate for slaughtering an animal could be granted only with the concurrence of the Veterinary Officer and the Chairman or Chief Officer of a District Board, Municipality etc., and if the two differed, then according to the decision of the Sub Divisional Animal Husbandary Officer. Section 3 of the U. P. Act permitted the slaughter of a bull or bullock only if it was over 20 years of age and was permanently unfit. It further provided that the animal could not be slaughtered within 20 days of the grant of 'a certificate that it was fit to be slaughtered and gave a right of appeal to any person aggrieved by the order granting the certificate. Section 4(1)(b) of the Madhya Pradesh Act provided that no bull, bullock or buffallo could be slaughtered except upon a certificate issued by the competent authority and section 4(2)(a) provided that no certificate could be issued unless the animal was over 20 years of age and was unfit for work or breeding. Section 4(3) gave a right of appeal to any person aggrieved by the order of the competent authority. Section 5 provided that no animal 611 shall be slaughtered within 10 days of the date of the issue of the certificate and where an appeal was preferred against the grant of the certificate, till the time such appeal was disposed of. The petitioners, who carried on the profession and trade of butchers, contended that the various provisions of the three Acts set out above infringed their fundamental rights by practically putting a total ban on the slaughter of bulls, bullocks and she buffaloes even after the animal had ceased to be useful and thus virtually put an end to their profession and trade. Held, (i) that the ban on the slaughter of bulls, bullocks and she buffaloes below the age of 20 or 25 years was not a reasonable restriction in the interests of the general public and was void. A bull, bullock or buffalo did not remain useful after 15 years, and whatever little use it may have then was greatly offset by the economic disadvantages of feeding and maintaining unserviceable cattle. The additional condition that the animal must, apart from being above 20 or 25 years of age, also be unfit was a further unreasonable restriction. Section 3 of the Bihar Act, section 3 of the U. P. Act and section 4(2)(a) of the M. P. Act were invalid. (ii) Rule 3 of the Bihar Rules was bad as it imposed dis proportionate restrictions on the rights of the petitioners. The procedure involved such expenditure of money and time as made the obtaining of the certificate not worthwhile. (iii) The provisions in the Uttar Pradesh and Madhya Pradesh Acts providing that the animal shall not be slaughtered within 20 and10 days respectively of the issue of the certificate and that any person aggrieved by the order of the competent authority, may appeal against it, were likely to hold up the slaughter of the animal for a long time and practically put a total ban on slaughter of bulls, bullocks and buffaloes even after they had ceased to be useful. These provisions imposed unreasonable restrictions on the fundamental rights of the petitioners and were void. Mohd. Hanif Quareshi vs The State of Bihar, [1959] S.C.R. 629, State of Madras vs V. G. Row, ; and The State of Bihar vs Maharajadhiraja Sir Kameshwar Singh of Darbhanga, , referred to.

The appellants, two of the electors of the Akola Constituency of the Madhya Pradesh State Assembly, filed an Election Petition against Respondent No. 1, the successful candidate in the election held on December 13, 1951, and the three other respondents who having been validly nominated went to the polls but were defeated. The Election Petition, under Section 80 of the Representation of the People Act of 1951, was admittedly time barred by one day. The Election Commission condoned the delay under the proviso to Section 85 of the Act and constituted a Tribunal for the trial of the petition. On pleadings of the parties, nine issues were framed by the Tribunal which are covered by the following questions: (1) Whether the election petition was presented by a properly authorised person. (2) Whether there was sufficient cause for presentation of the petition one day out of time. (3) Whether the petition was defective for non joinder of certain parties as respondents. (4) Whether the petition was defective for want of proper verification. (5) Whether,the petition was defective for vagueness of the particulars relating to the corrupt practices set out in Schedule A thereto. The Tribunal found only the first of the above points in favour of the petitioners by a majority. But in respect of the other four points, it held against the petitioners unanimously. As a result of the adverse findings on these four points, the petition was dismissed without any trial on the merits. It is against this dismissal that the appellants have now come up to this Court on obtaining special leave. When the delay in submitting an election petition is condoned 429 by the Election Commission in exercise of its power under the proviso to Section 85 of the Representation of the People Act (Act XLIII of 1951), it is not open to the Election Tribunal, under Section 90(4) of the Act, to reconsider the question of limitation. Even if, according to the requirement of Section 82 of the Representation of the People Act, any of the necessary parties other than the returned candidate has not been impleaded, the petition is not liable to be dismissed in limin on that sole ground; but it is a matter to be taken into consideration at the appropriate stage with reference to the final result of the case. Section 83(1) of the Act provides that an election petition has to be verified in the manner provided for verification of pleadings under the Code of Civil Procedure. Clauses (2) and (3) of rule 15 in Order VI of the Code lay down the procedure for verification of pleadings. Apart from those cases where the date of the pleading and the verification may be relevant and important, it would be a wrong exercise of discretionary power to dismiss an application on the sole ground of the absence of the date of verification. In such a case the applicant should normally be called upon to remove the lacuna by adding a supplementary verification indicating the date of the original verification and the reason for the earlier omission. The requirement of "full particulars" of corrupt practices in Section 83(2) of the Act, is one that has got to be complied with, with sufficient fullness and clarification, so as to enable the opposite party to meet the allegations against him fairly, and so as to prevent the enquiry from being turned into a rambling and roving inquisition. The primary responsibility for furnishing full particulars of alleged currupt practices and for filing a petition in full compliance with Section 83 (2) of the Act is that of the petitioners. If they fail to do so initially it is their duty and responsibility to remove the defects when opportunity is available. Tribunals, however, should not take an all too narrow view of their function in dealing with the various alleged defects in the petition and dismiss it on the ground of want of particulars. They should call for better particulars and if that order was not complied with strike out such of the charges as are vague. The petitioners also alleged that the returned candidate was disqualified to stand because he had interest in contracts with the Government. But the Tribunal ignored these allegations and without enquiring into their truth dismissed the petition on the ground that the allegations relating to the charge of corrupt practices were vague, Held that it was not in the interest of purity of elections that such allegations of disqualification should be ignored and that it was a matter which called for enquiry. Case remitted for enquiry with reference to the allegations that the returned candidate was disqualified and the charge of corrupt practice, which was held to be not vague. Dinabandhu vs Jadumoni ( ; and Jagan Nath vs Joswant ([1954] S.C.R. 892), followed, 430

Dismissing the writ petitions but partly allowing, the Court ^ HELD: By Iyer, J. (on behalf of Y. V. Chandrachud, C.J., P. N. Bhagwati. J. and himself) 1. Section 433A of the Code of Criminal Procedure Code as introduced With effect from 18 12 1978 is constitutionally valid. May be, penologically the prolonged terms prescribed by the Section is supererogative [1248 C D] 2. Section 433A is supreme over the Remission Rules and short sentencing, statutes made by the various States. [1248 D] 3. All remissions and short sentencing passed under Articles 72 and 161 of the Constitution are valid but release with follow in life sentence case only on Government making an order en masse or individually, in that behalf [124D E] 4. Section 432 and section 433 of the Code are not a manifestation of Articles 72 and 161 of the Constitution but a separate, though similar, power and section 433A, by nullifying wholly or partially these prior provisions does not violate or detract from the full operation of the constitutional power to pardon, commute and the like. [1248 E F] 5. Section 433A of the Code does not contravene the provisions of Article 20(1) of the Constitution. [1248G] 6. Imprisonment for life lasts until the last breath and whatever the length of remissions earned, the prisoner can claim release only if the remaining sentence is remitted by Government. [1248 G] Gopal Vinayak Godse vs State of Maharashtra & Ors., [19611 3 S.C.R. 440, reiterated . 1197 7. Section 433A, in both its limbs (i.e. both types of life imprisonment specified in it), is prospective in effect. The mandatory minimum of 14 years actual imprisonment will not operate against those whose cases were decided by trial court before the 18th December, 1978, directly or retroactively as explained in the judgment when section 433A came into force. All 'lifers ' whose conviction by the court of first instance was entered prior to that date are entitled to consideration by Government for release on the strength of earned remissions although a release can take place only it Government makes an order to that effect. It follows by the same logic, that short sentencing legislations if any, will entitle a prisoner to claim release thereunder if his conviction by the court of first instance was before section 433A was brought into effect. [1248 H, 1249 A] 8. The power under Articles 72 and 161 of the Constitution can be exercised by the Central and the State Governments, not by the President or Governor on their own. The advice of the appropriate Government binds the Head of the State. No separate order for each individual case is necessary but any general order made must be clear enough to identify the group of cases and indicate the application of mind to the whole group. [1249 D] 9. Considerations for exercise of power under Articles 72/161 may be myriad and their occasions protean, and are left to the appropriate Government, by no consideration nor occasion can be wholly irrelevant, irrational, discriminatory or mala fide. Only in these rare cases will the court examine the exercise. [1249 D E] 10. Although the remission rules or short sentencing provisions proprio vigore may not apply as against section 433A. if the Government, Central or State, guides itself by the self same rules or schemes in the exercise of its constitutional power. Until fresh rules are made in keeping with experience gathered, current social conditions and accepted penological thinking. the present remission and release schemes may usefully be taken as guidelines under Articles 72/161 and orders for release passed. Government cannot be faulted, if in some intractably savage delinquents, section 433A is itself treated as a guideline for exercise of Articles 72/161. [1249E G] 11. The U.P. Prisoners ' Release on Probation Act, 1938 enabling limited enlargement under licence will be effective as legislatively sanctioned imprisonment of a loose and liberal type and such licensed enlargement will toe reckoned for the purpose of the 14 year duration. Similar other statutes and rules will enjoy similar efficacy. [1249 G H] 12. Penal humanitarianism and rehabilitative desideratum warrant liberal paroles. subject to security safeguards, and other humanizing strategies for inmates so that the dignity and worth of the human person are not desecrated by making mass jails anthropoid zoos. Human rights awareness must infuse institutional reform and search for alternatives. [1250 A B] 13. Law in action fulfils itself not by declaration alone and needs the wings of communication to the target community. So, the whole judgment well translated in the language of the State, must be kept prominently in each ward and made available to the inmate, in the jail library. [1250B C] 14. Section 433A does not forbid parole or other release within the 14 year span . So to interpret the Section as to intensify inner tension and taboo intermissions of freedom is to do violence to language and liberty. [1250 C D] 1198 15. Parliament has the legislative competency to enact the provisions in section 433A of Criminal Procedure Code. [1214F] It is trite law that the Lists in the Seventh Schedule broadly delineate the rubrics of legislation and must be interpreted liberally. Article 246(2) gives power to Parliament to make laws with respect to any of the matters enumerate ed in List III. Entries 1 and 2 in List 111 (especially Entry 2) are abundantly comprehensive to cover legislation such as is contained in section 433A, which merely enacts a rider, as it were, to sections 432 and 433(a). A legislation on the topic of "Prisons and Prisoners" cannot be read into section 433A. On the other hand, section 433A sets a lower limit to the execution of punishment provided by the Penal Code and is appropriately placed in the Chapter on "Execution and Sentences" in the Procedure Code. Once the irrefutable position that the execution, remission and commutation of sentences primarily fall, as in the earlier 1898 Code, within the 1973 Procedure Code (Chapter XXIII) is accepted, section 433A can be rightly assigned to Entry 2 in List III as a cognate provision integral to remission and commutation, as it sets limits to the power conferred by sections 432 and 433. This limited prescription as a proviso m, the earlier prescription relates to execution of sentence, not conditions in prison or regulation of prisoner 's life. The distinction between prisons and prisoners on the one hand and sentences and their execution, remission and commutation on the other, is fine but real. To bastardize section 433A as outside the legitimacy of Entry 2 in list III is to breach all canons of constitutional interpretation of legislative list [1214B F] 15. (i) The power of the State to enact the laws of remissions and short sentencing under Entry 4 of List 11 is subject to Articles 246(1) and (2) and so parliamentary legislation prevails over State legislation. Moreover, Article 254 resolves the conflict in favour of parliamentary legislation. If a State intends to legislate under Entry 2 of list III such law can prevail in that State as against a parliamentary legislation only if Presidential assent has been obtained in terms of Article 254(2). In the present case, section 433A must hold its sway over any State legislation even regarding "prisons and prisoners", if its provisions are repugnant to the Central law. [1214G, 1215 B C] 15 (ii). Remission schemes do not upset sentences, but merely provide re wards and remissions for in prison good conduct and the like If the sentence is life imprisonment remissions, as such cannot help. If the sentence is for a fixed term, remissions may help, but section 433A does not come in the way. Thus incompatibility between section 433A and remission provisions exists. [1215 C D] 16. The fasciculus of clauses (sections 432, 433 and 433A), read as a package, makes it clear that while the Code does confer wide powers of remission and commutation or sentences, it emphatically intends to carve out an extreme category from the broad generosity of such executive power. The non obtained clause, in terms, excludes section 432 and the whole mandate cf the rest of the Section necessarily subjects the operation of section 433(a) to a serious restriction. This embargo directs that commutation in such cases shall not reduce the actual duration of imprisonment below 14 years. Section 431 does declare emphatically an imperative intent to keep imprisoned for at least 14 years those who fall within the sinister categories spelt out in the operative part of section 433A. [1216 B C] 1199 It is elementary that a non obstante tail should not wag a statutory dog. A non obstante Clause cannot whittle down the wide import of the principal part. The enacting part is Clear and the non obstante clause cannot cut down its scope.[1217 A B] Aswini Kumar Ghose and Another vs Aravinda loose & Another; , , followed. To read down section 433A to give overriding effect to the Remission Rules of the State would render the purposeful exercise a ludicrous futility. If "Laws suffer from the disease of Language", courts must cure the patient. not kill him. , "Notwithstanding the "notwithstanding. " in section 433A, the Remission Rules and like provisions stand excluded so far as "lifers" punished for capital offences are concerned. [1217D E] 17. Sentencing is a judicial function but the execution of the sentence. after the courts pronouncement, is ordinarily a matter for the Executive under the Procedure Code, going by Entry 2 in List 111 of the Seventh Schedule. Once a sentence has been imposed, the only way to terminate it before the stipulated term is by action under sections 432/433 of the Code or Articles 72/161. And if the latter power under the Constitution is not invoked, the only source of salvation is the play of power under sections 432 and 433(a) so far as a 'lifer ' is concerned. No release by reduction or remission of sentence is possible under the corpus juris as it stands, in any other way. The legislative power of the state under Entry 4 of List 11, even if it be stretched to snapping point, an deal only with Prisons and Prisoners, never with truncation of judicial sentences. Remissions by way of reward or otherwise cannot cut down the sentence as such and cannot grant final exit passport for the prisoner except by Government action under section 432(1). The topic of Prisons and Prisoners does not cover release by way of reduction of the sentence itself. That belongs to Criminal Procedure in Entry 2 c f List 111 although when the sentence is for a fixed term and remission plus the period undergone equal that term the prisoner may win his freedom. Any amount of remission to result in manumission requires action under section 432(1), read with the Remission Rules. That is why Parliament, tracing the single source of remission of sentence to Section 43 ', blocked it by the non obstante clause. No remission, however long. can set the prisoner free at the instance of the State, before the judicial sentence has run out, save by action under r the constitutional power or under section 432. So read, section 433A achieves what it wants arrest the release of certain classes of "lifers" before a certain period, by blocking of section 432. [1217 G H, 1218 A E] Sentencing is a judicial function and whatever may be done in the matter of executing that sentence in the shape of remitting. commuting or otherwise abbreviating, the Executive cannot alter the sentence itself. Remission cannot detract from the quantum or quality of sentence or its direct and side effects except to the extent of entitling the prisoner to premature freedom if the deduction following upon the remission has that arithmetic effect. The nature of a life sentence is incarceration until death, judicial sentence of imprisonment for life cannot be in jeopardy merely because of long accumulation of remissions. Release would follow only upon an order under section 401 of the Criminal Procedure Code, 1898 (corresponding to section 432 of the 1973 Coded by the appropriate Government or on a clemency order in exercise of power under Article 72 or 161 of the Constitution. [1218 F &, 1219H. 1220A, E F] Sarat Chandra Rabha and Ors. vs Khagendranath Nath & Ors. ; ; Gopal VinayaK Godse vs State of Maharashtra & Ors. ; , referred to. 1200 18. Section 433A escapes the Exclusion of section 5 of the Code of Criminal Procedure. A thing is specific if it is explicit. It need not be "express". What is precise, exact, definite and explicit, is specific. Sometimes, what is specific may also be special but yet they are distinct in semantics. From this angle the Criminal Procedure Code is a general Code. The remission rules are special laws but section 433A is a specific, explicit, definite provision dealing with a particular situation or narrow class of cases. as distinguished from the general run of cases covered by section 432 Crl. P.C. Section 433A picks out of a mass of imprisonment cases a specific class of life imprisonment cases and subjects it explicitly to a particularised treatment. Therefore, section 433A applies in preference to any special or local law because section 5 expressly, declares that specific provisions, if any, to the contrary will prevail over any special or local law. [1225 G H, 1226 A C] Hakim Khuda Yar vs Emperor A.I.R. 1940 Lah. ]29; Baldeo Bikram Sardar & Ors. vs Emperor A.I.R. 1941 Bom. 146, dissented from. In Re Net Book Agreement 1957 [1962] 3 All E.R. QBD 751, quoted with approval. It is trite law that civilised criminal jurisprudence interdicts retroactive impost of heavier suffering by a later law. Ordinarily, a criminal legislation must be so interpreted as to speak futuristically. While there is no vested right for any convict who has received a judicial sentence to contend that the penalty should be softened and that the law which compels the penalty to be carried out hl full cannot apply to him, it is the function of the court to adopt a liberal construction when dealing with a criminal statute in the ordinary course if things. This humanely inspired canon, not applicable to certain terribly antisocial categories may legitimately be applied to section 433A. (The sound rationale is that expectations of convicted citizens of regaining freedom on existing legal practices should not be frustrated by subsequent legislation or practice unless the language is beyond doubt). Liberality in ascertaining the sense may ordinarily err on the side of liberty where the quantum of deprivation of freedom is in issue. In short, the benefit of doubt, other things being equal, must go to the citizen in penal statute. [1236 A D] The plain meaning of ' is" and "has been" is "is" and "has been ' only and, therefore, these expressions refer lo "after this Section comes into force". "Is" and "has" are not words which are weighed in the scale of grammar nicely enough in this Section and, therefore, over stress on the present tense and the present perfect tense may not be a clear indicator. The general rule bearing on ordinary penal statutes in their construction must govern this. [1236 F, G, H, 1237 A] Boucher Pierre Andre vs Supdt. Central Jail, Tihar. [1975] I S.C.R. 192 at 1 95, followed. When a person is convicted in appeal, it follows that the appellate court has exercised its power in the place of the original court and the guilt, conviction and sentence must be substituted for and shall have retroactive effect from the date of judgment of the trial court. The appellate conviction must relate back to the date of the trial court 's verdict and substitute it. In this view, even if the appellate court reverses an earlier acquittal rendered before section 433A came into force but allows the appeal and convicts the accused after section 433A came into force, such persons will also be entitled to the benefit of the remission system prevailing prior to section 433A on the basis 1201 which has been explained. An appeal is a continuation of an appellate judgment as a replacement of the original judgment. [1237D F] 21. The President is symbolic, the Central Government is the reality even as the Governor is the formal head and sole repository of the executive power but is incapable of acting except on, and according to, the advice of his council of ministers. The upshot is that the State Government, whether the Governor. likes it or not, can advise and not under Article 161, the Governor being bound by that advice. The action of commutation and release can thus be pursuant to a governmental decision and the order may issue even withhold the Governor 's approval although, under the Rules of Business and as a matter of constitutional courtesy, it is obligation that the signature of the Governor should authorise the pardon, commutation or release. The position is substantially the same regarding the President. It is not open either to the President or the Governor to take independent decision or direct release or refuse release of any one of their own choice. It is fundamental to the Westminster system that the Cabinet rules and the Queen reigns. The President and the Governor, be they ever so high in textual terminology, are but functional euphemisms promptly acting on and only on the advice of the Council of Ministers save in a narrow area of power. So, even without reference to Article 367(1) and sections 3(8)(b) and 3(60)(b) of the , that in the matter of exercise of the powers under Articles 72 and 161, the two highest dignitaries in our constitutional scheme act and must act not on their own judgment but in accordance with the aid and advice of the ministers. Article 74, after the 42nd Amendment silences speculation and obligates compliance. The Governor vis a vis his Cabinet is no higher than the President save and narrow area which does not include Article 161. The constitutional conclusion is that the Governor is but a shorthand expression for the State Government and the President is an abbreviation for the Central Government. [1239 C H, 1240A B] Shamsher Singh & Anr, vs State of Punjab, ; , applied. Victimology, a burgeoning branch of humane criminal justice, must find fulfillment, not through barbarity but by. compulsory recoupment by the wrong doer of the damage inflicted, not by giving more pain to the offender but by lessening the loss of the forlorn. The State itself may have its strategy of alleviating hardships of victims as part of Article 41. So the mandatory minimum in section 433A cannot be linked up with the distress of the dependants [1251 B C] Observations: 1. Parliamentary taciturnity does not preclude forensic examination about legislative competency. Nor does it relieve the Supreme Court as sentinel on the qui vive, from defending fundamental rights against legislative aggression, if any flagrant excess were clearly made out. [1211 F G] 2. Courts cannot abdicate constitutional obligations even if Parliament be pachydermic and politicians indifferent, with great respect, ordinarily they are not. indeed, Judges must go further, on account of their accountability to the Constitution and the country and clarify that where constitutional liberties are imperilled judges cannot be non aligned. But where counterfeit constitutional I claims are pressed with forensic fervour courts do not readily oblige by consenting to be stampeded. Justice is made of sterner stuff, though its core is like "the gentle rain from heaven" being interlaced with mercy. 11213 F Hl 1202 Per Fazal Ali, J. (Concurring) 1. Section 433A of the Code is constitutionally valid Section 433A is actually a social piece of legislation which by one stroke seeks to prevent dangerous criminals from repeating offences and on the other protects the society from harm and distress caused to innocent persons. [1256 B] 2. The dominant purpose and the avowed object of the legislature in introducing section 433A in the Code of Criminal Procedure unmistakably seems to be to secure a deterrent punishment for heinous offences committed in a dastardly, brutal or cruel fashion or offences committed against the defence or security of the country. [1251E F] Section 433A has advisedly been enacted to apply to a very small sphere and includes within its ambit only offences under sections 121, 132. 302., 303. , 396 etc., of the Indian Penal Code, that is to say, only those offence, where death or life imprisonment are the penalties but instead of death life imprisonment is given or where a sentence of death is commuted to that of life imprisonment. Section 433A when it confines its application only to these categories of offences which are heinous and amount to a callous outrage on humanity, has taken care of the fact that a sentence out of proportion of the crime is extremely repugnant to the social sentiments of a civilized society. [1252 D E, 1253 H, 1254 A B] 3. The deterrent punishment prevents occurrence of offences by (i) making it impossible or difficult for an offender to break the law again,(ii) by deterring not only the offenders but also others from committing offences, and (iii) punishment or for that matter a punishment in the form of a long term imprisonment may be a means to changing a person 's character or personality so that out of some motivation or reasons of a personal or general nature, the offender might obey the law. [1254G H, 1255A] The Parliament in its wisdom chose to act in order to prevent criminals committing heinous crimes from being released through easy remissions or substituted form of punishments without undergoing at least a minimum period of imprisonment of fourteen years which may in fact act as a sufficient deterrent which may prevent criminals from committing offences. [1256 E F] 4. No doubt, the reformative form of punishment on principle, is in fact the prime need of the hour, but before it can succeed people must be properly educated and realise the futility of committing crimes. [1255 E F] In the present distressed and disturbed atmosphere if deterrent punishment is not resorted to, there will be complete chaos in the entire country and criminals will be let loose endangering the lives of thousands of innocent people of our country. In spite of all the resources at its commands, it will be difficult for the State to protect or guarantee the life and liberty of all the citizens, if criminals are let loose and deterrent punishment is either abolished or mitigated. Secondly, while reformation of the criminal is only one side of the picture, rehabilitation of the victims and granting relief from the tortures and suffering which are caused to them as a result of the offences committed by the criminals is a factor which seems to have been completely overlooked while defending the cause of the criminals for abolishing deterrent sentences [1256H, 1257 A B] 5. A person who has deprived another person completely of his liberty for ever and has endangered the liberty of his family has no right to ask the court to uphold his liberty. Liberty is not a one sided concepts nor does Article 21 of the Constitution contemplate such a concept. If a person commits 1203 a criminal offence and punishment has been given to him by a procedure established by law which is free and fair and where the accused has been fully heard, no question of violation of Article 21 arises when the question of punishment is being considered. Even so, the provisions of the Code of Criminal Procedure of 1973 do provide an opportunity to the offender, after his guilt is proved to show circumstances under which an appropriate sentence could be imposed on him. These guarantees sufficiently comply with the provisions of Article 21. Thus, while considering the problem of penology courts should not overlook the plight of victimology and the sufferings of the people who die, suffer or are maimed at the hands of criminals. [1257C E] 6. In cases where section 433A applies, no question of reduction of sentence arises at all unless the President of India or the Governor choose to exercise their wide powers under Article 72 or Article 161 of the Constitution which also have to be exercised according to sound legal principles. Any reduction or modification in the deterrent punishment would far from reforming the criminal be counter productive. [1257 F G] 7. Parliament by enacting section 433A has rejected the reformative character of punishment in respect of offences contemplated by it, for the time being in view of the prevailing conditions in our country. It is well settled that the legislature understands the needs and requirements of its people much better than the courts because the Parliament consists of the elected representatives of the people and if the Parliament decides to enact a legislation for the benefit of the people, such a legislation must be meaningfully construed and given effect to so as to subserve the purpose for which it is meant. [1257 G H, 1258 A B] 8. There is no real inconsistency between section 433A and Articles ?2 and 161 of the Constitution of India. [1258E] Doubtless, the President of India under Article 72 and the State Government under Article 161 have absolute and unfettered powers to grant pardon, reprieves, remissions, etc. This power can neither be altered, modified or interfered with by any statutory provision. But, the fact remains that higher the power, the more cautious would be its exercise. This is particularly so because the present enactment has been passed by the Parliament on being sponsored by the Central Government itself. It is, therefore, manifest that while exercising the powers under the aforesaid Articles of the Constitution neither the President, who acts on the advice of the Council of Ministers. nor the State Government is likely to overlook the object, spirit and philosophy of section 433A so as to create a conflict between the legislative intent and the executive power. It cannot be doubted as a proposition of law that where a power is vested in a very high authority, it must be presumed that the said authority would act properly and carefully after an objective consideration of all the aspects of the matter. [1258 B D] Per Koshal, J. (Generally concurring) 1. The contention that the main object of every punishment must be reformation of the offender and that the other objects deterrence, prevention and retribution should be relegated to the background and be brought into play only incidentally is not correct for three reasons: (i) There is no evidence that all or most of the criminals who are punished are amenable to re formation. The matter has been the subject of social debate and so far as one can judge, will continue to remain at that level in the foreseeable future; (ii) The question as to which of the various objects of punishment should be the basis 1204 of a penal provision has, in the very nature of things, to be left to the Legislature and it is not for the courts to say which of them shall be given priority, preponderance or predominance. As it is , the choice must be that of the legislature and not that of the court and it is not for the latter to advise the legislature which particular object shall be kept in focus in a particular situation. Nor is it open to the courts to be persuaded by their own ideas about the propriety of a particular purpose being achieved by a piece of penal legislation, while judging its constitutionality. A contrary proposition would mean the stepping of the judiciary into the field of the legislature which is not permissible. It is thus outside the scope of the inquiry undertaken by this Court into the vires of the provisions contained in section 433A to find out the extent to which the object of reformation is sought to be achieved thereby, the opinion of great thinkers, jurists, politicians and saints (as to what the basis of a penal provision should be) notwithstanding; (iii) A careful study of the Penal Code brings out clearly that the severity of each. punishment sanctioned by the law is directly proportional to the seriousness of the offence for which it is awarded. This is strongly indicative of reformation not being the foremost object sought to be achieved by the penal provisions adopted by the legislature. A person who has committed murder in the heat of passion may not repeat his act at all later in life and the reformation process in his case need not be time consuming. On the other hand, a thief may take long to shed the propensity to deprive others of their good money. If the reformative aspect of punishment were to be given priority and predominance in every case the murderer may deserve, in a given set of circumstances, no more than a six months ' period of incarceration while a thief may have to be trained into better ways of life from the social point of view over a long period, and the death penalty, the vires of which has been recently upheld by a majority of four in a five Judges Bench of this Court in Bachan Singh and others vs State of Punjab and others, , would have to be exterminated from Indian criminal law. The argument based on the object of reformation having to be in the forefront of the legislative purposes behind punishment is, therefore, fallacious. [1259B D, G H, 1260A H, 1261 A]

The respondent rice millers obtained permits under clause (3) of the Southern States (Regulation of Export of Rice) Order, 1964, for exporting "broken rice" from Andhra Pradesh to Kerala but were intercepted for allegedly transporting "whole rice" for "broken rice". The rice was seized, and samples analysed in the presence of the District Revenue Officer who ordered confiscation of the estimated quantity of the "whole rice". On appeal, the District Judge remanded the matter for giving fuller opportunity to the respondents for objecting to the sample analysis which was to be carried out afresh in their presence. The State 's revision application against the remand order dismissed by the High Court, The Revenue Officer then ordered a release of 12%, and the confiscation of the remaining quantity seized, as no sample from the bags contained a minimum percentage of 60% of "broken" grains satisfying the test laid down in the Hand book on Grading Foodgrains and Oilseed. The District & Sessions Judge partially allowed the respondents ' appals. Both sides filed revision applications. The High Court decided in favour of the respondent, holding that "broken rice" included "whole rice". Allowing the appeals, the Court, ^ HELD: (1) Ordinarily, this Court does not interfere with findings of fact. But, where the errors of logic as well as law appear to be gross and to have occasioned a miscarriage of justice, the court is constrained to interfere. [609 D] (2) The Revenue Officer 's order releasing the seized rice to the extent of about 12% having become final, it should not be interfered with except to the extent that the learned Sessions Judge added 2% more for foreign matter thereby releasing slightly more in favour of the respondent. [610 D]

The petitioners challenged the validity of the orders issued by the State of Mysore under article 13(4) of the Constitution on July 10, 1961, and July 31, 1962. The petitioners contended that they had applied for admission to the Pre Professional Class in Medicine in the Karnatak Medical College, Hubli and they would have secured admission to the said medical college but for the reservation directed to be made by the orders mentioned above. They contended that the above mentioned orders were ultra vires. They prayed for an appropriate writ or order restraining the respondents from giving effect to those orders and requiring them to deal with their applications for admission on merits. Held, that the petitioners were entitled to an appropriate writ or order as claimed by them and the respondents were restrained from giving effect to the above mentioned orders. M. R. Balaji vs State of Mysore [1963] Supp. 1 S.C.R. 439, followed. The impugned orders we quashed only with reference to the additional reservation made in favour of the socially and 476 educationally backward classes and so the respondents were at liberty to give effect to the reservation made in favour of the ' Scheduled Castes and Scheduled Tribes, which was not challenged at all. The said reservation continues to be operative.

These three groups of special leave petitions/appeals/writ petitions concern the policy and legality of the levy of Court fees under the Provisions of the Karnataka Court Fees and Suits valuation Act, 1958, the PG NO 155 PG NO 156 Rajasthan Court Fees and Suits Valuation Act, 1961 and the Bombay Court Fees Act, 1959. The petitioners from Rajasthan had challenged before the High Court the constitutional validity of the provisions of section 20 read with Article 1 Schedule 1 of the Rajasthan Act which prescribed and authorised the levy of court fees on an uniform ad valorem basis without the prescription of any upper limit. the High Court upheld the constitutionality of the impugned provision. The appeal and the special leave petitions from Karnataka are directed against the common order of the Karnataka High Court upholding the validity of the corresponding provision of the Karnataka Act which similarly imposed an ad valorem court fee without prescribing any upper limit. The writ petitions have challenged the provision directly in this Court. So far as the Bombay Act is concerned, the State of Maharashtra has come up in appeal against the judgment of the Division Bench of the Bombay High Court affirming the order of the learned Single Judge striking down the provisions of section 29(1) read with entry 10 of Schedule I of the Act in so far as they purport to prescribe an ad valorem court fee, without any upper limit, on grants of probate, letters of administrative etc., while in respect of all other suits, appeal and proceedings an upper limit of court fee of Rs.15,000 is prescribed. The High Court held this prescription of ad valorem court fee without any upper limit on this class of proceedings alone was constitutionally impermissible in that it sought to single out this class of litigants. It was contended on behalf of the petitioners/appellants that (i) the imposition of court fees at nearly 10% of the value of the subject matter in each of the courts through which the case sojourns before it reaches a finally would seriously detract from fairness and justness of the system; (11) the exaction of ad valorem fee uniformly at a certain percentage of the subject matter without an upper limit or without the tapering down after a certain stage onwards would negate the concept of e fee and part take of the character of a tax outside the boundaries of the State 's power; (111) the ad valorem yardstick, which is relevant and appropriate to taxation, is wholly inappropriate because the principle or basis of distribution in the case of a fee should be the proportionate cost of services inter se amongst the beneficiaries; (iv) in the very nature of the Judicial process, a stage is reached beyond which there could be no proportionate or progressive increase in the services rendered to a litigant either qualitatively or PG NO 157 quantitatively; (v) in the process of `adjudication of disputes before courts, judicial time and the machinery of justice are not utilised in direct proportion to the value or the amount of the subject matter of the controversy; (vi) a recognition of the outermost limit of the possible services and a prescription of a corresponding upper limit of court fee should be made, lest the levy, in excess of that conceptual limit, becomes a tax; and (vii) though India is a federal polity, the judicial system, however, is an integrated one and that therefore different standards of court fee in different States would be unconstitutional . The contentions of the State were that (i) as long as their power to raise the funds to meet the expenses of administration of civil justice was not disputed and as long as the funds raised show a correlation to such expenses, the States should have sufficient play at the joints to work out the incidents of the levy in some reasonable and practical way; (ii) it would, quite obviously, be impracticable to measure out the levy directly in proportion to the actual judicial time consumed in each individual case, hence the need to tailor some rough and ready workable basis which, though may not be an ideal or the most perfect one, would at least be the least hostile; (iii) if an upper limit is fixed and the collection fell short of what the Government intends and is entitled to collect, this would eventually result in the enhancement of the general rates of court fee for all categories; (iv) if the value of the subject matter is a relevant factor in proportioning the burden of the court fee. where the line should be drawn in applying the principle it is more a matter of legislative wisdom and preference than of the strict judicial evaluation and adjudication; and (v) courts cannot compel the State to bring forth any legislation to implement and effectuate a Directive Principle. Dismissing the appeals, writ petitions and the special leave petition, this Court, HELD: ( I) All civilised Governments recognise the need for access to justice being free. Whether the whole of the expenses of administration of civil justice also in addition to those of criminal justice should be free and met entirely by public revenue or whether the litigants should contribute and if so, to what extent, are matters of policy. [170G] (2) A fee is a charge for the special service rendered to a class of citizens by Government or Government agencies and is generally based on the expenses incurred in rendering the services. [174B] PG NO 158 The Commissioner, Hindu Religious Endowments, Madras vs Lakshmindra Thirtha Swamiar of Shirur Mutt., [1954] SCR (1) 1005 and Om Prakash Agarwal vs Guni Ray, AIR 1986 (SC) 726 referred to. (3) It is for the governmental agencies imposing the fee to justify its impost and its quantum as a return for some special services. (4) Once a broad correlation between the totality of the expenses on the services, conceived as a whole, on the one hand and the totality of the funds raised by way of the fee, on the other, is established, it would be no part of the legitimate exercise in the examination of the constitutionality of the concept of the impost to embark its effect in individual cases. Such a grievance would be one of disproportionate nature of the distribution of the fees amongst those liable to contribute and not one touching the conceptual nature of the fee. [184A B] (5) The test is one of the comprehensive level of the value of the totality of the services, set off against the totality of the receipts. If the character of the `fee ' is thus established, the vagaries in its Distribution amongst the Class, do not detract from the concept of a `fee ' as such, though a wholly arbitrary distribution of the burden might violate other constitutional limitations. [185G] Municipal Corporation of Delhi & Ors. vs Mohd . Yasin. , ; H.H. Sudhundra Thirtha Swamiar vs Commissioner for Hindu Religious & Charitahle Endowments., [1963] Supp. 2 SCR 302; Sreenivasa General Traders & Ors. vs Andhra Pradesh & Ors., ; State of ' Maharashtra & Ors. vs The Salvation Army, Western India Territorv ; Kewal Krishan Puri & Anr. vs State of Punjab & Ors. ; Secretary. Government of ' Madras, Home Department & Anr. vs Zenith Lamp & Anr. vs State of Kanataka, AI 1979 (SC) 119; The Commissioner Hindu Religious Endowments Madras vs Sri Lakshmindra Thirtha Swantiar of Sri Shirur Mutt., ; ; Om Prakash Agarwal vs Giri Raj Kishori, 730; N.M. Desai vs The Teesteels Ltd. & Anr., AIR 1980 (2) SC 2125; Lady Tanumuti Girijaprasad & Anr. vs Special Rent Acquisition Officer, Western Railway Special Civil Application No. 979 of 1970 with Special Civil Application 287 of 1967; The City Corporation of Calicut vs Thachambalath Sadasvian & Ors., , referred to. Indian Organic Chemicals vs Chemtax Fibres, Secretary, Government of Madras Home Department vs Zenith Lamp & Electrial Ltd., ILR 1968 (Madras) 247 overruled. PG NO 159 (6) Though legislative measures dealing with economic regulation are not outside article 14, it is well recognised that the State enjoys the widest latitude where measures of economic regulation are,concerned. These measures for fiscal and economic regulation involve an evaluation of diverse and quite often conflicting economic criteria and adjustment and balancing of various conflicting social and economic values and interests. It is for the State to decide what economic and social policy it should pursue and what discriminations advance those social and economic policies. In view of the inherent complexity of these fiscal adjustments, courts give a larger discretion to the Legislature in the matter of its preferences of economic and social policies and effectuate the chosen system in all possible and reasonable ways. [187G H; 188A B] East India Tobacoo Co. vs State of Andhra Pradesh, ; The State of Gujarat & Anr. vs Shri Ambica Mills Ltd. Ahmedabad, referred to. (7) The lack of perfection in a legislative measure does not necessarily imply its unconstitutionality. It is rightly said that no economic measure has yet been devised which is free from all discriminatory impact and that is such a complex arena in which no perfect alternatives exist, the court does well not to impose too rigorous a standard of criticism. under the equal protection clause. reviewing fiscal services. [189F G ] G.K. Krishnan etc. vs The Slate of Tamil Nadu [1975] 2 SCR 715 730; San Antonic Independent School Districf vs Bodriguer. 411 U.S.I. at p. 41. Income Tax Officer, Shillong & Anr. vs N. Takim Roy Rymbai etc. ; , referred to. It is trite that for purposes of testing a law enacted by one State in exercise of its own independent legishtive powers for its alleged violation of Article 14 it cannot be contrasted with laws enacted by other States. [192C] The State of Madhya Pradesh vs G.C. Mandawar, ; , referred to. (9) Having regard to the nature and complexity of this matter It is, perhaps, difficult to say that the ad valorem principle which may not be an ideal basis for distribution of a fee can at the same time be said to be so irrational PG NO 160 as to incur any unconstitutional infirmity. The presumption of constitutionality of laws requires that any doubt as to the constitutionality of a law has to be resolved in favour of constitutionality. Though the scheme cannot be upheld, at the same time, it cannot be struck down either. [192E F] (10) The State is in theory entitled to raise the totality of the expenses by way of fee. Any interference with the present yardstick for sharing the burden might in turn produce a yardstick less advantageous to litigants at lower levels. [192G] (11) The High Court has struck down the provisions of section 29(1) read with entry 10 of Schedule I of the Bombay Court Fees Act, 1959 on the ground that the levy of court fee on proceedings for grant of probate and letters of administration ad valorem without the upper limit prescribed for all other litigants is discriminatory. If in respect of all other suits of whatever nature and complexity an upper limit of Rs.15,000 on the court fee is fixed, there is no logical justification for singling out this proceeding for an ad valorem impost without the benefit of some upper limit prescribed by the same statute respecting all other litigants. [193A B; F] (12) The Directive Principles of State Policy though not strictly enforceable in courts of law, are yet fundamental in the governance in the country. They constitute fons juris in a Welfare State. [194E] U.B.S.E. Board vs Hari Shanker, AIR 1979 SC 69 referred to. (13) The power to raise funds through the fiscal tool of a `fee ' is not to be confused with a compulsion to do so.

The point in controversy in this appeal was whether SS. 207 and 207A inserted into the Code of Criminal Procedure by the amending Act 26 of 1955, violated the provision of article 14 of the Constitution and were, therefore, invalid in law. The appellants were committed for trial to the Court of Session by the inquiring 397 Magistrate in a proceeding instituted against them on a Police report and he followed the procedure laid down in section 207A of the Code as required by section 207 Of the Code. The appellants moved the High Court for quashing the order of commitment on the ground that the provisions of section 207A introduced discrimination as against accused persons against whom proceedings were ' instituted on Police report and were unconstitutional in character. The High Court held against them. The contention was reiterated in this Court and it was sought to be made out that the provisions Of section 207A of the Code, in comparison and contrast to other provisions of Ch. XVIII of the Code, prescribed a less advantageous procedure for the accused persons in a proceeding started on Police report than the procedure prescribed for other cases in the succeeding sections of the chapter. Held, that sections 207 and 207A of the Code were not discriminatory and did not contravene article 14 of the Constitution and their constitutional validity was beyond question. Although there can be no doubt that the impugned sections introduced substantial difference in the procedure relating to commitment proceedings applicable to the two classes of cases, they did not in any way affect the procedure at the trial, and the true test of the constitutional validity of the classification they made, was whether it was reasonable and pertinent to the object the Legislature had in view, namely, a speedy trial of offences with the least possible delay. So judged there could be no doubt that the Legislature in prescribing the two different procedures at the commitment stage, one for proceedings instituted on Police report and the other for those that were not, had acted on a consideration that was reasonable and connected with the object it had in view. Budhan Choudhry vs The State of Bihar, ; , applied. Matajog Dobey vs H. C. Bhari, ; , Chiranjit Lal Chowdhuri vs The Union of India, ; , The State of Bombay vs F. N. Balsara, ; , The State of West Bengal vs Anwar Ali Sarkar, ; , Kathi Raning Rawat vs The State of Saurashtra, (1952) S.C.R. 435, Lachmandas Kewalram Ahuja vs The State of Bombay, ; , Qasim Razvi vs The State of Hyderabad, ; , Habeeb Mohamad vs The State of Hyderabad, ; and The State of Punjab vs Ajaib Singh; , , referred to.

The petitioner, the editor of a newspaper, was detained under r. 30(1)(b) of the Defence of India Rules, 1962. He filed a petition under article 32 of the Constitution for a writ of habeas corpus challenging the legality of the detention order on various grounds. Dismissing the petition, HELD:Rule 30 (1) (b) cannot be said to be ultra vires of section 3 (2) (15)(i) of the Defence of India Act for the reason that it does not state that the satisfaction of the authority making the order of detention has to be on grounds appearing to it to be reasonable. The rule requires only that the detaining authority must be satisfied that the detention is necessary for the purposes mentioned and that is what the latter part of the section under which it was made also says. This part does not contain any requirement as to satisfaction on reasonable grounds. The rule has clearly been made in terms of the section authorising it. [211 F] Article 352 of the Constitution does not require the proclamation to state the satisfaction of the President about the Emergency. The Article requires only a declaration of emergency threatening the security of India by one of the causes mentioned. The words "to that effect" can have no other meaning. A proclamation ceases to have effect only by one of the events mentioned in cl. 2 of article 352 of the Constitution.[212 C] Section 3(2)(15)(iv) of the Defence of India Act and r. 30 A of the Defence of India Rules, does not give a right to make a representation. Their effect is to provide a review of the detention order by the authorities and in the manner mentioned. Rule 23 of the Defence of India (Delhi Detenus) Rules, 1964, states that a detente will be allowed to interview a legal practitioner for the Purpose of drafting his representation against his detention. [213 C D]. The fact that newspapers and men connected with them may be dealt with under other provisions of the Art and Rules does not prevent detention of such persons under r. 30(1)(b) of the Defence of India Rules. [213 H] The order need not mention the part of India which was to be Prejudicially affected by the acts of the detenue.

Appeal No.232 of 1960. Appeal from the Judgment and Order dated October 6, 1958, of the Bombay High Court in Income Tax Reference No. 10 of 1958. R. J. Kolah, Dwaraka Das, section N. Andley, Rameshwar Nath, J. B. Dadachanji and P. L. Vohra for the Appellants. Hardyal Hardy and D. Gupta for the Respondent. November 29. The Judgment of J. L. Kapur and J. C. Shah, JJ., was delivered by Kapur, J. M. Hidayatullah, J., delivered a separate Judgment. KAPUR, J. This is an appeal pursuant to a certificate of the High Court of Bombay against the judgment and order of that Court in Income tax Reference No. 10 of 1958, answering the question referred to it against the assesses whose legal representatives are 744 the appellants before, us, the respondent being the Commissioner of Income tax. The facts which have given rise to the appeal are that the late Mr. Annantrai P. Pattani, hereinafter called the assessee was, by Hazur Order dated December 10, 1937, appointed the Chief Dewan of Bhavnagar State. On January 15, 1948, the Maharaja of Bhavnagar introduced responsible Government in his State and appointed the assessee as the Chairman of the Bhavnagar Durbar Bank but he received no salary for that post. On the same date by another Hazur Order the Maharaja granted a monthly pension of Rs. 2,000 to the assessee. The order was in the following terms: "He looked after us well in our childhood and rendered valuable services sincerely and with single minded loyalty to us and our State during extremely difficult period of the last war and thereafter, which has enhanced the prestige and prosperity of the State and given the State and the people a place of pride in India. In appreciation of this, it is (hereby) decided to grant him a monthly pension of Rs. 2,000 two thousand which is the monthly salary he is drawing at present. Date 22 1 1948. " On May 31, 1950, the Maharaja directed Messrs. Premchand Roychand & Sons, Bombay, with whom he had an account "to pay by cheque to Mr. A.P. Pattani Rs. 5 lacs out of the amount lying to the credit of my account with you." This sum was paid to the assessee on June 12, 1950. It is stated that the accountant of the Maharaja asked for instructions as to how that amount of Rs. 5 lacs was to be adjusted in the accounts and on December 27, 1950, the Maharaja made the following order: "In consideration of Shri Annantrai P. Pattani the Ex Diwan of our Bhavnagar State having rendered loyal and meritorious services Rs. 5,00,000 (Rupees Five Lacs) are given to him as gift. Therefore, it is ordered that the said amount should be debited to our Personal Expense Account." On March 1, 1948, Bhavnagar State was merged in the United States of Saurashtra and the Maharaja ceased to be the ruler of the said State as from that 745 date. The assessability of this sum of Rs. 5 lacs was raised in the course of the assessment proceedings for the assessment year 1951 52 and at the request of the ' assessee which is stated to be oral the Maharaja wrote on March 10, 1953, the following: "I confirm that in June 1950, 1 gave you a sum of rupees five lacs (Rs. 5,00,000) which wag a gift as a token of my affection and regard for you and your family. This amount was paid to you by Premchand Roychand & Sons according to my letter of 31st May, 1950, from moneys in my account with them. " On these facts the Income tax Officer held that Rs. 5,00,000 received on June 12, 1950, was liable to income tax under section 7(1) read with explanation (2) of that section as it stood before the amendment by the Finance Act, 1955. The assessee took an appeal to the Appellate Assistant Commissioner which was dismissed. Against that order an appeal was taken to the Income tax Appellate Tribunal but the Tribunal also dismissed the appeal. The Tribunal held that looking to the circumstances they would attach more importance to the "contemporaneous document, i.e., the order of the 27th December, 1950"; which clearly mentioned why the sum of Rs. 5,00,000 was paid to the assessee. The Tribunal was not inclined to "believe in the contents of that letter and would leave the matter at that. " The reference is to the letter of the Maharaja dated March 10, 1953. The Tribunal further held that there was no distinction between the Maha raja and the State and "assuming for a moment that this view of ours is not found to be correct, still it is clear from the Huzur Order No. 13 dated 22 1 1948 (vide para 2 above) that the assessee rendered services not only to the State, if it is distinct from the Maharaja but to the Maharaja as well; for that Huzur Order clearly refers to assessee rendering "valuable services sincerely and conscientiously to us and our State". We would, therefore, hold that the amount of Rs. 5 lacs is a taxable receipt falling under Section 7(1) read with Explanation 2. " At the instance of the assessee the following question of law was referred to the High Court: 746 "Whether the sum of Rs. 5 lacs has been properly ,brought to tax in the hands of the assessee for the assessment year 1951 52?" and a further question as to the applicability of section 4(3) (vii) of the Income tax Act was not referred on the ground that it did not arise out of the order of the Tribunal. The High Court, on the findings given by the Tribunal came to the conclusion that section 7(1) explanation (2) of the Income tax Act applied. It held that it was not possible to regard the receipt of this sum of money by the assessee as a windfall nor as a personal gift of the nature of a testimonial; that the gift was not made in appreciation of the personality or character of the assessee nor was it symbolical of its appreciation of his personal qualities; that the consideration for the gift was in terms stated to be past services and therefore it could not be treated as a mere gift by an employer to an employee when the Court did not know what motivated the making of that gift. On the facts of the case the High Court reached the conclusion, though with some reluctance, that the case fell within the ambit of section 7(1), Explanation (2). The High Court also held that this sum could not be exempted from tax on the ground that it was merely a casual or nonrecurring receipt because once connection with the employment was established there was no question of considering the recurring or the casual nature of the receipt. During the pendency of the proceedings in the High Court the assessee died and his heirs and legal representatives were brought on the record and hence they are the appellants. It was argued on behalf of the appellants that the facts showed that the sum paid cannot fall within section 7(1), Explanation (2), of the Income tax Act. By Hazur Order dated January 22, 1948, the Maharaja had compensated the assessee for valuable services rendered and single minded loyalty to the Maharaja and to his State during the difficult period of the war and thereafter, which had added to the prestige and prosperity of the State and in appreciation of that the 747 Maharaja had granted to the assessee a monthly pension of Rs. 2,000, which was paid to the assessee even after the merger and of the establishment of the United States of Saurashtra from out of the public revenue. At the time when Rs. 5,00,000 were paid, the State of Bhavnagar as such had ceased to exist. The Maharaja was no longer a Ruling Chief but was the Governor of the State of Madras. The order by which Messrs. Premchand Roychand & Sons, Bombay, were directed to pay the sum of Rs. 5,00,000 out of the account of the Maharaja does not mention any reason for payment. When as is alleged an accountant of the Maharaja asked as to how that amount of Rs. 5,00,000 was to be adjusted in the accounts, the Maharaja wrote on December 27, 1950, what is described as an order and directed that the sum should be debited to his Personal Expense Account. It also stated, why it is not clear, that that sum was to be given to the assessee in consideration of the assessee 's loyal and meritorious services as a gift. When asked later to clarify the reasons for making this gift the Maharaja made it clear that the gift was as a token of affection and regard for the assessee and his family and that the amount was paid by Messrs. Premchand Roychand & Sons from out of the private monies of the Maharaja with that firm. The Income tax Appellate Tribunal took into account the two documents the first of which has been described as an order of December 27, 1950, which was treated as a "contemporaneous document" and the other the letter of March 10, 1953, which was about two years later. The Tribunal did not accept the correctness of what was stated in the letter but attached a great deal of importance to the document of December 27, 1950, which the Tribunal thought was a con temporaneous document. It appears to us that the Tribunal was in error in treating the document of December 27, 1950, as a contemporaneous document and because of this erroneous approach the finding that it has given cannot be treated as a finding of fact which should bind the court in its decision. It is obvious that the reason why the 748 Tribunal attached all this importance to the document of December 27, 1950, was that it was contemporaneous. It would be difficult to accept that a document written six months after the fact of payment could be termed as contemporaneous document particularly when the object of that document was only to instruct an accountant as to how he should make a particular entry. The letter which was written by the Maharaja on March 10, 1953, was rejected because of the circumstances of the case one of which was the contemporaneous document. It does not appear to us that the Tribunal gave sufficient or any consideration to the fact that the Maharaja had already passed an order of a liberal and almost generous grant of a pension of Rs. 2,000 per mensem which was in lieu of the services rendered by the assessee both to the State as well as to the Maharaja and his family and that pension was ordered before the merger of the State and when the employment of the assessee as the Dewan terminated. According to what was stated in the letter of the Maharaja dated March 10, 1953, the sum of Rs. 5,00,000 was given as a gift in token of Maharaja 's affection and regard for the assessee and the assessee 's family. There is no reason shown why the Maharaja should have aided and abetted the assessee in escaping income tax. The only reason stated by the Tribunal is based on a wrong assumption as to the nature of the document of December 27, 1950. The payment of Rs. 5,00,000 was sought to be brought within the purview of section 7(1) of the Act read with explanation (2). This section at the relevant time provided: section 7(1) "The tax shall be payable by an assessee under the head "Salaries" in respect of any salary or wages, any annuity, pension or gratuity and any fees, commissions, perquisites or profits in lieu of, or in addition to, any salary or wages, which are due to him from; whether paid or not or are paid by or on behalf of. . . any private employer. . . . . Explanation 2: A payment due to or received by 749 an assessee from an employer or former employer or from a provident or other fund, is to the extent to, which it does not consist of contributions by the ', assessee or interest on such contributions a profit received in lieu of salary for the purpose of this subsection, unless the payment is made solely as compensation for loss of employment and not by way of remuneration for past services;. . . . Counsel for the appellants contended that the payment did not fall within this section because it was a gift made on account of personal qualifications and was a testimonial unconnected with any service rendered. The submission was that the assessee had already been compensated for his services to the Maharaja personally and the State and this sum of Rs. 5 lacs was a gift in token of affection and regard and not as a payment in consideration of the services already rendered to the State or the Maharaja or both. It will not be inappropriate to mention that in the document dated December 27, 1950, it is stated that Rs. 5,00,000 was paid to the assessee as ex Dewan of Bhavnagar State in consideration of his having rendered loyal and meritorious services to Bhavnagar State. There is no mention in the document of December, 1950, of any services rendered to the Maharaja and it does not seem to have been considered by the Tribunal as to why the Maharaja should make out of his personal account the gift of such a large amount for something which was not done for the Maharaja specifically, particularly when the services to the State and to the Maharaja and his family had already been well compensated. This lends support to the submission of the appellants that the amount was paid merely as a gift in token of Maharaja 's affection and regard for the assessee. Mr. Kolah for the appellants relied on several cases in support of his contention that the amount was not liable to tax under section 7. In Beynon vs Thorpe (1) the assessee resigned his position as a Managing Director of the Company; did no work for the company; did (1) 95 750 not attend any Board meetings and received no remuneration as a Director of the Company. It was, however, a custom of the company to give to its retiring employees voluntary pension or allowance and the company voted a pension of pound 5,000 a year to the assessee but this resolution was rescinded and by another resolution pound 5,000 was voted to the assessee" not as or because he is a Director but as a personal gift". The assessee was assessed under Schedule 'E ' in respect of both the pension and the final payment but these assessments were discharged on appeal by the Special Commissioners who decided that the allowances were gifts of personal nature only. It was hold that the payments were not income assessable to income tax in the hands of the assessee. Rowlatt, J., said at p. 14: "Now the question is whether this ceases to be a mere gift because what has led to it is a past employment, an employment which has ceased. It has been made abundantly clear by the Court in Scotland in Duncan 's case(1) that this sort of sums received by a person cannot possibly be put as receipts from his office or in respect of his office or employment, and they said in terms of that kind in a case like this that these emoluments cannot be taxed under Schedule 'E ', and I am bound to say I think that goes a very long way to conclude this case. But it is said that nevertheless they are in respect of the employment. Well, it seems to me that is a complete fallacy. It is nothing but a gift moved by the remembrance of past services already efficiently remunerated as services in themselves; it is merely a gift moved by that sort of gratitude or that sort of moral obligation if you please: it is merely a gift of that kind. In this ease it happens to be very large; in many cases it is very small, but in all the cases it seems to me, whether it is large gift like this or whether it is a small gift to a humble servant they are exactly on the same footing as gifts which are made to a child or gifts which are made to any other person whom the giver thinks he ought to supply with funds for one reason or another; and as the (1) 751 Lord President in Scotland points out it is only a matter of history that the feeling between the parties which has generated the gift arises out of an employment." Mr. Kolah also relied on Reed vs Seymour (1). In that case a committee of a Cricket Club granted a benefit match to a professional cricketer in their service. Out of the profits of the benefit match the beneficiary, who was the assessee purchased a farm and assessment was made on him under Schedule 'E ' in respect of the proceeds of the benefit match but this was discharged by the General Commissioner on appeal. This sum was held to be in the nature of a personal gift and not assessable *to income tax. Viscount Cave in his speech posed the question which Rowlatt, J., put, i.e., "is it in the end a personal gift or is it remuneration"; if the latter it is subject to tax, if the former it is not. In that case the test applied by Viscount Cave was that the terms of the assessee 's employment did not en title him to a benefit; the purpose for which the amount was paid was to express gratitude of the employers and of the cricket loving public for what he had done and in their appreciation of his personal qualities. It was also stated that if the benefit had taken place after Seymour 's retirement no one would have sought to tax the proceeds as his income and the circumstance that it was given before but in contemplation of, retirement does not alter its quality and the whole sum was a testimonial and not a perquisite and therefore it was not a remuneration for services but a personal gift. Counsel also relied on Moorehouse vs Dooland (2). In that case a cricket professional was employed under a contract in which it was provided that collections shall be made for any meritorious performance by him in accordance with the rules for the time being of the employing Cricket League Club. The assessee played twenty matches and on eleven occasions collections were made on his behalf under the rules of the Club and a total sum of pound 48 15s was collected. This was sought to be taxed as fees, wages perquisites or profits (1) [1927] XI T.C. 625.(2) 752 arising from his employment. It was held that (1) the test of liability to tax on voluntary payments from the standpoint of the person who receives it was that it accrued to him by virtue of his office or employment, i.e., byway of remuneration of his services; (2) that if the assessee 's contract of employment entitled him to receive voluntary payments and (3) that the payment was of a periodic and recurring character. On the other hand if a voluntary payment was made in circumstances which showed that it was given by way of a present or a testimonial on grounds personal to the recipient, the proper conclusion was that the payment was not profit accruing to the recipient by virtue of his office or employment but a gift to him as an individual paid and received by reason of his personal needs or by reason of his personal qualities. Applying these principles the proceeds were by the terms of the contract of employment received by way of remuneration and were liable to tax. In that case the payment was treated as being subject to tax because it was substantially in respect of services and accrued to the assessee by reason of his office. It is quite clear that had the gift been as a testimonial or a contribution for specific performance peculiarly due to the personal qualities of the recipient, it would have been treated as a mere present. The next case relied upon was David Mitchell vs Commissioner of Income tax (1) where the test laid was whether the payment was made in appreciation of .the personality and character of the assessee or in appreciation of the professional services rendered by him in order to give him an extra profit over and above the share of profit he might get from the firm for the services rendered. Counsel for the respondent argued that the gift made by the Maharaja was not in respect of personal qualities of the recipient but was relatable to his office although made by an ex employer and was therefore taxable; that the gift was voluntary is clear but it is not quite clear how the amount can be said to be relatable to the office held by the recipient. Even (1) 753 according to the case of the respondent the amount was paid about two years after the assessee had ceased to be an employee of the Maharaja or the State and immediately on his ceasing to be the Dewan of Bhavnagar State, the Maharaja had granted him a pension from out of the public funds for his services to the State as Dewan and for services rendered to the Maharaja and his family a handsome and a generous monthly pension of Rs. 2,000 per mensem. Apart from the fact that the Tribunal relied upon a document which was not contemporaneous, it seems to have overlooked the fact that there was a gap of two years before the amount of Rs. 5,00,000 was paid by the Maharaja out of his personal funds. Counsel for the respondent relied upon a judgment of this Court in P. Krishna Xenon vs The Commissioner of Income tax, Mysore, Travancore Cochin and Coorg, Bangalore (1). In that case the assessee was a teacher who taught his disciples Vedanta philosophy without any motive or intention of making any profit. One of the disciples made gifts of money to him on several occasions and it was contended by the assessee that he was not liable to tax on the amounts received from his disciple as he was not carrying on any vocation. But it was held that in teaching Vedanta philosophy the assessee was carrying on a vocation and that the payments made by the disciple were received by the recipient from his vocation. It was also held that if the voluntary payments had been made for reasons purely personal to the donee and not connected with his office or vocation, they would not be taxable but if they were made because of the office they would be taxable. The question was not what the donor thought he was doing but why the donee received it. The first thing to notice about that case is that those gifts were not made by the disciple as a gift to mark his esteem and affection for his preceptor but as was stated by the disciple in his affidavit he had paid those amounts because he had obtained the benefit of the teachings by the preceptor on Vedanta. It was found in that case and the disciple admitted (1) [1959] Supp. 1 S.C.R. 133. 754 that he had received benefit from the teaching of his preceptor and that the gifts that he had made, even though as a mark of esteem and affection, were the result of teaching imparted by the preceptor and because the amounts were paid to the preceptor as preceptor and the imparting of the teaching was the causa causans of the making of the gift,; it was not merely causa sine qua non. The payments were repeated and came with some regularity as the disciple visited the preceptor for receiving instructions. It was in these circumstances that this court held the payments to the preceptor as payments because of the imparting of the teaching and therefore they were income arising from the vocation of the recipient as a teacher of Vedanta philosophy. In our opinion the sum of Rs. 5,00,000 was not paid to the assessee in token of appreciation for the services rendered as a Dewan of Bhavnagar State but as a personal gift for the personal qualities of the assessee and as a token of personal esteem. The appeal is therefore allowed and the order of the High Court set aside and the reference is answered against the Commissioner of Income tax. The appellants will have their costs throughout. HIDAYATULLAH, J. I have had the advantage of reading the judgment just delivered by my brother, Kapur, J. I regret very much my inability to agree that the appeal should be allowed and the order of the High Court set aside. In my opinion, the High Court had correctly answered the question referred to it. The facts of the case have been stated in detail in the judgment of my learned brother, and I need not repeat them but refer only to some of them briefly. On June 12, 1950, a sum of Rs. 5 lakhs was given by the Maharaja of Bhavnagar to the predecessor of the appellants, who was an ex Dewan of the State. This was paid by Messrs. Premchand Roychand & Sons, Bombay, with whom the Maharaja had an account. There is no contemporaneous record to show why this payment was made; but it appears that when the accountant of the Maharaja enquired how the amount 755 was to be entered in the books of account, the Maharaja issued an order on December 27, 1950, to the following effect: "In consideration of Shri Annantrai P. Pattani the Ex Diwan of our Bhavnagar State having rendered loyal and meritorious services Rs. 5,00,000 (Rupees Five lacs) are given to him as gift.Therefore, it is ordered that the said amount should be debited to our Personal Expense Account." After the assessment proceedings had commenced in this case, the original assessee produced a letter written by the Maharaja on March 10, 1953, as follows: "I confirm that in June, 1950, I gave you a sum of rupees five lacs (Rs. 5,00,000) which was a gift as a token of my affection and regard for you and your family.This amount was paid to you by Premchand Roychand & Sons according to my letter of 31st May, 1950, from moneys in my account with them." The question in this case was whether section 7(1) of the Income tax Act read with Explanation 2 to that section as it stood prior to the amendment in 1955, applied to this payment. That section, so far as it is material, is as follows: "7(1).The tax shall be payable by an assessee under the head 'Salaries ' in respect of any salary or wages, any annuity, pension or gratuity and any fees, commissions, perquisites or profits in lieu of, or in addition to, any salary or wages, which are allowed to him by or are due to him, whether paid or not, from, or are paid by or on behalf of any private employer;. . . . . Explanation 2. A payment due to or received by an assessee from an employer or former employer or from a provident or other fund, is to the extent to which it does not consist of contributions by the assessee or interest on such contributions a profit received in lieu of salary for the purpose of this subsection, unless the payment is made solely as compensation for loss of employment and not by way of remuneration for past services;. . .". To determine whether the second Explanation applies 756 to the facts in this case, it has to be found if this pay ment was received by the assessee from a former employer by way of remuneration for past services. The Tribunal did not accept the letter of the Maharaja, and observed as follows: "In support of the latter view Mr. Tricumdas strongly relied upon the letter dated 10 3 1953 addressed by the Maharaja to the assessee, vide para 2 above. We have already indicated the circumstances in which that letter came to be written and would merely observe that we find it difficult to bring ourselves to believe in (sic) the contents of that letter and would leave the matter at that. " This, in my opinion, is a finding upon the evidentiary value of the letter of the Maharaja, and though the order of the Tribunal is worded mellifluously, the Tribunal 's decision is quite clearly that it was not per suaded to accept it. Indeed, of the two documents, greater worth has to be attached to one which was issued before the controversy started and was written not to the assessee but to the Maharaja 's accountant who enquired how the account was to be adjusted. The use of the word 'contemporaneous ' to describe the order to the accountant meant no more than this that it was earlier in time and very soon after the amount was given. The Tribunal did not rely on any extra neous evidence in reaching its conclusion, but on something which had proceeded from the Maharaja himself. The motive of the Maharaja may be irrelevant, because what has to be seen is not why the payment was made but for what the assessee had received it. The Maharaja no doubt had been generous in fixing the pension at Rs. 2,000 per month. But the payment of such a large sum was not just bounty but to reward the past services, which judged from the scale of the pension had not adequately been paid for in the past. In this connection, the words of the Maharaja himself (and what better evidence can there be?) were that the amount was paid "in consideration of Shri Annantrai P. Pattani the Ex Dewan of our Bhavnagar State having rendered loyal and meritorious services Rs. 5,00,000 are given to him as gift". 757 The word gift ' does not alter the nature of the payment. The Maharaja indeed made a gift, as he had stated over again; but this order quite clearly disclosees that it was by way of remuneration for past services. The case, therefore, falls within the ruling of the a Supreme Court reported in P. Krishna Menon vs The Commissioner of Income tax, Mysore, Travancore Cochin and Coorg, Bangalore (1), and is indistinguishable from it. In the earlier case of this Court, the person who gave the money did not even mention any past services; but this Court found that because the recipient had taught him Vedanta philosophy, the payment was really in the nature of remuneration for past services. The facts in P. Krishna Menon 's case (1) were that the assessee was teaching his disciples Vedanta philosophy without any motive or intention of making a profit out of such activity. One J. H. Levy who used to go to Travancore from England at intervals attended his teachings. Levy had an account with Lloyd 's Bank at Bombay, and on December 31, 1944, Levy transferred the entire amount of Rs. 2,41,103 11 3 to the credit of an account which Levy got the assessee to open in his ' own name. Levy made further remittances and by August 19, 1951, had paid about Rs. 4,50,000. It was held by this Court that the assessee was carrying on a vocation. In deciding the question whether the amounts were assessable to tax, this Court observed as follows: ". it seems to us that the present case is too plain to require any authority. The only point is, whether the moneys were received by the appellant by virtue of his vocation. Mr. Sastri contended that the facts showed that the payments were purely personal gifts. He drew our attention to the affidavit of Levy where it is stated 'all sums of money paid into his account by me have been gifts to mark my esteem and affection for him and for no other reason '. But Levy also there said, 'I have had the benefit of his teachings on Vedanta '. It is important to remember however that the point is not what the donor (1) [1959] Supp.1 S.C.R. 133.96 758 thought he was doing but why the donee received it". Sarkar, J., then referred to the dictum of Collins, M. R., in Herbert vs Mc Quade (1), which may be quoted here: "Now that judgment, whether or not the particular facts justified it, is certainly an affirmation of a principle of law that a payment may be liable to income tax although it is voluntary on the part of the persons who made it, and that the test is whether, from the standpoint of the person who receives it, it accrues to him in virtue of his office; if it does, it does not matter whether it was voluntary or whether it was compulsory on the part of the persons who paid it. That seems to me to be the test; and if we once get to this that the money has come to or accrued to, a person by virtue of his office it seems to me that the liability to income tax is not negatived merely by reason of the fact that there was no legal obligation on the part of the persons who contributed the money to pay it." The learned Judge also referred to the observations of Rowlatt, J., in Reed vs Seymour (2) and of Viscount Cave, L. C., in Seymour vs Reed (3), and observed that the real question was, is the payment in the nature of a personal gift or is it a remuneration?, and quoted as the reply the words of the Lord Chancellor "If the latter, it is subject to the tax; if the former, it is not." Sarkar, J., also referred to the observations of Lord Ashbourne in Blakiston vs Cooper (4), which were: "It was suggested that the offerings were made as personal gifts to the Vicar as marks of esteem and respect. Such reasons no doubt played their part in obtaining and increasing the amount of the offerings, but I cannot doubt that they were given to the vicar as vicar and that they formed part of the profits accruing by reason of his office.", and concluded as follows: "We have no doubt in this case that the imparting (1) (3) (2) (4) [1909] A.C. 104. 759 of the teaching was the causa causans of the making of the gift; it was not merely a causa sine qua non. The payments were repeated and came with the same regularity as Levy 's visits to the appellant for receiving instructions in Vedanta. We do not feel impressed by Mr. Sastri 's contention that the first payment of Rs. 2,41,103 11 3 was too large a sum to be paid as consideration. In any case, we are not concerned in this case with that payment. We are concerned with payments which are of much smaller amounts and as to which it has not been said that they were too large to be a consideration for the teaching. And one must not forget that these are cases of voluntary payments and the question of the appraisement of the value of the teaching received in terms of money is not very material. If the first payment was too big to have been paid for the teaching received, it was too big to have been given purely by way of gift. " In my opinion, the case of this Court concludes the matter, and the Tribunal was within its rights in accepting one piece of evidence in preference to another, and the finding on the evidentiary value of the letter of the Maharaja was a matter essentially for the Tribunal to decide finally. I thus agree with the High Court in the answer which it gave, in agreement on facts with the Tribunal, and the reasons for which the answer was given. I would, therefore, dismiss the appeal with costs. BY COURT: In view of the majority judgment of the Court, the appeal is allowed with costs throughout. Appeal allowed.

A who was the Dewan of the State of Bhavnagar before responsible government was introduced in the State, was granted a monthly pension of Rs. 2,000 by the Maharaja of the State by an order dated January 15, 1948. On March 1, 1948 the State of Bhavnagar was merged in the United States of Saurashtra and the Maharajah ceased to be the Ruler of the State. Subsequently on May 31, 1950, the Maharaja directed his banker in Bombay to pay A a sum of Rs. 5 lakhs out of the amount lying to his credit and when he was asked for instructions as to how that sum was to be entered in the books of account he passed an order on December 27, 1950, to the effect that in consideration of A having rendered loyal and meritorious services the said sum was given to him as a gift and that the amount should be debited to his personal expense account. The liability of the above sum for income tax was raised during the course of the assessment proceedings of A for the year 1951 52, and the assessee produced a letter dated March 10, 1953, written by the Maharajah at the request of the former, as follows: "I confirm that in June 1950, I gave you a sum of Rs. 5 lakhs which was a gift as a token of my affection and regard for you and your family. . The Income tax Officer held that the amount was liable to income tax under section 7(1), read with explanation (2), of the Indian Income tax Act, 1922. The Appellate Tribunal took into account the two documents dated December 27, 1950, and March 10, 1953, written by the Maharajah and considered that the first which clearly mentioned why the said sum was paid to the assessee, was more reliable for the reason that it was contemporaneous, than the second which was written more than 2 years later and the correctness of which they were not inclined to accept. The Tribunal agreed with the Income tax Officer that the amount was a taxable receipt. Held, (per Kapur and Shah, JJ.; Hidayatullah, J., dissenting), that on the facts of the case the sum of Rs. 5 lakhs was given to the assessee not as a payment in consideration of the services already rendered by him as the Dewan of the State, but merely as a gift in token of the Maharajah 's affection and regard for the assessee, and, therefore, was not liable to be assessed to tax 743 under section 7(1), explanation (2), of the Indian Income tax Act,1922. The Tribunal was in error in treating the document dated December 27, 1950, 'as a contemporaneous document while as a matter of fact it was written six months after the fact of payment, and because of this erroneous approach as a result of which the second letter had been rejected, the finding given by the Tribunal could not be treated as binding on the Court. P. Krishna Menon vs The Commissioner of Income tax, Mysore, Travancore Cochin and Coorg, Bangalore, [1959] Supp. 1 S.C.R. 133, distinguished. Per Hidayatullah, J. The use of the word "contemporaneous" to describe the order to the banker meant no more than this that it was earlier in time and very soon after the amount was given. The word "gift" did not alter the nature of pay ment; the Maharaja indeed made a gift, as he had stated over again, but the order disclosed that it was by way of remuneration for past services. The Tribunal was within its rights in accepting one piece of evidence in preference to another, and the finding on the evidentiary value of the letter of the Maharaja was a matter essentially for the Tribunal to decide finally. The decision in P. Krishna Menon vs The Commissioner of Income tax, Mysore, Travancore Cochin and Coorg, Bangalore, [1959] Supp. 11 S.C.R. 133, was applicable and concluded the present case.

The appellant, a partnership firm, was assessed by the Sales Tax Officer, who estimated the turnover for the Calendar year 1971, and for the first six months of the year 1972 and made two orders of assessment dated 26 March 1973 under section 33 of the Bombay Sales Tax Act, 1959 levying Sales Tax and penalty. Against the assessment and penalty orders for the two periods, the appellant appealed under clause (a) of sub section (1) of section 55 of the Act to the Assistant Commissioner. By a common order dated 29th September, 1973 the Assistant Commissioner reduced the quantum of the turnover and, consequently, the tax liability for each of the periods. Not fully satisfied by the relief granted, the appellant proceeded in second appeal to the Sales Tax Tribunal on 8th December, 1973. During the pendency of the appeals before the Tribunal, the Deputy Commissioner, issued two notices to the appellant on 24th April, 1974 requiring it to show cause why the appellate orders dated 29th September, 1973 passed by the Assistant Commissioner should not be revised under section 57 of the Act. The appellant objected to the exercise of revisional power by the Deputy Commissioner during the pendency of the appeals before the Tribunal. On 12th September 1975 the Deputy Commissioner rejected the objection. Against the order of rejection the appellant filed two appeals before the Tribunal, and by its order dated 27th October, 1977 the Tribunal dismissed the appeals. The Tribunal took the view that its deciding those appeals would result in nullifying the revisional power vested in the Deputy Commissioner. The two second appeals filed by the appellant against the appellate orders dated 19th September, 1973 passed by the Assistant Commissioner were adjourned. The appellant filed a writ petition in the High Court against the order of the Deputy Commissioner dated 12th September, 1975 rejecting its preliminary objection and also against the order passed by the Tribunal on 27th October, 1977 dismissing his appeals as well as the notices issued by the Deputy Commissioner on 24th April, 1974 in the purported exercise of his revisional power, contending that the Commissioner of Sales Tax could not exercise his revisional power against the appellate order of the Assistant Commissioner when a second appeal against that order was pending before the Tribunal. 98 The High Court rejected the appellant 's contention observing that as the statute did not provide any other forum or jurisdiction for protecting the interests of the Revenue, it was always open to the Commissioner to interfere in revision with an order prejudicial to the Revenue notwithstanding that such order may be already under appeal before the Tribunal. Allowing the appeal to this Court, ^ HELD: 1. It is not open to the Commissioner to invoke his power under clause (a) of sub section (1) of section 57 and summon the record of an order over which the Tribunal has already assumed appellate jurisdiction. The subordinate status of the Commissioner precludes that. [102 G] 2. An assessment order under the Bombay Sales Tax Act is appealable under section 55 of the Act. When the order is made by the Sales Tax Officer an appeal goes to the Assistant Commissioner. If the order is made by the Assistant Commissioner an appeal goes to the Commissioner and if it has been made by the Commissioner or Deputy Commissioner or Additional Commissioner an appeal lies before the Tribunal. Sub section (2) of section 55 provides for a second appeal against the appellate order of the Assistant Commissioner. The second appeal lies at the option of the appellant to the Commissioner or the Tribunal. The Tribunal exercises appellate jurisdiction by way of second appeal in respect of an assessment order made by the Sales Tax Officer. It also exercises by way of first appeal, appellate jurisdiction over an assessment order made by the Commissioner. It is at the apex of the appellate hierarchy, the Sales Tax Officer, the Assistant Commissioner and the Commissioner all of them being, subordinate to it. [101 C E] 3. While the Commissioner exercises revisional jurisdiction over an order passed by any officer or person subordinate to him, the Tribunal is the revisional authority over an order of the Commissioner. The Act constitutes the Tribunal an appellate as well as a revisional authority over the Commissioner. In quasi judicial matters the Commissioner is therefore subordinate to the Tribunal. [102 D] 4. The Tribunal is the supreme appellate and revisional authority under the statute. It cannot be divested of its jurisdiction to decide on the correctness of an order, it cannot be frustrated in the exercise of that jurisdiction, merely, because a subordinate authority, the Commissioner, has also been vested with jurisdiction over that order. Unless the statute plainly provides to the contrary that appears to be incontrovertible. [102 F] 5. The High Court was in error in concluding that the power to enhance an assessment can be discovered only in the revisional jurisdiction of the Commissioner and nowhere else. [104 H 105 A] 6. In a second appeal under sub section (2) of section 55 of the Bombay Sales Tax Act, the Tribunal has power to enhance the assessment. That being so, it is open to the Revenue to invoke that power in a pending second appeal filed by the dealer before the Tribunal. [104 G] 7. The Commissioner being a subordinate authority to the Tribunal cannot interfere with an order pending in appeal before the Tribunal, especially when 99 the interest of the Revenue is protected by the power of enhancement vested in the Tribunal while disposing of a second appeal filed by a dealer. [105 G] Commissioner of Sales Tax vs Motor and Machinery Manufacturers Ltd., (1976) 38 STC 78 over ruled. Commissioner of Income Tax vs Amritlal Bhogilal distinguished. Ramlal Onkarmal vs Commissioner of Income Tax, Assam , Kelpunj Enterprises vs Commissioner of Income Tax Kerala. , Russell Properties (P.) Ltd. vs A. Chowdhury, inapplicable.

In the Civil Suit No. 203 of 1955, on the original side of the Bombay High . Court, filed by the decree holder/respondent against the appellant/judgment, debtor for recovery of certain amount of money, summons were served on the judgment debtor who after filing his written statement absented himself, and did not take any further part in the proceedings of the Court resulting in a decree dated 29 6 1960 for Rs. 65,953.79. On 20 12 1961, Goa became a part of India and was made a Union Territory of India by the Constitution (Twelth Amendment) Act, 1962 passed on 27 3 1962. The decree holder applied to the Bombay High Court for transferring the decree to Goa Court for execution and by an order dated 28 8 1963 the decree was transferred to the Goa Court for execution. The execution application before the Executing Court at Panjim filed on 21 1 1964 was dismissed on 26 4 1965, holding that the decree transferred to it by the Bombay High Court was not executable. An appeal was preferred to the Additional Judicial Commissioner on 1 6 1965 and the appellant Judgment debtor filed his reply. During the pendency of the appeal, the Code of Civil Procedure was extended to Goa on 15 6 1966 by the Goa, Daman and Diu Extension of the Code of Civil Procedure and Arbitration) Act (30) of 1965 and repealing the Portuguese Code. The Additional Judicial Commissioner by its order dated 28 6 1967 held that in view of article 261(3) of the Constitution, the decree passed by the Bombay High Court could not be treated as nullity and, was therefore, executable. On appeal by certificate, the appellant/judgment debtor contended (1) that the decree passed by me Bombay High Court qua Goa Court was a nullity being a decree of a foreign court. Even if the decree was not a nullity it could be executed by a Goa court if the original decree had been approved by the Goa Court under section 50 of the Portuguese Code; (2) that`the Bombay High Court transferring the decree for execution to the Goa Court under sections 38 and 39 of the C.P.C. was without jurisdiction inasmuch as the C.P.C. had not been applied to Goa when the order of transfer was passed. (3) that as the provisions of the C.P.C. were applied to Goa after the order of the Execution Court was passed and a vested right had accrued to the appellant/judgment debtor the 'J decree continued to be inexecutable and could not be validated by article 261(3) of the Constitution. The respondent/decree holder contended (1) that inasmuch as the judgment debtor had appeared and participated in the suit for some time the decree passed by the Bombay High Court could not be said to be a nullity (ii) that as the C.P.C. was made applicable while the appeal was pending before the Additional Judicial Commissioner, Goa the decree became clearly executable and the order of transfer of the decree by the Bombay High Court stood validated. and (iii) that in view of the provisions of article 261(3) of the Constitution of India, there was no bar to the execution of the decree, which was passed by a court which was in the territory of India. 150 Dismissing the appeal, the Court, ^ HELD: (1) Where a party appears before the court, the decree of the court, even mf it is a foreign court is not a nullity. [154 D] Raj Rajendra Sardar Maloji Marsingh Rao Shitole vs Sri Shankar Saran and others; , , distinguished and held not applicable. Shaligram vs Daulat Ram, ; and Lalji Raja & Sons vs Firm Hansraj Nathuram, ; , applied. (2) The right of the judgment debtor to pay up the decree passed against him cannot be said to be a vested right, nor can the question of executability of the decree be regarded as a substantive vested right of the judgment debtor. A fortiorary, the execution proceedings being purely a matter of procedure it is well settled that any change in law which is made during the pendency of the cause would be deemed to be retrospective in operation and the Appellate Court is bound to take notice of the change in law. The Additional Judicial Commissioner was competent to take notice of the change in the law. [154 E F, 155 G] Mohanlal Chunilal Kothari vs Tribhovan Haribhai Tamboli, ; , 715 716. Gummalapura Taggina Matada Kotturswami vs Setra Veerava and others, A.T.R , 579 and Jose De Costa and another vs Bascora Sedashiva Sinai Naroornin and others, A.I.R. 1975 S.C. 1843, 1849, followed. (3) The proposition adumbrated viz., that the executability of the decree was a vested right which could not be taken away by the applicability of the Code of Civil Procedure to Goa during the pendency of the appeal is wrong, since the executability of the decree could not be considered to be a vested right [155F G] Lalji Raja and Sons. vs Firm Hansraj Nathuram ; , followed. (4) The contention that as the Code of Civil Procedure was not applicable to Goa at the time when the Bombay High Court passed the order transferring the decree to the Goa Court, the order of transfer was absolutely without jurisdiction was wrong.[156 C D] As the decree was passed by the Bombay High Court, section 38 of the Code of Civil Procedure would clearly apply and the decree passed by the Bombay High Court was not a foreign decree. It is true that at the time when the Bombay High Court passed the order of transfer, the Code of Civil Procedure had not been applied to Goa. But, that does not put the respondent/decree holder out of Court. The decree could be transferred and was valid and executable. But, because of infirmity, it could not be executed so long as the C.P.C. was not made applicable to Goa. Thus, the only bar which stood in the way of the execution of the decree was the non applicability of the provisions of the C.P.C. to Goa. This was, however, not an insurmountable bar or an obstacle and the bar or the obstacle disappeared the moment the Code of Civil Procedure was applied to Goa on 15 6 1966. [156 D F] HELD FURTHER: (5) The instant case is a fit case in which the doctrine A of eclipse would apply and the wall or the bar which separated Bombay from Goa having disappeared, there was no impediment in the execution of a decree. The decree lay dormant only so far as no bridge was built between Bombay and Goa but as soon as the bridge was constructed in the shape of the application of the provisions of the Code of Civil Procedure to Goa the decree became at once executable. [156 F G] (6) In the instant case, the decree passed by the Bombay High Court having been passed by a Court of competent jurisdiction and not being a nullity because the judgment debtor had appeared and participated in the proceedings of the Court to some extent, and the order of transfer under section 38 of the Code of Civil Procedure also not having suffered from any inherent lack of jurisdiction, the decree became enforceable and executable as soon as the Code of Civil Procedure was applied to Goa. [157 E F] 151 Bhagwan Shankar vs Rajaram Bapu Vithal, A.I.R. 1951 Bom. 125, 127, approved. (7) article 261(3) of the Constitution enjoins that a decree shall be executable in ally part of the territory of India, according to law. In the instant case, the decree was passed by the Bombay High Court after the Constitution came into force and article 261(3) would apply to the decree passed by the Bombay High Court. The Article would also apply to Goa because at the time when the application for execution was made in Goa Court, the Constitution had already been made applicable to that State also. [158 C D] (8) It is true that at the time when the Executing Court dismissed the suit of the decree holder/respondent, the Code of Civil Procedure had not been applied and the Portuguese Code continued to apply but after the application of the Code of Civil Procedure by virtue of the Goa, Daman and Diu (Extension of the Code of Civil Procedure and the Arbitration) Act, 1965. the Portuguese Code which was in force in Goa was clearly repealed and the present case does not fall within any of the clauses mentioned in the saving provisions of section 4 of the Act. Thus, when the Civil Procedure Code was made applicable to Goa during the pendency of the appeal, the appellate Court, namely, the Additional Judicial Commissioner was bound to decide the matter in accordance with the law that was in force. Hence, the contention the matter in accordance with the law that was in force. Hence, the contention that the words "according to law" in article 261(3) would mean that the decree would be executable only in accordance with the law in force in the Portuguese Code is not correct. [158 B F] [Jose De Costa and another vs Bascore Sadashiva Sinai Narcornin and others, A.I.R. 1975 S.C. 1843, 1849 followed.]

This appeal by special leave was directed against the order of the High Court asking the Income tax Appellate Tribunal under section 66(4) Of the Income tax Act to submit a supplementary ' statement of case on points, which were never raised by the parties nor decided by the Income tax Authorities or the Tribunal. The only question canvassed before them was whether certain cheques, which were received by the assessee at Bhavnagar having been cashed in British India, the monies in respect of them could be said to have been received in British India. The Tribunal held that the monies related back to the receipt of the cleques and were as such received at Bhavnagar. The question was whether the receipt of the cheques at Bhavnagar amounted to receipt of the sale proceeds at Bhavnagar. ' The High Court held that the mere receipt of the cheques by post at Bhavnagar was not conclusive in absence of a further finding as to whether the cheques were sent by post without any request, express or implied, having been made by the assessee and observed as follows " But we cannot shut out the necessary inquiry which even from our own point of view is necessary to be made in order that we should satisfactorily answer the question raised in the Reference. It must not be forgotten that under sec. 66(4) of the Income tax Act we have a right independently of the conduct of the parties to direct the Tribunal to state further facts so that we may properly exercise our advisory jurisdiction. " Held, that the High Court had misconceived its powers under section 66(4) of the Act and its decision must be set aside. Section 66(4) of the Indian Income tax Act, which must be read with sections 66(1) and 66(2) Of the Act, did not empower the High Court to raise a new question of law which did not arise out of the Tribunal 's order or direct the Tribunal to investigate new and further facts necessary to determine the new question which had not been referred to it under s 66(1) or section 66(2) of the Act and direct the Tribunal to submit supplementary statement of case. Such additions and alterations in the statement of case as section 66(4) of the Act empowered the High Court to direct, could 250 relate only to such facts as already formed part of the record but were not included by the Tribunal in the statement of the case. Craddock (H. M. Inspector of Taxes) vs Zevo Finance Co. Ltd., ; Commissioner of Income tax, West Bengal vs State Bank of India, ; Industrial Development and Investments Co., Ltd. vs Commissioner of Excess Profits Tax, Bombay, [1957] 31 I.T.R. 688; Vadilal Ichhachand vs Commissioner of Income tax, Bombay North, Kutch and Saurashtra, Ahmedabad, and Commissioner of Income tax vs Bhurangya Coal Co. [195S] , referred to. Commissioner of Income tax, Bihar & Orissa vs Visweshwar Singh, and Sir Sunder Singh Majithia vs Commissioner of Income tax, C. P. and U. P. [1942] 10 I.T.R. 457, considered.

The Income tax Officer, Companies Circle, Bombay treating the petitioner as an agent of a non resident issued a notice of demand under section 156 read with section 210 of the Indian Income tax Act, 1961. By this notice the petitioner was called upon to pay advance tax as agent of the foreign principal during the financial year 1964 65. The petitioner filed a petition under article 32 of the Constitution challenging the demand. The contentions. in support of the petition were: (i) that under sections 209 and 210 of the Indian Income tax Act, 1961 no order for payment of advance tax can be made against an agent of a non resident; (ii) that a provision which authorises collection of advance tax from an agent of a non resident infringes the equality clause of the Constitution. In support of the first contention it was urged that since under section 209(1) the amount of advance tax payable by an assessee in the financial year is to be computed on his total income of the latest previous year in respect of which he has been assessed by way of regular 'assessment, an agent cannot be directed to pay advance tax the liability whereof depends upon the determination of total income of the, principal. HELD: (i) Sections 207 and 208 which impose liability to pay advance tax in a financial year, section 210 which authorises the Income tax Officer to make a demand for payment of advance tax from a person who is previously assessed, and section 212(3) which imposes the duty to make an estimate of the total income likely to be received or to accrue or arise. and to pay advance tax if the total estimated income exceeds the maximum amount not charge.able to tax in his case by Rs. 2,500/apply to every person whether he is assessed ' in respect of his own income or as a representative assessed and it is not possible to imply in the application of these: provisions 'an unexpressed limitation on the express words of the statute in favour of an agent of a non resident principal. [358 C D] It is expressly enacted by section 161 that as regards income in respect of which a person is a representative assessee, he shall be subject to the same duties, 'responsibilities. and liabilities as if the income. were income received by or accruing to or in favour of him beneficially. It is clearly implicit therein that a representative assessee is not exempt from liability to pay advance tax. [357 C] of the liability to pay advance tax it is not predicated that the previous year should have come to. an end before the liability can anse. The previous year of an assessee may in some cases end after the commencement but before the end of a financial year in which advance tax is payable: it may in other cases commence and end with the financial year. But the liability to pay advance tax is not in any manner 354 affected because the previous year ends before or with the financial year. There is nothing in the Act under which the liability to pay advance tax of a representative assessee depends upon determination of the total for the previous year. [357 C G] Accordingly, it could not be held that the petitioner was not liable to pay advance tax on behalf of his non resident principal. [358 E F] (ii) The plea that the provisions imposing liability to pay advance tax upon an agent of a non resident infringe the equality clause of the Constitution could not be accepted. The only ground urged, that an assessee may escape liability to pay advance tax when his previous year coincides with the financial year, was without substance. [359 B C]

The respondent was a firm carrying on business in different lines. It was assessed to income tax under section 23(4) of the Income tax Act, 1922 for the assessment year 1949 50 on the ground that notices issued under section 22(2) and (4) had not been complied with. Later on, that assessment 412 was cancelled. However, before the cancellation, it was found that an interest income of Rs. 88,737 in the shape of U.P. Encumbered Estates Act Bonds received by the respondent from third parties had escaped assessment as the assessee failed to disclose the same. The Income tax Officer issued a notice for the assessment year 1949 50 on the ground that a sum of Rs. 88,737 had escaped assessment in the said assessment year. After the cancellation of the assessment made under section 23(4), the Income tax officer, ignoring the notice issued by him under section 34(1)(a), included that amount in the fresh assessment made by him for the year 1949 50.The respondent appealed to the Appellate Assistant Commissioner who ordered the deletion of the sum of Rs. 88,737 from the assessment for the year 1949 50 and directed the same to be included in the assesment for the year ending 1948 49. Pursuant to the direction given, the Income tax Officer served a notice on the respondent under section 34(1). Against that notice the assessee filed a writ petition in the High Court for quashing the above mentioned proceeding on the ground that these were initiated beyond the time prescribed by a. 34. The High Court accepted the petition and quashed the notice on the ground that it was issued by the appellant beyond the ordinary period of limitation It also overruled the contention of the appellant that no period of limitation governed the notice in as much as the second proviso to section 34(3) was attracted to the facts of the case. The only direction which the Appellate Assistant Commissioner could give was one which was covered by section 31 of the Act and as the appeal before him was confined to a particular assessment year, the direction must necessarily be limited to a matter falling within that year. if the direction be treated as based on a finding recorded by Appellate Assistant Commissioner, that finding would have to be disregarded when applying the proviso. The appellant came to this Court by special leave. Held: (per B. P. Sinha, C.J., K. Subba Rao and N. Rajagopala Ayyangar JJ.). The proviso to sub section (3) of section 34 of the Indian Incometax Act, 1922 does not save the time limit prescribed under sub section (1) of section 34 in respect of an escaped assessment of a year other than that which is the subject matter of appeal or revision as the case may be and hence the notice under section 34(1)(a) issued in the present case was clearly barred by time. The jurisdiction of the High Court or the Supreme Court under section 66 or section 66(b) is a limited one and is confined only to the questions referred to them. Moreover, the questions referred by Tribunal cannot exceed its jurisdiction. Therefore the assessment or reassessment made under the said sections or Pursuant to the orders or directions made thereunder must necessarily relate to the assessment of the year under review, revision or appeal as the case may be. 'Me proviso to sub section (3) of section 34 does not confer any fresh power upon the Income tax Officer to make assessment in respect of the escaped incomes without any time limit. It only lifts the ban of limitation in respect of certain assessments made under certain provisions of the Act and the lifting of the ban cannot be so construed as to increase the jurisdiction of the tribunal Under the 413 relevant sections. The lifting of the ban was only to give effect to the orders that may be made by the appellate, revisional or reviewing Tribunal within the scope of its jurisdiction. If the intention was to remove the period of limitation in respect of any assessment against any person, the proviso would not have been added as proviso to sub section (3) which deals with completion of an assessment but would have been added to sub section (1) of section 34. The word 'finding ' covers only the material questions which arise in a particular case for decision by the authority hearing the. case or the appeal which, being necessary for passing the final order or giving the final decision in the appeal, has been the subject of controversy between the interested parties or on which the parties concerned have been given a hearing. The expression 'direction ' refers to a direction which the appellate or revisional authority is empowered to give under the law. The expression "any person" must be confined to a person intimately connected with the assessment of the year under appeal or revision. Held: per Raghubar Dayal and J. R. Mudholkar JJ. (dissenting): That the notice was not in contravention of the provisions of section 34 and hence could not be quashed on that ground. When an appeal is before an appellate authority, the whole matter is at large before it and there fore when a specific case is put before it by an assessee, it has both the power as well as the duty to give its finding thereon. The ground given by an assessee for claiming a reduction or annulment of assessment may be that the income upon which he had been assessed was not earned in the accounting period of the year to which the assessment pertained but in respect of a specified earlier or later year. The appellate authority is entitled to go into the whole question and come to a finding one way or the other. The finding of a tribunal is its conclusion on a point agitated before it and for a conclusion to amount to a finding, it is not necessary that it should be the final and ultimate conclusion. The contention of respondent that the second proviso to a. 34(3) enabling a notice to issue only to assessee in respect of escaped income without limit of time on the ground that the appellate authority has made a finding or direction in the proceeding before it makes a discrimination against such assessee because it does not lift the bar of limitation with regard to other assessees similarly situated but with regard to whom no finding has been made or direction given by appellate authority, was rejected. It was held that prima facie, there was a reasonable basis for the classification. The ground on which classification was made had a rational relationship with the object which was intended to be achieved by law, ie., to detect and bring to assessment the escaped income. Commissioner of Income tax vs section M. Chitnavis, (1932) L.R. 59 I.A. 290, Sir Kikabhai Premchand vs Commissioner of Income tax (Central), Bombay, pt. Hazart Lal vs Income tax Officer, Kanpur. Lakshman Prakash vs Commissioner of Income 414 tax, U.P., , A. section Khader Ismail vs Income tax Officer, Salem, (1963)48 I.T.R. 16, Simrathmul vs Additional Income tax Officer, Ootachamund, (1959)36 I.T.R. 41, Brindaban Chandra Basak vs Incometax Officer, , K. C. Thomas, First Income tax Officer. Bombay vs Vasant Hira Lal Shah , Prashar & Anr. V. Sasantsen Dwarkadas 49 I.T.R. (S.C.) 1, Kamlapat Hotilal vs Income tax Officer, , Hiralal Amrit Lal Shah vs K. C. Thomas, Income tax Officer, Bombay, , General Construction and Supply Co. vs Income tax Officer (8th) C Ward, Bombay, , Suraj Mal Mohata & Co. vs A. V. Visvanatha Sastri ; , A. Thangal Kunju Mudaliar vs M. Venkatachalam Potti & Anr. ; and Palaji vs Income tax Officer, Special Investigation Circle ; , referred to.

A consent decree was passed against the assessee awarding maintenance to his wife and children. The decree did not create any charge upon the income of the assessee. The assessee claimed in the assessment of income tax deduction of the amount paid under the decree from his total income. Held, that the assessee was not entitled to the deduction. Where by the obligation income was diverted by an overriding title before it reached the assessee, it was deductible; but where the income was required to be applied to discharge an obligation after such income reached the assessee, it was not deductible. The true test was whether the amount sought to be deducted, in truth, never reached the assessee as his income. In the present case, the wife and children of the assessee received a portion of the income of the assessee, after the assessee had received the income as his own. Bejoy Singh Dudhuria vs Commissioner of Income tax, (1933) I I.T.R. 135, not applicable. P. C. Mullick vs Commissioner of Income tax, Bengal, , applied. Diwan Kishen Kishore vs Commissioner of Income tax, , Seth Motilal Menekchand vs Commissioner of Income tax, , Prince Khanderao Gaekway vs Commissioner of Income tax, , Commissioner of Income tax, Bombay vs Makanji Lalji, , Commissioner of Income tax, Bombay V. D. R. Naik, , D. C. Aich, It; re, , Hira Lal, In re, and V. M. Raghavalu Naidu & Sons vs Commissioner of Income tax, , referred to

The appellant created a trust in 1955 by transferring certain securities held by him to a bank as trustee. One of the beneficiaries of the trust was the appellant 's minor daughter M. The income accruing to M under the trust during the previous years relevant to the assessment years 1957 58, 1958 59, 1959 60 and 1960 61 was included in the assessments made on the appellant as an individual for those years by applying the provisions of section 16(3)(b) of the Indian Income Tax Act 1922. In the assessment for the year 1960 61 the Income tax Officer had also to deal with the appellant 's claim for the allowance under section 9(2) off the said Act in respect of two separate houses owned by the appellant and maintained by him for residential purposes in New Delhi. The Income tax Officer allowed the claim only in respect of one of the houses. The appellant 's appeals. before the authorities under the Act failed. The High Court decided the questions referred to it against the appellant. In appeals before this Court on certificate the contentions of the appellant which fell for consideration were : (i) (a) that section 16(3) (b) must be strictly construed; (b) that the assets covered by the trust deed not having been transferred to the wife or minor daughter but to a bank as trustee, section 16(3) (b) of the Act had no application; (c) even if section 16(3) (b) of the Act applied, what was to be included in computing the total income of the appellant was not the in come that had been received by the minor daughter under the trust deed but only so much of the income of the trustee as arose from the assets transferred to the trustee for the benefit of the minor child; (ii) that a reading of the first and second provisos to section 9(2) of the Act clearly showed that the allowance to an assessee is not confined only to one residential house HELD : (i) (a) it is true that section 16(3) (b) creates an artificial liability and must therefore be strictly construed. But in construing section 16(3)(b) Courts cannot ignore the clear and unambiguous expressions contained therein and all those expressions must receive a proper interpretation.[9 C D] C.I.T. Bombay vs Manual Dhanji, , C.I.T.,. Gujarat vs Keshavlal Lallubhai Patel, and; C.I.T., West Bengal II vs Prem Bhai Parekh (b) The contention that section 16(3) (b) applies only to those cases where ultimately the corpus of the trust property is also transferred to the wife or the minor child, must be rejected. The provisions of section 16(3)(b) are very clear, and, the only requirement so far as this aspect is concerned is that the assets Must be transferred. to, any person or association of persons and that transfer of assets must be for the benefit of the wife or the 2 minor child or both. In this connection it is pertinent to note the wordings of section 16(3) (a) (iii) and section 16(3) (a) (iv). The former provision clearly refers to assets transferred directly or indirectly to the wife by the husband and the latter provision refers to assets transferred directly or indirectly to the minor child not being a married daughter. But in cl. (b) of section 16(3) the transfer of assets is not to the wife or the minor child or both but to any person or association of persons. Therefore it is clear that when the legislature intended to provide for a direct transfer of assets either to the wife or to the minor child, it has used the expressions as are found in section 16(3) (a) (iii) and section 16(3) (a) (iv). The different phraseology used in cl. (b) of section 16(3) makes it clear that the transfer of assets need not be to the wife or the minor child. Nor does the said clause require that the corpus of the property so transferred to any person or association of persons should ultimately vest in the wife or the minor child [9G 1OB] C.I.T. Bombay vs Sir Mahomed Yusuf Ismail, [1944] 12 I.T.R. 8 approved. (c) From a plain reading of section 16(3) (b) it is clear that what is to be included in computing the total income of the assessee is that part of the income of the trust which is received for the benefit in this case of the minor daughter. It is the share income which has accrued to or has been received by the minor daughter under the trust deed in the relevant accounting year, that has to be included in the total income of the father, the assessee. The expression "so much of the income" occurring in this clause also makes it clear that the said provision relates to the share income of the minor daughter, in this case, and not that of the trustee bank. [11 B C] Tulsidas Kilachand and ors. vs C.I.T. Bombay City 1, and C.I.T. Bombay vs Manilal Dhanji, applied. (ii)A reading of the second proviso to sub section (2) of section

Appeal No. 517 of 1958. Appeal from the judgment and order dated October 31, 1957, of the Kerala High Court in O. P. No. 215 of 1957. G. B. Pai and Sardar Bahadur, for the appellant. Hardyal Hardy and D. Gupta, for the respondents. November 29. The Judgment of the Court was delivered by SHAH, J. C. A. Abraham hereinafter referred to as the appellant and one M. P. Thomas carried on business in food grains in partnership in the name and style of M. P. Thomas & Company at Kottayam. M. P. Thomas died on October 11, 1949. For the account years 1123, 1124 and 1125 M.E. corresponding to August 1947 July 1948, August 1948 July 1949 and August 1949 July 1950, the appellant submitted as a partner returns of the income of the firm as an unregistered firm. In the course of the assessment proceedings, it was discovered that the firm had carried on transactions in different commodities in fictitious names and had failed to disclose substantial income earned therein. By order dated November 29, 1954, the Income Tax Officer assessed the suppressed income of the firm in respect of the assessment year 1124 M.E. under the Travancore Income Tax Act and in respect of assessment years 1949 50 and 1950 51 under the Indian Income Tax Act and on the same day issued notices under section 28 of the Indian Income Tax Act in respect of the years 1949 50 and 1950 51 and 767 under section 41 of the Travancore Income Tax Act for the year 1124 M.E., requiring the firm to show cause why penalty should not be imposed. These notices were served upon the appellant. The Income Tax Officer after considering the explanation of the appellant imposed penalty upon the firm, of Rs. 5,000 in respect of the year 1124 M. E., Rs. 2,O00 in respect of the year 1950 51 and Rs. 22,000 in respect of the year 1951 52. Appeals against the orders passed by the Income Tax Officer were dismissed by the Appellate Assistant Commissioner. The appellant then applied to the High Court of Judicature of Kerala praying for a writ of certiorari quashing the orders of assessment and imposition of penalty. It was claimed by the appellant inter alia that after the dissolution of the firm by the death of M. P. Thomas in October, 1949, no order imposing a penalty could be passed against the firm. The High Court rejected the application following the judgment of the Andhra Pradesh High Court in Mareddi Krishna Reddy vs Income Tax Officer, Tenali (1). Against the order dismissing the petition, this appeal is preferred with certificate of the High Court. In our view the petition filed by the appellant should not have been entertained. The Income Tax Act provides a complete machinery for assessment of tax and imposition of penalty and for obtaining relief in respect of any improper orders passed 'by the Income Tax authorities, and the appellant could not be permitted to abandon resort to that machinery and to invoke the jurisdiction of the High Court under article 226 of the Constitution when he had adequate remedy open to him by an appeal to the Tribunal. But the High Court did entertain the petition and has also granted leave to the appellant to appeal to this court. The petition having been entertained and leave having been granted, we do not think that we will be justified at this stage in dismissing the appeal in limine. On the merits, the appellant is not entitled to relief. The Income Tax Officer found that the appellant had, with a view to evade payment of tax, (1) 768 deliberately concealed material particulars of his income. Even though the firm was carrying on transactions in food grains in diverse names, no entries in respect of those transactions in the books of account were posted and false credit entries of loans alleged to have been borrowed from several persons were made. The conditions prescribed by section 28(1)(c) for imposing penalty were therefore fulfilled. But says the appellant, the assessee firm had ceased to exist on the death of M. P. Thomas, and in the absence of a provision in the Indian Income Tax Act whereby liability to pay penalty may be imposed after dissolution against the firm under section 28(1)(c) of the Act, the order was illegal. Section 44 of the Act at the material time stood as follows: "Where any business,. carried on by a firm. has been discontinued . every person who was at the time of such discontinuance . a partner of such firm,. shall in respect of the income, profits and gain of the firm be jointly and severally liable to assessment under Chapter IV for the amount of tax payable and all the provisions of Chapter IV shall, so far as may be, apply to any such assessment. " That the business of the firm was discontinued because of the dissolution of the partnership is not disputed. It is urged however that a proceeding for imposition of penalty and a proceeding for assessment of income tax are matters distinct, and section 44 may be resorted to for assessing tax due and payable by a firm business whereof has been discontinued, but an order imposing penalty under section 28 of the Act cannot by virtue of section 44 be passed. Section 44 sets up machinery for assessing the tax liability of firms which have discontinued their business and provides for three consequences, (1) that on the discontinuance of the business of a firm, every person who was at the time of its discontinuance a partner is liable in respect of income, profits and gains of the firm to be assessed jointly and severally, (2) each partner is liable to pay the amount of tax payable by the firm, and (3) that the provisions of Chapter, so far as may be, apply to such assessment. The liability declared by section 44 is 769 undoubtedly to assessment under Chapter IV, but the expression "assessment" used therein does not merely mean computation of income. The expression "assessment" as has often been said is used in the Income Tax Act with different connotations. In Commissioner of Income Tax, Bombay Presidency & Aden vs Khemchand Ramdas (1), the Judicial Committee of the Privy Council observed: "One of the peculiarities of most Income tax Acts is that the word "assessment" is used as meaning sometimes the computation of income, sometimes the determination of the amount of tax payable and sometimes the whole procedure laid down in the Act for imposing liability upon the tax payer. The Indian Income tax Act is no exception in this respect. . ". A review of the provisions of Chapter IV of the Act sufficiently discloses that the word "assessment" has been used in its widest connotation in that chapter. The title of the chapter is "Deductions and Assessment". The section which deals with assessment merely as computation of income is section 23; but several sections deal not with computation of income, but determination of liability, machinery for imposing liability and the procedure in that behalf. Section 18A deals with advance payment of tax and imposition of penalties for failure to carry out the provisions there in. Section 23A deals with power to assess individual members of certain companies on the income deemed to have been distributed as dividend, section 23B deals with assessment in case of departure from taxable territories, section 24B deals with collection of tax out of the estate of deceased persons; section 25 deals with assessment in case of discontinued business, section 25A with assessment after partition of Hindu Undivided families and sections 29, 31, 33 and 35 deal with the issue of demand notices and the filing of appeals and for reviewing assessment and section 34 deals with assessment of incomes which have escaped assessment. The expression "assessment" used in these sections is not used merely in the sense of computation of income and there is in our judgment no ground for holding (1) 770 that when by section 44, it is declared that the partners or members of the association shall be jointly and severally liable to assessment, it is only intended to declare the liability to computation of income under section 23 and not to the application of the procedure for declaration and imposition of tax liability and the machinery for enforcement thereof. Nor has the expression, "all the provisions of Chapter IV shall so far as may be apply to such assessment" a restricted content: in terms it says that all the provisions of Chapter IV shall apply so far as may be to assessment of firms which have discontinued their business. By section 28, the liability to pay additional tax which is designated penalty is imposed in view of the dishonest contumacious conduct of the assessee. It is true that this liability arises only if the Income tax Officer is satisfied about the existence of the conditions which give him jurisdiction and the quantum thereof depends upon the circumstances of the case. The penalty is not uniform and its imposition depends upon the exercise of discretion by the Taxing authorities; but it is imposed as a part of the machinery for assessment of tax liability. The use of the expression "so far as may be" in the last clause of section 44 also does not restrict the application of the provisions of Chapter IV only to those which provide for computation of income. By the use of the expression "so far as may be" it is merely intended to enact that the provisions in Ch. IV which from their nature have no application to firms will not apply thereto by virtue of section 44. In effect, the Legislature has enacted by section 44 that the assessment proceedings may be commenced and continued against a firm of which business is discontinued as if discontinuance has not taken place. It is enacted manifestly with a view to ensure continuity in the application of the machinery provided for assessment and imposition of tax liability notwithstanding discontinuance of the business of firms. By a fiction, the firm is deemed to continue after discontinuance for the purpose of assesment under Chapter IV. The Legislature has expressly enacted that the provisions of Chapter IV shall apply to the assessment of 771 a business carried on by a firm even after discontinuance of its business, and if the process of assessment includes taking steps for imposing penalties, the plea that the Legislature has inadvertently left a lacuna in the Act stands refuted. It is implicit in the contention of the appellant that it is open to the partners of a firm guilty of conduct exposing them to penalty under section 28 to evade penalty by the simple expedient of discontinuing the firm. This plea may be accepted only if the court is compelled, in view of unambiguous language, to hold that such was the intention of the Legislature. Here the language used does not even tend to such an interpretation. In interpreting a fiscal statute, the court cannot proceed to make good deficiencies if there be any: the court must interpret the statute as it stands and in case of doubt in a manner favourable to the tax payer. But where as in the present case, by the use of words capable of comprehensive import, provision is made for imposing liability for penalty upon tax payers guilty of fraud, gross negligence or contumacious conduct, an assumption that the words were used in a restricted sense so as to defeat the avowed object of the Legislature qua a certain class will not be lightly made. Counsel for the appellant relying upon Mahankali Subbarao vs Commissioner of Income Tax (1), in which it was held that an order imposing penalty under section 28(1)(c) of the Indian Income Tax Act upon a Hindu Joint Family after it had disrupted, and the disruption was accepted under section 25A(1) is invalid, because there is a lacuna in the Act, submitted that a similar lacuna exists in the Act in relation to dissolved firms. But whether on the dissolution of a Hindu Joint Family the liability for penalty under section 28 which may be incurred during the subsistence of the family cannot be imposed does not fall for decision in this case: it may be sufficient to observe that the provisions of section 25A and section 44 are not in pari materia. In the absence of any such phraseology in section 25A as is used in section 44, no real analogy between the content of that section and section 44 may be assumed. Undoubtedly, (1) 772 by section 44, the joint and several liability which is declared is liability to assessment in respect of income, profits or gains of a firm which has discontinued its business, but if in the process of assessment of income, profits or gains, any other liability such as payment of penalty or liability to pay penal interest as is provided under section 25, sub section (2) or under section 18A sub sections (4), (6), (7), (8) and (9) is incurred, it may also be imposed, discontinuation of the business notwithstanding. In our view, Chief Justice Subba Rao has correctly stated in Mareddi Krishna Reddy 's case (supra) that: "Section 28 is one of the sections in Chapter IV. It imposes a penalty for the concealment of income or the improper distribution of profits. The defaults made in furnishing a return of the total income, in complying with a notice under sub section (4) of section 22 or sub section (2) of section 23 and in concealing the particulars of income or deliberately furnishing inadequate particulars of such income are penalised under that section. The defaults enumerated therein relate to the process of assessment. Section 28, therefore, is a provision enacted for facilitating the proper assessment of taxable income and can properly be said to apply to an assessment made under Chapter IV. We cannot say that there is a lacuna in section 44 such as that found in section 25A of the Act. We are unable to agree with the view expressed by the Andhra Pradesh High Court in the later Full Bench decision in Commissioner of Income Tax vs Rayalaseema Oil Mills (1), which purported to overrule the judgment in Mareddi Krishna Reddy 's case (supra). We are also unable to agree with the view expressed by the Madras High Court in section V. Veerappan Chettiar vs Commissioner of Income Tax, Madras (2). In the view taken by us, the appeal fails and is dismissed with costs. (1) Appeal dismissed.

The appellant who was carrying on business in food grains in partnership with another person submitted the returns of the income of the firm for the accounting years even after his partner 's death. It was found that certain income of the firm was concealed and the Income tax Officer not only assessed the firm to tax for the suppressed income but also imposed penalties for concealing the said income. Appeals to the higher income tax authorities failed and the appellant then applied to the High Court for a writ of certiorari quashing the orders of assessment and imposition of penalty on the ground inter alia that the firm was dissolved by his partner 's death and no penalty could be imposed after dissolution of the firm, The High Court rejected the petition. On appeal with the certificate of the High Court, Held, that by virtue of section 44 and other provisions of the Income Tax Act a partner of a dissolved partnership firm may not only be made liable to assessment for income tax for the accounting years but despite dissolution of the firm he may be made liable to pay penalty for concealing the income of the firm under section 28(1)(c) of the Act. The analogy of dissolution of a Hindu joint Family does not apply to dissolution of a partnership. Mareddi Krishna Reddy vs Income tax Officer, Tenali, , approved. Commissioner of Income tax vs Ravalaseema Oil Mills, and section V. Veerappan Chettiar vs Commissioner of Income tax, Madras, , disapproved. Mahankali Subbarao vs Commissioner of Income tax, , distinguished. The Legislature intended that the provisions of Ch. IV of the Act shall apply to a firm even after discontinuance of its business. In interpreting a fiscal statute the Court cannot proceed to make good deficiencies if there be any. In case of doubt it should be interpreted in favour of the tax payer. The expression "assessment" has different connotations an has been used in its widest connotation in Ch. IV and section 44 97 766 he Act. It is not restricted only to computation of tax but includes imposition of penalty on tax payers found in the process of assessment guilty of concealing income. Commissioner of Income tax, Bombay Presidency and Aden vs Khemchand Ramdas, , referred to. The Income tax Act provided a complete machinery for obtaining relief against improper orders passed by the Income tax Authorities and the appellant could not be permitted to abandon that machinery, and invoke the jurisdiction of the High Court under article 226 of the Constitution against the orders of the taxing authorities.

The question for decision in this appeal was whether a single transaction of sale of land measuring about three quarters of an acre was an adventure in the nature of trade so as to make it liable to income tax. The assessee appellant, an Engineer by profession, was engaged in various business activities including that of an engineering firm but, admittedly, had no dealing, except the one in question, in respect of land. In 1946 be entered into an agreement with the Hindusthan Co operative Insurance Society Ltd. for the purchase of the land in question and paid a sum of Rs. 32,748 in two instalments, being 25% of the estimated total price of the land. As his construction activities declined and the Government, who had requisitioned the land, were not immediately releasing it, the appellant sold his rights under the agreement to a third party in 1947 and thereby received a sum of Rs. 74,000 odd in excess of the amount paid by him to the Society. The land, however, was not released by the Government until 1949. The Income tax Officer held that the transaction was an adventure in the nature of trade and the said sum was a profit therefrom, taxable under section 10 of the Incometax Act, and included it in the assessable income. The Appellate Assistant Commissioner, in appeal, held that the assessee, a man of means, had intended to purchase the land for his own use, and that the motive of profit was entirely absent when the purchase was made and that as it was a case of appreciation of capital, he was liable to pay Capital Gains tax. The Appellate Tribunal on appeal by the Department, reversed the findings and the decision of the Appellate Assistant Commissioner and affirmed that of the Income tax Officer. After the assessee had obtained from this Court special leave to appeal, he made an application to the High Court under section 66(2) of the Income tax Act, which that Court dismissed as being barred by limitation. Held, (per Bhagwati and Sinha, JJ., Kapur, J., dissenting) that admittedly the transaction in question being a single instance of its kind, and not in the line of the business of the assessee, it was for the Department to prove that the dominant intention of the appellant, when he entered into the agreement with the Society, was to embark on a venture in the nature of 847 trade as distinguished from a capital investment, and they having failed to do so, the appeal must succeed. Commissioners of Inland Revenue vs Reinhold, , applied. There could be no doubt, as held by the Court, that the question for decision involved in such cases was one of law or a mixed question of fact and law. G. Venkataswami Naidu and Co. vs The Commissioner of I come tax; , , referred to and distinguished. The line of demarcation, however, between an isolated trans action and a venture in the nature of trade was very thin and each case had to be decided on the total impression all its facts and circumstances made on the mind of the judge. Case law reviewed. KAPUR, J. Even though the powers of this Court under article I36 of the Constitution were very wide, they had to be exercised within the limits imposed by its own decisions and one such limitation was that this Court would not ordinarily interfere on questions of fact. Since the question involved in the instant case was a mixed question of law and fact, the facts should properly be found by the body whose exclusive function under the Income tax Act was to do so. G. Venkataswami Naidu & Co. vs The Commissioner of Income tax; , and Dhakeswari Cotton Mills vs The Commissioner of Income tax, [1955] i S.C.R. 94I, referred to. Nor could an assessee be allowed to by pass the procedure prescribed by sections 66(1), 66(2) of the Income tax Act to have question of law determined. Since, however, the Appellate Tribunal had, in the instant case, failed to consider certain essential facts, the case should be remitted to it for a proper decision in the light of the observations made by this Court.

The Income tax Officer found that the respondents ' books of accounts were unreliable and after assessing income for Fasli year 1357, corresponding to the year 1946 47, issued notice to the respondents on December 22, 1949, under section 40 of the Hyderabad Income tax Act to show cause why penalty should not be levied in addition to the tax and by an order dated October 31, 1951, directed payment of the said penalty. The State of Hyderabad merged with the Indian Union during the pendency of the proceedings before the Income tax Officer and by section 13 of the Finance Act, 1950, the Hyderabad Income tax Act ceased to have effect from April 1, 1950, but the operation of that Act in respect of levy, assessment and collection of income tax and super tax in respect of periods prior thereto for which liability to income tax could not be imposed under the Indian Income tax Act, was saved. The question was whether (a) the Income tax Officer had power on October 31, 1951, to impose a penalty under section 40(1) of the Hyderabad Income tax Act and (b) whether the assessee had a right to appeal against the order of the Income tax Officer imposing penalty and whether the Appellate Assistant Commissioner had jurisdiction to hear appeals or whether his order was a nullity. Held, that the power of the Income tax Officer to impose a penalty under section 40(1) of the Hyderabad Income tax Act in respect of the year preceding the date of the repeal of the Hyderabad Income tax Act was not lost because by section 13 of the Finance Act, 1950,,for the operation by the Hyderabad Income tax Act in respect of levy, assessment and collection of income tax and super tax in respect of periods prior to April, 1951, for which liability to income tax could not be imposed under the Indian Income tax Act, was saved and so the proceedings for imposing the penalty could be continued after the enactment of section 13(1) of the Indian Finance Act, 1950. Held, that the appeal against the order of the Income tax Officer on the ground that he was not competent to pass the order did lie to the Appellate Assistant Commissioner, whose jurisdiction was not made conditional upon the competence of the 924 Income tax Officer to pass the. orders made appealable; as a court of appeal he had jurisdiction to determine the soundness of the conclusions of the Income tax Officer both on the question of fact and law and even as to his jurisdiction to pass the order appealed from, and his order was not a nullity.

An air parcel declared by the consigner to contain rasogollas and other edibles was found to contain Rs. 51,000 worth of Indian currency notes. The parcel was booked to be sent from Calcutta to Hong Kong. The consignor 's name as given. on the parcel was found to be false and on investigation the suspicion of the customs authorities fell on the appellants two of whom were partners in a firm, the third being an employee of the firm. The office of the firm was searched. Certain incriminating documents including account slips and cash books of the firm were seized. In a complaint filed by the Assistant Collector of Customs against the appellants and their firm it was alleged that sending out money in Indian currency was prohibited by section 8(2) of the Foreign Exchange Regulation 7 of 1947 and any attempt to do the same was punishable under section 23B of the Act. The trial court acquitted the appellants but the High Court in appeal convicted them under section 23(1A). By special leave appeals were filed in this Court. Judgment was delivered on August 18, 1970. Thereafter review petition No. 37 of 1970, was filed. A further judgment in respect of the contention raised therein as to the interpretation of section 23C(i) was delivered on February 18, 1971. HELD : (i) The proposition that if an investigating officer conducts a search his evidence cannot be relied on unless it is corroborated is a novel one with no principle or authority to support it. It all depends on the facts of each case. In the present case there was the corroborative evidence of P.W. 8 who signed the search document and also the entries themselves in the account books and their tallying with the slips. [755 G] (ii) There was no substance in the argument that the account slips could not be taken into consideration because they were not evidence. These were part of the things discovered during search and if the entries therein were carried into the account books there was no reason why they could not be looked at [755 H] (iii) In the context of section 23C(1) a person 'in charge ' must mean that the person should be in over all control of the day to day business of the company or firm. The inference follows from the wording of section 23C(2). It mentions director who may be a. party to the policy being followed by 749 a company and yet not be in charge of the business of the company. Further it mentions manager who usually is in charge of the business not in over all charge. Similarly the other officers may be in charge of only some part of the business. [758 G 759 A] State vs section P. Bhadani, A.I.R. 1959 Pat. 9, R. K. Khandelwal vs State and Public Prosecutor vs R. K. Karuppian, A.I.R. 1958 Mad. 183, referred to. In the present case the appellant G had himself stated that he alone looked after the affairs of the firm. This meant that he was in charge within the meaning of the section though there may be a manager working under him [760 C D] When a partner in charge of a business proceeds abroad it does not mean that he ceased to be in charge, unless there is evidence that he gave up charge in favour of another person. Therefore it must be held that the appellant was in charge of the business of the firm within the meaning of section 23C(1). [760 E F]. In view of the fact that G was abroad at the time of contravention it was possible that the contravention took place without his knowledge or lack of diligence. He was being vicariously punished. In such a case a. sentence of imprisonment may not be imposed but a sentence of fine only would meet the ends of justice. [760 G] (iv) As regards appellant P the prosecution had been unable to prove by any reliable evidence that he took any active part in the conduct of the business of the firm. He must therefore be given the benefit of doubt and acquitted. [757 A] (v) The case was fit for review because at the time of arguments the attention of the court was not drawn specifically to sub section 23C(2) and the light it throws on the interpretation of sub s.(1). [761 A]

The appellant, a registered partnership firm, was the managing agent of (he respondent. After submitting its resignation to the board of directors of the respondent company, the appellant filed a suit claiming a sum of money in accordance with an agreed scheme. The appellant firm consisted of 5 partners with effect from April 1, 1949, and in addition, a minor was entitled to a 4 anna share in the profits of the partnership but was not liable for the losses. The minor was represented by his mother as guardian. On October 24, 1949, another partnership deed was executed wherein the mother was shown as a partner of the appellant firm with a 4 anna share and the minor 's name was omitted. The respondent contended that the suit was not maintainable. because the constitution of the old firm had been changed on October 24, 1949, and that the newly constituted firm consisting of 6 partners had not been registered. The trial court held that the new partnership deed was not acted upon and decreed the suit for a part of the amount claimed. There were appeals by both sides. The High Court disagreed with the finding of the trial court that the later partnership deed had not been acted upon and held that the mandatory condition of section 69(2), Indian Partnership Act, was not fulfilled as the name Of the mother. who was a partner in the reconstituted firm and in whose favour cause of action had accrued, was not shown in the register of firms, and that this defect was fatal to the suit. Allowing the appellant 's appeal to this Court and remanding the appeal to the High Court for disposal on merits, ^ HELD: The trial court took the correct view of the matter in so far as it held that the later partnership deed was not acted upon and that the mother did not become a partner of the appellant firm. [1028B] (1) The question as to when it was decided not to act upon the later deed is not material. The evidence of one of the partners of the appellant firm that it was not acted upon and that the mother was not a partner is admissible and is fully corroborated by the documentary evidence. It is a statement made by him against his own Pecuniary interest, because, if the mother was a partner, the loss of the other partners would extend only to 12 anna share in the rupee; whereas if she was not a partner then they would have to bear losses to the full extent of 16 annas in the rupee. [1029G H; 1030H 1031D] (2) In the register relating to the registration of firms kept under the Indian Partnership Act, an entry relating to the registration of the appellant firm dated May 5, 1952. reveals that even in the year 1952, the stand of the partners of the appellant firm was that the mother was not a partner and that it was only her minor son who was entitled to a share in the profits of the partnership. [1028G 1029A] (3) In the statement of accounts of the appellant firm it is only the minor that is shown to have a 4 anna share and not his mother. [1030B C] (4) Applications in connection with the registration of that firm were pre rented to the Income Tax Authorities under section 26A, Indian Income Tax Act, 1922. All there applications were signed by the mother and they show that the mother never claimed to be a partner of the appellant firm and that, on the contrary. she acknowledged that it was her minor son who was entitled to the 4 anna share in the profits. [1029E G] 1023 (5) The directors of the respondent company had passed a resolution in 1950 referring to the two partnership deeds. But the entry which was made in the register of the respondent company regarding the partners of its managing agents as required by section 87, Indian Companies Act, 1913, shows that after April 1, 1949, there were only 5 partners, besides the minor under the guardianship of his mother of the appellant firm. If the mother had become a partner since October 24, 1949, it is unlikely that an entry to that effect would not have been made in the register of the defendant company, because, under section 87, a return has to be sent to the Registrar of Firms regarding any change in the particulars required to be contained in the register and non compliance with the requirement would entail imposition of fine. [1029A E] (6) The letter of resignation sent by the appellant firm was signed by the mother also, but there was no indication whether she signed in her capacity as partner or as the guardian of her minor son. [1028F G] (7) Soon after the presentation of the suit, on an application under order XXX, r. 2, C.P.C., filed by the respondents, the appellant firm declared the names of its partners and the declaration did not show the mother as one of the partners. The question as to who should share the profits of the appellant firm and should be otherwise entitled to its assets is essentially a matter for the partners of that firm. Unlike the case of a defendant firm from which money is claimed where each partner may be personally liable, in the case of the plaintiff (appellant) firm claiming money, it would be a wholly untenable plea for the defendants, from whom money is claimed, to urge that even though the mother as well as other partners claimed that it was not she but her minor son that was entitled to the 4 anna share in the partnership, the Court should hold that it was the mother who was entitled to that share. [1030C G]

The appellant (since deceased) was being assessed as the Karta of the Hindu Undivided Family consisting of himself, his mother, his wife and three sons until the assessment years 1948 49. For the assessment year 1949 50 and subse quent years upto 1961 62 he filed a return in his individual capacity claiming that there had been a total partition of the family and that he was assessable in respect of the income from the properties of the family that fell to his share on partition; in the alternative he claimed partial partition. Both of his claims having been negatived, the entire income was assessed in the hands of the Hindu Undi vided Family and the returns filed by the appellant in his individual capacity were finalised on the footing that there was no income assessable in his individual capacity. The Hindu Undivided Family went up in appeals and ultimately the Tribunal accepted the claim of partial partition in respect of some of the properties. The conclusion of the Tribunal was affirmed by the High Court, with the result that the income from some of the erstwhile family properties stood excluded from the assessment of the Hindu Undivided Family and became liable to be included in the hands of the appel lant. The original assessments made on the appellant as an individual for the assessment upto 1961 62 had been complet ed under the Income tax Act, 1922 and in these assessments no income from the erstwhile joint family properties had been included as the Income Tax Officer was of the view, as in 1949 50, that it was assessable in the hands of the family. There were no proceedings initiated or pending under Section 34 of the 1922 Act in respect of these assessment years as on 1.4.1962, when the 1922 Act was repealed by the 1962 Act. The Income Tax Officer therefore, served a notice for reassessment on the appellant, invoking the provisions of Section 297(2)(d)(ii) of the Act. The appellant resisted the reassessment proceedings on the ground that notice was barred by limitation while the department contended that the reassessment proceedings in this case were saved by the provisions of Section 150(1) of the 1961 Act. The High Court accepted the contention of the department. 10 Dismissing the assessee 's appeal, this Court, HELD: The provisions of Section 150(1) have been spe cially made applicable and operative in respect of a notice under section 148 issued in pursuance of Section 297(2)(d)(ii). The application of the provisions of Section 297(2)(d)(ii) gives rise to two sets of situations to one of which the language of Section 150(1) would squarely apply. Section 150(1) will operate to lift the time bar in cases where the reassessment is initiated under section 148 to give effect to an order passed under the 1961 Act. Section 297(2) is a provision enacted with a view to provide for continuity of proceedings in the context of repeal of one Act by a fresh one broadly containing analogous provisions and the transitory provisions should as far as possible, be construed so as to affect such continuity and not so as to create a lacuna. It will therefore be appropriate to so read the words of section 297(2)(d)(ii) as to permit the applica bility of section 150 (or section 153) with the necessary modifications. [18 G, 19A B, D E] The last words of Section 297(2)(d)(ii) should be read to mean that where the proceedings initiated under Section 148, subject to the relaxations and limitation of Sections 149 and 150, all the provisions of the Act shall apply accordingly: that is to say, in the same manner as they would apply in case of proceedings normally initiated under these provisions. Since reassessment proceedings so initiat ed to give effect to orders on appeal, revision or reference will not be subject to a time limit, the proceedings like wise initiated under Section 297(2)(d)(ii) read with Section 149 will also not be subject to any limitations save to the extent mentioned in Section 150(2). [19 E F] Income Tax Officer vs Eastern Coal Co. Ltd., ; Commissioner of Income Tax ' vs Kamalapat Moti lal, ; Ambaji Traders vs Income Tax Officer, ; Commissioner of Income Tax vs T.P. Asrani, ; Jain vs Mahendra, ; Govinddas vs Income Tax Officer, ; Seth Gujannal Modi vs Commissioner of Income Tax, ; Third Income Tax Officer vs Damodar Bhat, ; Jain Bros. vs Union of India, ; , referred to.

The appellant was a shareholder of a company known as Mafatlal Gagalbhai and Co., Ltd. The Company with its registered office at Bombay was at all material times resident in British India. It was also doing business in the former Baroda State and used to keep its profits derived in that State with Mafatlal Gagalbhai Investment Corporation, Navsari. In the year 1949 Mafatlal Gagalbhai and Co. Ltd. declared dividends out of profits which had accrued partly in British India and partly in the Indian State. The appellant was assessed to income tax on the dividends earned by her. She did not bring those dividends into British India and claimed the benefit of para. 4 of the Merged States (Taxation Concessions) Order. The Tribunal held that the income did not accrue to the appellant in the Baroda State but it did not decide the question whether she was entitled to the benefits of the Taxation Concessions Order. The High Court on a reference to it held that para. 4 of the Taxation Concessions Order. did not apply to the assessee but it did not decide the other question as to where the income had accrued to the assessee. On appeal by special leave the appellant contended, inter alia, that since the Tribunal had not gone into the question of the applicability to the assessee of the Concessions Order and had not expressed any opinion thereon, the High Court could not raise the question on its own and decide it: Held, that the High Court exceeded its jurisdiction in going outside the point of law decided by the Tribunal and deciding a different point of law. Section 66 of the Income tax Act which confers jurisdiction upon the High Court only permits a reference of a question of law arising out of the order of the Tribunal. It does not confer jurisdiction on the High Court to decide a different question of law not arising out of such order. New Jehangir Vakil Mills Ltd. vs Commissioner of Income tax, , Scindia Steam Navigation Co. Ltd. vs Commissioner of Income tax, , Commissioner of Incometax vs Breach Candy Swimming Bath Trust, and Ismailia Grain Merchants Association vs Commissioner of Incometax, [1957] 31 I.T.R. 433, distinguished. Mash Trading Co. vs Commissioner of Income tax, , considered.

The appellant, a dealer in pulses in Vijayawada in Madras State made certain sales outside the State during the assessment year 1949 50. The appellant claimed exemption from sales tax of sales effected outside the State during the year but the Deputy Commercial Tax Officer disallowed the claim. A first appeal and a revision petition to the Board of Revenue were unsuccessful. The appellant thereafter brought a suit for the recovery of tax collected from him with interest contending that part of sales effected outside the State could not be taxed under article 285(1)(a) of the Constitution. The Trial Court held that the assessment to tax of the sales during the period from April 1, 1949 to January 25, 1950 ' could not be impeached but the sales from January 26 to March 31 outside the State were not liable to sales tax; as there was a single order of assessment 'for the whole year, the entire assessment was illegal. In appeal to the High Court, and upon a direction from that Court, the Trial Court gave a finding that deliveries of the goods were not made for purposes of consumption within the delivery State only. The High Court. therefore. allowed the appeal holding that the appellant could not claim the benefit under Article 286(1)(a) in the absence of evidence as to how the whole sales disposed of the goods after obtaining delivery and therefore the entire turn over for the year 1949 50 would be assessable to tax. In the appeal to this Court, it was contended inter alia (i) that the High Court was in error in holding that the burden of proof was on the appellant to show that there was not only delivery of goods for consumption within the delivery States but there was actual consumption of goods in those States: (ii) the assessment must be treated as an indivisible one and if a part of the assessment was illegal, the entire assessment must be deemed to be infected and treated as invalid. HELD: Allowing the appeal, (i) The part of the turnover which related to sales from January 26, 1960 to March 31. 1960 was not liable to sales tax and the levy of sales tax from the appellant to this extent was illegal. It was rightly contended that the appellant did not carry the burden of showing that there was not only delivery of goods for consumption within the States but that the goods were actually consumed in those States. [749 C] India Copper Corporation Ltd. vs The State of Bihar, 12 S.T.C. 56 relied upon. 744 (ii) In the present case though there was a single order of assessment for the period from April 1, 1949 to March 31, 1950, the assessment could be split up and dissected and the items of sales separated and taxed for different periods. It was possible to ascertain the turnover of the appellant for the pre Constitution and post Constitution periods from the figures furnished in the plaint by the appellant himself. It was, therefore. open to the Court in these circumstances to sever the illegal part of the assessment and give a declaration with regard to the illegal part alone instead of1 declaring the entire assessment void. [752 B] Case law referred to.

Appeals Nos. 490 and 491 of 1958. Appeals from the judgment and decree dated February 18, 1955, of the Madras High Court in Second Appeals Nos. 2038 and 2039 of 1950. N. R. Raghavachariar, M. R. Krishnaswami and T. V. R. Tatachari, for the appellant. R. Ganapathi Iyer and D. Gupta, for the respondent. November 29. The Judgment of the Court was delivered by KAPUR, J. Two suits were brought by the appellants for a declaration against the levy of sales tax by the State of Madras and an injunction was also prayed for. Both the suits were decreed by the Subordinate Judge of Salem and the decrees were confirmed on appeal by the District Judge of Salem. Two appeals were taken to the High Court by the State of Madras against those decrees and by a judgment dated February 18, 1955, the decrees were set aside by a common judgment. Against these decrees the appellants have brought these appeals by a certificate of that Court. The appellants are merchants dealing in cotton yarn. They obtained a license under section 5 of the Madras General Sales Tax Act (Act IX of 1939), hereinafter referred to as the 'Act '. This license exempted 738 them from assessment to sales tax under section 3 of the Act on the sale of cotton yarn and on handloom cloth "subject to such restrictions and conditions as may be prescribed including conditions as to license and license fees". The license was issued on March 31,1941, and was renewed for the following years. On September 20, 1944, the Commercial Tax Authorities made a surprise inspection of the premises of the appellants and discovered that they were maintaining two separate sets of account on the basis of one of which the appellants submitted their returns to the Department. Because the other set of account books showed black market activities of the firm Balakrishna Chetty was prosecuted and sentenced to six months ' imprisonment for an offence connected with the breach of Cot. ton Yarn Control Order. During the pendency of those proceedings the Deputy Commercial Tax Officer made assessments for the years. 1943 44 and 1944 45, the tax for the former was Rs. 37,039 and for the latter Rs. 3,140. The appellants unsuccessfully appealed against these assessments and their revisions also failed. On August 24, 1945, the appellants brought a suit for a declaration and injunction in regard to the first assessment alleging that the assessment was against the Act. On September 2, 1946, a similar suit was brought in regard to the second assessment. It is out of these suits that the present appeal has arisen. The controversy between the parties centres round the interpretation of the words "subject to" in section 5 of the Act. The High Court has held that on a true interpretation of the provisions of the Act and the rules made thereunder, the observance of conditions of the license was necessary for the availability of exemption under section 5; that as the appellants had contravened those conditions they were liable to pay tax for both the years notwithstanding the license which had been issued to them under section 5 of the Act. it will be convenient at this stage to refer to the provisions of the Act which are relevant for the purpose of this appeal. section 2(b) " dealer" means any person who carries on the business of buying or selling goods;" 739 section 2(f) " "prescribed" means prescribed by rules made under this Act;". section 3(1) "Subject to the provisions of this Act, every dealer shall pay in each year a tax in accordance with the scale specified below: (a). . . . . . (b) if his turnover ex One half of I per ceeds twenty cent of such turn thousand rupees. over". section 5 "Subject to such restrictions and conditions as may be prescribed, including the conditions as to licenses and license fees, the sale of bullion and specie, of cotton, of cotton yarn and of any cloth woven on handlooms and sold by persons dealing exclusively in such cloth shall be exempt from taxation under Section 3". section 13 "Every dealer and every person licensed under section 8 shall keep and maintain a true and correct account showing the value of the goods sold and paid by them; and in case the accounts maintained in the ordinary course, do not show the same in an intelligible form, he shall maintain a true and correct account in such form as may be prescribed in this behalf.". The following rules are relevant for the purpose of this appeal and we quote the relevant portions: R. 5 "(1) Every person who (a). . . . . (b) deals with cotton and/or cotton yarn, (c). . . . . . (d). . . . . . (e) shall if he desires to avail himself of the exemption provided in sections 5 and 8 or of the concession of single point taxation provided in section 6, submit an application in Form I for a licence and the relevant portion of Form III is as follows: "Form III Cotton Licence to a dealer in Cotton yarn cloth woven on handlooms 740 See rule 6(5). Licence No. dated having paid a licence fee of Rs. (in words) hereby licensed as a dealer in Cotton/Cotton yarn Cotton woven on handlooms for the year ending at (place of business) subject to the provisions of the Madras General Sales Tax Act, 1939, and the rules made thereunder and to the following conditions:". R. 8 "Every licence granted or renewed under these rules shall be liable to cancellation by the Deputy Commercial Tax Officer in the event of a breach of any of the provisions of the Act, or of the Rules made thereunder or of the conditions of the licence. " The contention raised on behalf of the appellants was that as long as they held the licence it was immaterial if they were guilty of any infraction of the law and that they were not liable to any assessment of sales tax under the provisions of the Act and the only penalty they incurred was to have their licence cancelled and/or be liable to the penalty which under the criminal law they had already suffered. The contention comes to this that in spite of the breaches of the terms and conditions of the licence, having a licence was sufficient for the purpose of exemption under the Act. This contention, in our opinion, is wholly untenable. Section 3 is the charging section and section 5 gives exemption from taxation but that section clearly makes the holding of a licence subject to restrictions and conditions prescribed under the provisions of the Act and the rules made thereunder because the opening words of that section are "subject to such restrictions and conditions as may be prescribed." Under B. 13 an important condition imposed under the Act is the keeping by the dealer and every person licensed of true and correct accounts showing the value of the goods sold and paid by him. Next there is r. 5 of the General Sales Tax Rules which provided 741 that if any person desired to avail himself of the exemption provided in section 5, he had to submit an application in Form I for a licence and the Form of the licence shows that the licence was subject to the provisions of the Act and the rules made thereunder which required the licensee to submit returns as required and also to keep true accounts under section 13. This shows that the giving of the licence was subject to certain conditions being observed by the licensee and the licence itself was issued subject to the Act and the rules. But it was contended that the words "subject to" do not mean "conditional upon" but "liable to the rules and the provisions" of the Act. So construed section 5 will become not only inelegant but wholly meaningless. On a proper interpretation of the section it only means that the exemption under the licence is conditional upon the observance of the conditions prescribed and upon the restrictions which are imposed by and under the Act whether in the rules or in the licence itself ; that is, a licensee is exempt from assessment as long as he conforms to the conditions of the licence and not that he is entitled to exemption whether the conditions upon which the licence is given are fulfilled or not. The use of the words "subject to" has reference to effectuating the intention of the law and the correct meaning, in our opinion, is "conditional upon". The appellants have been found to have contravened the provisions of the Act as well as the rules and therefore it cannot be said that they have observed the conditions upon which the exemption under the licence is available. In that view of the matter, it was rightly held that they were not exempt from assessment under the Act. The appeals are therefore dismissed with costs. Appeals dismissed.

The appellants, who were dealers in Cotton yarn, obtained a license under the Madras General Sales Tax Act, 1939 (IX of 1939). Section 5 of that Act exempted such dealers from pay ment of sales tax under section 3 of the Act subject to such restrictions and conditions as might be prescribed, including the conditions as to licenses and license fees. Section 13 required a licensee to keep and maintain true and correct accounts of the value of the goods sold and paid by him. Rule 5 of the General Sales Tax Rules provided that any person seeking exemption under section 5 of the Act must apply for license in Form 1 which made the license subject to the provisions of the Act and the rules made thereunder. The appellants on surprise inspection were found to maintain two separate sets of accounts, on the basis of one of which they submitted their returns and the other 737 showed black market activities. The question for determination in the appeal was whether the appellants who had been refused exemption and were assessed to tax, could claim exemption under the Act. Held, that the question must be answered in the negative. Section 5 of the Madras General Sales Tax Act, 1939, pro perly construed, leaves no manner of doubt that an exemption from assessment thereunder is clearly conditional upon the observance by the assessee of the conditions and restrictions imposed by the Act, either in the rules or in the license itself, and the words 'subject to ' used by the section means "conditional upon". It was not correct to say that licensee was exempt from assessment so long as he held the license notwithstanding any breach of the provision of the law and that the only penalty he could be subjected to was the cancellation of his license or criminal prosecution.

Under an agreement dated July 11, 1945, the appellants were appointed managing agents of the Coimbatore Spinning and Weaving Co. Ltd., for 20 years, and certain remuneration was provided for them including 10% commission on the net profits of the company due and payable yearly immediately after the accounts of the company were closed and commissions on purchases and capital expenditure of the company. Prior to October 1, 1944, the appellants were the managing agents of the Coimbatore Mills Agency Ltd., who were the managing agents of the Coimbatore Spinning and Weaving Co. Ltd. The year of account of the appellants ended on March 31, of the company on June 30, and of the Agency Company on September 30. For the assessment year 1945 46 the appellants submitted a return of their income which included the stipulated remuneration and commissions. This return was accepted by the Income tax Officer, and Excess Profits Tax liability for the chargeable accounting period ending March 31, 1945, was also worked out on that basis. A return of income was submitted by the appellants for the assessment year 1946 47 which included commission for the period 1 4 45 to 30 6 45 on purchases of cotton and stores and on capital expenditure. The Tax Officer directed that the commission on purchases and capital expenditure be taken into account 272 for the year April 1, 1945, to March 31, 1946, and that the receipts be computed accordingly. The assessment for 1945 46 was then reopened under section 34 of the Income tax Act under section 15 of the Excess Profits Tax Act and as a result of apportionment made by the application of r. 9 of Sch. 1 of the Excess Profits Tax Act, the liability of the appellants for Income tax and Excess Profits 'fax was revised and fresh assessments were made. The orders of assessment were confirmed by the appellate authorities. Held, that as in the instant case the chargeable accounting period for the assessment of Excess Profits Tax and the year of account of the company did not tally, by the assessment of income made on the assumption that they did tally, there had resulted under assessment and it was open to the Tax Officer to take action under section 15 of the Excess Profits Tax Act. The Excess Profits Tax Officer acted properly in apportioning under r. 9 of Sch. 1 the commission received by the appellants. Rule 9 of Sch. 1 of the Excess Profits Tax Act is enacted in general terms and it is applicable to all contracts which are intended to be operative for fixed periods. If, for the performance of the entire contract, remuneration is payable at certain rates the profits earned out of that remuneration must be apportioned in the manner prescribed by 19 if the performance of the contact extends beyond the accounting period. E. D. Sassoon & Co., Ltd. vs The Commissioner of Income tax, Bombay City; , , distinguished.

On 30th June, 1969, State Government issued a notifica tion under Section 8A of the Karnataka Sales Tax Act, 1957, providing a package of reliefs and incentives including one concerning relief from payment of sales tax. A further notification dated 11th August, 1975 was issued, envisaging certain modified procedures for effectu ating the reliefs contemplated by the exemption notification of 30th June, 1969. For the assessment year 1976 77, the appellant made an application to the Respondent No. 1 on 10th November, 1976 for adjustment of the refunds against sales tax due and permission was granted with retrospective effect from 1st May, 1976 validating the adjustments, which the appellant had made during the interregnum. For the three subsequent years, viz., 1977 78, 1978 79 and 197980, similar applications, which were made on 29th March 1977, 20th March 1978 and 8th March 1979 respectively, remained undisposed of. In anticipation of the permission, appellant adjusted the refund against tax payable for these years and filed its monthly returns setting out adjustments so effected. 337 There was no dispute that the appellant was entitled to the benefit of the notification dated 30th June, 1969 and that the refunds were eligible to be adjusted against sales tax payable for respective years. The respondent No. 1 in his letter dated 27.3.1979 informed the appellant that the orders on appellant 's appli cation for permission would be passed only on receipt of the clarification from the Government on the matters. On 9th January, 1980, the appellant was issued three demand notices by the Commercial Tax Officer demanding payment of the sales tax, stating that as prior permission to adjust sales tax had not been considered by the respond ent No. 1, he was obliged to proceed to recover the taxes. Steps for recovery of the penalties were also initiated. The appellant moved the High Court for issue of writ of mandamus to quash the demand notices and the proceedings initiated for recovery of penalty under section 13 of the Act. The High Court dismissed the writ petition, against which the present appeal was filed. The appellant urged that indisputably the permission for the three years had been sought well before the commencement of the respective years but had been withheld for reasons, which were demonstrably extraneous; that the basic eligibil ity was conditioned by the notification of 30th June, 1969, which required a certificate from the Department of Indus tries and Commerce; that the requirement of the annual permission for adjustment envisaged by the notification of 11th August; 1975 was merely procedural, as clause 3 of the notification stipulated; and that if the conditions were satisfied, it was deemed that permission was given. The respondents contended that it was not as if the right to the refund was denied or defeated by the inaction of the Deputy Commissioner but only one mode of the refund by adjustment became unavailable; that the benefit envis aged by the notification of 11th August, 1975 was in the nature of a concession and that the appellant in order to avail itself of its benefit had to show strict compliance with conditions subject to which it was available; that where exemptions were concerned, the conditions thereof ought to be strictly construed and strict compliance with them exacted before a person could lay claim to the 338 benefit of the exemptions; and that if, in the meanwhile, the period itself expired, no relief was possible as quite obviously, the requirements of 'prior permission ' became impossible of compliance. Allowing the appeal, this Court, HELD: 1. The main exemption is under the 1969 notifica tion. The subsequent notification which contains condition of prior permission clearly envisages a procedure to give effect to the exemption. [347E F] 2. Clause 3 of the notification leaves no discretion to the Deputy Commissioner to refuse the permission, if the conditions are satisfied. The words are that he "will grant". There is no dispute that appellant had satisfied the conditions. Yet the permission was withheld not for any valid and substantial reason, but owing to certain extrane ous things concerning some interdepartmental issues. Appel lant had nothing to do with those issues. [347F H] 3. There was no other disentitling circumstance which would justify the refusal of the permission. Appellant did not have prior permission, because it was withheld by the Revenue without any justification. The High Court took the view that after the period to which the adjustment related had expired no permission could at all be granted. A permis sion of this nature was a technical requirement and could be issued making it operative from the time it was applied for. [349C D] 4. A distinction between the provisions of statute which are of substantive character and were built in with certain specific objectives of policy on the one hand and those which are merely procedural and technical in their nature on the other must be kept clearly distinguished. [347E G] 5. The choice between a strict and a liberal construc tion arises only in case of doubt in regard to the intention of the Legislature manifest on the statutory language. Indeed, the need to resort to any interpretative process arises only where the meaning is not manifest on the plain words of the statute. If the words are plain and clear and directly convey the meaning, there is no need for any inter pretation. [348F G] Assistant Commissioner of Commercial Taxes (Asstt.), Dharwar & Ors. vs Dharmendra Trading Co. & Ors., ; ; Wells vs Minister of Housing and Local Government, at 1007 339 and Union of India & Ors. vs M/s. Wood Papers Ltd. & Ors., [1991] JT (1) 151 at 155, referred to. Kedarnath Jute Manufacturing Co. vs Commercial Tax Officer, Calcutta & Ors., ; at 630 and Col lector of Central Excise, Bombay and Anr. vs Messrs Parle Exports (P) Ltd., ; , distinguished. Francis Bennion: "Statutory Interpretation", 1984 edi tion at page 683, referred to.

The respondents in the above appeals are owners of certain lands which are to be compulsorily acquired udder Madras Lignite (Acquion of Land) Act, 1953. This Act came into force on August 20, 53 before article 31 of the Constitution was amended by the Constituion (Fourth Amendment) Act, 1955. By the said Act substantially o provisions which are material to the present appeals were made. ,e first was that compensation for acquisition of lignite bearing lands der the Land Acquisition Act is to be assessed on the market value the land prevailing on August 28, 1947 and not on the date on which notification is issued under section 4(1) of the Land Acquisition Act. condly it was provided that in awarding compensation the value of non agricultural improvements commenced since April 28, 1947 win not taken into consideration. In accordance with the above provisions, after issuing the notices as acquired under sections 4(1) and 6 of the Land Acquisition Act the Land acquisition Officer made awards regarding the lands of the respondents. he respondents thereupon filed petitions under article 226 of the Constition before the High Court of Madras challenging the validity of the ward on the ground that the provisions of the Act relating to the ward of compensation violate article 31(2) of the Constitution [as it food before the Constitution (Fourth Amendment) Act, [955]. The High Court upheld the contention. In appeal, Held: (i) The validity of the Act impugned in the present appeal ,is to be examined in the light of the provisions of article 31 of the constitution as they stood before the Constitution (Fourth Amendment) Act, 1955. Chiranjit Lai Chowdhuri V. Union of India, [1950] S.C.R. 869, State of West Bengal vs Subodh Gopal Bose, ; , and State of lest Bengal vs Mrs. Bela Banerjee, ; , relied. 937 (ii) The principle laid down in Bela Banerjee 's case, that the ceiling on the compensation without reference to the value of the land at the time of the acquisition is arbitrary and cannot be regarded as due compensation in letter and spirit within the requirement of article 31(2), would apply to the impugned Act. Fixation of compensation for compulsory acquisition of land notified many years after that date on the market value prevailing on the date on which lignite was discovered is wholly arbitrary and inconsistent with the letter and spirit of article 31(2) as it stood before the Constitution (Fourth Amendment) Act, 1955. (iii) Any principle for determination of compensation denying to the owner all increments in value between a fixed date and the date of issue of the notice under section 4(1) of the Land Acquisition Act must prima facie, be regarded as denying him the true equivalent of the land which is ex propriated and it is for the State to show that fixation of compensation on the market value on an anterior date does not amount to a violation of the Constitutional guarantee. In the present appeals no materials have been placed by the State which would support any such case. (iv) Denial of compensation for the value of non agricultural improvements would be denying to him just compensation for the loss suffered by him on account of compulsory acquisition of his holding and would amount to infringement of article 31(2) of the Constitution.

The question for determination in the appeal was whether the Union of India was entitled to levy and recover arrears of excise duty on cotton cloth for the period April 1, 1949, to March 31, 1950, payable by the respondent, a cloth mill in the State of Rajasthan, under the Rajasthan Excise Duties Ordinance, 1949. After the coming into force of the Indian Constitution and the extension of the Central Excise and Salt Act, 1944, and the rules framed thereunder to the State of Rajasthan by section II of the Finance Act of 1950, the duty in respect of cloth manufactured on and from April 1, 1950, became payable under that Act. The appellant Union, however, claimed that as a result of the agreement entered into on February 25, 1950, by the President of India with the Rajpramukh of Rajasthan under article 278 and article 295 of the Constitution, the Union of India became entitled as from April 1, 1950, to claim and recover all arrears of excise duties which the State of Rajasthan was entitled to recover from the respondent before the Central Excise and Salt Act, 1944, was extended to Rajasthan. Notice having been accordingly served on the respondent demanding payment of the outstanding amount of Rs. 1,36,551 12 as payable by it, it moved the High Court under article 226 of the Constitution. On a reference by the Division Bench which heard the matter in the first instance, the Full Bench finding in favour of the respondent held that article 277 was a complete refutation of the said claim by the Union and article 278 and the said agreement were overridden by it. Held, that the provisions of articles 277 and 278 of the Con stitution, properly construed, leave no manner of doubt that article 277 was in the nature of a saving provision, subject in terms to the provisions of article 278, permitting the States to levy a tax or duty which, after the Constitution could be levied only by the centre. But article 277 had to yield place to any agreement in respect of such taxes and duties made between the Union Government and the Government of a Part B State under article 278. Since there could not be the least doubt in the instant case that the agreement between the President and the Rajpramukh of Rajasthan conceded to the Union the right to levy and collect the arrears of the cotton excise duty in Rajasthan, the High Court was wrong in taking a contrary view of the matter.

The petitioner Company carrying on the business of manu facturing bidis and having its head office at Jabalpur in the State of Madhya Pradesh made certain purchases of tobacco in the State of Bombay. The Sales Tax Officer assessed the petitioner to a purchase tax under the provisions of the Bombay Sales Tax Act, 1953. The petitioner contested the assessment of 710 purchase tax on the grounds that those transactions and pur chases were " Outside the State of Bombay " within the meaning of article 286(1)(a) of the Constitution read with the Explanation, that the provisions of the Bombay Sales Tax Act, 1953, did not authorise the imposition, levy or collection of any purchase tax on the transactions in question and that the transactions took place in the course of inter State trade and commerce. The petitioner 's appeal to the Assistant Collector of Sales Tax was dismissed and then the present petition for writs of mandamus and certiorari was filed in the Supreme Court. The petitioner contended that the Bombay Sales Tax Act, 1953, did not authorise the imposition of a tax on the purchase of bidi tobacco which was not one of the goods specified in column 4 of Schedule B of the said Act. The petitioner further contended that the purchased tobacco was delivered to it within the State of Bombay as a direct result of the purchase but it was intended to be sent to the State of Madhya Pradesh to be manufactured into bidis at that place. The only thing which was done in the Bombay State was to remove the stem and dust from the tobacco which process did neither amount to " consumption " of tobacco as contemplated under the Explanation to article 286 of the Constitution nor did it convert the tobacco which was sent to the Head Office into an article " commercially different " from the tobacco purchased from the cultivators. In their counter affidavit the respondents averred that the raw tobacco was converted into bidi pattis before it was sent outside Bombay State both of which were commercially different articles and the market value of which was also different. These averments were not controverted by the petitioner. Held, that the words " all goods other than those specified from time to time in Schedule A and in the preceding entries " in entry 8o of Schedule B of the Bombay Sales Tax Act, 1953, amounted to a specification of goods for the purposes of section lo of the Act and as bidi tobacco purchased by the petitioner was not within Schedule A or any of the earlier entries in Schedule B purchase tax at the rate mentioned against entry 8o was leviable under section 1o of the Act. Whenever a commodity was so dealt with as to change it into another commercial commodity there was consumption of the first commodity within the meaning of the Explanation to article 286 of the Constitution. State of Travancore Cochin vs Shanmugha Vilas Cashew Nut Factory, ; , followed. The delivery of tobacco in Bombay State for changing it into bidi patti which is a commercially different article amount ed to delivery for the purpose of consumption and the purchase fell within the meaning of article 286(i)(a) of the Constitution and took place inside tile Bombay State.

The assessee Oil refinery, predecessor in interest to the respondent Corporation in one of the appeals had registered itself as a dealer under the Bombay Sales Tax Act, 1959. During the Calendar year 1961, it had purchased sulphuric acid from a chemical company for processing and refining crude oil and manufacturing kerosene for a marketing company. On the sulphuric acid so purchased sales tax was recovered from it by the chemical company. While the refined kerosene which was not taxable upto 31.3.1961 was sold by the marketing company, the acid sludge yielded in the purification process was sold by the refinery. The refinery paid sales tax on the acid sludge sold by it, and claimed a set off (and a refund, if need be) of the sales tax paid by it on its purchase of sulphuric acid, on the ground that all the conditions set out in clause (e) of Rule 41 of the Bombay Sales Tax Rules, 1959 were fulfilled, viz., it was manufacturer within the meaning of Section 2 (17) of the Act, that it was also a registered dealer, that it manufactured taxable goods for sale, that while acid sludge was taxable throughout the year, kerosene was taxable with effect from 1.4.1961 onwards and that tax was recovered on the raw material purchased by it by the chemical company. 808 The Sales Tax Officer allowed the set off only partly. On appeal, the Appellate Assistant Commissioner held that the assessee was entitled to no set off at all under Rule 41 since what was manufactured by the assessee was kerosene and not acid sludge, and the kerosene was sold not by the assessee manufacturer, but by some other company. The Appellate Tribunal, however, allowed the assessee 's claim in full and on reference this was upheld by the High Court. The respondent Cotton Mill in the other appeals purchased raw unginned cotton from agriculturists and unregistered dealers during periods 1.7.73 to 30.6.74 and 1.7.74 to 30.6.75 and paid sales tax on the raw cotton so purchased. The cotton was ginned yielding place to ginned cotton and cotton seed. The respondent manufactured yarn and cloth from the ginned cotton. The cotton waste and yarn waste obtained in the course of manufacture were also sold by the assessee. It paid sales tax on the yarn and cotton waste sold by it and claimed a set off, under 41 A of the Rules, of the sales tax paid on the purchase value of the entire raw cotton purchased by it. The Sales Tax Officer allowed a set off of only part of the purchase tax paid on the raw cotton purchased by the assessee proportionate to the extent of yarn sales. On appeal, the Appellate Tribunal allowed a set off of the entire purchase tax paid on the raw cotton, machinery and other purchases, which had been used in the process of manufacture of cotton waste. It, however, directed that the deductions should be so allowed as not to result in a double deduction of the same amount of purchase tax. In the appeals, by Special leave, before this Court, on behalf of the State Government, it was contended that Rules 41 and 41 A were intended to give relief to a dealer in respect of purchase of goods which were used in the manufacture of taxable goods for sale, that the manufactured goods, viz., pure kerosene was neither sold by the respondent so as to attract sales tax in his hands nor, was it liable to sales tax at all for the first three months, and the cotton purchased on payment of tax was used for the manufacture of cloth which was not liable to sales tax, and that a set off could not be allowed merely because a by product or waste product, viz., acid sludge and cotton waste was sold for a nominal turn over, which was subject to tax, and that the set off should be split up proportionately and allowed only to a proportionate extent, on the basis of the respective 809 turnover of the taxable and non taxable goods, and an apportionment of such nature was implicit in a tax law and was also in consonance with the object and purpose of the rules. On behalf of one of the respondents it was contended that under Rule 41 it was not a requirement that the manufactured goods had to be sold by the manufacturing dealer himself and that the sulphuric acid purchased was wholly used in the manufacture of two items kerosene and acid sludge one of which, viz., the sludge, was taxable and also subjected to tax, and the amount of set off was specified in the rule itself as the amount of purchase tax paid on the goods so used, and could not be scaled down proportionately merely because the turnover of the taxable goods was insignificant. The other respondent adopted these contentions. Dismissing the appeals, this Court, HELD: 1.1 The assessees are entitled to a set off of the entire tax paid by them on the purchases of sulphuric acid and cotton respectively. The only condition under the rule is that the goods purchased on payment of tax should have been used in the manufacture of taxable goods for sale. Their concurrent user for the manufacture of another item of goods which may or may not be taxable is immaterial though kerosene was also taxable for nine months in the year and yarn was also manufactured and it was subject to tax. Commissioner of Sales Tax vs Burmah Shell Refineries Limited, (1978) 41 S.T.C. 337, referred to. 1.2. The principle of apportionment on the basis of turnovers of various items of goods manufactured and restriction of the quantum of set off to a proportion based on the turnover of taxable goods to the total turnover cannot be accepted. No doubt under the rules, situations are conceivable where severance of taxable element is implicit, but the type of user in the instant case is a composite one, in which it is not possible to correlate any part of the purchased goods as having gone in for the purpose of manufacture of taxable goods. Anglo French Textiles vs C.I.T., , S.C.; Tata Iron & Steel Co. vs State ; and Best & Co. vs C.I.T. , S.C., distinguished. 810 1.3 In the instant case the entire sulphuric acid purchased has no doubt been used in the manufacture of kerosene though perhaps not a drop of acid clings to the kerosene manufactured. Equally, the entire sulphuric acid has gone into the composition of the acid sludge. Having regard to the nature of the interactions in the instant case,it is incontrovertible that the entire sulphuric acid purchased has gone into the manufacture of the sludge. The rules do not require that the purchased goods must have been used only for the manufacture of taxable goods for sale. Therefore, it is not possible to cut down the quantum of relief clearly outlined in the rule on the basis of some general principle claimed to underline the provision. 1.4 The basis for the relief provided is not very clear cut. Various reliefs have been provided in a group of rules which come in for application in various situations. The relief may be based on the principle that the manufactured product is taxed either in the hands of the same assessee or in someone else 's hands, or that the manufactured goods are exported which may yield no tax but earn foreign exchange, or even that the purchases are utilised for manufacture of goods in the State thus contributing to the industrial development of the State. It is, therefore, difficult to read into the provision a quantitative correlation of the goods resulting in a taxable turnover and the purchases of raw materials on which tax has been paid. 1.5 Rule 41 does not contemplate that the goods purchased by the dealer should be used for manufacture of taxable goods for sale by him. No such restriction can be read into this rule. 2.1 Where a subsidiary product is turned out regularly and continuously in the course of a manufacturing business and is also sold regularly from time to time, an intention can be attributed to the manufacturer to manufacture and sell the subsidiary product. State of Gujarat vs Raipur Manufacturing Co. Ltd., (1967) 19 S.T.C. 1, relied on. 2.2 The assessees in the instant case do purchase sulphuric acid and unginned cotton for use in a manufacturing process, which yield not only kerosene and yarn/cloth, but also acid sludge and cotton waste. There is also no evidence to suggest that acid sludge is not a commercial 811 commodity with a market but an item of waste.

The respondents as plaintiffs brought the suit, out of which the present appeal arises, under the provisions of 0. 21, r. 63 Of the Code of Civil Procedure for a declaration that the deed of trust executed in favour of the appellant deity was a sham and fictitious document and the properties covered by it were liable to sold in execution of their decree. The courts below dismissed the suit but the High Court, by misplacing the onus on the deity to prove its title, set aside the concurrent findings, of the Courts below and decreed the respondents ' suit. Held, that the question whether a trust deed was a fictitious document or not was essentially a question of fact. Meenakshi Mills, Madurai vs The Commissioner of Income tax, Madras, ; , referred to. It was well settled by a long series of decisions of the Privy Council and of this Court that the High Court could not, in a second appeal, interfere with findings of fact arrived at by the Courts below" however erroneous they might be. Even assuming that it was open to the High Court to go behind the findings of fact, it was clear that it had completely misdirected itself on the question of onus. In a suit, such as the present, where the plaintiff sought for a declaration that a document solemnly executed and registered was a fictitious one, the burden lay heavily on him to prove that it was so and that burden became still more heavy where he sought a declaration that an order passed by the court upholding a claim of a third party under 0. 21, r. 60 of the Code was erroneous.

Appeal No. 395 of 1959. Appeal by special leave from the Award dated November 25, 1957 of the Industrial Tribunal, Bombay, in Reference (I. T.) No. 24 of 1956. N. C. Chatterjee, D. H. Buch and K. L. Hathi, for the appellants. M. C. Setalvad, Attorney General for India, J. B. Dadachanji and section N. Andley, for the respondent Nos. 1 and 2. M. C. Setalvad, Attorney General for India, Dewan Chaman Lal Pandhi and I. N. Shroff, for the respondent No. 3. 1960. November 30. The Judgment of the Court was delivered by WANCHOO, J. This is an appeal by special leave in an industrial matter. It appears that the appellants were originally in the service of the Scindia Steam Navigation Co. Ltd. (hereinafter called the Scindias). Their services were transferred by way of loan to the Air Services of India Limited (hereinafter referred to as the ASI). The ASI was formed in 1937 and was 813 purchased by the Scindias in 1943 and by 1946 was a full subsidiary of the Scindias. Therefore from 1946 to about 1951, a large number of employees of the, Scindias were transferred to the ASI for indefinite periods. The Scindias had a number of subsidiaries and it was usual for the Scindias to transfer their employees to their subsidiary companies and take them back whenever they found necessary to do so. The ' appellants who were thus transferred to the ASI were to get the same scale of pay as the employees of the Scindias and the same terms and conditions of service (including bonus whenever the Scindias paid it) were to apply. The Scindias retained the right to recall these loaned employees and it is the case of the appellants that they were entitled to go back to the Scindias if they so desired. Thus the terms and conditions of service of these loaned employees of the ASI were different from those employees of the ASI who were recruited by the ASI itself. This state of affairs continued till 1952 when the Government of India contemplated nationalisation of the existing air lines operating in India with effect from June 1953 or thereabouts. When legislation for this purpose was on the anvil the appellants felt perturbed about their status in the ASI which was going to be taken over by the Indian Air Lines Corporation (hereinafter called the Corporation), which was expected to be established after the , No. XXVII of 1953, (hereinafter called the Act) came into force. They therefore addressed a letter to the Scindias on April 6, 1953, requesting that as the Government of India intended to nationalise all the air lines in India with effect from 1 June, 1953, or subsequent thereto, they wanted to be taken back by the Scindias. On April 24, the Scindias sent a reply to this letter in which they pointed out that all persons working in the ASI would be governed by cl. 20 of the Air Corporation Bill of 1953, when the Bill was enacted into law. It was also pointed out that this clause would apply to all those actually working with the ASI on 103 814 the appointed day irrespective of whether they were recruited by the ASI directly or transferred to the ASI from the Scindias or other associated concerns. It was further pointed out that if the loaned employees or others, employed under the 'ASI, did not want to join ,the proposed Corporation they would have the option not to do so under the proviso to cl. 20(1) of the 'Bill; but in case any employee of the ASI whether loaned or otherwise made the option not to join the proposed Corporation, the Scindias would treat them as having resigned from service, as the Scindias could not absorb them. In that case such employees would be entitled only to the usual retirement benefits and would not be entitled to retrenchment compensation. Finally, it was hoped that all those in the employ of the ASI, whether loaned or otherwise, having been guaranteed continuity of employment in the new set up would see that the Scindias would not be burdened with surplus staff, requiring consequential retrenchment of the same or more junior personnel by the Scindias. On April 29, 1953, a reply was sent by the union on behalf of the appellants to the Scindias. It was pointed out that the loaned staff should not be forced to go to the proposed Corporation without any consideration of their claim for re absorption into the Scindias. It was suggested that the matter might be taken up with the Government of India and the persons directly recruited by the ASI who were with other subsidiary companies might be taken by the proposed Corporation in place of the appellants. It seems that this suggestion was taken up with the Government of India but nothing came out of it, particularly because the persons directly recruited by the ASI. who were employed in other subsidiary companies did not want to go back to the ASI. In the meantime, the Scindias issued a circular on May 6,1953, to all the employees under the ASI including the loaned employees, in which they pointed out that all the persons working with the ASI would be governed by cl. 20(1) when the Bill became law and would be absorbed in the proposed Corporation, unless 815 they took advantage of the proviso to cl. 20(1). It was also pointed out that such employees as took advantage of the proviso to el. 20(1) would be treated as having resigned from service and would be entitled to usual retirement benefits as on voluntary retirement, and to nothing more. It was also said that their conditions of service would be the same until duly altered or amended by the proposed Corporation. The circular then dealt with certain matters relating to provident fund with which we are however not concerned. It appears that the Act was passed on May 28, 1953. 20(1) of the Act, with which we are concerned, is in these terms: "(1) Every officer or other employee of an existing air company (except a director, managing agent, manager or any other person entitled to manage the whole or a substantial part of the business and affairs of the company under a special agreement) employed by that company prior to the first day of July, 1952, and still in its employment immediately before the appointed day shall, in so far as such officer or other employee is employed in connection with the undertaking which has vested in either of the Corporations by virtue of this Act, become as from the appointed date an officer or other employee, as the case may be, of the Corporation in which the undertaking has vested and shall hold his office or service therein by the same tenure, at the same remuneration and upon the same terms and conditions and with the same rights and privileges as to pension and gratuity and other matters as he would have held the same under the existing air company if its undertaking had not vested in the Corporation and shall continue to do so unless and until his employment in the Corporation is terminated or until his remuneration, terms or conditions are duly altered by the Corporation : Provided nothing contained in this section shall apply to any officer or other employee who has, by notice in writing given to the Corporation concerned prior to such date as may be fixed by the Central Government by notification in the official gazette 816 intimated his intention of not becoming an officer or other employee of the Corporation." After the Act was passed, notice was sent on June 17, 1953, to each employee of all the air companies which were being taken over by the proposed Corporation m and he was asked to inform the officer on special duty by July 10, 1953, if he desired to give the notice contemplated by the proviso to section 20(1). A form was sent in which the notice was to be given and it was ordered that it should reach the Chairman of the Corporation by registered post by July 10. The appellants admittedly did not give this notice as required by the proviso to section 20(1). In the meantime on June 8, 1953, a demand was made on behalf of the appellants in which the Scindias were asked to give an assurance to them that in the event of retrenchment of any loaned staff by the proposed Corporation within the first five years without any fault, the said staff would be taken back by the Scindias. Certain other demands were also made. The Scindias replied to this letter on July 3 and pointed out that they could not agree to give an assurance to take back the loaned staff in case it was retrenched by the proposed Corporation within the next five years. We are not concerned with the other demands and the replies thereto. On July 8, a letter was written on behalf of the appellants to the Scindias in which it was said that the appellants could not accept the contention contained in the circular of May 6, 1953. Though the appellants were carrying on this correspondence with the Scindias, they did not exercise the option which was given to them under the proviso to section 20(1) of the Act,. by July 10, 1953. First of August, 1953, was notified the appointed day under section 16 of the Act and from that date the undertakings of the "existing air companies" vested in the Corporation established under the Act (except the Air India International). So on August:1, 1953, the ASI vested in the Corporation and section 20(1) of the Act came into force. Hence as none of the appellants had exercised the option given to them under the proviso, they would also be governed by the said provision, 817 unless the contention. raised on their behalf that they could in no case be governed by section 20(1), is accepted. The tribunal came to the conclusion that, whatever the position of the appellants as loaned staff from the Scindias to the ASI, as they were informed on May 6, 1953, of the exact position by the Scindias and they did not ask for a reference of an industrial dispute immediately thereafter with the Scindias and as they" ' did not exercise the option given to them by the proviso to section 20(1) before July 10, 1953, they would be governed by section 20(1) of the Act. In consequence, they became the employees. of the Corporation as from August 1, 1953 and would thus have no right there after to claim that they were still the employees of the Scindias and had a right to revert to them. The consequence of all this was that they were held not to be entitled to any of the benefits which they claimed in the alternative according to the order of reference. It is this order of the tribunal rejecting the reference which has been impugned before us in the present appeal. The main contention of Mr. Chatterjee on behalf of the appellants is that they are not governed by section 20 (1) of the Act and in any case the contract of service between the appellants and the Scindias was not assignable and transferable even by law and finally that even if section 20(1) applied, the Scindias were bound to take back the appellants. We are of opinion that there is no force in any of these contentions. 20(1) lays down that every officer or employee of the "existing air companies" employed by them prior to the first day of July, 1952, and still in their employment immediately before the appointed day shall become as I from the appointed day an officer or employee, as the case may be, of the Corporation in which the undertakings are vested. The object of this provision was to ensure continuity of service to the employees of the "existing air companies" which were being taken over by the Corporation and was thus for the benefit of the officers and employees concerned. It is further provided in section 20(1) that the terms of service etc. would be the same until they are duly altered by the Corporation. One should have thought that the employees of the air 818 companies would welcome this provision as it ensured them continuity of service on the same terms till they were duly altered. Further there was no compulsion on the employees or the officers of the "existing air companies" to serve the Corporation if they did not want to do so. The proviso laid down that any officer or other employee who did not want to go into the service of the Corporation could get out of service by notice in writing given to the Corporation before the date fixed, which was in this case July 10, 1953. Therefore, even if the argument of Mr. Chatterjee that the contract of service between the appellants and their employers had been transferred or assigned by this section and that this could not be done,, be correct, it loses all its force, for the proviso made it clear that any one who did not want to join the Corporation, was free not to do so, after giving notice upto a certain date. Mr. Chatterjee in this connection relied on Nokes vs Doncaster Amalgamated Collieries Ltd. where it was observed at p. 1018 "It is, of course, indisputable that (apart from statutory provision to the contrary) the benefit of a contract entered into by A to render personal service to X cannot be transferred by X to Y without A 's consent, which is the same thing as saying that, in order to produce the desired result,, the old contract between A and X would have to be terminated by notice or by mutual consent and a new contract of service entered into by agreement between A and Y." This observation itself shows that a contract of service may be transferred by a statutory provision; but in the present case, as we have already said, there was no compulsory transfer of the contract of service between the "existing air companies", and their officers and employees to the Corporation for each of them was given the option not to join the Corporation, if he gave notice to that effect. The provision of section 20(1) read with the proviso is a perfectly reasonable provision and, as a matter of fact, in the interest of employees themselves. But, Mr. Chatterjee argues that section 20(1) will only apply to those who were in the employ of the "existing air companies"; it would not (1) , 819 apply to those who might be working for the "existing air companies" on being loaned from some other company. In other words, the argument is that the, appellants were in the employ not of the ASI but of the Scinaias and therefore section 20(1) would not apply to them and they would not become the employees of the Corporation by virtue of that provision when they failed to exercise the option given to them by the proviso. According to him, only those employees of the ASI who were directly recruited by it, would be covered by section 20(1). We are of opinion that this argument is fallacious. It is true that the appellants were not originally recruited by the ASI. They were recruited by the Scindias and were transferred on loan to the ASI on various dates from 1946 to 1951. But for the purposes of section 20(1) we have to see two things: namely, (i) whether the officer or employee was employed by the existing air company on July 1, 1952, and (ii) whether he was still in its employment on the appointed day, (namely, August 1,1953). Now it is not disputed that the appellants were working in fact for the ASI on July 1, 1952, and were also working for it on August 1, 1953. But it is contended that though they were working for the ASI they were still not in its employment in law and were in the employment of the Scindias because at one time they had been loaned by the Scindias to the ASI. Let us examine the exact position of the appellants in order to determine whether they were in the employ of the ASI or not. It is not disputed that they were working for the ASI and were being paid by it; their hours of work as well as control over their work was all by the ASI. From this it would naturally follow that they were the employees of the ASI, even though they might not have been directly recruited by it. It is true that there were certain special features of their employment with the ASI. These special features were that they were on the same terms and conditions of service as were enjoyed by the employees of the Scindias in the matter of remuneration, leave, bonus, etc. It may also be that they could not be, dismissed by the ASI and the Scindias may have had to take action in case it was 820 desired to dismiss them. Further it may be that they could be recalled by the Scindias and it may even be that they might have the option to go back to the Scindias. But these are only three special terms of their employment with the ASI. Subject to these special terms, they would for all purposes be the employees of the ASI and thus would in law be in the employment of the ASI both on July 1, 1952 and on August 1, 1953. The existence of these special terms in the case of these appellants would not in law make them any the less employees of the ASI, for whom they were working and who were paying them, who had power of control and direction over them; who would grant them leave, fix their hours of work and so on. There can in our opinion be no doubt that subject to these special terms the appellants were in the employ of the ASI in law. They would therefore be in the employ of the ASI prior to July 1, 1952 and would still be in its employ immediately before August 1, 1953. Consequently, they would clearly be governed by section 20(1). As they did not exercise the option given to them by the proviso to section 20(1), they became the employees of the Corporation from August 1, 1953, by the terms of the statute. The last point that has been urged is that even if section 20(1) applies, the Scindias are bound to take back the appellants. Suffice it to say that there is no force in this contention either. As soon as the appellants became by force of law the employees of the Corporation, as they did so become on August 1, 1953, in the circumstances of this case, they had no further right against the Scindias and could not; claim to be taken back in their employment on the ground that they were still their employees, in spite of the operation of section 20(1) of the Act. Nor could they claim any of the alternative benefits specified in the order of reference, as from August 1, 1953, they are by operation of law only the employees of the Corporation and can have no rights whatsoever against the Scindias. We are therefore of opinion that the tribunal 's decision is correct. The appeal fails and is thereby dismissed. There will be no order as to costs. Appeal dismissed.

Section 20(1) of the (XXVII of 1953), read with the proviso, is a perfectly reasonable provision and in the interest of the employees and it is not correct to say that it can apply only to the direct recruits of the existing air 812 companies and not at all to loaned employees working under them. The two conditions of its applications are (i) that the officer or employee was employed by the existing air company on July 1, 1952, and (ii) that he was still in its employment on August 1, 1953, the appointed day. In the instant case where the appellants who had been recruited by the Scindia Steam Navigation Co., Ltd., and on purchase by it of the Air Services of India Ltd., loaned to the latter, and were working under its direction and control on and between the said dates and being paid by it, Held, that in law they were the employees of the Air Ser vices of India from the appointed day, notwithstanding the existence of certain special features of their employment, and as such governed by section 20(1) of the Act and since they did not exercise the option given to them under the proviso, they became employees of the Corporation established under the Act and ceased to have any rights against the original employers. Nokes vs Doncaster Amalgamated Collieries Ltd., [1940] A.C. 1014, considered.

The six employees in the Tin Plate Co. of India Ltd. were adjudged insolvents. They were members in a Provident Fund of the said company, having certain amounts standing to their credit in the Fund. The appellants creditor of the said employees filed applica tions under section 4 of the Insolvency Act against the company and Trustees of the Fund for orders that amounts standing to the credit of the insolvents in the Provident Fund account were their properties and had vested in the court and were available for distribution amongst the creditors and therefore should be brought into court. The respondent pleaded in answer that the amount standing to the credit of each insolvent in the Provident Fund represented the contributions of the company and of the employees and that the corpus was a trust fund in the hands of the trustees of the fund; so they were not properties of the insolvents over which they had a disposing power and that they were not debts due to the insolvents. It was said that according to the rules governing the Provident Fund the monies become payable to the employee or any other member of his family only on the happening of certain contingencies such as retirement, discharge, dismissal or death and that till then no right accrued to the insolvent. It was further urged that the trustees could not be removed from the custody and control of the fund by the Official Receiver. On a construction of the Rules of the Provident Fund, the Insolvency Court held in favour of the creditor. On appeal, the High Court held that under the rules of the Fund, the insolvents had no present disposing power over the monies standing to their credit and that the Fund had vested in the Trustee. On appeal to the Supreme Court: Held that it is reasonably clear from these rules that a subscriber has a present interest in the Fund though the moneys may become payable to him, or his nominee or heirs only in the future. Even where there is a declaration about the nominee who is to receive payment after the subscriber 's death, the fund would still be the property of the subscriber in the hands of the nominee for the satisfaction of his debts, as there is no present gift to take effect immediately. It could not be maintained that the subscribers had no right, title or interest in the fund or that such interest as they may possess was dependent upon a possible contingency which may or may not occur. The amount standing to the credit of a subscriber even if payable in future would be a debt due by the company to him within the meaning of section 60 of the Code and hence liable to attachment and sale. A person cannot enter into any arrangement or agreement by which his own title will cease in the event of bankruptcy for it would then be a fraud perpetrated on the Insolvency Law. The liability of the estate to be attached by creditors on a bankruptcy or judgment is an incident of the estate, and no attempt to deprive it of that incident by direct prohibition would be valid. Notwithstanding the rules of the Fund in the present case, the subscribers have an interest in the moneys which can vest in the Official Receiver on their adjudication. The word "property" in the Insolvency Act is used in the widest possible sense which includes even property which may belong to or is vested in another but over which the insolvent has a disposing power which he may exercise for his own benefit; and this part of the definition has reference obviously to powers of appointment and the power of a Hindu father who is the managing ember of a joint family. The fact that on the date of the adjudication the insolvent could not transfer the property does not militate against the view that he has a vested interest in the same. Banchharam Mojumdar vs Adyanath Bhattacharjee, ([1909] I.L.R. , Dugdale vs Dugdale ([1888] 38 Ch. D. 176), Ex parte Dever. In re Suse and Sibeth ([1887] , Hudson vs Gribble ([1903] 1 K.B. 517), D. Palaiya vs T. P. Sen and another (A.I.R. 1935 Pat. 211), Secretary, Burma Oil Subsidiary Provident Fund (India) Ltd. vs Dadibhar Singh (A.I.R. 1941 Rang. 256), Gajraj Sheokarandas vs Sir Hukamchand Sarupchand and another (A.I.R. 1939 Bom. Anandrao alias Adkoba s/o Risaram ji vs Vishwanath Watuji Kalar and others, (A.I.R. 1944 Nag. 144), Ismail Jokaria & Co. vs Burmah Shell Provident Trust Ltd. (A.I.R. 1942 Sind 47), Bishwa Nath Sao vs The Official Receiver ([1936] I.L.R. 16 Pat. 60), and Sat Narain vs Behari Lal and Others ([1924] 52 I.A. 22), referred to.

By an order dated August 20, 1943, the Appellate Tribunal directed that certain deductions claimed by the assessee should be allowed. The matter came back to the Income tax Officer and he made an order on September 26, 1945, but did not issue any fresh notice of demand. The assessee appealed to the Appellate Assistant Commissioner complaining that in his order of September 26, the Income tax Officer had wrongly included a sum of Rs. 13,000 60 464 as unassessed foreign income of earlier years. The Appellate Assistant Commissioner held that the order of September 26 was not appealable. The assessee, therefore, made a miscellaneous application to the Appellate Tribunal, which held that the Incometax Officer acted wrongly in including the sum of Rs. 13,000 at that stage and directed the Income tax Officer to revise his computation accordingly. The Commissioner of Income tax, being of opinion that the Appellate Tribunal had no jurisdiction to entertain or make such order on a miscellaneous application applied for a reference to the High Court under section 66 (1) of the Income tax Act. The Tribunal referred certain questions and the High Court directed the Tribunal to refer certain other questions also but when the references came on for bearing the High Court held that the references were incompetent. The Commissioner of Incometax appealed to the Supreme Court with the leave of the High Court : Held, (i) that in carrying out the directions of the Tribunal and in passing the order of September 26, 1945, the Income tax Officer cannot be regarded as having acted under section 23 or section 27 of the Act and no appeal lay from his order under section 30 (1). The order made by the Appellate Assistant Commissioner was not therefore an order under a. 31 (3) and no further appeal lay to the Appellate Tribunal under section 33 (1) so as to enable the Tribunal to make an order under section 33 (4) and us there was no order under a. 33 (4), no question of law can be said to arise out of an order under section 33 (4) and there can be no valid reference under section 66 (1) or section 66 (2); (ii) even assuming that the order of the Income tax Officer dated September 26, 1945, was an order under a. 23 or section 27 and as such appealable, the order made by the Appellate Assistant Commissioner declining to entertain the appeal was not an order under any of the sub sections of a. 31 and no appeal lay therefrom to the Appellate Tribunal under section 33 (1) and there could be no order of the Appellate Tribunal under section 34 (1). The order of the Appellate Tribunal correcting the order of the Income tax Officer and directing that the sum of Rs. 13,541 should not be included cannot be regarded in any event as an order under section 33 (4) so as to attract the operation of section 66 (1) or (2).

In Income Tax Officer, Kolar Circle and Anr. vs Seghu Buchiah Setty. , this Court held that the recovery proceedings initiated against the assessee respondent on the basis of the original demand notice were had as it was of the view that the amount of tax assessed when reduced as a result of the appellate orders a fresh demand notice had to be served on the respondent before he could be treated as a defaulter. To get over the difficulties in the collection of income tax and other direct taxes created by the decision in Seghu Chetty 's case, the was passed with retrospective effect by an express provision in section 5. The property belonging to two brothers, the certificate debtors in C.A. 1575(NT) 71 and C.A. 1965 (NT) of 1963 respectively were purchased by M/s Jurdine Henderson (Ltd.) on September 20, 1954, i.e. after service of notices under section 7 of the Bengal Public Demands Recovery Act, 1913. The objections raised by the certificate debtors were rejected and the property came to be sold. In both cases the Company received a notice on August 6, 1956 fixing a date for settling the terms of the sale proclamation in respect of the respective one half share of each of the two Certificate debtors. Immediately thereafter the respondent company made an application in each of the two cases that it had purchased the property being unaware of the pendency of any Certificate case against any of its vendors for realization of incometax dues and that the Company was the owner of the property and it was not liable to be sold as that of the Certificate debtor. The Certificate Officer rejected the objection holding that the purchase having been made after service of notice under section 7 of the Bengal Act on the Certificate debtor, was void as against any claim enforceable in execution of the Certificate and hence the Company had no right to object to the sale. The Company went up in appeal before the Commissioner and succeeded in both the cases. Two revisions were filed before the Board of Revenue which were allowed. The respondent company then moved the High Court under Article 227 of the Constitution. The petition giving rise to Civil Appeal No. 1575 was allowed. The other petition giving rise to C.A. 1965 of 1971 was dismissed by the same Bench. 556 Two questions, namely (a) the locus standi of the purchaser Company to prefer a claim objecting to the sale of the property and (b) the effect of section 3(1)(a) and (b) of the Validation Act, 1964 read with Section 35(4) of the Income Tax Act, 1962 arose for decision in these appeals. Allowing C.A. 1575/71 and dismissing C.A. 1965/71 (both by certificates) the Court. ^ HELD: 1. The Company as a purchaser of the property of the certificate debtors had locus standi to prefer the claim. The company preferred a claim objecting to the sale of property on the ground that it was not liable to be sold as it had purchased the property from the two certificate debtors. In the Bengal Public Demands Recovery Act, 1913, there is no express provision enabling a person other than the Certificate debtor claiming an interest in the property to be sold to file any objection. He, of course, under section 22 can take recourse to the said provision by filing an application to set aside the sale of immovable property on deposit of the amounts provided therein. But the rules in Schedule II under section 38 have the effect as if enacted in the body of the Act. In Schedule II is to be found rule 39 which is very much like rule 58 of Order 21 of the Code of Civil Procedure, 1908. [561 F G] (a) It was open to it to show under rule 40 that at the date of the service of notice under section 7 it had some interest in the property in dispute. If the notice served at the beginning of the two Certificate cases under section 7 on the two Certificate debtors was not a valid notice in the sense that in one case on the reduction of the amount of the Certificate it became necessary to give a fresh notice and in the other without a fresh demand notice under the Income tax Act for the enhanced amount, the Certificate case could not proceed, then the Company had validly purchased the property and its purchase was not void. The property purchased by it could not then be sold for realization of the income tax dues against the two brothers. If, however, no fresh notice was necessary to be served in either of the two cases then it is plain that the Company 's purchase was void as against the claim enforceable in execution of the Certificate. [561 H, 562 A C] (b) It is clear from sections 7, 8, 9 and 10 of the Bengal Public Demands Recovery Act, 1913, that if the Certificate is modified or varied by the certificate officer under Section 10, while disposing of the petition of objection filed by the Certificate debtor under section 9, then the Certificate case proceeds further without a fresh notice under section 7.[561 D E] In the instant case, the amount was not reduced on the objection of the Certificate debtor but it was reduced on receipt of the information from the Income Tax Officer. [561 E] 2. The transfer was void against the Certificate claims in both cases under section 8(a) of the Bengal Public Demands Recovery Act, 1913. In both the cases notices under section 7 of the Bengal Act had been served upon the Certificate debtor before the property in question was transferred by them to the company. In neither of the two cases did the certificate proceeding became invalid, in one case by reduction of the demand and in the other by an enhancement, since clause (c) of section 3(1) of the Validation Act clearly and expressly provides that no proceedings in relation to Government dues 557 shall be invalid merely because no fresh notice was served upon the assessee, after the dues were enhanced or reduced in any appeal or proceeding. [566 E F] Ram Swarup Gupta vs Behari Lal Baldeo Prasad and Ors., ; Distinguished. (a) On a plain reading of clause (a) of section 3 of the Validation Act, it is clear that the intention of the Legislature is not to allow the nullification of the proceedings which were initiated for recovery of the original demand. On the basis of another notice of demand for the enhanced amount two courses are open to the department (i) to initiate another proceedings for the recovery of the amount by which the dues are enhanced treating it as a separate demand or (2) to cancel the first proceedings and start a fresh one for the recovery of the entire amount including the enhanced one. In the latter case, the first proceedings started for the recovery of the original amount will lose its force and the fresh proceedings will have to proceed de novo. But in the former, the proceedings are not affected at all. [564 E G] 3. (b) The argument that the effect of sub section (4) of section 35 of the Income Tax Act has not been done away with by clause (a) of section 3 of the Validation Act, 1964 is not correct. Firstly on a correct interpretation of sub section (4) of section 35 it would be noticed that though the expression used is "the sum payable" but in the context it would mean only the "extra enhanced sum payable" and not the whole of the enhanced amount. The expression "sum payable" had to be used in sub section (4) because that sub section was also providing for a contingency where by the rectification order the amount of refund was reduced. In such a case the expression "the sum payable" would obviously mean the difference between the amount refunded and the reduced amount which was liable to be refunded. Secondly, even if it were to be held that in the case of enhancement the expression "the sum payable" in sub section (4) means the whole of the enhanced amount by a rule of harmonious construction it has got to be held that in view of section 3(1)(a) of the Validation Act even in the case of a rectification a notice of demand is to be served now only in respect of the amount by which the Government dues are enhanced. [565 B E] 4. Sub clause (i) of clause (b) of sub section (1) of section 3 of the Validation Act clearly provides that it is not necessary for the Taxing Authority to serve upon the assessee a fresh notice of demand. The only thing which he is required to do that he has to give intimation of the fact of such deduction to the assessee and to the Tax Recovery officer. The purpose of giving intimation to the assessee is to bring it to his pointed knowledge that the demand against him has been reduced, although by other methods also such as by service of a copy of the Appellate Order or the revisional order being served on him he may be made aware of that. The intimation to the Tax Recovery Officer is essential as without that intimation from the Taxing Authority he cannot reduce the amount of the Certificate debt in the proceedings already commenced. [565 E H] (a) The view of the High Court that the provision contained in subclause (ii) of clause (b) of section 3(1) of the Validation Act is mandatory and in absence of a formal intimation to the assessee and to the Tax Recovery Officer as required by the said provision the proceedings initially started could not be continued under sub clause (iii), is not sustainable in law. [565 H, 566 A] 558 (b) On the facts of the case in C.A. 1575(NT)/71, the requirement of sub clause (ii) stood fulfilled and nothing further had to be done in the matter by the Taxing Authority. That being so the proceedings initiated on the basis of the notice of demand served upon the assessee before the reduction of the amount in appeal could be continued in relation to the amount so reduced from the stage at which such proceedings stood immediately before such disposal as provided for in sub clause (iii). [566 C D]

The respondent was appointed as a temporary clerk in an engineering division of the Government. The attempt of another clerk to impersonate and appear for him in a depart mental examination was detected. The Executive Engineer obtained explanations from both the clerks and reported the matter to the Superintending Engineer, who brought the matter to the notice of the ChiefEngineer. The Chief Engi neer wrote to the Superintending Engineer to award suitable punishment. The Superintending Engineer passed the order that the respondent a "temporary clerk is hereby served with one month 's notice to the effect that his services shall not be required after one month from the date of receipt of this notice. " The respondent filed a suit challenging the order on the ground that the termination was one passed by way of punishment and therefore attracted Art 311 of the constitution;. and since the provisions of the Article had not been complied had not been complied with the order was void. The Trial Court and the First Appellate Court dismissed the suit. But the High Court went,through the official correspondence preceding the passing of the impugned order, and observing that a close scrutiny of the facts on record showed that the order was passed by way of punishment on the basis of the enquiry proceeding and as a result of the recommendation by the Executive Engineer followed by the direction issued by Chief Engineer, allowed the second appeal. Allowing the appeal to this Court, HELD :(1) It is no longer open to any one to urge that the constitutional position in regard to cases of the present nature is not clear. An examination of the deci sions of this Court shows that there is no real conflict in their ratio decidendi. Even if there is a conflict, the proper course for a High Court is to find out and follow the opinion expressed by larger benches of this Court in preference to those expressed by smaller benches of this Court. This practice is followed by those Court itself and has hardened into a rule of law. [475B C] Union of India & Anr. K.S. Subramanian; , , followed. State of U.P. & Ors vs Sughar Singh [1974] 2 .S.C.R. 335: ; , The State of Punjab vs P.S. Cheema A.I.R. 1975 S.C. 1096, Satish Chandra Anand vs The Union of India ; , Shyam Lal vs State of U.P. ; , Parshotam Lal Dhingra vs Union of India ; , Gopi Kishore Prasad vs Union of India AIR. , The State of Orissa & ,Anr. vs Ram Narayan Das ; , Madan Gopal vs State of Punjab [1963] 3 S.C.R. 716, Rajendra Chandra Banerjee vs Union of India ; , Champakal Chimanlal Shah vs The Union of. India , Jagdish Mitter vs Union of India A.I.R. 1964 S.C. 449, State of Punjab & Anr. vs Shri Sukh Raj Bahadur ; , Union Of India 463 & Ors. R.S. Dhaba , State of Bihar & Ors. vs Shiva Bhikshuk Mishra R.S. Sial vs The State of U.P. & Ors. , Shamsher Singh & Anr. vs State of Punjab ; and The Regional Manager & Anr. vs Pawan Kumar Dubey [1976] 3 S.C.R. 540 referred to. (2) Before it is held that an order terminating the services of a Government servant amounts to punishment the Court must hold that either of the two tests,namely, (a) that the servant had a right to the post or (b) that he had been visited with evil consequences such as forfeiture of pay etc., is satisfied. Therefore, an order terminating the services of a temporary servant or probationer under the Rules of employment and without anything more will not attract article 311. Where a departmental enquiry is contem plated but an enquiry is not in fact proceeded with, article 311 will not be attracted unless it can be shown that the order, though. unexceptionable in form, is made following a report based on misconduct. Even though misconduct, negli gence, inefficiency or other disqualification may be the motive for the order of termination, if a right exists under the contract or the rules to terminate his services, then article 311(2) is not attracted unless the misconduct or negli gence is the very foundation of the order. Where there are no express words in the impugned order itself ' which throw a stigma on the Government servant, the Court would not delve into secretariat files to discover whether some kind of stigma could be inferred on such research. [469 A B; 473 C; 471 H; 475 F] Parshotam Lal Dhingra vs Union of India [1958] S.C.R. 828, R.S. Sial vs The State of U.P. & Ors. [1974] 3 S.C.R. 754, Shamsher Singh & Ant. vs State of Punjab ; and 1. N. Saksena vs State of Madhya Pradesh ; followed. (3) The respondent was a temporary hand and had no right to the post. Under the contract of service and the service rules applicable to him the State had the right to terminate his services by giving him one month 's notice. The order ex facie is an order of termination of service sim pliciter. It does not cast any stigma on the respondent nor does it visit him with evil consequences, nor is it founded on misconduct. Therefore, the respondent could not invite the Court to go into the motive behind the order and claim the protection of article 311(2) of the Constitution. [475 D E] (4) The High Court failed to appreciate the true legal .and constitutional position and upset the concurrent findings of fact arrived at by the Courts below, ignoring the well settled principle of law that a second appeal cannot be entertained on the ground of erroneous findings of fact, however, gross the error might seem to be. [475 G H] Paras Nath Thakur vs Smt. Mohani Das & Ors. [1960] 1 S.C.R. 271. Sri Ramanuja Jeer & Ors. vs Sri. Ranga Ramanuja Jeer & Anr. ; , P. Ramachandra Ayyar vs Ramalingam ; and Madamanchi Ramappa & . Anr. vs Muthaluru Bojappa ; , referred to.

In APSRTC vs Rammohan Rao (Civil revision petition No. 1598/1968, dated April 25, 1969), the High Court of Andhra Pradesh held: (i) that wages under section 2(iv)(d) of the Payment of Wages Act included gratuity and (ii) that Rule 8.01 of the Hyderabad Government Railway Establishment Code, 1949, did not stand alone and read with Rule 8.15 it meant that an employee who has received the Provident Fund was not disentified to gratuity. Following the said deci sion, the labour court in a11 the appeals allowed the claims of the respondents to gratuity in addition to Provident Fund vide its order dated August 25, 1970. Dismissing the appeals by special leave the Court, HELD: (i) Rule 8.15 of the Hyderabad Government Railway Establishment Code, 1949, cannot be read in the same manner as the Andhra Pradesh High Court had done it in the earlier case. Rule 8.15 only explains that the how Rule 8.05 was to be applied in certain cases. Rule 8.05 lays down that the period for which gratuity on retirement or contribution to the provident Fund has been received will count towards the qualifications in Rule 8.05 and further clarifies that the period will not, however, affect the calculation of the amount of gratuity under Rule .8.19. The obvious intention of Rule 8.15 was that the amount already received either as gratuity or contribution to the Provident Fund will not be paid again to the employee. The periods for which payments had already been made which may happen in certain cases, would nevertheless count towards the qualifying period prescribed by Rule 8.05. [242F H] (2) When gratuity was awarded in a previous proceeding as a part of wages in the teeth of the clear provision of Rules 8.01 imposing a condition precedent which was not satisfied to eligibility for it, the contention that such a patently illegal view could or should be held to be binding on the parties in a subsequent claim for gratuity on the same too.ting is unacceptable. The most the court can say is that the previous recognition of a claim to gratuity, prac tically in excess of jurisdiction to do so, debars the labour court from, going into the question whether the respondent was rightly paid that amount as gratuity in the past. In the instant ease, the provisions of section 11 of the C.P.C. have no application. [253 D G] (3) It is true that the whole idea of the Provident Fund to which the employer also contributes, seems to be. different from a gratuity to which "good. continuous, effi cient and faithful" service may entitle an. employee yet he cannot claim the benefit of both the guaranteed or other Provident Fund to which the 249 employer contributes as well as to gratuity as of right in the face of the provisions of Rule 8.01 and 8.02 of the Gratuity rules. Illegal payments of gratuity in the past will not affect legal claims to Provident Fund. [253 H. 254, A] Andhra Pradesh State Road Transport Corporation vs M. Rammohan Rao (Civil) Revision Petition No. 1598/1968 decided on April 25, 1969), (A.P.), over ruled.

The appellant was posted as the Local Purchase Officer at the Army Ordnance Depot in Poona district. In connection with the purchase of some engineering tools, charges were brought against him under section 5(1)(d) read with section 5(2) of the Prevention of Corruption Act, for having procured pecu niary benefit for a certain contractor by corrupt means, thereby causing wrongful loss to the army department. The Trial Court convicted the appellant, and in appeal the High Court confirmed the conviction. The Supreme Court granted him Special Leave to appeal under article 136 of the Constitu tion, and allowing the appeal, HELD: 1. Both the courts below had proceeded on the footing that it was for the accused to prove the ingredients of section 5(1)(d) of the Act. This approach was wrong. It was for the prosecution to prove affirmatively that the appel lant by corrupt or illegal means or by abusing his position obtained any pecuniary advantage for some other person. [536 C D] 2. Normally this Court in special leave against a con current judgment of the High Court and the trial Court does not re appraise the evidence, but here we find that both the courts below have drawn wrong inferences from proved facts and have made a completely wrong approach to the whole case by misplacing the onus of proof which lay on the prosecution on the accused and presuming that the accused had a dishon est intention. [536 B C, H] Narayanan Nambiar vs State of Kerala [1963] Supp. 2 SCR 724; 730 731, referred to.

The appellant Union and the respondent company through their communications dated January 24,1957, April 24,1957 and May 1,1957 concluded an agreement relating to various items of industrial disputes which inter alia provided that the employer had agreed not to contest the issue whether field force including salesmen were not 'workmen ' within the meaning of the expression in the and that disputes of an All India nature could be raised only at Delhi. Two employees of the Respondent company who were salesmen and protected workmen with the meaning of the expression in the and who were office bearers of the union, were charge sheeted and after a disciplinary enquiry their services were terminated. The appellant union raised an industrial dispute contending that the termination of services of these two workmen were illegal and invalid, and that the enquiry was equally illegal, and improper, and that the action of the employer was an act of reprisal and victimization, because of their trade union activities. The Government referred the industrial dispute to the Industrial Tribunal. The employer contended that the two workmen were not 'workmen ' within the meaning of the expression in the Act and that the Government had no jurisdiction to refer the dispute to the Industrial Tribunal. It was further contended that the services of the workmen were terminated not by way of punishment but under the contract of service and that the disciplinary enquiry which was commenced was subsequently dropped. The appellant union however contended that the employer was estopped from challenging the status of the two workmen within the meaning of the expression 308 in the Act on account of the subsisting, valid, concluded agreement between the parties and that in view of the award of the Industrial Tribunal, Delhi in I.D. No. 46/66. The contentions about the existence of the agreement and the status of salesmen were res judicata and could not be reopened so long as the agreement was in force and operative. The Tribunal rejected the preliminary objections raised on behalf of the union and came to the conclusion that the three communications dated January 24,1957, April 24,1957 and May 1, , W 3, W 4 respectively did not spell out a complete, concluded agreement between the parties on the points mentioned therein but it was an inchoate agreement in the stage of negotiations and the employer was not bound to stand by its offer made in the communication dated January 24,1957 denying itself the right to contest the status of the field force including salesmen as not being workman within the meaning of the Act. The award of the Industrial Tribunal, Delhi in I.D. No. 46/66 in which it was held that there was a concluded agreement between the parties and therefore the industrial disputes raised therein could not be adjudicated at Delhi did not operate as res judicata because the issue in that award was not directly and substantially in issue in the present reference. The Tribunal set down the reference for further hearing. Allowing the Appeal: ^ HELD: 1. The Tribunal committed a serious error, apparent on record in holding that there was no concluded agreement between the parties as emerging from Exs. W 2, W 3, and W 4. [329 F] In the instant case, having meticulously examined various references pertaining to various industrial disputes between the parties at different centres in India since the agreement in 1957 it unquestionably emerges that the employer till the present reference never once even whispered that the agreement was not a concluded agreement or that it was an inchoate one left hanging at the stage of negotiations. It was only in the present reference the contention raised was that the agreement was not a concluded agreement. The employer which swore by the agreement and repeatedly succeeded in getting thrown out certain references at the threshold on account of the agreement contended that there was no concluded agreement, and ignoring the whole history, the Tribunal fell into an error in accepting this contention. The Tribunal wholly ignored the fact that it was a solemn agreement, of which effective and wholesome advantage had been taken by the employer and when it did not suit it, it wanted to turn round and not only repudiate it but disown it. No court of justice can ever permit such a thing to be done. [324 E 325 B] Hindustan Lever Ltd. vs Ram Mohan Ray & Ors., ; Western India Match Co. vs Their Workmen ; at 566; and Aluminium Factory Workers, Union vs Indian Aluminium Co. Ltd. , referred to 2. The Tribunal is directed to proceed to determine the dispute on merits without concerning itself with the consideration of the question whether the concerned workmen were workmen within the meaning of the expression under the Act. [332 E] 3. The concept of compulsory adjudication of industrial disputes was statutorily ushered in with a view to providing a forum and compelling the parties 309 to resort to the forum for arbitration so as to avoid confrontation and dislocation in industry. A developing country like India can ill afford dislocation in industrial production. Peace and harmony in industry and uninterrupted production being the demands of the time, it was considered wise to arm the Government with power to compel the parties to resort to arbitration and as a necessary corollary to avoid confrontation and trial of strength, which were considered wasteful from national and public interest point of view. A welfare State can ill afford to look askance at industrial unrest and industrial disputes. [326H 327B] Dahyabhai Ranchhoddas Shah vs Jayantilal Mohanlal. ,[1973] Lab. & Industrial Cases 967 referred to. The Act did not confer till the introduction of Chapters V A and V B, any special or enforceable benefits on the workmen. The Act was designed to provide a self contained Code to compel the parties to resort to industrial arbitration for the resolution of existing or apprehended disputes without prescribing statutory norms for varied and variegate industrial relation, so that the forums created for resolution of disputes may remain unhampered by any statutory control and devise rational norms keeping place with improved industrial relations reflecting and imbibing socioeconomic justice. If this is the underlying object behind enactment of the Act, the Court by interpretative process must strive to reduce the field of conflict and expand the area of agreement and show its preference for upholding agreements sanctified by mutuality and consensus in larger public interest, namely to eschew industrial strife, confrontation and consequent wastage. [327 C E] 5. It is inappropriate to usher in the technical concept of res judicata pervading the field of civil justice into the field of industrial arbitration. The principle analogous to res judicata can be availed of to scuttle any attempt at raising industrial disputes repeatedly in defiance of operative settlements and awards. But this highly technical concept of civil justice may be kept in precise confined limits in the field of industrial arbitration which must as far as possible be kept free from such technicalities which thwart resolution of industrial disputes. [326 D G] Shahdara (Delhi) Sharanpur Light Railway Co. Ltd. vs Shahdara(Delhi) Sharanpur Railway Workers Union, at 742; and Workmen of Straw Board Manufacturing Co. Ltd. vs M/s Straw Board Manufacturing Co. Ltd. ; referred to. Unilateral repudiation is distinct from termination and an agreement/settlement remains in force and binding till terminated and does not come to an end by unilateral repudiation. [328 E] In the instant case, the parties entered into a solemn agreement. It is not suggested that the agreement has been terminated. The only argument put forward on behalf of the employer was that the union has repudiated the agreement by raising disputes of an all India nature at a regional level and thereby committed breach of the agreement. This contention is entirety without merits. What has happened is that the Union raised certain disputes which according to the Union were of a regional nature and which it was not estopped from raising in the teeth of the terms of the binding agreement between the parties. On the other hand the employer contended that the disputes so raised were of an all India nature. Both sides swore by the agreement, the difference in approach being whether the dispute was of an all India nature or of regional nature. The divergence in approach 310 was as to the interpretation, the coverage, the ambit and the width of the agreement Both the parties swore by the agreement but differed in their approach and interpretation and the forum namely the Industrial Tribunal consistently upheld at the instance of the employer that there was a binding valid agreement subsisting between the parties. This constitutes adherence to agreement, performance of the agreement, implementation of the agreement and being bound by the agreement. This conduct in no sense can be said to constitute repudiation. [327 F 328 C] 7. The Tribunal derives its jurisdiction by the order of reference and not on the determination of a jurisdictional fact which it must of necessity decide to acquire jurisdiction. [330 G] 8. In industrial adjudication, issue are of two types: (i) those referred by the Government for adjudication and set out in the order of reference, and (ii) incidental issues involving mixed questions of law and facts. The Tribunal may frame preliminary issues if the point on which the parities are at variance, go to the root of the matter. But the Tribunal cannot travel beyond the pleadings and arrogate to itself the power to raise issues which the parties to the references are precluded from raising. If the employer does not question the statues of the workmen, the Tribunal cannot suo motu raise the issue and proceed to adjudicate upon the same and throw out the reference on the sole ground that the concerned workman was not a workman within the meaning of the expression under the Act. [331 G 332 A] 9. Whether a particular person is a workman or not depends upon factual matrix. Workman is defined in Sec. 2(s) of the Act. The ingredients and the incidents of the definition when satisfied, the person satisfying the same would be a workman. Negatively if someone fails to satisfy one or other ingredient or incident of the definition, he may not be held to be workman within the meaning of the expression in the Act. [330 C] 10. There is no provision in the Act which obliges the Industrial Tribunal or other forums set up under the Act to decide even in the absence of a contention from the employer, a preliminary issue whether the person who has invoked its jurisdiction is a workman or not. There is no such obligation cast statutorily on the Tribunal. If the employer does not raise the contention about the status of the workman approaching the Tribunal, the Tribunal has no obligation to decide. The status of the person whether he is a workman or not. The Tribunal must proceed on the assumption that no such contention is raised and is required to be adjudicated upon. [330 D F]

Appeals Nos. 12 and 13 of 1951. Appeals from the Judgment and Decree dated the 17th/21st February, 1947, of the High Court of Judicature at Calcutta (Mukherjea and Biswas JJ.) in Appeal from Original Order No. 62 of 1946 with cross objectiou and Civil Revision Case No. 657 of 1946 arising out of Judgment and Order dated the 13th March, 1946, of the Court of the Subordinate Judge, Howrah, in Title Execution Case No. 68 of 1936. M. C. Setalvad (Attorney General for India) and Purushottam Chatterjee (section N. Mukherjee, with them) for the appellant in Civil Appeal No. 12 of 1951 and respondent in Civil Appeal No. 13 of 1951. C. K. Daphtary (Solicitor General for India) and N. C. Chatterjee (C. N. Laik and A. C. Mukherjea, with them) for the respondents in Civil Appeal No. 12 of 1951 and appellants in Civil Appeal No. 13 of 1951. October 30. The judgment of the Court was delivered by MAHAJAN J. These are two cross appeals from the decision of the High Court at Calcutta in its appellate jurisdiction dated 17th February, 1947, modifying the order of the Subordinate Judge of Howrah in Title Execution Case No. 68 of 1936. The litigation culminating in these appeals comnmenced about thirty years ago. In the year 1923, one Durga Prasad Chamria instituted a suit against the respondents, Radha Kissen Chamria, Motilal Chamria and their mother Anardevi Sethan (since deceased) for specific performance of an agreement, 139 for sale of an immoveable property in Howrah claiming a sum of Rs. 11,03,063 8 3 and other reliefs. The suit, was eventually decreed compromise the 19th April, 1926. Under the compromise decree the plaintiff became entitled to a sum of Rs. 8,61,000 from the respondents with interest at 61 per cent. with yearly rests from the date fixed for payment till realization. Part of the decretal sum was payable the execution of the solenama and the rest by instalments within eighteen months of that date. Within fifteen months from the date of the decree a sum of Rs. 10,00,987 15 6 is said to have been paid towards satisfaction of it. No steps were taken either by the judgment debtors or the decre holder regarding certification of most of those payments within the time prescribed by law. The judgment debtors after the expiry of a long time made an application for certification but the decree holder vehemently resisted it and declined to 'admit the payments. The result was that the court only recorded the payment of the last three instalments which had been made within ninety days before the application and the judgmentdebtors had to commence a regular suit against the decree holder for recovery of the amounts paid, and not admitted in the execution proceedings. In the year 1929 a decree was passed in favour of the judgment debtors for the amount paid by them and not ,certified in the execution. In the meantime the decree holder had realized further amounts in execution of the decree by taking out execution proceedings two or three occasions. The amount for which a decree had been passed against the decree holder was also thereafter adjusted towards the amount duo under ' the consent decree. On the 17th March, 1933, the decree was assigned by Durga Prasad to the appellant Keshardeo Chamria. The execution proceedings out of which these appeals arise were started by the assignee the 10th October, 1936, for the realization of Rs. 4,20,693 8 9 and interest and costs. This execution had a chequered career. To begin with, the judgment debtors raised 140 an objection that the assignee being a mere benamidar of Durga Prasad Chamria had no locus standi to take out execution. This dispute eventually ended in favour of the assignee after about five years ' fight and it was held that the assignment was bonafide and Keshardeo was not a benamidar of the decree holder. On the 17th July, 1942, Keshardeo made an application for attachment of various new properties of the judgment debtors and for their arrest. Another set of objections was filed against this application by Radha Kissen Chamria. He disputed the correctness of the decretal amount, and contended that a certain payment of Rs. 1,60,000 should be recorded and certified as made the 28th May, 1934, and not the date the sum was actually paid to the decreeholer. This objection was decided by the Subordinate Judge the 11th September, 1942, and it was held that the judgment debtors were liable to pay interest the sum of Rs. 1,60,000 up to the 12th October, 1936, and not up to the 4th July, 1941, 'as claimed by the assignee. appeal the High Court by its judgment dated the 22nd June, 1943, upheld the decree holder 's contention, and ruled that the judgment debtors were liable to pay interest up to the 4th July, 1941, this sum of Rs. 1,60,000. The judgment debtors then applied for leave to appeal to the Privy Council against this decision and leave was granted. the 13th February, 1945, an application wag made to withdraw the appeals, and with ' drawal was allowed by an order of the court dated the 20th February, 1945. Thus the resistance offered by the judgment debtors to the decree holder 's application of the 17th July, 1942, ended the 20th February, 1945. The records of the execution case were then sent back by the High Court and reached the Howrah Court the 28th February, 1945. The decreeholder 's counsel was informed of the arrival of the records by an order dated the 2nd March, 1945. The hearing of the case was fixed for the 5th March 1945. the 5th March, 1945 the court made the following order; 141 Decree holder prays for time to take necessary steps. The case is adjourned to 10th March, 1945, for order. Decree holder to take necessary steps by, that date positively. " The decree holder applied for further adjournment, of the case and the 10th the court passed an order in these terms: "Decree holder prays for time ' again to give necessary instructions to his pleader for taking necessary steps. The 'petition for time is rejected. The execution case is dismissed part satisfaction. " When the decree holder was apprised of this order, he, the 19th March, 1945, made an application under section 151, Civil Procedure Code, for restoration of the execution and for getting aside the order of dismissal. this application notice was issued to the judgment debtors who raised a number of objections against the decree holder 's petition to revive the execution. By an order dated the 25th April, 1945, the Subordinate Judge granted the decree holder 's prayer and ordered restoration of the execution. The operative part of the order is in these terms: " 10th March, 1945, the decree holder again prayed for time for the purpose of giving necessary instructions to his pleader for taking steps. That petition was rejected by me. 10th March,, 1945, by the same order I mean the order rejecting the petition for adjournment I dismissed the 'execution case part satisfaction. The learned counsel behalf of the present petitioner wants me to vacate the order by which I have dismissed the execution case part satisfaction. He has invoked the aid of section 151, Civil Procedure Code,: for cancellation of this order and the consequent restoration of the execution case. I would discuss at the very outset as to whether I was justified in dismissing the,execution case in the same order,after rejecting the petition of the decree holder for an 142 adjournment without giving him an opportunity to his pleader to make any submission he might have to make after the rejection of the petition for time. It is clear from the order that the fact that the petition for time 'filed by the decree holder 10th March, 1945, was rejected by me was not brought to the notice of the pleader for the decree holder. It seems to me that there was denial of justice to the decree holder in the present execution proceeding inasmuch as it was a sad omission my part not to communicate to his pleader the result of this petition he made praying for an adjournment of this execution proceeding and at the same time, to dismiss the execution case part satisfaction which has brought about consequences highly prejudicial to the interest of the decree holder. I think section 151, Civil Procedure Code, is the only section which. empowers me to rectify the said omission I have made in not com municating to the pleader for the decree holder as to the fate of his application for an adjournment of the execution case and as such I would vacate the order passed by me dismissing the execution case part satisfaction. The ends of justice for which the court exists demand such rectification and I would do it. The learned Advocate General behalf of the judgment debtor Radha Kissen has argued before me that this court has no jurisdiction to vacate the order passed by me 10th March, 1945, dismissing the execution case part satisfaction. His argument is that section 48, Civil Procedure Code, stands in my way inasmuch as the law of limitation as provided in the above section debars the relief as sought for by the decree holder in the present application. I do not question the soundness of this argument advanced by the learned Advocate General. The facts of this case bring home the fact that in the present case I am rectifying a sad omission made by me which brought about practically a denial of justice to the decree holder and as such the operation of section 48, Civil Procedure Code, does not come to the assistance of the judgment debtor Radha Kissen," 143 It would have saved considerable expense and trouble to the parties had the dismissal for default chapter been closed for ever by this order of the Judge; the proceedings, however, took a different course. A serious controversy raged between the parties about the correctness of this obviously just order and after seven years it is now before us. An appeal and a revision were preferred to the High Court against this order. By its judgment dated 24th August, 1945, the High Court held that no appeal lay against it as the question involved did not fall within the ambit of section 47, Civil Procedure Code. It, however, entertained the revision application and allowed it, and remanded the case to the Subordinate Judge for reconsideration and disposal in accordance with the observations made in the order. The High Court took the view that the Subordinate Judge was in error in restoring the execution without taking into consideration the point whether the decree holder 's pleader could really take any step in aid of the execution if he had been apprised of the order of the court dismissing the adjournment application. This is what the High Court said: "The ground put forward by the Subordinate Judge in support of his order for restoration is that the order rejecting the adjournment petition should have been communicated to the pleader for the decree holder but this was not done. We will assume that this was an omission the part of the court. The question now is whether it was possible for the decree holder to take any further steps in connection with the execution of the decree and thereby prevent the execution case from being dismissed for default. No evidence was taken by the learned Subordienate Judge this point and even the pleader who was in charge of the execution case behalf of the decree holder was not examined. . If really the decree holder was not in a position to state that day as to what was the amount due under the decree for which he wanted the execution to be levied and if according to him it required elaborate accounting for the purpose 144 of arriving at the proper figure, it was not possible for him to ask the court to issue any process by way of attachment of the property that date. It seems to us that the learned Judge should have considered this matter properly and he should have found proper material as to whether the decree holder could really take any steps after the application for adjournment was disallowed." In sharp contrast to the opinion contained in the order of remand is the view now expressed by the High Court this point in its final judgment under appeal "One important circumstance which, in our opinion ; tells 'in favour of the decreeholder is the fact we have noticed before, namely, that after the ' petition for time was rejected the court did not call the execution case and otherwise intimate its decision to go with it. In one sense this,might be regarded as a mere error of procedure the part of the court which it would be wrong to allow the decreeholder to take advantage of, but an, error it was, as was admitted by the learned judge himself who had dealt with the matter, and we do not think his opinion, can be lightly brushed aside. There can be no doubt that the learned judge was in the best position to speak as regards the actual proceedings in his court % the 10th March, 1945, and if he thought that it amounted to a 'denial of justice ' to have rejected the petition for time and by the same order to dismiss the ,execution case, it is not for us to say that he was not right. It may well be that even if the case was called the decree holder 's pleader would even then have been absent, but having regard to all the facts and circumstances of the case, we think the court might yet give the decree holder the benefit of doubtin this matter, and assume in his favour that his pleader would have appeared before the learned, judge and tried to avert a peremptory dismissal of the execution case, even though he or his client might not have been fully ready with all necessary materials for continuing the execution proceeding. 145 As we have pointed out before and as the court below has also found, it was possible,for the decreeholder or his pleader to have submitted to the court, some sort,of an account of the decretal dues that date after refusal of the adjournment but even if this could not be done, we still believe that the pleader, if he appeared, could have done something, either by drawing the court 's attention to some of its previous orders or otherwise, by which a dismissal of the case might be prevented. " It was not difficult to envisage what the counsel would have done when faced with such a dilemma. He, would. have straightaway stated that the execution should issue, for an amount,which was roughly known to ' him, and that the court should,issue a process, for the arrest of the judgment debtors. BY such a statement he would have saved the dismissal without any,detriment to his client: who could later make another application stating the precise amount due and praying for additional reliefs. After remand the 13th March, 1946, the learned Subordinate Judge restored the execution case in respect of a sum of Rs.92,OOO only and maintained the order of dismissal in other respects. He held that the decree holder was grossly negligent on the 5th and the 10th March, 1945, and that due to his negligence the execution case was dismissed in default that even if his pleader had been informed of the order rejecting the application for adjournment he could not have taken any steps to prevent the dismissal of the execu tion; that the execution being now barred by limitation the judgment debtors should not be deprived of the valuable rights acquired by them but at the same time they should not be allowed to retain the advantage of an acknowledgment of a debt of Rs, 92,000 made by the decree holder. Both the decree holder and the judgment debtors were dissatisfied with this order. The decree holder preferred an appeal to the High Court and also filed an application under section 115, Civil Procedure 146 Code. The judgment debtors filed cross objections in the appeal and also preferred an alternative application in revision. The appeal, the cross objections and the two revision 'applications were disposed of together by the High Court by its judgment dated 17th February, 1947. The order dismissing the execution in default was set aside and the case was restored terms. The decreeholder was held disentitled to interest the decretal amount from 10th March, 1945, to the date of final ascertainment of the amount of such interest by the executing court and was ordered to pay to the judgment debtors a consolidated sum of Rs. 20,000 by way of compensatory costs. He was to pay this amount to the judgment debtora within two weeks of the arrival of the records in the executing court or have it certified in the execution. In default the appeal was to stand dismissed with costs and the cross objections decreed with costs. An application for leave to appeal to His Majesty in Council against this order was made by the judgment debtors and leave was granted to them 30th May, 1947. The decree holder also applied for leave and he was granted leave 27th June, 1946. Both the appeals were consolidated by an order of the court dated 4th December, 1947, and thereafter the appeals were transferred to this court. On behalf of the decree holder it was contended that the High Court was wrong in allowing the judgment debtors Rs. 20,000 by way of compensation for costs, and that having regard to the terms of the compromise decree it had no jurisdiction to deprive the decree holder of the interest allowed to him by the decree, and that it had neither power nor jurisdiction under section 115, Civil Procedure Code, to set aside the order dated 25th April, 1945, passed by Mr. Chakravarti, Subordinate Judge, under section 151 of the said Code and that the interlocutory remand order of the High Court being without jurisdiction. , all subsequent proceedings taken thereafter were null and void. 147 The earned counsel for the judgment debtors not only supported the judgment of the High Court to the extent it went in their favour but contended that the High Court should have refused to restore the execution altogether and that the assumption made by it that the decree holder 's pleader could do something to prevent the dismissal of the case or could present some sort of statement to the court was wholly unwarranted and unjustifiable. It was urged that it ought to have been held that the decree holder was guilty of gross negligence and he was himself responsible for the dismissal of the case, and that it was not necessary to formally call the case after the rejection of the petition for adjournment and that a valuable right having accrued to the judgment debtors by efflux of time, they should not have been deprived of it in the exercise of the inherent powers of the court. It is unnecessary to consider all the points taken in these appeals because, in our opinions the point canvassed behalf of the decree holder that the order of remand was without jurisdiction and that all the proceedings taken subsequent to the order of the executing court reviving the execution were void, has force. The sole ground which the Subordinate Judge had ordered restoration of the execution was that he had himself made a sad mistake in dismissing it at the same time that he dismissed the adjournment application without informing the decree holder 's counsel that the request for adjournment had been refused and without calling upon him to state what he wanted done in the matter in those circumstances. As the Subordinate Judge was correcting his own error in the exercise of his inherent powers, it was not necessary for him to investigate into the correctness of the various allegations and counter allegations made by the parties. He was the best judge of the procedure that was usually adopted in his court in such cases and there is no reason whatsoever for the supposition that when the Subordinate Judge said that he had not given any opportunity to 148 the decree holder 's pleader to take any steps in execution of the decree after the dismissal of the adjournment application he was not right. It could not be seriously suggested that such an opportunity was given to the decree holder, the dismissal order of the execution having been made at the same moment of time as the order dismissing the application for adjournment It is quite clear that the interest of justice demanded that the decree holder 's pleader should have been informed that his request for adjournment had been refused, and further given opportunity to state what he wanted done in that situation. It was wholly unnecessary in such circumstances to speculate what the pleader would have done when faced with that situation. I The solid fact remains that he was not given that opportunity and that being so, the order dismissing the execution was bad and was rightly corrected by the court its own initiative in the exercise of its inherent powers. The point for determination then is whether such an order could be set aside by the High Court either in the exercise of its appellate or revisional powers. It is plain that the High Court bad no jurisdiction in the exercise of its appellate jurisdiction to reverse this decision. In the remand order itself it was held that it was difficult to say that the order by itself amounted to a final determination of any question relating to execution, discharge or satisfaction of a decree and that being so, it did not fall within the ambit of section 47 Civil Procedure Code. We are in entire agreement with this observation. The proceedings that commenced with the decree holder 's application for restoration of the execution and terminated with the order of revival can in no sense be said to relate to the determination of any question concerning the ,execution, discharge or satisfaction of the decree. Such proceedings are in their nature collateral to the execution and are independent of it. It was not contended and could not he seriously urged that an order under section 151 simpliciter is 149 appealable. Under the Code of Civil Procedure certain specific orders mentioned in section 104 and Order XLIII, rule 1, only are appealable and no appeal lies from any other orders. (Vide section 105, Civil Procedure Code). An order made under action 151 is not included in the category of appealable orders. In support of his contention that an order made under section 151 may in certain circumstances be appealable, Mr. Daphtary placed reliance two single Judge judgments of the Madras High Court and a Bench decision of Oudh. [Vide Akshia Pillai vs Govindarajulu Chetty(1); Govinda Padayachi vs Velu Murugiah Chettiar(2); Noor Mohammad vs Sulaiman Khan(1)]. In all these cases execution sale had been set aside by the court in exercise of inherent powers and it was held that such orders were appealable. The ratio of the decision in the first Madras case is by no means very clear and the reasoning is somewhat dubious. In the other two cases the orders were held appealable the ground that they fell within the ambit of section 47, Civil Procedure Code, read with section 151. It is unnecessary to examine the correctness of these decisions as they have no bearing the point before us, ' there being no analogy between an order setting aside an execution sale and an order setting aside the dismissal of an application. The High Court was thus right in upholding the preliminary objection that no appeal lay from the order of the Subordinate Judge dated 25th April, 1945. We now proceed to consider whether a revision was competent against the order of the 25th April, 1945, when no appeal lay. It seems to us that in this matter really the High Court entertained an appeal in ' the guise of a revision. The revisional ' jurisdiction of the High Court is set out in the 115th section of the Code of Civil Procedure in these terms: (I) A.I.R. 31924 Mad. 778. (3) A.I.R. 1943 Oudh 35. (2) A.I.R. 1933 Mad. 399 20 150 "The High Court may call for the record of any case which has been decided by any court subordinate to such High Court and in which appeallies thereto, and if such subordinate court appears: (a) to have exercised a jurisdiction not vested in it by law, or (b) to have failed to exercise a jurisdiction so vested, or (e) to have acted in the exercise of its jurisdiction illegally or with material irregularity, the High Court may make 'such order in the case as it thinks fit.,, A large number of cases have been collected in the fourth edition of Chitaley & Rao 's Code of Civil Procedure (Vol. I), which only serve to show that the High Courts have not always appreciated the limits of the jurisdiction conferred by this section. In Mohunt Bhagwan Ramanuj Das vs Khetter Moni Dassi(1), the High Court of Calcutta expressed the opinion that sub clause (c.) of section 115, Civil Pro cedure Code, was intended to authorize the High Courts to interfere. and correct gross and palpable errors of subordinate courts, so as to prevent grave injustice in non appealable cases. This decision was, however, dissented from by the same High Court in Enat Mondul vs Baloram Dey(2), but was cited with approval by Lort Williams J., in Gulabohand Bangur vs Kabiruddin Ahmed(1). In these circumstances it is worthwhile recalling again to mind the decisions ,of the Privy Council this subject and the limits stated therein for the exercise of jurisdiction conferred by this section the High Courts. As long ago as 1894, in Hajah Amir Has8an Khan 'vs Sheo Baksh Singh(1), the Privy Council made the following observations section 622 of the former Code of Civil Procedure, which was replaced by section 115 of the Code of 1908: "The question then is, did the Judges of the lower courts in this case, in the exercise of their (I) (1897) I C.W.N. 617. (3) Cal. (a) (4) (1883 84) L.R. xi I.A. 237. 151 jurisdiction, act illegally or with material irregularity. It appears that they had perfect jurisdiction to decide the case, and even if they decided wrongly, they did not exercise their jurisdiction illegally or with material irregularity." In 1917 again in Balakrishna Udayar vs Vasudeva Aiyar(1), the Board observed: "It will be observed that the section applies to jurisdiction alone, the irregular exercise or nonexercise of it, or the illegal assumption of it. The section is not directed against conclusions of law or fact in which the question of jurisdiction is not involved. " In 1949 in Venkatagiri Ayyangar vs Hindu Religious Endowments Board, Madras(1), the Privy Council again examined the scope of section 115 and observed that they could see no justification for the view that the section was intended to authorize the High Court to interfere and correct gross and palpable errors of subordinate courts so as to prevent grave injustice in non appealable cases and that it would be difficult to formulate any standard by which the degree of err or of subordinate courts could be measured. It was said " Section 115 applies only to cases in which no appeal lies, and, where the legislature has provided no right of appeal, the manifest intention is that the order of the trial Court, right or wrong, shall be final. The section empowers the High Court to satisfy itself three matters, (a) that the order of the subordinate court is within its jurisdiction ; (b) that the case is one in which the court ought to exercise jurisdiction; and (c) that in exercising jurisdiction the court has not acted illegally, that is, in breach of some provision of law, or with material irregularity, that is, by committing some error of procedure in the course of the trial which is material in that it may have affected the ultimate decision. If the High Court is satisfied those three matters,, it has no (1) (1917) L.R. 44 I,A. 26i. (2) (1949) L.R. 76 I.A. 67. power to interfere because it differs, however profoundly, from the conclusions of the subordinate court questions of fact or law. " Later in the same year in Joy Chand Lal Babu vs Kamalaksha Choudhury(1), their Lordships had again adverted to this matter and reiterated what they had said in their earlier decision. They pointed out "There have been a very large number of decisions of Indian High Courts section 115 to many of which their Lordships have been referred. Some of such decisions prompt the observation that High Courts have not always appreciated that although error in a decision of a subordinate court does not by itself involve that the subordinate court has acted illegally or with material irregularity so as to justify interference in revision under sub section (c), nevertheless, if the erroneous decision results in the sub ordinate court exercising a jurisdiction not vested in it by law, or failing to exercise a jurisdiction so, vested, a case for revision arises under subsection (a) or subsection (b) and sub section (c) can be ignored. " Reference may also be made to the observations of Bose J. in his order of reference in Narayan Sonaji vs Sheshrao Vithoba(2) wherein it was said that the words "illegally" and "material irregularity" do not cover either errors of fact or law. They do not refer to the decision arrived at but to the manner in which it is reached. The errors contemplated relate to material defects of procedure and not to errors of either law or fact after the formalities which the law prescribes have been complied with. We are therefore of the opinion that in reversing the order of the executing court dated the 25th April, 1945, reviving the execution, the High Court exercised jurisdiction not conferred it by section 116 of the Code. It is plain that the order of the Subordinate Judge dated the 25th April, . 1945, was one that he had jurisdiction to make, that in making that order he neither acted in excess, of his jurisdiction (I) (I949) T .R . 76 J. A. 131. (2) A.I.R. 1948 Nag. 153 nor did he assume jurisdiction which he did not possess. It could not be said that in the exercise of it he acted with material irregularity or committed any breach of the procedure laid down for reaching the result. All that happened was that he felt that be had committed an error, in dismissing the main execution while he was merely dealing with an adjournment application. It cannot be said that his omission in not taking into consideration what the decree holder 's pleader would have done had he been given the opportunity to make his submission amounts to material irregularity in the exercise of jurisdiction. This speculation was hardly relevant in the view of the case that he took. The Judge had jurisdiction to correct his own error without entering into 'a discussion of the grounds taken by the decree holder or the objections raised by the judgment debtors. We are satisfied therefore that the High Court acted in excess of its jurisdiction when it entertained an application in revision against the order of the Subordinate Judge dated the 25th April, 1945, and set it aside in exercise of that jurisdiction and remanded the case for further enquiry. The result therefore is that Appeal No. 12 of 1951 is allowed, as the interlocutory remand order of the High Court was one without jurisdiction and that being so, the subsequent proceedings taken in consequence of it, viz., the order of the Subordinate Judge restoring the application for execution to the extent of Rs. 92,000, and the further order of the High Court appeal restoring the execution case terms, are null and void and have to be set aside and the order of the executing court dated the 25th April, 1945, restored. We order accordingly. Appeal No. 13 of 1951 is dismissed. In the peculiar circumstances of this case we direct that the parties be left to bear their own costs throughout, that is, those incurred by them in the High Court in the proceedings which terminated with the remand order, the costs incurred in the subordinate court after the remand order, and the costs there after 154 incurred in the High Court and those incurred in this court i n these appeals. Appeal No. 12 allowed. Appeal No. 13 dismissed. I Agent for the appellant in C. A. No. 12 and respondent in C.A. No. 12: P. K. Chatterjee. Agent for the respondents in C. A. No. 12 and appellants in C. A. No. 13: Sukumar Ghose.

A Subordinate Judge dismissed an application by a decree holder for adjournment of an execution case and by the same order dismissed the execution case itself without informing the decree. holder 's pleader that the application for adjournment had been dismissed and asking him whether be had to make any submission in 137 the matter of the execution case, and an application for restoration of the execution case setting aside the order of dismissal, the Subordinate Judge, finding that he had committed an error which had resulted in denial of justice restored the execution case in the exercise of the inherent powers of the court under section 151, Civil Procedure Code. The judgment debtor preferred an appeal and an application, for revision to the High Court against this order. The High Court held that the appeal was not maintainable but set aside the order of the Subordinate Judge in the exercise of its revisional powers and remanded the case to the Subordinate Judge for fresh disposal after considering whether it would have been possible for the decree holder to take any further steps in connection with the execution application after the dismissal of the application for adjournment: Held, (i) that the order of the Subordinate Judge dismissing the execution case without giving an opportunity to the decree holder 's pleader to state what he had to say the case itself was bad and was rightly set aside by the court its own initiative in exercise of its inherent powers. (ii)The High Court had no jurisdiction in the exercise of its appellate powers to reverse the order of restoration as that order by itself did not amount to a final determination of any question relating to execution, discharge or satisfaction of a decree within the meaning of section 47, Criminal Procedure Code, and an order made under section 151, Criminal Procedure Code, simpliciter is not an appealable order. Akshia Pillai vs Govindarajulu Chetty (A.I.R. 1924 Mad. 778), Govinda Padayachi vs Velu Murugiah Chettiar (A.I.R. and Noor Mohammad vs Sulaiman Khan (A.I.R. 1943 Oudh 35) distinguished. (iii)As the order of the Subordinate Judge was one that he had jurisdiction to make, and as he had, in making that order, neither acted in excess of his jurisdiction or with material irregularity nor committed any breach of procedure, the High Court acted in excess of its revisional jurisdiction under section 115, Civil Procedure Code, and the order of remand and all proceedings taken subsequent to that order were illegal. Section 115, Civil Procedure Code, applies to matters of jurisdiction alone, the irregular exercise or non exercise of it or the illegal assumption of it, and if a subordinate court had jurisdiction to make the order it has made and has not acted in breach of any provision of law or committed any error of procedure which is material and may have affected the ultimate decision, the High Court has no power to interfere, however profoundly it may differ from the conclusions of that court questions of fact or law. Rajah Amir Hassan Khan vs Sheo Baksh Singh (1883 83) 11 I.A. 237, Bala Krishna Udayar vs Vasudeva Aiyar (1917) 44 IA. 261, Venkatagiri Ayyangar vs Hindu Religious Endowments Board 138 1949) 76 I.A. 67, Joy Chand Lal Babu vs Kamalaksha Chowdhury 1949)76 I.A.131 and Narayan Sonaji vs Sheshrao Vithoba (I.L.R. referred to. Mohunt Bhagwan Ramanuj Das vs Khettar Moni Dassi and Gulab Chand Bargur vs Kabiruddin Ahmed , dissented from.

The right of appeal is a matter of substantive right and not merely a matter of procedure, and this right becomes vested in a party when the proceedings are first initiated in, and before a decision is given by, the inferior Court and such a right cannot be taken away except by express enactment or necessary intendment. Section 22(l.) of the Central Provinces and Berar Sales Tax Act, 1947, provided that no appeal against an order of assessment should be entertained by the prescribed authority unless it was satisfied that such amount of tax as the appellant might admit to be due from him, had been paid. This Act was amended on the 25th November, 1949, and section 22(l) as amended provided that no appeal should ])a admitted by the said authority unless such appeal was accompanied by satisfactory proof of the payment of the tax in respect of which the appeal had been preferred. On the 28th of November, 1947, the appellant submitted a return to the Sales Tax Officer, who, finding that the turnover exceeded 2 lacs, submitted the case to the Assistant Commissioner for disposal and the latter made an assessment on the 8th April, 1950. The appellant preferred an appeal on the 10th May, 1950, without depositing the amount of tax in respect of which he had appealed. The Board of Revenue was of opinion that section 22(l.) as amended applied to the case as the assessment was made, and the appeal was preferred, after the amendment came into force, ' and rejected the appeal. Held, (i) that the appellant had a vested right to appeal when the proceedings were initiated, i.e., in 1947, and his right to appeal was governed by the law as it existed on that date ; (ii) that the amendment of 1950 cannot be regarded as a mere alteration in procedure or an alteration regulating the exercise of the right of appeal, but whittled down the right itself, and it had no retrospective effect as the Amendment Act of 1950 did not expressly or by necessary intendment give it retrospective effect, and the 988 appeal could not therefore be rejected for non payment of the tax in respect of which the appeal was preferred. Colonial Sugar Refining Co. Ltd. vs Irving , Nanabin Aba vs Sheku bin Andu (I.L.R. , Delhi Cloth and General Mills Co. Ltd. vs Income tax Commissioner, Delhi (54 I.A. 421), Kirpa Singh vs Rasaldar Ajaipal Singh (A.I.R. 1928 Lab. 627), Sardar Ali vs Dalimuddin (I.L.R. applied. Badraddin Abdul Rahim vs Sitaram Vinayak Apte (I.L.R. disapproved. In re Vasudeva Samiar (A.I.R. 1929 Mad. 381), Ram Singha vs Sankar Dayal (I.L.R. 50 All. 965), Radhakisan vs Sri Dhar (A.I.R. , Gordhan Das vs Governor General in Council (A.I.R. 1950 Punj. 103) and Nagendra Nath Bose vs Monmohan referred to.

The appellant, who was a Ruler of a former Indian State, had money dealings with the respondent. They referred their disputes to an arbitrator who made his award directing the appellant to pay. a certain sum of money, in installments. The award also stated that the existing documents relating to debts on lands would remain as before and would remain as securities till the payment of debts The arbitrator filed the award into court and the court, after notice to the parties passed a decree in terms of a compromise modifying the award. The respondent started execution proceedings and the court passed a prohibitory order under O.XXI, r. 46 of the Civil Procedure Code, 1908, in respect of the sums payable to the appellant by the Central Government on account of the privy purse; but on the application of the appellant, that order was vacated. The appellant and respondent filed appeals in the High COurt, against the various orders, and the High Court decided all the appeals against the appellant. In the appeal to the Supreme Court, it was contended that, (i) as the award affected immovable property of the value of more than Rs. 100, and was not registered, a decree could not be passed in terms the award, (ii) the proceedings under the Indian , were incompetent in the absence of the consent of the Central Government under sections 86(1) and 87B of the Code, and therefore the decree passed in those proceedings was without jurisdiction and void and (iii) the amount receivable by the appellant as his privy purse was a political pension within the meaning of section 60(1)(g) of the Code, and not liable to attachment or sale in execution of a decree. HELD: (i)The award did not create or of its own force declare any interest in any immovable property and since it did not come within the purview of section 17 of the , was not required to be registered. [(204 H] (ii) A proceeding under section 14 read with section 17 of the , for the passing of a judgment and decree on an award, does not commence with a plaint or a petition in the nature of a plaint, and cannot be regarded as a suit and the parties to whom the notice of the filing of the award is given under section 14(2) cannot be regarded as "sued in any Court otherwise competent to try the suit" within the meaning of section 86.(1) read with section 87B of the Code. Neither are those provisions of the Code attracted by reason of section 41(a) of the or section 141 of the Code. It follows that the COurt was competent to entertain the proceedings under section 14 of the and pass a decree in those proceedings though no consent to the institution of the proceedings had been given by the Central Government. [205 G H; 206 B D] 202 (iii) The amounts of the privy purse of the appellant were not liable to attachment or sale in execution of the respondent 's decree. [209 C D] The periodical payment of money by the Government to a Ruler of a former Indian State as privy purse on political considerations and under political sanctions and not under a right legally enforceable in any municipal court is strictly a political pension within the meaning of section 60(1)(g) of the Code. The privy purse satisfies all the essential characteristics of a political pension, and as such is protected from execution under section 60(1) (g). [209 A C]

Respondent No. 1 obtained a mortgage decree for Rs. 1,14,581/14/6 against one Rao Raja Inder Singh (the judgment debtor). The mortgage money was advanced under three mortgages, and the mortgaged properties consisted of Jagirs and some non Jagir immovable property. The latter property was sold in execution and Rs. 33,750/ paid to the decree holder in partial satisfaction of the decree. Then the decree holder filed an execution petition in the Court of the District Judge for the balance amount i.e. Rs. 99,965/3/6, praying for attachment of the amount of compensation and rehabilitation grant which would be paid to the judgment debtor on account of resumption of his Jagir. The judgmment debtor submitted two applications in which he claimed relief under sections 5 and 7 of the Rajasthan Jagirdars ' Debt Reduction Act. The decree holder, in his reply, to those petitions urged that the provisions relied in were ultra vires the Constitution of India, being in contravention of articles 14, 19 and 31 of the Constitution. Thereafter the decree holder moved a petition under article 228 of the Constitution before the High Court, praying that the execution case pending in the Court of the District Judge, be withdrawn from that court to the High Court. The High Court transferred the case to its file. By its judgment the High Court could held that apart from the later part of section 2(e) excluding certain debts and section 7 (2) of the Act, the rest of the Act was valid. The High Court granted a certificate under article 133(1)(c) of the Constitution to the State of Rajasthan to file an appeal to this Court. Hence the appeal: Held: (i) That the impugned part of section 2(e) infringes article 14 of the Constitution for the reason that no reasonable classification is disclosed for the purpose of sustaining the impugned part of section 2(e). It is now well settled that in order to pass the test of permissible classification, two conditions must be fulfilled, namely, (1) that the classification must be founded on an intelligible differentiation which distinguishes persons or things that are to be put together from others left out of the group, and (2) that the differential must have a rational relationship to the object sought to be achieved by the statute in question. The said condition No. 2 above has clearly not been satisfied in this case. The object sought to be achieved by the impugned Act was to reduce the debts secured on the Jagir lands which had been resumed under the provisions of the Rajasthan Land Reforms and Resumption of Jagirs Act. The fact that the debts are owed to a Government or local authority or other bodies mentioned in the impugned part of section (2) (e) has no rational relationship with the object sought to be achieved by the Act. Further, no intelligible principle underlies the exempted categories of debts. The reason why a debt advanced on behalf of a person by the Court of Wards is clubbed with a debt due to a State or a scheduled bank and why a debt due to a non scheduled bank is not excluded from the purview of the Act is not discernible. Manna Lal vs Collector of Jhalwar. ; , Nand Ram Chhotey Lai vs Kishore Raman Singh, A.I.R. (1962) All 521 and 905 Jamnalal Ramlal Kimtee vs Kishendas and State of Hyderabad, A.I.R. (1955) Hyd. 194, distinguished. (ii) Section 7(2) is valid as it imposes reasonable restrictions, in the interests of general public. on the rights of a secured creditor. This sub section has been designed with the object of rehabilitating a Jagirdar whose Jagir properties have been taken over by the State for a public purpose at a low valuation. If this provision was not made, the Jagirdar would find it diffcult to start life afresh because his future income and acquired properties would be liable to attachment and sale for the purpose of satisfying the demands of such creditors.

By a lease dated 14th December 1948, the respondent plaintiff gave to the appellant defendant on lease two plots Nos. 12 and 13 situated at Sitaladevi Temple Road, Mahim for a period of 15 years commencing from 1st December 1948 at the yearly rent of Rs. 10,200/ payable in equal quarterly instalments of Rs. 2,550/ in advance. The lease deed provided that the appellant was at liberty to erect building and structures on the two plots of land. The appellant agreed to pay and discharge all taxes and outgoings imposed on the above two plots as also on the buildings to be erected by the defendant. On the expiration of the term of the lease, the appellant agreed to deliver back the possession of two plots to the respondent `free of all buildings, erections and structures and levelled and put in good order and condition to the satisfaction of the respondent '. Clause IV of the lease provided for determination and forfeiture of the lease in the event of the rents having been allowed to be in arrears for more than 30 days or upon breach of conditions of the lease. The forfeiture clause also provided that upon forfeiture the respondent would be entitled to re enter upon not only the two plots of land but also the structure standing thereon. The appellant constructed on plot No. 12 a three storied building consisting of about 72 flats, shops with carpet area of 13,000 square feet and the cost of the building with superstructures in 1949 was about Rs. 6,00,000/ . Since the appellant defaulted not only in payment of rent but also in payment of dues in respect of lands and buildings which he erected, the respondent filed a suit in 1951 for ejectment. The appellant filed an application for the fixation of standard rent and the standard rent was fixed at Rs. 435/ per month from September 1, 1950. A compromise was entered into between the parties in the suit on 5th March, 1954, by which they agreed on a rent of Rs. 435/ per month from September 1950 to February 1954. An appeal against the fixation of standard rent of Rs. 435/ per month was disposed of on 28th June, 1955 whereby standard rent was refixed at Rs. 620/ p.m. from 1st September 1950. The appellant again defaulted in payment of rent and taxes. The arrears of rent amounted to Rs. 11,472.30 and taxes to the extent of Rs. 1,12,053.60 for the period ending 30th September 1960. The respondent by a notice determined and forfeited the lease and called upon the appellant to deliver possession of the lands alongwith structures thereupon. The notice also specified that the notice was not only a notice of forfeiture, but also notice under section 12 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947. On 1st 1016 December 1961, as the appellant failed to pay the arrears of rent and the taxes, the respondent filed the suit for ejectment and prayed for a decree for ejectment against the appellant in respect of two plots of land Nos. 12 and 13 and also the buildings and structures standing thereon, and claimed arrears of rent of Rs. 11,472.50 and mesne profits at the rate of Rs.620/ p.m. The appellant in order to get the benefit of section 12(3)(b) of the Rent Control Act, 1947, applied for time for making deposit of arrears of rent. The appellant could not make the payment within the extended time allowed, but after the issues were framed and the suit was taken up for trial, he deposited the arrears of rent and cost in the Court after the Court made an endorsement "accept without prejudice". Subsequently, on 11th November, 1964 the Trial Court passed a decree for ejectment in respect of plots and the buildings in favour of the respondent. A decree was granted regarding arrears of rent and for mesno profits. Both the appellant and the respondent preferred appeals and the Bench of two Judges of the Court of Small Causes by a common judgment disposed of both the appeals on 4th April 1965. The Appellate Court held that it had no jurisdiction to give a decree for ejectment in respect of the two buildings constructed on plot No. 12 by the appellant. It held that clause IV of the lease which permitted forfeiture was in the nature of penalty and the appellant was entitled to be relieved from the liability to deliver possession of the buildings constructed by him upon forfeiture by the respondent. It also found that the appellant was entitled to be relieved from the penalty of forfeiture of the lease under section 114 and 114A of the Transfer of Property Act. It rejected the plea of the appellant that he was always ready and willing to pay arrears of rents and found that because of repeated defaults the appellant was not entitled for relief from ejectment under section 12(3)(b) of the Bombay Rent Act. The respondent filed a revision petition against the order of the appellate Court declining to direct possession of the two buildings and the appellant tenant filed an appeal against the order of appellate Court directing his ejectment from the two plots of lands Nos. 12 and 13. The High Court disposed of both the revision petition and the cross appeal by a common judgment whereby it allowed the revision petition of the respondent/landlord and dismissed the appeal of the appellant/tenant and decreed the suit of the respondent directing the appellant to deliver peaceful possession of the land demised to him and also buildings which have been constructed by the appellant on the demised lands. It also confirmed the decree regarding arrears of rents and mesne profits. Hence the appeal by certificate. Dismissing the appeal, the Court. ^ HELD: 1. Section 28 of the Bombay Rent Act, 1947 confers jurisdiction on the Court of Small Cause. Bombay to entertain try any suit for proceedings between a landlord and tenant relating to recovery of rents or possession of any premises to which any of the provisions of that part applied. The Jurisdiction thus conferred enables the Court to try any Suit between the landlord and the tenant relating to recovery of possession of the premises. [1022 A B] Importers and Manufacturers Ltd. vs Pheroze Framroze Taraporewala and Ors. ; Babulal Bhura Mal and Anr. vs Nandram Shivram and Ors., ; ; followed. 1017 Raizada Tapen Das and Anr. vs M/s Gorakhram Gokalchand ; ; Sushila Kashinath Dhonde and Ors. vs Harilal Govinji Bhogani and Ors., ; explained and distinguished. The conditions specified in section 12(3)(b) of the Bombay Rent Act, 1947 will have to be strictly observed by the tenant if he wants to avail himself of the benefits provided under the section. In the instant case, the persistent default of the appellant tenant on various occasions and his clear statement that he was not in a position to pay the arrears would exclude any relief under section 12(3) (b) of the Act. The respondent plaintiff would be entitled to a decree for possession of the plots under the provisions of the Bombay Rent Act and in effect the decree for possession of the land would mean that the land should be delivered to him without the structures. [1023 D G, 1025 D E] Ganpat Lodha vs Sachikant Vishnu Shivale. ; ; applied. 3. To contend that as the respondent plaintiff has sought two reliefs one under the Bombay Rent Act and another under the contract, the entire plaint must be rejected is wrong. In asking for the relief for possession of the land. the respondent plaintiff is entitled to incidental and consequential reliefs such as for effectively taking possession of the plot without the structure, that is he is entitled to ask for the demolition of the superstructure. The prayer in the plaint asking for possession of the land including the structures would not take the suit out of the competence of the Small Causes Court. [1025 E. F G] Ramachandra Raghunath Shirgaonkar vs Vishnu Balaji Hindalekar. ; Khimjee Thakorsee vs Pioneer Fibre Co. Ltd., AIR 1941 Bom. 337 and K Arumugham Naicker and Anr. vs Tiruvalluva Nainar Temple by its Trustee. AIR 1954 Mad. 985; approved.

The Corporation of Calcutta is not precluded from taking proceedings under section 363 of the Calcutta Municipal Act, 1923 by reason of its having taken proceedings prior thereto under section 488 of the Act read with Rule 62 of Schedule XVII. The question of inconvenience to neighbours is not relevant for the purpose of deciding whether an order for demolition should be made under section 363 of the Act. When the Legislature provides that on the same facts proceedings could be taken under two different sections and the penalties provided in those sections are not the same, it obviously intends to treat them as distinct, and, therefore, where no question under section 403 of the Code of Criminal Procedure arises, proceedings taken under one section cannot be treated as falling within the other. The word. "may" in section 363 of the Act does not mean "shall" and the Magistrate has under that section discretion whether he should pass an order for demolition or not. It is a well settled principle that when the legislature entrusts to an authority the power to pass an order in its discretion an order passed by that authority in exercise of that discretion is, in general, not liable to be interfered with by an appellate court, unless it can be shown to have been based on some mistake of facts or misapprehension of the principles applicable thereto. In the present case, however, the orders of the courts below were based on mistakes and misdirections and therefore could not be supported. But the Supreme Court did not think this to be a fit case for an order for the demolition of the buildings in view of certain special circumstances, viz, (1) though section, 363(2), which directs that no appli 126 996 cation for demolition shall be instituted after the lapse of five years from the date of the work, did not, in terms, apply as the proceedings had been started in time, it was nearly five years since the building bad been completed and the interests of the public did not call for its demolition, and (2) the appeal came on a certificate granted under article 134(1)(c) with a view to obtaining the decision of the Supreme Court on certain questions of importance. Abdul Samzad vs Corporation of Calcutta ([1905] I.L.R. , referred to.

Respondent No. 1 in the appeals instituted a suit for partition against his younger brothers and sisters, and the heirs of his deceased brothers. The plaintiff was the eldest among the brothers and sisters. The 1st and 2nd Defendants were his brothers, the 3rd Defendant his sister, the 4th and 5th Defendants, the widow and son respectively of the third brother. Defendant 6 was the widow of the fourth brother, and Defendants 7 to 12 were his children, while Defendant No. 14 was the wife of Defendant No. 1, and Defendants 13, 15, 16 and 17 were their children. The subject matter of the appeals related only to one item of property known as "Naroda Chawl" measuring 7 acres and 2 gunthas of land, where 115 rooms and huts stood con structed, out of which 114 rooms had been let out to ten ants, and one room was retained for the caretaker. According to Defendants No. 6 to 12 this property exclu sively belonged to defendant No. 6 and was not liable to partition. The other defendants however supported the plain tiff 's case that it belonged to the 233 joint family and was liable to partition. Defendants 6 to 12 pleaded that the plaintiff 's father Bapalal orally gifted this property to his daughter in law Defendant No. 6 in March 1946 and made a statement before the Revenue authorities on . the basis of which her name was mutated and she was put in possession thereof, that although she came in peaceful possession, the management which in cluded realisation of rent was in the hands of Defendant No. 1, that as some dispute arose in 1952 she assumed direct charge of the chawl and had remained in possession thereaf ter, and that she had acquired good title therein by adverse possession before the suit was filed in 1960. The City Civil Judge who tried the suit, held that there was a joint Hindu family and a business was carried on for the benefit of the family and the income therefrom was thrown into the common pool and all the properties including the disputed chawl were treated as belonging to the family. As the case of Defendant No. 6 about the gift, the mutation of her name, and her exclusive possession from 1946 till the date of the suit was found correct, it was held that she had acquired title by adverse possession, and the suit was dismissed with respect to the disputed chawl. The plaintiff appealed to the High Court. Some of the defendants also filed appeals in respect of the other items of property. All these appeals were heard and disposed of by a common judgment. The High Court reversed the finding of adverse posses sion in regard to the disputed chawl and granted a decree for partition. It held that Defendant No. 6 remained in exclusive possession of the property only since 1952, the period was thus short of the time required for prescription of title. It further held that since the rents of the chawl from 1952 were collected by her husband and after his death by her son (Defendant No. 7), she was liable to render accounts till the death of her husband, and she along with Defendant No. 7 would be jointly liable for the period thereafter. Separate Appeals were preferred by Defendant Nos. 6 and 7 to this Court. Allowing the Appeals, setting aside the decision of the High Court and restoring that of the Trial Court. 234 HELD: 1. The principle that revenue entry furnishes presumptive evidence of title is inapplicable in the instant case. It cannot be denied that title to Naroda Chawl could not have passed to Defendant No. 6 by virtue of the entry Ext. The value of the chawl even in 1946 was large and no registered instrument of transfer was executed. Besides Ext. 247 describes the plaintiff 's father (Bapalal) and Defendant No. 6 (Chandrakanta) as Kabjedar, that is occu pant. In such circumstances, the presumption which can be raised in favour of Defendant No. 6 from this entry is with respect of her possession and possession only. [238F G] Gangabai and others vs Fakirgowda Somaypagowda Desai and others, AIR 1930 Privy Council 93; and Desai Navinkant Kesarlal vs Prabhat Kabhai, 9 Gujarat Law Reporter 694, referred to. The account books have to be rejected as not reli able. It is apparent from the evidence that nobody takes the responsibility of supporting the correctness of the entries therein. Many of the documents produced by Defendant No. 1 were accepted, but the account books which were section Nos. 123 75 to 123 97 of Ext. 123 were in express terms not admitted. The plaintiff filed his objection Ext. Defendant No. 6 also filed her objection Ext. The books were admitted in evidence and marked as exhibits on the statement of the plaintiff which he made in cross exami nation. The plaintiff by saying that he had written as per the instructions of Defendant No. 1 made it clear that he Could not vouchsafe for its reliability. Defendant No. 1 could not summon courage to support them either personally or through any witness. No reason has been suggested as to why he did not produce other important documents in his possession which could have supported the account books and the joint case of the parties resisting the appellant 's claim. [243B E] 3. Defendant No. 1 cannot be treated to be in joint possession as he was actually collecting the rents from the tenants. it is well settled that the possession of the agent is the possession of the principal and in view of the fidu ciary relationship, Defendant No. 1 cannot be permitted to claim his own possession. [247D E] David Lyeii vs John Lawson Kennedy, [1889] XIV H.L.(E) 437; Williams vs Pott, L.R. XII Equity Cases 149 and Secre tary of State for India vs Krishnamoni Gupta, 29 Indian Appeals 104, referred to. It is the intention to claim exclusive title which makes 235 possession adverse and this animus possidendi must be evi denced and effectuated by the manner of occupancy which again depends upon the nature of the property. The manner of possession depends upon the kind of possession which the particular property is susceptible. That possession to the extent to which it is capable of demonstration must be hostile and exclusive and will cover only to the extent of the owner 's possession. [246E F] (b). The title to the chawl as owner, subject to the tenancy was an interest in immovable property so as to be covered by Article 144 of the Indian Limitation Act, 1908, which specifically mentioned, ". or any interest therein". [246E] In the instant case, the parties have been fighting for the rent from the chawl so long as it continued in posses sion of the tenants. Before the gift of 1946 the Defendant No. 1 was collecting the rent and he continued to do so even thereafter till 1952. The appellant has, however, estab lished her case that the Defendant No. 1 acted as her agent after 1946 and when he repudiated this agency in 1952 he was effectively removed from the management of the chawl. Since 1946 the tenants attorned to the Defendant No. 6 and paid rent to her under printed receipts announcing her ownership, but of course through her agent the Defendant No. 1. The fact that the tenants have been in actual physical posses sion of the chawl is, in the circumstances, of no assistance to the respondents. What is material is that they paid the rent to the Defendant No. 6. Defendant No. 6 was in adverse possession from the period 1946 to 1952 through her agent Defendant No. 1 and thereafter through her husband and son Defendant No. 7 till 1960 when the suit was filed, the total period being more than 12 years. [246G H; 248G] Uppalapati Veera Venkata Satyanarayanaraju and another vs Josyula Hanumayamma and another, and Hari Prasad Agarwalla and another vs Abdul Haw and others, A.I.R. 1951 Patna 160, referred to.

The Income tax officer, Dacca, acting under the Bengal Agricultural Income tax Act, 1944, sent by registered post a notice to the Manager of an Estate belonging to the Tripu ra State but situated in Bengal, calling upon the latter to furnish a return of the agricultural income derived from the Estate during the previous year. The notice was received by the Manager in the Tripura State. The State, by its then Ruler, instituted a suit in June, 1946, against the Province of Bengal and the Income tax Officer, in the court of the Subordinate Judge of Dacca for a declaration that the said Act in so far as it purported to impose a liability to pay agricultural income tax on the plaintiff was ultra vires and void, and for a perpetual injunction to restrain the defend ants from taking any steps to assess the plaintiff. The suit was subsequently transferred to the Court of the Subor dinate Judge of Alipore. The partition of India under the Indian Independence Act took place on the 158h August 1947, and the 2 Province of East Bengal in which the Estate was situated, was substituted as a defendant in the place of the Province of Bengal on an application made by it, and in its written statement it contended that the court of Alipore which was situated in West Bengal had no jurisdiction to proceed with the suit. The High Court of Calcutta, reversing the order of the Subordinate Judge of Alipore held that the provisions of the Indian Independence (Legal Proceedings) Order, 1947, and the Indian Independence (Rights, Property and Liabili ties)Order, 1947, did not apply to the case and, as the matter was accordingly governed by the rules of internation al law, the court of Alipore had no jurisdiction to proceed with the suit: Held per KANIA C.J., PATANJALI SASTRI, MUKHERJEA and CHANDRASEKHARA AIYAR JJ. (FAZL ALI J. concurrinG) The suit was not one with respect to any property transferred to East Bengal by the Indian Independence (Rights, Property and Liabilities) Order, 1947, nor was it a suit in respect of any "rights" transferred by the said Order, inasmuch as the Province of East Bengal obtained the right to levy income tax not by means of any transfer under the said Order, but by virtue of sovereign rights which were preserved by section 18 (3) of the Indian Independence Act, 1947, and article 12 (2) of the said Order had no application to the case. Held per KANIA C.J., PATANJALI SASTRI, MUKHERJEA AND CHANDRASEKHARA AIYAR J.J. (FAZL ALI J, dissenting.) (i) Since the object of the Indian Independence (Rights, Property and Liabilities) Order, 1947, was to provide for the initial distribution of rights, properties and liabili ties as between the two Dominions and their Provinces, a wide and liberal construction, as far as the language used would admit, should be placed upon the Order, so as to leave no gap or lacuna in relation to the matters sought to be provided for. The words "liability in respect of an action able wrong" should not therefore be understood in the re stricted sense of liability for damages for completed acts, but so as to cover the liability to be restrained by injunc tion from completing what on the allegations in the plaint are illegal or unauthorised acts which have been commenced. As the Province of Bengal was, on the: allegations in the plaint, liable to be restrained from proceeding with an illegal assessment, that liability was, accordingly, a liability in respect of "an actionable wrong other than breach of contract" with in the meaning of article 10 (2) (a) of the above said Order; and, as the cause of action arose wholly in Dacca within the Province of East Bengal, that liability passed to the province of East Bengal under article 10 (2) (a), the latter must be deemed to be substituted as a party to the suit and the suit must continue in the court of the Subordinate Judge of Alipore, under Art.4 of the Indian Independence (Legal Proceedings) Order, 1947. (ii) Assuming that the cause of action did not wholly arise 3 in Decca, article 10 (9.) (c) would apply and the Province of East Bengal would still be liable, though jointly with the Province of West Bengal. (iii) As the suit was not one "to set aside or modify any assessment made under the Act", section 65 of the Bengal Agricultural Income tax Act, 1944, had no application and the suit was therefore one in respect of an "actionable" wrong within the moaning of article 10 (2) (a). Per FAZL ALI J. The words "liability in respect of an actionable wrong other than breach of contract" in article 10 of the Indian Independence (Rights, Property and Liabili ties) order 1947, refer to liability capable of being ascer tained in terms of money such as liability for damages for tort and not liability in any abstract or academic sense. Even if a meaning, as wide ' as they can bear in a legal context, is given to the words "actionable wrong" and "liability" two elements are necessary to constitute an actionable wrong, namely, (i) an act or omission amounting to an infringement of a legal right of a person or breach of duty towards him, and (ii) damage or harm resulting there from. The mere issuing of a notice under section 4 of the Bengal Agricultural Income tax Act, 1944, by the Income tax Officer is not an actionable wrong because no right known to law is infringed thereby and no action for damages can be main tained in respect of such an act, even assuming that the Income tax Officer had exceeded his powers or acted under an invalid provision of law. No "liability for an action able wrong" was thus involved in the suit and no liability in respect of such a wrong could therefore be said to have been transferred to the Province of East Bengal within the meaning of article 10 (2.) of the said Order so as to entitle the plaintiff to continue the suit against the Province of East Bengal under article 10 (2). For the purpose of understanding the full scope of section 65 of the Bengal Agricultural Income tax Act, 1944 it is necessary also to read the latter part which provides that no suit or other proceeding shall lie against any officer of the Crown for anything in good faith done or intended to be done under the Act. " The latter part of the section clearly excludes the jurisdiction of the courts to prevent the Income tax Officer from proceeding with an assessment which has been started and the section must on a fair construction be held to bar all suits in connection with such assessment whether against the State or an Income tax Officer of the State. If, therefore, no suit or action lies, there cab be no liability for an actionable wrong. [The nature of actionable wrongs and torts discussed.] Judgment of the Calcutta High Court reversed.

Appeal No. 327 of 1959. Appeal from the order dated June 28, 1956, of the Bombay High Court at Nagpur in Misc. First Appeal No. 15 of 1954. 98 774 A. V. Viswanatha Sastri, Shankar Anand and A. G. Batnaparkhi, for the appellant. K. N. Rajagopal Sastri, as amicus curiae. November 29. The Judgment of the Court was delivered by SHAH, J. Ramachandra Dhondo Datar hereinafter referred to as the respondent was employed by the appellant company in its publications branch. By agreement dated March 23, 1943, the appellant company agreed to pay to the respondent as from April 1, 1943, remuneration per annum equal to 3 1/2% of the gross sales or Rs. 12,000 whichever was greater. The agreement was to remain in operation for ten years from April 1, 1943, in the first instance and was renewable at the option of the respondent for such period as he desired. By notice dated April 19, 1948, served on the respondent on April 22, 1948, the appellant company terminated the employment of the respondent. The respondent then filed a civil suit in the court of the Fifth Additional District Judge, Nagpur, for a decree for Rs. 1,30,000 being the amount of compensation for wrongful termination of employment, arrears of salary and interest. On July 17, 1953, the court after giving credit for the amount received by the respondent passed a decree for Rs. 42,359 (which was inclusive of Rs. 36,000 as compensation for termination of employment and Rs. 6,000 as salary in lieu of six months notice and interest) and costs and interest on judgment. The respondent then applied for execution of the decree and claimed Rs. 54,893 12 0 less Rs. 18,501 10 0 decreed against him in a cross suit filed by the appellant company. The Income Tax Officer, Nagpur, served a notice under section 46 of the Indian Income Tax Act upon the respondent and also gave intimation to the District Judge, Nagpur, that the appellant company be permitted to deduct at source and to pay into the Government Treasury Rs. 15,95613 0 as income tax, surcharge and super tax due on the sum of Rs. 50,972 2 0 awarded to the respondent. The appellant company also applied that the 775 executing Court do declare that the appellant company was entitled and in law bound to deduct the tax due on the amount. The learned Judge directed the appellant company to pay to the Income Tax Department Rs. 15,956 13 0 on account of income tax and super tax on the amount due to the respondent and directed it to pay the balance in court after filing a receipt for payment of tax from the Income Tax department. In appeal to the High Court of Judicature at Nagpur, the order passed by the District Judge was reversed and execution as claimed by the respondent was directed. The appellant company contends that under section 18(2) of the Income Tax Act, it was bound to deduct the tax computed at the appropriate rate on the salary payable to the respondent as the amount due under the decree represented salary. Section 18 sub section (2) of the Income Tax Act in so far as it is material provides that any person paying any amount chargeable under the head "salaries" shall at the time of payment deduct income tax and super tax at the rate representing the average of the rates applicable to the estimated total income of the assessee under the head "salary". Sub section (7) declares that a person failing to deduct the taxes required by the section shall be deemed to be an assessee in default in respect of such tax. The Legislature has, it is manifest, imposed upon the employer the duty to deduct tax at the appropriate rate on salary payable to the employee and if he fails to do so, the tax not deducted may be recovered from him. But the liability to deduct arises in law, if the amount is due and payable as salary. In this case, there has been no assessment of tax due by the Income Tax Officer on the amount payable to the respondent. Under section 46(5), any person paying salary to an assessee may be required by the Income Tax Officer to deduct arrears of tax due from the latter and the employer is bound to comply with such a requisition and to pay the amount deducted to the credit of the Government. But this order can only be passed if income tax has been assessed and has remained unpaid. It is undisputed that at the, material 776 time, no tax was assessed against the respondent; the Income Tax Officer had accordingly no authority to issue a notice under section 46(5). Nor could the Income Tax Officer claim to recover tax due by a proceeding in the nature of a garnishee proceeding by applying to the civil court to attach the Judgment debt payable by the company. The application submitted by the Income Tax Officer must therefore be ignored. Undoubtedly, the employer is by section 18 of the Act liable to deduct from the salary payable by him to his employee the amount of tax at the average rate appli cable to the estimated total income; but can it be said that as between the appellant company and the respondent the decretal amount represented salary? The respondent had filed a suit for a decree for arrears of salary, compensation for wrongful termination of employment and interest. The court having passed a decree on that claim, it became a judgment debt. It may have been open to the appellant company in the suit to apply to the court for making a provision in the decree for payment of income tax due by the respondent, but no such provision was made. We are not concerned to decide in this appeal whether in the hands of the respondent the amount due to him under the decree, when paid, will be liable to tax; that question does not fall to be determined in this appeal. The question to be determined is whether as between the appellant company and the respondent the amount decreed is due as salary payment of which attracts the statutory liability imposed by section 18. The claim decreed by the civil court was for compen sation, for wrongful termination of employment, arrears of salary, salary due for the period of notice and interest and costs, less withdrawals on salary account. The amount for which execution was sought to be levied was the amount decreed against which was set off the claim under the cross decree. A substantial part of the claim decreed represented compensation fir wrongful termination of employment and it would be difficult to predicate of the claim sought to be enforced what part thereof if any represented salary due. Granting that compensation payable to an 777 employee by an employer for wrongful termination of employment be regarded as in the nature of salary, when the claim is merged in the decree of the court, ' the claim assumes the character of a judgment debt and to judgment debts section 18 has not been made applicable. The decree passed by the civil court must be executed subject to the deductions and adjustments permissible under the Code of Civil Procedure. The judgment debtor may, if he has a cross decree for money, claim to set off the amount due thereunder. If there be any adjustment of the decree, the decree may be executed for the amount due as a result of the adjustment. A third person who has obtained a decree against the judgment creditor may apply for attachment of the decree and such decree may be executed subject to the claim of the third person: but the judgment debtor cannot claim to satisfy, in the absence of a direction in the decree to that effect the claim of a third person against the judgment creditor, and pay only the balance. The rule that the decree must be executed according to its tenor may be modified by a statutory provision. But there is nothing in the Income Tax Act which supports the plea that in respect of the amount payable under a judgment debt of the nature sought to be enforced, the debtor is entitled to deduct income tax which may become due and payable by the judgment creditor on the plea that the cause of action on which the decree was passed was the contract of employment and a part of the claim decreed represented amount due to the employee as salary or damages in lieu of salary. Counsel for the appellant company strongly relied upon the decision of the House of Lords in Westminster Bank Ltd. vs Riches (1). That was a case in which in an action brought by one R against the Westminster Bank trustee of the estate of one X R was awarded a decree for pound 36,255 principal and pound 10,028 as interest. The Bank thereafter brought an action for a declaration that it had satisfied the judg ment in the action by R by paying him the amount (1) 18 Tax Cases 159. 778 due less pound 5,014, the latter sum representing income tax on the interest awarded by the judgment. It was held by the House of Lords that pound 10,028 was "interest of money" within Schedule D and General Rule 21 of the Income Tax Act, 1918, and that income tax was deductible therefrom. In that case, the only argument advanced on behalf of the Bank is set out in the speech of Viscount Simon, L. C. at p. 187: "The appellant contends that the additional sum of pound 10,028 though awarded under a power to add interest to the amount of the debt, and though called interest in the judgment, is not really interest such as attracts Income Tax, but is damages. The short answer to this is that there is no essential incompatibility between the two conceptions. The real question, for the purposes of deciding whether the Income Tax Acts apply, is whether the added sum is capital or income, not whether the sum is damages or interest." The House of Lords in that case by a majority held that pound 10,028 awarded under the judgment represented not capital but interest and was liable to tax. In our view, ' this case has no application to the facts of the present case. In the case before us, there is a decree passed in favour of the respondent: under the scheme of the Civil Procedure Code, that decree has to be executed as it stands, subject to such deductions or adjustments as are permissible under the Code. There was no tax liability which the respondent was assessed to pay in respect of this amount till the date on which the appellant company sought to satisfy the alleged tax liability of the respondent. As between the appellant company and the respondent, the amount did not represent salary; it represented a judgment debt and for payment of income tax thereon, no provision was made in the decree. The Civil Procedure Code bars an action of the nature which was filed in Westminster Bank 's case (supra). The defence to the execution if any must be raised in the execution proceeding and not by a separate action. The amount payable by the appellant company to the respondent was not salary but a judgment debt, and before paying that debt the appellant company could not claim 779 to deduct at source tax payable by the respondent. Nor could the appellant company seek to justify its plea on the ground that the judgment creditor was indebted to a third person. The principle of the case in Manickam Chettiar vs Income Tax Officer, Madura (1), on which reliance was also sought to be placed by the appellant company has no application to this case. In Manickam Chettiar 's case (1), in execution of a money decree certain properties belonging to a judgment debtor were attached and sold and the sale proceeds were received by the court. The Income Tax Officer who had assessed the decree holder to tax payable by him on his other income applied to the court for an order directing payment to him out of the sale proceeds the amount of income tax due by the decree holder. It was held that the claim for income tax was entitled to priority in payment and the court had inherent power to make an order on the application for payment of money due as income tax. Tax had admittedly been assessed, and proceedings substantially for recovery of the tax so assessed were adopted by the Income Tax Officer. It was held in the circumstances that the court had jurisdiction to direct recovery of tax out of the amount standing to the credit of the decree holder. The principle of that case can have no application to the facts of the present case. The respondent had not appeared before us, but we have been assisted by Mr. Rajagopala Sastri and we are indebted to him for placing the evidence and the various aspects of the case on a true appreciation of which the question in issue fell to be determined. The appeal fails and is dismissed. As there was no appearance for the respondent, there will be no order for costs. Appeal dismissed. (1) VI I.T. R. 180.

In a civil suit the respondent obtained a decree against his employer the appellant company for a sum which included com pensation for wrongful termination of his service, arrears of salary, interest and costs of the suit, and then applied for execution of the decree. The Income tax Officer served a notice upon the respondent under section 46 of the Indian Income tax Act and applied to the District Judge that the appellant be permitted to deduct at source the income tax, surcharge and super tax on the sum awarded to the respondent and pay the same in the Government Treasury. The appellant company also moved the executing court for a declaration that they were entitled and bound to deduct the tax due on the amount. The District judge directed the appellant company to pay the income tax and super tax to the Income Tax Department and pay the balance in Court together with a receipt for the income tax paid. In appeal the High Court reversed the order of the District judge and directed the execution of the decree as claimed by the respondent. On appeal by the appellant company, Held, that as no tax was assessed against the respondent the Income Tax Officer could not issue a notice under section 46(5) requiring the appellant company to deduct tax from the decretal amount. A substantial part of the decretal amount did not represent salary" of the respondent: it consisted of compensation for wrongful termination of the respondent 's service, salary in lieu of six months ' notice, interest and costs of the suit. It was a judgment debt and no provision for payment of income tax was made in the decree which was liable to be executed as prayed by the respondent. The appellant company was not therefore entitled or bound to deduct income tax under section 18 sub section (2) of the Act.

For the assessment years 1961 62 and 1962 63, the corresponding valuation dates of which were March 31, 1961 and March 31, 1962, assessment orders were made under the Wealth Tax Act on March 24, 1961 and March 23, 1962 respectively while the notice of demands were served on the assessee on April 11, 1961 and April 11, 1962 respectively. Against the said notices of demand the assessee preferred appeals on May 9, 1961 and May 9, 1962 respectively. For the purpose of determining the assessee 's net wealth, the assessee 's claim for a deduction of certain sums representing the estimated liabilities on account O? ' income tax and wealth tax was rejected in both assessments by the Wealth Tax Officer. On appeal by the assessee, the Appellate Assistant Commissioner of Wealth Tax allowed a part of the claim. In appeal before the Appellate Tribunal, the Revenue contended that since the assessee had disputed the wealth tax liability of Rs. 22,679/ in respect of the assessment year 1960 61 and the sum of Rs. 39,692/ in respect of the assessment year 1961 62, he was not entitled to a deduction of the same, being barred by reason of the provisions of section 2(m) (iii) (a) of the Wealth Tax Act. The Tribunal rejected the said contention and held that section 2 (m)(a) was not attracted as the tax had not become payable on the relevant valuation dates. The Wealth Tax References made at the instance of the Revenue were decided in favor of the assessee by the High Court of Gujarat by its common judgement in Commissioner of Wealth Tax vs Kantilal Manilal reported in The present appeal by special leave arises therefrom. Dismissing the appeal, the Court ^ HELD: 1.1 In order to invoke the bar prescribed by Section 2(m) (iii) (a) of the Wealth Tax Act it is necessary for the Revenue to establish that both 298 requirements therein are satisfied, that is to say, that an amount of the tax is outstanding on the valuation date and further that the amount is claimed by the assessee in an appeal as not being payable by him. [302E F] 1.2 An amount of tax is outstanding if it is payable and has remained unpaid. In other words, if there is a debt due and there has been no payment of the debt. There are three stages in respect of an income tax liability. The tax liability comes into existence on the last day o f the previous year relevant to the assessment year. Thereafter when the assessment proceedings take place an assessment order is made quantifying the assessable income and determining the tax payable. Thereupon, a notice of demand is served for payment of the tax, and the tax then becomes payable and a debt becomes due to the Revenue. A survey of the provisions of the Wealth Tax Act contained in Sections 14 to 17 and Section 30 makes it clear that in all material respects the scheme of the Wealth Tax Act is in this regard substantially, the same as that incorporated in the Income Tax Act. The notice of demand requiring payment of the tax, interest or penalty is issued pursuant to Section 30 of the Act. If the amount remains unpaid within the periods specified in the notice the amount of the tax is said to be outstanding [303D F] 1.3 Section 2(m)(iii)(a) of the Wealth Tax Act comes into play only after a demand for payment of tax has been made. The clause, read in its entirety, speaks of a debt owed by the assessee represented by an amount of tax "payable in consequence of any order" passed under the relevant tax statute and "outstanding on the valuation dates." [303H; 304A] 1.4 The expression "debt owed" is a debt which the assessee is under an obligation to pay and, therefore, it includes both a liability to pay in present as well as a liability to pay in future an ascertainable sum of money. Both kinds of liabilities are included within the expression "debt owed". But Section 2(m)(iii)(a) narrows the scope down to a liability which exists in present time because the clause speaks of tax outstanding in consequence of an order passed under the relevant taxing statute. [304B C] 1.5 In the present case, the notice of demand in each case was served after the valuation date had been passed. There was no demand already subsisting on the respective valuation dates. As the notices of demand respecting the wealth tax liability of Rs. 22,679 and Rs. 39,692 were served on the assessee subsequent to the valuation dates, if cannot be said that on the respective valuation dates the amount of tax were outstanding. In the result a material requirement of Section 2(m) (iii) (a) is not satisfied and therefore, it cannot be invoked by the Revenue. [304D E] Commissioner of Wealth Tax vs Kantilal Manilal, , approved. Doorga Prasad vs The Secretary of State, , quoted with approval 299 Kesoram Industries & Cotton Mills Ltd. vs Commissioner of Wealth Tax (Central), Calcutta, ; , followed. 1.6 The appeals in the present case, though filed subsequent to the respective valuation dates, would none the less have sufficed to bring the second requirement of section 2 (m) (iii) (a) into operation. But for Section 2 (m) (iii) (a) an amount of a tax outstanding on the valuation date would constitute a debt owed by the assessee on the valuation date, and the assessee would be entitled to claim its deduction in the process of computing his net wealth. Parliament, however, intended that if the amount of the tax was challenged by the assessee as not being payable by him by recourse to any of the statutory remedies prescribed in the relevant Act, such claim to deduction would be barred. Plainly, in order to give full effect to that intent it is immaterial whether the statutory remedy is being availed of on the valuation date or has been taken thereafter. A challenge by the assessee that the amount outstanding is not payable by him is sufficient to bar his claim to deduction whether the challenge is subsisting on the valuation date or is initiated after the valuation date has passed. [305 D; A C] Late P. Appauoo Pillai vs Commissioner of Wealth Tax, Madras, overtuled.

The appellants had applied for compensation to the Jagir Abolition Officer under section 13 of the Bombay Merged Territories and Areas (Jagir Abolition) Act, 1953 in respect of their proprietary jagirs. Against the orders of the said officer they preferred appeals to the Revenue Tribunal which were dismissed for non prosecution. The appellants thereupon filed applications for restoration of the appeals within 30 days of the receipt of the orders of dismissal of the appeals. These applications were dismissed as time barred, the Tribunal taking the view that time was to be calculated from the date of the order. The appellants ' applications under article 227 of the Constitution to the High Court failed and they came by way of special leave, to this Court. It was contended on behalf of the appellant that (i)the Tribunal even while deciding ex parte had to decide on merits and that (ii) the applications for restoration were filed within the time prescribed in Regulation 21 made under the Bombay Revenue Tribunal Act, 1958 which applied to the case. HELD:(i) In the context of section 20 and ;in view of the express language of section 17(1) of the Jagirs Abolition Act the Tribunal had no power to dismiss the appeals in question for non prosecution, but it was obligatory on its part of decide the appeals on merits and to record is decision even though there was default on the part of the appellant to appear in the appeal. [142 E F] (ii) The Tribunal also committed an error of law in dismissing as time barred the applications for restoration of the appeals made by the appellants. In Regulation 21 made under Bombay Revenue Tribunal Act, 1958 the time prescribed for such applications is thirty days from the date of receipt of the Tribunal 's order dismissing the appeal, and the appellants had filed their applications within the said period. [145 A, B] Regulation 21 lays down the procedure for dealing with applications for restoration made under Regulation 20 and the latter Regulation includes within its scope all appeals 'decided ex parte ' whether on merits or otherwise. It could not therefore be said that Regulation 21 did not apply to the case. [144 H]

The respondent, as plaintiff, filed a suit against the appellant, as defendant, in the Original side of the Bombay High Court for the enforcement of its claim for a large amount of over Rs. 40 lakhs. The appellant not only contested the claim but also made a counter claim. The appellant made a request that in the event of a decree being passed against them, they may be allowed to pay the decretal amount in instalments. A single Judge dismissed the counter claim and passed a decree in favour of respondent and allowed the decretal amount to be paid in instalments. Delivery of Judgment which commenced on 12th December 1980 was concluded on 16th December 1980, upon which the advocates for the appellant addressed a letter to the Prothonotary and Senior Master, High Court, requesting that the accompanying memorandum of appeal be taken on file. This appeal which was numbered 36 of 1981 26 was filed on 20th January, 1981. The appeal was directed against the order in respect of instalments. On 21st January 1981, when the matter was called for admission before a Division Bench the appellant asked for leave to withdraw the appeal and the appeal was allowed to be withdrawn. A week after the withdrawal of appeal No. 36 the appellant filed an appeal against the judgment taking grounds relating to the merits of the case and also the direction as to instalments. This appeal was numbered 44 of 1981. After this appeal was heard on merits for a few days, the respondent raised a preliminary objection that because the appellant had earlier filed appeal No. 36 against the provision regarding instalments and which had been withdrawn, the present appeal No. 44 was not maintainable. The Division Bench upheld the preliminary objection and dismissed appeal No. 44 on the ground that the appellant had by filing appeal No. 36 against the provision relating to instalments abandoned its right to challenge the decree on merits. The appellant contended in this Court that the filing of earlier appeal No. 36 or the withdrawal thereof does not affect the right of appellant to prefer appeal No. 44 against the decree on merits. Appeal No. 36 was filed against the order of the High Court passed under Order 20, r. 11 of the Code of Civil Procedure in regard to instalments only and not against the decree. Appeal No. 36 had been filed soon after the judgment had been pronounced and long before the decree incorporating the order regarding instalments had been drawn up. Appeal No. 36 must be considered to be an appeal against the order and not against the decree. The right to prefer an appeal is a creature of statute. The order regarding instalments is not appealable under C.P.C. and such an order cannot also be considered to be a 'Judgment ' within the meaning of clause 15 of the Letters Patent. Appeal No. 36 which was against the order regarding instalments was incompetent and was therefore no appeal in the eye of law and for all legal purposes was non est. Even if appeal No. 36 has to be considered an appeal against the decree in view of amended provision of Order 20, r. 11 of C.P.C., the said appeal still must be held to be incompetent and no appeal in the eye of law as the appeal was filed without a certified copy of the decree and was even withdrawn before a certified copy of the decree could be filed. Appeal No. 44 filed against the decree in terms of the provisions contained in the Original Side Rules of Bombay High Court becomes a proper and competent appeal as the earlier appeal No. 36 was not a valid appeal in the eye of law. The provisions of Order 2, r. 2 and Order 23, r. 1 of C.P.C. do not in any way affect the maintainability and the merits of appeal No. 44 as the cause of action and the subject matter of appeal No. 44 are entirely different from the cause of action and the subject matter of appeal No. 36. The appellant did not waive his statutory right to file the appeal. The appellant by his conduct has also not disentitled himself to file Appeal No. 44. Appeal No. 36 was filed on the advice of lawyer under mistaken belief; mistaken advice of a lawyer cannot be the foundation of a plea of estoppel. No prejudice has been caused to the respondent by filing and withdrawal of appeal No. 36 by the appellant. The respondent contended that in view of the amended provisions of Order 20, r. 11, the order regarding instalments which is required to be incorporated in the decree necessarily forms a part of the decree. In view of the 27 provisions contained in Order 2, r. 2 and Order 23, r. 1 of C.P.C. it was open to the appellant to prefer an appeal against the decree or to appeal against any part thereof. The appellant preferred to file appeal No. 36 only against the part of the decree relating to instalments and not against the decree as a whole. The filing of appeal restricted to the directions as to the instalments bars a subsequent appeal against the decree on merits. The appellant having obtained a benefit or advantage under the decree to the prejudice of respondent cannot now question the correctness of the decree passed. Allowing the appeal, ^ HELD: The provisions of Order 20, r. 11, Order 41, r. 1 Order 5, r. 2 and Order 23, r. 1 of the Code of Civil Procedure do not deprive the appellant of his right to file appeal No. 44. [54 D] The right to prefer an appeal is a right created by statute. A right of appeal may be lost to a party in appropriate cases by the provisions of law and also by the conduct of the party. The law of limitation may deprive the party of the right he may enjoy to prefer an appeal. Also in appropriate cases a party may be held to have become disentitled from enforcing the right to appeal which he may otherwise have. [46 A C] In the instant case the defendant appellant did have a right of appeal against the decree by virtue of the provisions of section 96 read with Order 41 of Civil Procedure. The appeal has been filed within the period of limitation, The law of limitation, therefore, does not defeat the right of the appellant to file an appeal. [46 C D] Order 20, r. 11 makes provisions for postponement of payment of money decree and of its payment in instalments and lays down the procedure for directing payment of a money decree in instalments. The amendment introduced in 1976 to Order 20, r. 11 requires that any provision directing the payment of the amount decreed shall be postponed or shall be made by instalments may be incorporated in the decree. The direction regarding payment of the decretal amount is an independent order which is required to be incorporated in the decree and it can only be incorporated in the decree when the decree is drawn up. It retains the character of an order till it is so incorporated in the decree. The rules of the Original Side of the Bombay High Court make necessary provisions as to the drawing up of a decree. In view of procedure laid down in the rules for the drawing up of a decree, there is bound to be a time lag between the judgment and the drawing up of a decree, in which the order regarding instalment is to be incorporated. Appeal against any provision granting instalments or refusing to grant instalments will not be competent if the direction granting or refusing to grant instalments is considered to be an order. Such an order is not appealable under the Code. Such an order will also not be a 'judgment ' within the meaning of clause 15 of the Letters Patent and will not be appealable as such if however, the direction with regard to instalments is considered to be a part of the decree, an appeal will undoubtedly lie as an appeal from a decree. [47 D E, 41 G H, 41 C D, 47 F H] 28 The provisions of Order 20, r. 11 do not deprive the appellant in the instant case of his right to prefer an appeal against the decree. The earlier appeal No. 36 of 1981 had been filed long before the decree in which the order regarding instalments under Order 20, r.11 of the Code was to be incorporated had been drawn up. As at the time of filing the earlier appeal No. 36 the order regarding instalments had not been incorporated in the decree, the order retained its character of an order. The earlier appeal No. 36 at the time when it was filed, should therefore be regarded as an appeal against an order. The precipe filed for the drawing up of the order, the letter to the Prothonotary and Senior Master of the High Court by the Advocates for the appellant, the memorandum of appeal filed and the amount of stamp furnished on the memorandum are facts which go to indicate that the earlier appeal had been filed against the order regarding instalments treating the same to be an order. The appeal No. 36 must therefore be held to be incompetent. If the earlier appeal No. 36 were to be considered to be an appeal against the decree, the appeal would still be incompetent, because the appellant had furnished the amount of stamp necessary for preferring an appeal against the order and the requisite stamp in respect of an appeal against a decree had not been affixed. [46 E, 48 D E, 48 H, 49 A B, 48 B, 43 D C] Under Order. 41, r.1, every appeal has to be preferred in the from of a memorandum signed by the appellant or his pleader and presented to the court or to such officer as it appoints in that behalf, and has to be accompanied by a copy of the decree appealed from, and of the judgment on which it is founded. Rule 1 empowers the appellate court to dispense with the filing of the judgment but there is no jurisdiction in the appellate court to dispense with the filing of the decree. The requirement that the decree should be filed alongwith the memorandum of appeal is mandatory and in the absence of the decree the filing of the appeal would be incomplete, defective and incompetent. So long as the certified copy of the decree is not filed there is no valid appeal in the eye of law. Though by virtue of the provisions of the Original Side Rules of the Bombay High Court the earlier appeal could be permitted to be filed without a certified copy of the decree or order, the appeal would not be valid and competent unless the further requirement of filing the certified copy had been complied with. [49 G H, 50 A, 53 C, F] In the instant case, at the time when the earlier appeal No. 36 had been withdrawn, the certified copy of the decree had not been filed. The said appeal without the certified copy of the decree remained an incompetent appeal. The withdrawal of an incompetent appeal which would indeed be no appeal in the eye of law cannot in any way prejudice the right of any appellant to file a proper appeal, if the right of appeal is not otherwise lost by lapse of time or for any other valid reason. [52 F G] Order 2, r.2, contemplates that at the time of the institution of the suit, the whole of the claim which the plaintiff is entitled to make in respect of the cause of action, has to be made and also deals with the consequences of non compliance with the requirements of the said rule. It is doubtful whether the principles underlying this rule can be said to be applicable to an appeal. This rule is applicable only to suits and cannot in terms apply to appeals. Even if 29 an appeal be considered to be a continuation of a suit for certain purposes, the provision of this rule cannot in terms be made applicable to an appeal in view of the scheme of the said rule and the language used therein. [53 F G, 53 E F] In the instant case the provisions of Order 2, r.2 of the Code do not stand in the way of the appellant in the matter of filing the subsequent appeal No. 44. Even if the principles underlying Order 2, r.2 are considered as applicable to an appeal the maintainability of the appeal No. 44 cannot be held to be affected in any way as the cause of action in respect of the present appeal is entirely different from the cause of action on which the earlier appeal was filed. [23 A B, G] Order 23, r.1 of the Code does not also stand in the way of the maintainability of the instant appeal No. 44. Apart from the incompetency of the earlier appeal No. 36, the subject matter of the said appeal was entirely different from the subject matter of the present appeal. [53 H, A B] The provisions of the Code of Civil Procedure contained in Order 20, r.11, Order 2. r. 2 and Order 23,r. 1 do not in terms deal with any question in relation to the right of appeal or the extinguishment thereof. These provisions do not by themselves confer any right of appeal on a party or deprive any party of the right of appeal which a party may enjoy. These are not the statutory provisions which either confer a right of appeal on a party or deprive a party of any such right. [54 B C] A mere prayer for postponement of payment of decretal amount or for payment thereof in instalments on the basis of the provisions contained in Order 20, r.11 (1) of the Code at a time when the decision in the suit is yet to be announced can never be considered to amount to such conduct of the party as to deprive him his right to prefer an appeal against any decree, if ultimately passed, and to disentitle him from filing an appeal against the decree. [55 G H] In the matters of litigation the litigant who is not expected to be familiar with the formalities of law and rules of procedure is generally guided by the advice of his lawyers. The statement of the lawyers recorded by the Division Bench in its judgment clearly goes to indicate that the lawyer had advised filing of the earlier appeal under mistaken belief. The act done by the defendant appellant on the mistaken advice of a lawyer cannot furnish a proper ground for depriving the defendant appellant of his valuable statutory right of preferring an appeal against the decree. The filing of an incompetent appeal on the mistaken advice of a lawyer cannot, in our opinion, reflect any such conduct on the part of the defendant appellant as to disentitle him to maintain the present appeal. [56 C, D; F, G] The present appeal No. 44 had been filed long before the decree had been drawn up, and, there can be no question of execution of any decree at the time when that appeal was filed. The question of the defendant appellant having obtained an advantage under the decree does not therefore really arise. [59 A B] 30

The appellant encashed high denomination currency notes of the value of Rs. 87,5oo and was called upon by the Incometax Officer to submit a return for the relevant year. The appellant made three statements, discrepant in material particulars, at different stages as to how he received the amount. The Income tax Officer held that the true nature of the receipt had not been disclosed, treated it as income from an undisclosed source and assessed him accordingly. The Assistant Commissioner of Income tax upheld that order on appeal. On a further appeal, the Appellate Tribunal reviewed the facts, considered the discrepancies in the appellant 's case and affirmed the order of assessment. An application for a reference to the High Court having been made under section 66 of the Indian Income tax Act, the Tribunal held that no question of law arose from its order and dismissed the same. The High Court thereafter summarily dismissed the application made by the appellant under section 66(2) of the Act. Against that order of summary dismissal special leave to appeal was obtained from this court and the sole question for determination in the appeal was whether the order of the Tribunal on the face of it disclosed any question of law and if the High Court was right in summarily dismissing the application under section 66(2) of the Act. Held, that no question of law arose from the order of the Tribunal and the appeal must fail. In order to decide whether the principles laid down by this court in Dhirajlal Girdharilal vs Commissioner of Income tax, Bombay, and Omar Salay Mohamed Sait vs Commissioner of Income tax, Madras, (1959) 37 I.T.R. 151, applied to a particular case, it was necessary to read the order of the Tribunal as a whole for determining whether or not it had properly considered the material facts and the evidence, for and against, in coming to its final conclusion and whether any irrelevant consideration or matter of prejudice had vitiated such conclusion. Those decisions do not require that the order of the Tribunal must be examined sentence by sentence so as to discover a minor lapse here or an incautious opinion there and rest a question of law thereon. 771 Dhirajlal Girdharilal vs Commissioner of Income tax, Bombay, and Omar Saley Mohamed Sait vs Commis sioner of Income tax, Madras, , explained. Although a mere rejection of an explanation given by the assessee does not invariably establish the nature of a receipt. , where the circumstances of the rejection are such as to properly raise the inference that the receipt is an income, the assessing authorities are entitled to draw that inference. Such an inference is one of fact and not of law.

The appellant created a trust in 1955 by transferring certain securities held by him to a bank as trustee. One of the beneficiaries of the trust was the appellant 's minor daughter M. The income accruing to M under the trust during the previous years relevant to the assessment years 1957 58, 1958 59, 1959 60 and 1960 61 was included in the assessments made on the appellant as an individual for those years by applying the provisions of section 16(3)(b) of the Indian Income Tax Act 1922. In the assessment for the year 1960 61 the Income tax Officer had also to deal with the appellant 's claim for the allowance under section 9(2) off the said Act in respect of two separate houses owned by the appellant and maintained by him for residential purposes in New Delhi. The Income tax Officer allowed the claim only in respect of one of the houses. The appellant 's appeals. before the authorities under the Act failed. The High Court decided the questions referred to it against the appellant. In appeals before this Court on certificate the contentions of the appellant which fell for consideration were : (i) (a) that section 16(3) (b) must be strictly construed; (b) that the assets covered by the trust deed not having been transferred to the wife or minor daughter but to a bank as trustee, section 16(3) (b) of the Act had no application; (c) even if section 16(3) (b) of the Act applied, what was to be included in computing the total income of the appellant was not the in come that had been received by the minor daughter under the trust deed but only so much of the income of the trustee as arose from the assets transferred to the trustee for the benefit of the minor child; (ii) that a reading of the first and second provisos to section 9(2) of the Act clearly showed that the allowance to an assessee is not confined only to one residential house HELD : (i) (a) it is true that section 16(3) (b) creates an artificial liability and must therefore be strictly construed. But in construing section 16(3)(b) Courts cannot ignore the clear and unambiguous expressions contained therein and all those expressions must receive a proper interpretation.[9 C D] C.I.T. Bombay vs Manual Dhanji, , C.I.T.,. Gujarat vs Keshavlal Lallubhai Patel, and; C.I.T., West Bengal II vs Prem Bhai Parekh (b) The contention that section 16(3) (b) applies only to those cases where ultimately the corpus of the trust property is also transferred to the wife or the minor child, must be rejected. The provisions of section 16(3)(b) are very clear, and, the only requirement so far as this aspect is concerned is that the assets Must be transferred. to, any person or association of persons and that transfer of assets must be for the benefit of the wife or the 2 minor child or both. In this connection it is pertinent to note the wordings of section 16(3) (a) (iii) and section 16(3) (a) (iv). The former provision clearly refers to assets transferred directly or indirectly to the wife by the husband and the latter provision refers to assets transferred directly or indirectly to the minor child not being a married daughter. But in cl. (b) of section 16(3) the transfer of assets is not to the wife or the minor child or both but to any person or association of persons. Therefore it is clear that when the legislature intended to provide for a direct transfer of assets either to the wife or to the minor child, it has used the expressions as are found in section 16(3) (a) (iii) and section 16(3) (a) (iv). The different phraseology used in cl. (b) of section 16(3) makes it clear that the transfer of assets need not be to the wife or the minor child. Nor does the said clause require that the corpus of the property so transferred to any person or association of persons should ultimately vest in the wife or the minor child [9G 1OB] C.I.T. Bombay vs Sir Mahomed Yusuf Ismail, [1944] 12 I.T.R. 8 approved. (c) From a plain reading of section 16(3) (b) it is clear that what is to be included in computing the total income of the assessee is that part of the income of the trust which is received for the benefit in this case of the minor daughter. It is the share income which has accrued to or has been received by the minor daughter under the trust deed in the relevant accounting year, that has to be included in the total income of the father, the assessee. The expression "so much of the income" occurring in this clause also makes it clear that the said provision relates to the share income of the minor daughter, in this case, and not that of the trustee bank. [11 B C] Tulsidas Kilachand and ors. vs C.I.T. Bombay City 1, and C.I.T. Bombay vs Manilal Dhanji, applied. (ii)A reading of the second proviso to sub section (2) of section

The appellant land owner held lands in excess of 30 standard acres as on 6.4.1960. He filed a return as required by the Tamil Nadu Land Reforms (Fixation of Ceiling on Land) Act, 1961 and an enquiry was initiated by the Authorised Officer concerned under Section 9(2)(b) of the Act. Several objections raised by the appellant were rejected and the Authorised Officer came to the conclusion that the family of the appellant could be reckoned to be of five members be tween 6.4.1960 and 2.10.1962 and thus the appellant was entitled to 30 standard acres; his wife and daughter however could hold 10 and 7.71 standard acres respectively as strid hana. The appellant was asked to elect which lands he wished to be included in his holding and state which lands should be treated as surplus. Feeling aggrieved by the said deter mination, the appellant preferred an appeal under Section 78(1) to the Land Tribunal. The appellant contended (i) that the Authorised Officer had wrongly included the lands of his minor sons, unmarried daughter and wife gifted to them long before 1960; (ii) that subsequent to the filing of the appeal, the Act was amended as a consequence whereof his rights and liabilities with regard to the fixation of ceil ing area were required to be worked out on the basis of the revised date of commencement of the Act i.e. 15.2.1970; notified date being 2.10.1970. It was also urged by the appellant that the lands of his eldest son Laxminarayanan could not be included in his holding. On those grounds amongst others relating to the effect of subsequent transac tions the appellant prayed that the matter ought to be remanded to the Authorised Tribunal for a de novo considera tion. The appellant authority rejected all the contentions and dismissed the appeal, whereupon the appellant preferred a revision application before the High Court. Before the High Court his plea regarding subsequent transactions was confined to the documents executed between 15th February 1970, the date of commencement of the 359 Act, and 2nd October 1970, the notified date; contentions regarding other transactions were not pressed. The High Court accepted this contention and took the view that even in respect of proceedings which commenced prior to the coming into force of the Amending Act, an affected person can take advantage of the provisions contained In Section 2 IA. The High Court held that while Section 2 of the Amending Act reduced the ceiling area to half, benefit was conferred by Section 21A and hence both the provisions had to be read together. On that reasoning the High Court opined that the three documents relating to subsequent transactions executed between the said date, could not be ignored in fixing the ceiling area unless it was found that the documents were executed to defeat the provisions of the Act, in which case the transactions may be declared void under Section 22 of the Act. The High Court accordingly directed the Authorised Officer to make further inquiries regarding the three trans actions in question and pass appropriate orders. The High Court rejected the other contentions. The appellant being aggrieved with the rejection of other points raised before the High Court has preferred this appeal by special leave. Dismissing the appeal, this Court, HELD: The proceedings in this case had started and concluded before the Authorised Officer long before the Amending Act saw the light of the day. Under Section 3(1) of the Amending Act, any action taken (including any order made, decision or direction given, proceeding taken, etc.) under the provisions of Act before the date of publication of the Amending Act, can be continued and enforced after the said date in accordance with the provisions of the Act as if the Amending Act had not been passed. This is however, subject to subsection (2) which carves out an exception to sub section (1) insofar as the reduction of the ceiling area from 30 standard acres to 15 standard acres is concerned. [367E G] B.K.V. Radhamani Ammal vs Authorised Officer, Land Reforms, Coimbatore, , referred to.

The respondent was appointed on 15.7.1962 as a Chemistry lecturer in Kulohaskar Ashram Agriculture Intermediate College run by the appellant society. By a communication dated 20.6.1963, he was informed by the management that his services were no longer required after 15.7.1963. He filed a civil suit for permanent injunction restraining the manage ment from proceeding with the proposed action. But the management having withdrawn the letter, he withdrew the suit as having become infructuous. However on 28.8.1964, the respondent was placed under suspension whereupon he again filed a civil suit for a declaration that the order of suspension was illegal. The trial court dismissed the suit but the first appellate court allowed the appeal and decreed the suit as prayed for. On appeal the High Court affirmed that decision, on 9.4.69. During the pendency of the appeal before the High Court, the management appellant had passed a fresh order suspending the respondent pending enquiry on certain allegations. The respondent again filed a civil suit to challenge the competency of the managing committee to take action against him. In the said suit he also pleaded that the prior approval of the District Inspector of Schools having not been taken, the order placing him under suspen sion was bad. The Munsiff Court accepted the suit and de clared the suspension order as illegal and void. The first appellate court reversed that order and the respondent preferred second appeal to the High Court. During the pendency of the respondent 's second appeal, U.P. Secondary Educational Laws (Amendment) Act, 1976 came into force from 18.8.76 which inter alia provided that prior approval of the District Inspector of School was necessary before any action could be taken against teaching staff of a college. The respondent sought to amend the pleadings of second appeal in consonance with the Act but 451 the High Court declined but he succeeded on this question before this Court. Contemporaneously with the litigation set out above, the respondent filed a suit for recovery of arrears of salary, past pendente lite and future. It was claimed for the period between 21.2.1964 and 20.2.1967. The trial court decreed the suit for Rs.7812/92 p. being the arrears of salary for the period of three years. The management appealed to the Dis trict Court and the respondent filed cross objection. As stated earlier, the second appeal preferred by the respond ent was pending in the High Court. Hence the parties moved the High Court for withdrawing the appeal pending before the District Court for being disposed of alongwith the second appeal No. 2038/1970, which request was accepted and the said appeal came to be registered as First Appeal No. 460 of 1982. The High Court disposed of both the appeals by a common judgment whereby the second appeal was dismissed and the finding as to the validity of the suspension order was confirmed. However the First Appeal was allowed and the decree of the trial court was reversed and a suit for ar rears of salary filed by the respondent was dismissed. The respondent appealed to this Court and his appeal was allowed and his claim to salary between 20.2.1964 to 15.1.1966 was settled at Rs. 10,000 and the court further held that the order of suspension ceased to be operative w.e.f. 17.10.1975. Thereafter the respondent on May 18, 1986 moved the High Court under Article 227 of the Constitution for a writ of Mandamus against the State of U.P. and the management of the College for his reinstatement in service and for payment of entire arrears of salary. The High Court accepted the writ petition and granted him the relief asked for. Hence these appeals by the Management of the school and the State of U.P. Allowing the appeals, this Court, HELD: Indeed, the reinstatement would be an unwise move from any point of view. In educational institutions, the Court cannot focus only on the individual. The Court must have regard to varying circumstances in the academic atmos phere and radically changed position of the individual sought to be reinstated. The court must have regard to interests of students as well as the institution. [459E] In the instant case, during the gap of twenty five years, the respondent must have clearly lost touch with Chemistry as well as the 452 art of teaching. It must have been also deeply buried and disintegrated under the new acquisition of his legal knowl edge. Reinstatement of such a person seems to be unjustified and uncalled for. [459G] Legal profession may not be considered as an employment but the income from profession or avocation if not negligi ble, cannot be ignored while determining damages or back wages for payment. [463G] In a case like this. the Government cannot be saddled with the liability to make payment. There is no relationship of master and servant between Government and respondent and such relationship existed only between the management and respondent. So far as statutory liability to pay salary to teacher is concerned, the Government has been paying salary to Dr. Gopendra Kumar who has since been appointed as Lec turer in the place of the respondent. Therefore, the manage ment alone should pay the amount ordered. [464D E] Vaish Degree College vs Lakshmi Narain, ; G.R. Tiwari vs District Board, Agra and Anr., ; , 59; The Executive Committee of U.P. Warehousing Corpo ration Ltd. vs Chandra Kiran Tyagi, ; , 265; Bank of Baroda vs Jewan Lal Mehrotra, and Sirsi Municipality vs Kom Francis, ; ; Smt. J. Tiwari vs Smt. Jawala Devi Vidya Mandir & Ors., ; ; Deepak Kumar Biswas vs The Director of Public Instruc tions, ; Andi Mukta Sadguru Shree Muktajee Vandas Swami Suvaran Jayanti Mahotsav Samarak Trust & Ors. V.R. Rudani & Ors., ; at 697; TrilokChand Modichand & Ors. vs H.B. Munshi & Anr., ; Maimoona Khatun & Anr. vs State of U. P. & Anr. , ; ; Managing Director U.P. Warehousing Corporation & Anr. vs Vinay Narain Vajpayee, ; ; Maharaja Sayajirao University of Baroda & Ors. vs R.S. Thakur, AIR 1968 SC 2112 and S.M. Saiyad vs Baroda Municipal Corpora tion, [1984] Supp. SCC 378, referred to.

Appeals Nos. 776 and 777 of 1957. Appeals by special leave from the judgment and order dated September 25, 1956, of the Bombay High Court in Income tax Application No. 48 of 1956; and from the judgment and order dated March 17,1954, of the Income tax Appellate Tribunal, Bombay, in E.P.T.A. Nos. 757, 903 and 944 of 1948 49, respectively. A. V. Viswanatha Sastri and G. Gopalakrishnan, for the appellants. A. N. Kripal and D. Gupta. for the respondent. November 30. The Judgment of the Court was delivered by HIDAYATULLAH, J. These are two appeals, with special leave, against an order of the High Court of Bombay rejecting a petition under section 66(2) of the Indian Income tax Act and the order of the Income tax Appellate Tribunal, Bombay, in respect of which the petition to the High Court was made. Messrs. section C. Cambatta & Co. (Private) Ltd., Bombay, have filed these appeals, and the Commissioner of Excess Profits Tax, Bombay, is the respondent. We are concerned in these appeals with three chargeable accounting periods, each ending respectively on December 31, beginning with the year, 1943 and ending with the year, 1945. 807 The appellants carry on various businesses, and one such business was the running of a theatre and restaurant, called the Eros Theatre and Restaurant. In October, 1943, a subsidiary Company called the Eros Theatre and Restaurant, Ltd. was formed. The paid up capital of the subsidiary Company was Rs. 7,91,100 divided into 7,911 shares of Rs. 100 each. 7,901 shares were allotted to the appellant Company as consideration for assets, goodwill, stock in trade and book debts which were taken over by the subsidiary Company, and the remaining 10 shares were held by the Cam batta family. The assets which were transferred were as follows: Assets: Assets transferred. Rs.1,28,968 Stock in trade. Rs.40,000 Book debts. . Rs.100 Rs.1,69,068 They together with the capital reserve of Rs. 6,21,032 made up the amount of Rs. 7,90,100. In the books of the subsidiary Company, the share capital account was shown separately as follows: Rs. 2,50,000 debited to the various assets account. Rs. 5,00,000 debited to the goodwill account. Rs. 40,000 debited to the stock in trade account. Rs. 100 debited to the book debts account. It will thus appear that goodwill was not shown separately in the appellants ' account books, but only in the accounts of the subsidiary Company. In working out the capital of the two Companies for excess profits tax, a sum of Rs. 5,00,000 was claimed as goodwill as part of the capital of the subsidiary Company. Both the Department as well as the Tribunal held that section 8(3) of the Excess Profits Tax Act applied; and the goodwill was not taken into account in working out the capital. The Tribunal declined to state a case, but the High Court directed that a reference be made on two questions, which were framed as follows: 808 "(1) Whether on the facts of the case, the Appellate Tribunal was right in applying section 8(3) of the Excess Profits Tax Act? (2). Whether in the computation of the capital employed. in the business of the assessee, the Tribunal erred in. not including the value of the goodwill or any "portion thereof?" The High Court by its judgment and order answered the first question in the negative and the second, in the affirmative. It held that sub section (5) and not sub section (3) of section 8 of the Excess Profits Tax Act was applicable. It, therefore, held that "the Tribunal should have allowed for the value of the goodwill whatever it thought was reasonable at the date of the transfer. " When the matter went before the Tribunal again, three affidavits and a valuation report by a firm of architects were filed. The goodwill, according to the report of the architects, amounted to Rs. 25 lakhs. It may be mentioned here that the subsidiary Company was using the premises under a lease granted on November 20, 1944, for three years beginning from April 1, 1944, on a rental of Rs. 9,500 per month. The Tribunal came to the conclusion that no goodwill had been acquired by the business of the Theatre as such, and that whatever goodwill there was, related to the site and building itself. They then proceeded to consider what value should be set upon the goodwill on the date of the transfer of the subsidiary Company as directed by the High Court. They took into account certain factors in reaching their conclusions. They first considered the earning capacity of the business, and held that prior to 1942 the business had not made profits, and that the name of Eros Theatre and Restaurant thus by itself had no goodwill at all. They, therefore, considered that the only goodwill which had been acquired attached to the lease, which the trustees had given to the Eros ;Theatre and Restaurant Ltd., and computing the goodwill as the value of the lease to the subsidiary Company, they felt that Rs. 2 lakhs was a liberal estimate of the value of the goodwill in the hands of Eros Theatre and Restaurant, Ltd. at the material time. 809 Petitions under sections 66(1) and 66(2) read with a. 21 of the Excess Profits Tax Act were respectively rejected by the Tribunal and the High Court; but the appellants obtained special leave from this Court, and filed these appeals. In our opinion, a question of law did arise in the case whether the goodwill of the Eros Theatre and ' Restaurant, Ltd., was calculated in accordance with law. The Tribunal seems to have taken into account only the value of the leasehold of the site to the subsidiary Company, and rejected other considerations which go to make up the goodwill of a business. No doubt, in Cruttwell vs Lye(1), Lord Eldon, L. C. observed that goodwill was "nothing more than the probability that the old customers would resort to the old place". The description given by Lord Eldon has been considered always to be exceedingly narrow. The matter has to be considered from the nature of the business, because the goodwill of a public inn and the goodwill of a huge departmental stores cannot be calculated on identical principles. The matter has been considered in two cases by the House of Lords. The first case is Trego vs Hunt (2), where all the definitions previously given were considered, and Lord Macnaghten observed that goodwill is "the whole advantage, whatever it may be of the reputation and connection of the firm, which may have been built up by years of honest work or gained by lavish expenditure of money". In a subsequent case reported in Inland Revenue Commissioners vs Muller & Co.s. Margarin, Ltd. (3), Lord Macnaghten at pp. 223 and 224 made the following observations:. "What is goodwill? It is a thing very easy to describe, very difficult to define. It is the benefit and advantage of the good name, reputation, and connection of a business. It is the attractive force which brings in custom. It is the one thing which distinguishes an old established business from a new business at its first start. . . If there is one attribute common to all cases of goodwill in it is the attribute (1) 346. (2) (3) 810 of locality. For goodwill has no independent existence. It cannot subsist by itself. 'It must be attached to a business. Destroy the business, and the goodwill perishes with it, though elements remain which may perhaps be gathered up and be revived again". These two cases and others were considered in two 'Australian cases. The first is Daniell vs Federal Com missioner of Taxation (1), where, Knox, C. J. observed: "My opinion is that while it cannot be said to be absolutely and necessarily inseparable from the premises or to have no separate value, prima facie at any rate it may be treated as attached to the premises and whatever its value may be, should be treated as an enhancement of the value of the premises". In the second case reported in Federal Commissioner of Taxation vs Williamson (2), Rich, J., observed at p. 564 as follows: "Hence to determine the nature of the goodwill in any given case, it is necessary to consider the type of business and the type of customer which such a business is inherently likely to attract as well as the surrounding circumstances. . The goodwill of a business is a composite thing referable in part to its locality, in part to the way in which it is conducted and the personality of those who conduct it, and in part to the likelihood of competition, many customers being no doubt actuated by mixed motives in conferring their custom". In Earl Jowitt 's Dictionary of English Law, 1959 Edn., "goodwill" is defined thus: "The goodwill of a business is the benefit which arises from its having been carried on for some time in a particular house, or by a particular person or firm, or from the use of a particular trade mark or trade name" It will thus be seen that the goowill of a business depends upon a variety of circumstances or a combination of them. The location, the service, the standing of the business, the honesty of those who run it, and the lack of competition and many other factors go individually or together to make up the goodwill, (1) ; (2) ; 811 though locality always plays a considerable part. Shift the locality, and the goodwill may be lost. At the same time, locality is not everything. The power to attract custom depends on one or more of the other factors as well. In the case of a theatre or restaurant, what is catered, how the service is run and what the competition is, contribute also to the goodwill. From the above, it is manifest that the matter of goodwill needs to be considered in a much broader way than what the Tribunal has done. A question of law did arise in the case, and, in our opinion, the High Court should have directed the Tribunal to state a case upon it. Civil Appeal No. 776 of 1957 is allowed. The High Court will frame a suitable question, and ask for a statement of the case from the Tribunal, and decide the question in accordance with law. The costs of this appeal shall be borne by the respondent; but the costs in the High Court shall abide the result. There will be no order in Civil Appeal No. 777 of 1957. C. A. No. 776 of 1957 allowed.

The appellant carried on various businesses and one such was the running of a Theatre and Restaurant. In October, 1943, a subsidiary company was formed which was using the premises of the Theatre under a lease granted to it from April, 1944. In working out the capital of the two companies for excess profits tax, a claim of rupees five lakhs for goodwill as part of the capital of the subsidiary company was not taken into account. On reference to the High Court it held that the Tribunal should have allowed the value of the goodwill whatever it thought was reasonable at the date of transfer. Thereafter the Tribunal took into account only the value lease hold of the site to the subsidiary company and came to the conclusion that no goodwill had been acquired by the business of the Theatre as such and whatever goodwill there was related to the site of building itself, and estimated the value of goodwill at rupees two lakhs. Petition under sections 66(1) and 66(2) read with section 21 of the Excess Profits Tax Act being rejected by the Tribunal and the High Court, the appellants came appeal by special leave. Held, that the goodwill of a business needed to be considered in a broader way. It depended upon a variety of circumstances or a combination of them. The nature, the location, the (1) 102 806 service, the standing of the business, the honesty of those who run it, and the lack of competition and many other factors went individually or together to make up the goodwill, though the locality always played a considerable part. Shift the locality, and the goodwill may be lost but it was not everything. The power to attract custom depended on one or more of the other factors as well. In the instant case a question of law did arise, whether the goodwill of the Eros Theatre and Restaurant Ltd. was calculated in accordance with law. Cruttwell vs Lye, (1810) 17 ves. 335, Trego vs Hunt, L.), Inland Revenue Commissioners vs Muller & Co. 's Margarin, Ltd., 9101 A. C. 217 (H. L.), Daniell vs Federal Commissioner of Taxation; , and Federal Commissioner of Taxation vs Williamson, ; , discussed.

The Appellant Bank which was registered under the Co operative Societies 'Act, 1922, received, in the relevant account years, by way of interest on deposits with the Imperial Bank of India certain sums of money. The Income tax Officer assessed the aforesaid sums under section 12 of the Indian Income tax Act 1922, as income from other sources, but the appellant claimed that the deposits were made not with the idea of making investments but for the purpose of carrying on its business as a bank and that as the interest received on the deposits was profit attributable to its business activities it was not subject to incometax because of the Notification issued by the Central Government under section 6o of the Act. Under the Notification profits of any Co operative Society are exempt from the tax payable under the Act but not income derived from "other sources" referred to in section 12 of the Act. Held, that the interest from deposits received by the Appel lant Bank in the present case arose out of a transaction entered into for the purpose of carrying on its banking business and fell within the income exempted under the Notification. The Punjab Co operative Bank Ltd. vs The Commissioner of Income tax, Punjab, , relied on.

The Income tax Officer found that the respondents ' books of accounts were unreliable and after assessing income for Fasli year 1357, corresponding to the year 1946 47, issued notice to the respondents on December 22, 1949, under section 40 of the Hyderabad Income tax Act to show cause why penalty should not be levied in addition to the tax and by an order dated October 31, 1951, directed payment of the said penalty. The State of Hyderabad merged with the Indian Union during the pendency of the proceedings before the Income tax Officer and by section 13 of the Finance Act, 1950, the Hyderabad Income tax Act ceased to have effect from April 1, 1950, but the operation of that Act in respect of levy, assessment and collection of income tax and super tax in respect of periods prior thereto for which liability to income tax could not be imposed under the Indian Income tax Act, was saved. The question was whether (a) the Income tax Officer had power on October 31, 1951, to impose a penalty under section 40(1) of the Hyderabad Income tax Act and (b) whether the assessee had a right to appeal against the order of the Income tax Officer imposing penalty and whether the Appellate Assistant Commissioner had jurisdiction to hear appeals or whether his order was a nullity. Held, that the power of the Income tax Officer to impose a penalty under section 40(1) of the Hyderabad Income tax Act in respect of the year preceding the date of the repeal of the Hyderabad Income tax Act was not lost because by section 13 of the Finance Act, 1950,,for the operation by the Hyderabad Income tax Act in respect of levy, assessment and collection of income tax and super tax in respect of periods prior to April, 1951, for which liability to income tax could not be imposed under the Indian Income tax Act, was saved and so the proceedings for imposing the penalty could be continued after the enactment of section 13(1) of the Indian Finance Act, 1950. Held, that the appeal against the order of the Income tax Officer on the ground that he was not competent to pass the order did lie to the Appellate Assistant Commissioner, whose jurisdiction was not made conditional upon the competence of the 924 Income tax Officer to pass the. orders made appealable; as a court of appeal he had jurisdiction to determine the soundness of the conclusions of the Income tax Officer both on the question of fact and law and even as to his jurisdiction to pass the order appealed from, and his order was not a nullity.

This appeal by special leave was directed against the order of the High Court asking the Income tax Appellate Tribunal under section 66(4) Of the Income tax Act to submit a supplementary ' statement of case on points, which were never raised by the parties nor decided by the Income tax Authorities or the Tribunal. The only question canvassed before them was whether certain cheques, which were received by the assessee at Bhavnagar having been cashed in British India, the monies in respect of them could be said to have been received in British India. The Tribunal held that the monies related back to the receipt of the cleques and were as such received at Bhavnagar. The question was whether the receipt of the cheques at Bhavnagar amounted to receipt of the sale proceeds at Bhavnagar. ' The High Court held that the mere receipt of the cheques by post at Bhavnagar was not conclusive in absence of a further finding as to whether the cheques were sent by post without any request, express or implied, having been made by the assessee and observed as follows " But we cannot shut out the necessary inquiry which even from our own point of view is necessary to be made in order that we should satisfactorily answer the question raised in the Reference. It must not be forgotten that under sec. 66(4) of the Income tax Act we have a right independently of the conduct of the parties to direct the Tribunal to state further facts so that we may properly exercise our advisory jurisdiction. " Held, that the High Court had misconceived its powers under section 66(4) of the Act and its decision must be set aside. Section 66(4) of the Indian Income tax Act, which must be read with sections 66(1) and 66(2) Of the Act, did not empower the High Court to raise a new question of law which did not arise out of the Tribunal 's order or direct the Tribunal to investigate new and further facts necessary to determine the new question which had not been referred to it under s 66(1) or section 66(2) of the Act and direct the Tribunal to submit supplementary statement of case. Such additions and alterations in the statement of case as section 66(4) of the Act empowered the High Court to direct, could 250 relate only to such facts as already formed part of the record but were not included by the Tribunal in the statement of the case. Craddock (H. M. Inspector of Taxes) vs Zevo Finance Co. Ltd., ; Commissioner of Income tax, West Bengal vs State Bank of India, ; Industrial Development and Investments Co., Ltd. vs Commissioner of Excess Profits Tax, Bombay, [1957] 31 I.T.R. 688; Vadilal Ichhachand vs Commissioner of Income tax, Bombay North, Kutch and Saurashtra, Ahmedabad, and Commissioner of Income tax vs Bhurangya Coal Co. [195S] , referred to. Commissioner of Income tax, Bihar & Orissa vs Visweshwar Singh, and Sir Sunder Singh Majithia vs Commissioner of Income tax, C. P. and U. P. [1942] 10 I.T.R. 457, considered.

In the assessment year 1957 58, the Wealth Tax Officer had included a sum of Rs.4,90,775 representing the market value of certain immovable properties in respect of which, although the assessee had received full consideration money, he had not executed any registered sale deeds in favour of the vendees. The question was whether the properties belonged to the assessee even after such sale for the purpose of inclusion of his net wealth within the meaning of section 2(m) of the Wealth Tax Act, 1957. The Wealth Tax Officer held that the assessee 1073 still owned those properties and consequently the value of the same was included in his net wealth. On appeal, the Appellate Assistant Commissioner sustained the order of the Wealth Tax Officer with certain deductions in value. On further appeal, the Tribunal held that the assessee had ceased to be the owner of the properties because the assessee having received the consideration money from the purchasers and the purchasers having been put into possession were protected in terms of section 53A of the and the term 'owner ' not only included the legal ownership but also the beneficial ownership. The High Court following the ratio of Commissioner of Income Tax, A.P. Hyderabad vs Nawab Mir Barkat Ali Khan, , reversed the order of Tribunal and upheld that of the Wealth Tax Officer and the Assistant Appellate Commissioner. The Assessee Nizam of Hyderabad, was a paramount ruler owning certain private properties called Sarf e khas. On surrendering his paramountcy and acceding to the Union of India, his private properties were taken over by the Government and it was agreed to pay him a sum of Rs. 1 crore annually distributed as follows: (a) Rs.50 lakhs as a privy purse; (b) Rs.25 lakhs in lieu of his previous income from the Sarf e khas, and (c) Rs.25 lakhs for the upkeep of palaces etc. The Government in its letter to the assessee stated that his Sarf e khas estates should not continue as an entirely separate administration independent of the Diwani administrative structure and it should, therefore, be completely taken over by the Diwani, its revenue and expenditure being merged with the revenues and expenditure of the State. Question was whether the assessee 's right to receive the sum of Rs.25 lakhs O.S. from the State Government was an asset for the purposes of inclusion in his net wealth under the Wealth Tax Act, 1957. The Wealth Tax Officer treating the said sum as an annuity and as an asset or property, capitalised the same to Rs.99,78,572 and included that amount as an asset of the assessee. The Appellate Assistant Commissioner agreed with this view. The Tribunal, however, refused to call it as an annuity, characterised it as an annual payment for surrender of life interest and held that the capitalised value of such life interest be added to the net wealth and taxed. The High Court agreed with the view taken by the Tribunal that it was only an annual payment made in compensation for the property which had been taken over by the Govern 1074 ment, therefore, it was a part of the wealth and it was possible to commute the annual payment of Rs.25 lakhs. The High Court found that there was neither any express preclusion nor any circumstances from which legitimately an inference could be drawn precluding commutation of the said amount into a lumpsum grant. Consequently, the High Court upheld the order of the Wealth Tax Tribunal. Partly allowing the Appeal, ^ HELD: (1) Under section 3 of the Wealth Tax Act, 1957 the charge of wealth tax is on the 'net wealth ' of the assessee on the relevant valuation date as defined under section 2(m) of the Act. [1081E F] (2) The material expression for the purposes of this appeal is "belonging to the assessee on the valuation date". The properties in respect of which registered sale deeds had not been executed but consideration for sale of which had been received and possession in respect of which had been handed over to the purchasers belonged to the assessee for the purpose of inclusion of his net wealth. [1081G H; 1082A] (3) It is not necessary for the purpose of section 2(m) to be tied down with the controversy whether in India there is any concept of legal ownership apart from equitable ownership or not or whether under sections 9 and 10 of the Indian Income Tax Act, 1922 and sections 22 to 24 of the Indian Income Tax Act, 1961, where 'owner ' is spoken of in respect of house properties, the legal owner is meant and not the equitable or beneficial owner. All the rights embedded in the concept of ownership of Salmond cannot strictly apply either to the purchasers or the assessee in the instant case. [1082C D; 1082H; 1083A] (4) The liability to wealth tax arises because of the belonging of the asset, and not otherwise. Mere possession, or joint possession unaccompanied by the right to be in possession, or ownership of property would, therefore, not bring the property within the definition of "net wealth" for it would not then be an asset "belonging" to the assessee. Unlike the provisions of Income tax Act, section 2(m) of the Act uses the expression 'belonging to ' to indicate that the person having lawful dominion of the assets would be assessable to wealth tax. [1083C E] (5) Though the expression 'belonging to ' no doubt was capable of denoting an absolute title was neyertheless not confined to connoting that sense. Full possession of an interest less than that of full ownership could also be signified by that expression. [1086G H] 1075 Commissioner of Wealth tax, West Bengal vs Bishwanath Chatterjee and Others, and Raja Mohammad Amir Ahmed Khan vs Municipal Board of Sitapur and another. A.I.R. , relied upon. Webster 's Distionary and Aiyar 's Law Lexicon of British India, [1940] edn., p. 128 and Salmond on Jurisprudence, 12th edn., pp. 246 to 264, referred to. (6) The property is owned by one to whom it legally belongs. The property does not legally belong to the vendee as against the vendor, the assessee. The precise sense in which the words 'belonging to ' were used in section 2(m) of the Act must be gathered only by reading the instrument or the document as a whole. [1090C D] (7) Though all statute including the Wealth Tax Act should be equitably interpreted, there is no place of equity as such in taxation laws. The concept of reality in implementing fiscal provision is relevant and the Legislature in section 2(m) has not significantly used the expression 'owner ' but used the expression 'belonging to '. The Legislature having designedly used the expression 'belonging to ' and not the expression 'owned by ' had perhaps expected Judicial statesmanship in interpretation of this expression. [1089G H] (8) On a distinction being made between 'belonging to ' and 'ownership ' the following facts emerge: (1) the assessee has parted with the possession which is one of the essentials of ownership; (2) the assessee was disentitled to recover possession from the vendee and assessee alone until document of title is executed was entitled to sue for possession against others i.e. others than the vendee in possession in this case. The title in rem vested in the assessee; (3) the vendee was in rightful possession against the vendor; (4) the legal title, however, belonged to the vendor; and (5) the assessee had not the totality of the rights that constitute title but a mere husk of it and a very important element of the husk. [1088H; 1089A B] (9) The property in question legally cannot be said to belong to the vendee. The vendee is in rightful possession only against the world. Since the legal title still vests with the assessee, the property should be treated as belonging to the assessee. It will work some amount of injustice in such a situation because the assessees would be made liable to bear the tax burden in such situations without having the enjoyment of the property in question. But times perhaps are not ripe to transmute equity on this aspect in the interpretation of law. [1089C F] 1076 (10) Under section 53A of the Transfer of Property Act, 1908 where possession had been handed over to the purchasers and the purchasers are in rightful possession of the same as against the assessee, secondly that the entire consideration has been paid, and thirdly the purchasers were entitled to resist eviction from the property by the assessee in whose favour the legal title vested because conveyance has not yet been executed by him and when the purchasers were in possession had right to call upon the assessee to execute the conveyance, it cannot be said that the property legally belonged to the assessee in terms of section 2(m) of the Act in the facts and circumstances of the case, even though the statute must be read justly and equitably and with the object of the section in view. If a person has the user and is in the enjoyment of the property it is he who should be made liable for the property in question under the Act, yet the legal title is important and the Legislature might consider the suitability of an amendment if it is so inclined. [1090F H; 1091A] Commissioner of Wealth tax, Gujarat IV vs H.H. Maharaja F.P. Gaekwad, approved. Commissioner of Income tax, A.P. Hyderabad vs Nwab Mir Barkat Ali Khan, referred to. Commissioner of Wealth tax, A.P. vs Trustees of H.E.H. Nizam 's family (Remainder Wealth) Trust, , R.B. Jodha Mal Kuthiala vs Commissioner of Income tax, Punjab, Jammu & Kashmir and Himachal Pradesh, , Commissioner of Income tax, West Bengal II vs Ganga Properties Ltd., , Commissioner of Wealth tax Gujarat I vs Kum Manna G. Sarabhai, , Commissioner of Income tax, Gujarat vs Ashaland Corporation, , Commissioner of Income tax, Bombay City III vs Smt. T.P. Sidhwa, 133 I.T.R.840, Smt. Kala Rani vs Commissioner of Income Tax, Patiala I, , Mrs. M.P. Gnanambal vs Commissioner of Income tax, Madras, , S.B. (House & Land) Pvt. Ltd. vs Commissioner of Income tax, West Bengal, and Addl. Commissioner of Income tax Bihar vs Sahay Properties and Investment Co. (P) Ltd., distinguished. (11) Special leave is a discretionary jurisdiction and the dismissal of a special leave petition cannot be construed as affirmation by the Supreme Court of the decision from which special leave was sought for. [1087E] Daryao & Ors. vs State of U.P. & Ors. , ; relied upon. 1077 Sahu Govind Prasad vs Commissioner of Income tax, at 863 approved. (12) Section 2(e) (iv) of the Wealth Tax Act, 1957 provides that "assets" includes property of every description, movable or immovable, but does not include a 'right to any annuity ' in any case where the terms and conditions relating thereto preclude the commutation of any portion thereof into a lump sum grant. [1091B D] (13) The term 'annuity ' is not defined in the Act. It must be given the signification which it has assumed as a legal term owing to judicial interpretation and not its popular and dictionary meaning. An 'annuity ' is a certain sum of money payable yearly either as a personal obligation of the grantor or out of property. The hall mark of an annuity is: (1) it is a money; (2) paid annually; (3) in fixed sum; and (4) usually it is a charge personally on the grantor. [1091G H] (14) In this case, in view of the background of the terms of payment and the circumstances why the payment was made, there cannot be any doubt that Rs.25 lakhs annually was an 'annuity '. It was a fixed sum to be paid out of the property of the Government of India in lieu of the previous income of the assessee from Sarf e khas. Therefore, it was an 'annuity '. [1093C D] (15) In the instant case, there is no express provision in the document itself which prevented commutation of this annuity into a lump sum. For inferring whether such as express provision precluding commutation exists, the background of the facts and circumstances of the payment has to be kept in mind. The assessee was given Rs.25 lakhs in lieu of his previous income from the Sarf e khas. Income is normally meant for expenditure. The assessee had to incur various exenditures. Commutation is often made when one is not certain as to whether the source from which that income comes. In this case, this being an agreement between earstwhile ruler and the Government of India, there is no such motivation and this payment of Rs.25 lakhs in lieu of the previous income of Sarf e khas must be read in conjunction with two other sums namely Rs.50 lakhs as privy purse and Rs.25 lakhs for upkeep of palaces. This bears the same character. [1093E H; 1094A B] (16) As privy purses were not commutable, from the circumstances and keeping in background of the payment, there was an express provision flowing from the circumstances precluding the 1078 commutation of this amount of Rs.25 lakhs and, therefore, it was exempt under section 2(e) (iv) of the Act. [1094B C] (17) There was no right granted and can be gathered from the terms of the grant of payment for the assessee to claim commutation of the amount of Rs.25 lakhs. That would defeat the purpose of the set up of the arrangement under which the payment of the amount was made. From the nature of the sum stipulated in the letter written by the Government to the assessee, the assessee had no right to claim commutation. Taking that fact in conjunction with the circumstances under which the payment of Rs.25 lakhs was agreed to, it is held that from the terms of the agreement, there was an express stipulation precluding commutation and, therefore, it comes within cl. (iv) of section 2(e) of the Act and the assessee was entitled to exemption. [1094C F] Oxford Dictionary: Jarman on Wills (P. 1113), relied on and Ahmed G.H. Ariff and Others vs Commissioner of Wealth tax, Calcutta, , Commissioner of Wealth tax Gujarat vs Arundhati Balkrishna, , Commissioner of Wealth tax, Rajasthan vs Her Highness Maharani Gayatri Devi of Jaipur, , Commissioner of Wealth tax, Lucknow vs P.K. Banerjee, and H.H. Maharajadhiraja Madhav Rao Jiwaji Rao Scindia Bahadur & Ors. vs Union of India; , referred to.

The appellant created a trust in 1955 by transferring certain securities held by him to a bank as trustee. One of the beneficiaries of the trust was the appellant 's minor daughter M. The income accruing to M under the trust during the previous years relevant to the assessment years 1957 58, 1958 59, 1959 60 and 1960 61 was included in the assessments made on the appellant as an individual for those years by applying the provisions of section 16(3)(b) of the Indian Income Tax Act 1922. In the assessment for the year 1960 61 the Income tax Officer had also to deal with the appellant 's claim for the allowance under section 9(2) off the said Act in respect of two separate houses owned by the appellant and maintained by him for residential purposes in New Delhi. The Income tax Officer allowed the claim only in respect of one of the houses. The appellant 's appeals. before the authorities under the Act failed. The High Court decided the questions referred to it against the appellant. In appeals before this Court on certificate the contentions of the appellant which fell for consideration were : (i) (a) that section 16(3) (b) must be strictly construed; (b) that the assets covered by the trust deed not having been transferred to the wife or minor daughter but to a bank as trustee, section 16(3) (b) of the Act had no application; (c) even if section 16(3) (b) of the Act applied, what was to be included in computing the total income of the appellant was not the in come that had been received by the minor daughter under the trust deed but only so much of the income of the trustee as arose from the assets transferred to the trustee for the benefit of the minor child; (ii) that a reading of the first and second provisos to section 9(2) of the Act clearly showed that the allowance to an assessee is not confined only to one residential house HELD : (i) (a) it is true that section 16(3) (b) creates an artificial liability and must therefore be strictly construed. But in construing section 16(3)(b) Courts cannot ignore the clear and unambiguous expressions contained therein and all those expressions must receive a proper interpretation.[9 C D] C.I.T. Bombay vs Manual Dhanji, , C.I.T.,. Gujarat vs Keshavlal Lallubhai Patel, and; C.I.T., West Bengal II vs Prem Bhai Parekh (b) The contention that section 16(3) (b) applies only to those cases where ultimately the corpus of the trust property is also transferred to the wife or the minor child, must be rejected. The provisions of section 16(3)(b) are very clear, and, the only requirement so far as this aspect is concerned is that the assets Must be transferred. to, any person or association of persons and that transfer of assets must be for the benefit of the wife or the 2 minor child or both. In this connection it is pertinent to note the wordings of section 16(3) (a) (iii) and section 16(3) (a) (iv). The former provision clearly refers to assets transferred directly or indirectly to the wife by the husband and the latter provision refers to assets transferred directly or indirectly to the minor child not being a married daughter. But in cl. (b) of section 16(3) the transfer of assets is not to the wife or the minor child or both but to any person or association of persons. Therefore it is clear that when the legislature intended to provide for a direct transfer of assets either to the wife or to the minor child, it has used the expressions as are found in section 16(3) (a) (iii) and section 16(3) (a) (iv). The different phraseology used in cl. (b) of section 16(3) makes it clear that the transfer of assets need not be to the wife or the minor child. Nor does the said clause require that the corpus of the property so transferred to any person or association of persons should ultimately vest in the wife or the minor child [9G 1OB] C.I.T. Bombay vs Sir Mahomed Yusuf Ismail, [1944] 12 I.T.R. 8 approved. (c) From a plain reading of section 16(3) (b) it is clear that what is to be included in computing the total income of the assessee is that part of the income of the trust which is received for the benefit in this case of the minor daughter. It is the share income which has accrued to or has been received by the minor daughter under the trust deed in the relevant accounting year, that has to be included in the total income of the father, the assessee. The expression "so much of the income" occurring in this clause also makes it clear that the said provision relates to the share income of the minor daughter, in this case, and not that of the trustee bank. [11 B C] Tulsidas Kilachand and ors. vs C.I.T. Bombay City 1, and C.I.T. Bombay vs Manilal Dhanji, applied. (ii)A reading of the second proviso to sub section (2) of section

On being challenged, the Bombay High Court, following its earlier decision in Paritosh Bhupesh Kumarsheth and other vs Maharashtra State Board of Secondary and Higher Secondary Education, Pune and another, AIR 1981 Bombay 895, declared clauses (1) and (2) of Rule 37 of Goa, Daman and Diu Secondary and Higher Secondary Education Rules, 1975 insofar as they prohibit inspection and/or revaluation of answer books, as invalid. Hence these appeals by special leave, Allowing the appeals. ^ HELD: The decision followed by the Bombay High Court has been overruled by this Court in Maharashtra State Board of Secondary and Higher Secondary Education and another vs Paritosh Bhupesh Kumarsheth and others ; The present case is fully covered by the dicta laid down in the said ruling. Hence the judgment of the High Court is set aside and the validity of clauses(1) and (2) of Rule 37 is upheld. [431F G] Maharashtra State Board of Secondary and Higher Secondary Education and another vs Paritosh Bhupesh, Kumarsheth and others, decided by Supreme Court ;

It appears that proceedings under r. 12(5) of the Central Sales Tax (Orissa) Rules 1957 and under sub section (4) of section 12 of the Orissa Sales Tax Act, 1947 were initiated against the petitioners for the assessment year 1980 81 in relation to assessment of tax on sales in the course of inter state trade and commerce under the and inside sales effected during the year in question under the Orissa Sales Tax Act, 1947. Despite repeated opportunities to get themselves ready for the assessment of tax and to produce their account books and other documents, they sought adjournments on the one pretext or another. Eventually the Assistant Sales Tax Officer, Cuttack II circle, Cuttack before whom the assessment proceedings were pending, refused to grant any further adjournment and proceeded to best judgment assessment and treated the gross turnover of Rs. 7,13,94,903.63 p. as returned by the petitioners for purposes of the to be their taxable turnover. Similarly, he treated the gross turnover of Rs. 2,02,07,852.65 p returned by the petitioners as representing inside sales vis a vis the State of Orissa to be their taxable turnover. After allowing adjustment of Rs. 27,88,388.47 p paid by the petitioners, the learned Sales Tax Officer raised a demand for the payment of a sum of Rs. 43,57,101.89 p towards tax on sales in the course of inter State trade and commerce payable under the and after allowing adjustment of Rs. 1,08,480.11 p paid by the petitioners, he raised the demand for payment of a sum of Rs. 13,06, 069.60 p as tax payable under the Orissa Sales Tax Act, 1947. Thus the petitioners were faced with a total demand of Rs. 56,57,171.49 p for the assessment year 1980 81. The petitioners instead of preferring appeals under sub s (1) of section 23 of the Act filed petitions before the High Court under article 226 of the Constitution challenging the validity of the two orders of assessment. The High Court was not satisfied that this was a case of inherent lack of jurisdiction or any violation of principles of natural justice and accordingly held that they were not entitled to invoke the extraordinary jurisdiction of the High Court under article 226 of the Constitution, Dismissing the Petitions, ^ HELD: In the provenance, of tax where the Act provides for a complete machinery which enables an assessee to effectively raise in the courts the question of the validity of an assessment denied an alternative jurisdiction 744 to the High Court to interfere under article 226 of the Constitution. The phrase "made under the Act" describes the provenance of the assessment; it does not relate to its accuracy in point of law. The use of the machinery provided by the Act, not the result of that use, is the test. [748 G H; 749 A] Under the scheme of the Act, there is hierarchy of authorities before which the petitioners can get adequate redress against the wrongful act complained of. They have the right to prefer an appeal before the prescribed authority under sub section (1) of section 23 of the Act. If they are dissatisfied with the decision in the appeal, they can prefer a further appeal to the Tribunal under sub section (3) of section 23 of the Act, and then ask for a case to be stated on a question of law for the opinion of the High Court under section 24 of the Act. The Act provides for a complete machinery to challenge an order of assessment, and the impugned orders of assessment can only be challenged by the mode prescribed by the Act and not by a petition under article 226 of the Constitution. [751 F H] Raleigh Investment Company Limited vs Governor General in Council, 74 IA 50, followed. K.S. Venkataraman & Co. vs State of Madras ; and State of Uttar Pradesh vs Mohammad Nooh ; ; distinguished. The question whether a provision is ultra vires or not cannot obviously be decided by any of the authorities created by the Act and therefore cannot be the subject matter of a reference to the High Court or a subsequent appeal to this Court. No such question arises in a case like the present where the impugned orders of assessment are not challenged on the ground that they are based on a provision which is ultra vires. This is a case in which the entrustment of power to assess is not in dispute and the authority within the limits of his power is a Tribunal of exclusive jurisdiction. The challenge is only to the regularity of the proceedings before the learned Sales Tax Officer as also his authority to treat the gross turnover returned by the petitioners to be the taxable turnover. Investment of authority to tax involves authority to take transactions which in exercise of his authority the taxing officer regards as taxable and not merely authority to tax only those transactions which are, on a true view of the facts and the law, taxable. There is no justification for extending the principles laid down in Raleigh Investment Company 's case or Mohammad Nooh 's case to a case like the present where there is an assessment made by the learned Sales Tax Officer under the Act. [749 E H; 753 A B] The question whether another adjournment should have been granted or not was within the discretion of the learned Sales Tax Officer and is a matter which can properly be raised in an appeal under sub section (1) of section 23 of the Act.[751 D] The rule laid down in Mohammad Nooh 's case which requires the exhaustion of alternative remedies is a rule of convenience and discretion, rather than a rule of law. [751 E] 745 The Act provides for an adequate safeguard against an arbitrary or unjust assessment. The petitioner have a right to prefer an appeal under sub section (1) of section 23 of the Act subject to their payment of an admitted amount of tax as enjoined by the proviso thereto. As regards the disputed amount of tax, they have the remedy of applying for stay of recovery to the Commissioner of Sales Tax under cl. (a) of the second proviso to sub section (1) of section 13 of the Act. It is for the Commissioner to decide whether or not there should be such stay on such terms and conditions as he thinks fit, looking to the nature of the demand raised in the facts and circumstances of the present case. [752 E F; 753B C]

Appeals Nos. 187 and 190 of 1960. Appeals from the judgment dated 22nd January, 1957, of the Punjab High Court (Circuit Bench), Delhi, in Civil Reference No. 6 of 1953. Veda Vyasa, section K. Kapur and K. K. Jain, for the appellant. B. Ganapathi Iyer and D. Gupta, for the respondent. November 30. The Judgment of the Court was delivered by KAPUR, J. These appeals are brought by the assessee company against a common judgment and order of the Punjab High Court by which four appeals were decided in Civil Reference No. 6 of 1953. The appeals relate to four assessment years, 1947 48, 1948 49, 1949 50 and 1950 51. Two of these assessments, i.e., for the years 1947 48 and 1948 49 were made on the 800 appellant as successor to the two limited companies hereinafter mentioned. Briefly stated the facts of the case are that the appellant company was incorporated in the year 1947. Its objects inter alia were to acquire as a going concern activities, functions and business of the Delhi Stock & Share Exchange Limited and the Delhi Stock and Share Brokers Association Limited and to promote and regulate the business of exchange of stocks and shares, debentures and debenture stocks, Government securities, bonds and equities of any description and with a view thereto, to establish and conduct Stock Exchange in Delhi and/or elsewhere. Its capital is Rs. 5,00,000 divided into 250 shares of Rs. 2,000 each on which dividend could be earned. The appellant company provided a building and a hall wherein the business was to be transacted under the supervision and control of the appellant. The appellant company also made rules for the conduct of business of sale and purchase of shares in the Exchange premises. The total income for the year 1947 48 was Rs. 29,363 out of which a sum of Rs. 15,975 shown as admission fees was deducted and the income returned was Rs. 13,388. In the profit and loss account of that year Members ' admission fees were shown as Rs. 9,000 and on account of Authorised Assistants admission fees Rs. 6,875. The Income tax Officer who made the assessment for the year 1947 48 disallowed this deduction. The return for the following year also was made on a similar basis but the return for the years 1949 50 and 1950 51 did not take into account the admission fees received but in the Director 's report the amounts so received were shown as having been taken directly into the balance sheet. The Income tax Officer, however, disallowed and added back the amount so received to the income returned by the appellant. Against these orders appeals were taken to the Appellate Assistant Commissioner who set aside the additional assessments made under section 34 in regard to the assessment years 1947 48, 1948 49 and 1949 50 and the 4th appeal in regard to the year 1950 51 was decided against the appellant. Both sides appealed 801 to the Income tax Appellate Tribunal against the respective orders of the Appellate Assistant Commissioner and the Tribunal decided all the appeals in favour of the appellant. It was held by one of the members of the Tribunal that the amounts received as entrance fees were intended to be and were in fact treated as capital receipts and were therefore excluded from assessment and by the other that as there was no requisite periodicity, those amounts were not taxable. At the instance of the respondent a case was stated to the High Court on the following question: "Whether the admission fees of Members or Authorised Assistants received by the assessee is taxable income in its hands?" The High Court answered the question in favour of the respondent. The High Court held that the appellant was not a mutual society and therefore was not exempt from the payment of income tax; that it had a share capital on which dividend could be earned and any person could become a shareholder of the company by purchasing a share but every shareholder could not become a member unless he was enrolled, admitted or elected as a member and paid a sum of Rs. 250 as admission fee. On becoming a member he was entitled to exercise all rights and privileges of membership. It also found that the real object of the company was to carry on business as a Stock Exchange and the earning of profits. It was held therefore that the admission fees fell within the ambit of the expression "profits and gains of business, profession or vocation". The further alternative argument which was raised, i.e., that the income fell under section 10(6) of the Act, was therefore not decided. Mr. Veda Vyasa contended on behalf of the appellant that there were only 250 members of the appellant company; that the amount received as membership fees was shown as capital in the books of the company and there was no periodicity and therefore the amounts which had been treated as income should have been treated as capital receipts and therefore exempt from assessment. It was firstly contended that the question did not arise out of the order of the 802 Tribunal and that a new question had been raised but the objection is futile not only because of the absence of any such objection at the stage of the drawing up the statement of the case but also because of failure to object in the High Court; nor do we see any validity in the objection raised. That was the only matter in controversy requiring the decision of the court and was properly referred by the Tribunal. It was then contended that the question had to be answered in the light of facts admitted or found by the Tribunal and that the nature of the appellant 's business or the rules in regard to membership could not be taken into consideration in answering the question. That again is an unsustainable argument. The statement of the case itself shows that all these matters were taken into consideration by one of the members of the Tribunal and the learned judges of the High Court also decided the matter on that material which had been placed before the Income tax authorities and which was expressly referred to in their orders and which again was placed before the High Court in the argument presented there on behalf of the appellant company. It is wholly immaterial in the circumstances of the present case to take into consideration as to how the appellant treated the amounts in question. It is not how an assessee treats any monies received but what is the nature of the receipts which is decisive of its being taxable. These amounts were received by the appellant as membership admission fees and as admission fees paid by the members on account of Authorised Assistants. As far as the latter payment is concerned that would fall within the decision of this Court in Commissioner of Income tax. vs Calcutta Stock Exchange Association Ltd. (1) and therefore is taxable income. The former, i.e., members admission fees has to be decided in accordance with the nature of the business of the appellant company, its Memorandum and Articles of Association and the Rules made for the conduct of business. The appellant company was an association which carried on a trade and its profits were divisible as dividend amongst the shareholders. (1) 803 The object with which the company was formed was to promote and regulate the business in shares, stocks and securities etc., and to establish and conduct the business of a Stock Exchange in Delhi and to facilitate the transaction of such business. The business was more like that in Liverpool Corn Trade Association vs Monks (1). In that case an association was formed with the object of promoting the interest of corn trade with a share capital upon which the association was empowered to declare a dividend. The Association provided a Corn Exchange market, newsroom and facilities for carrying on business and membership was confined to persons engaged in the corn trade and every member was required to be a shareholder and had to pay an entrance fee. The Association also charged the members and every person making use of facilities a subscription which varied according to the use made by them. The bulk of the receipts of the Association was derived from entrance fees and subscriptions. It was therefore contended that the Association did not carry on a trade and that it was a mutual association and entrance fees and subscriptions should be disregarded in computing assessment of the assessable profits. It was held that it was not a mutual association whose transactions were inca pable of producing a profit; that it carried on a trade and the entrance fee paid by members ought to be included in the associations receipts for purposes of computing the profit. Rowlatt, J. said at p. 121: "I do not see why that amount is not a profit. The company has a capital upon which dividends may be earned, and the company has assets which can be used for the purpose of obtaining payments from its 'members for the advantages of such use, and one is tempted to ask why a profit is not so made exactly on the same footing as a profit is made by a railway company who issues a traveling ticket at a price to one of its own shareholders, or at any rate as much a profit as a profit made by a company from a dealing with its own shareholders in a line of business which is restricted to the shareholders." (1) 804 In Commissioner of Income tax, Bombay City vs Royal Western India Turf Club Ltd. (1) this Court rejected the applicability of the principle of mutuality because there was no mutual dealing between members inter se. There was no putting up a common fund for discharging a common obligation undertaken by the contributors for their mutual benefit and for this reason the case decided by the House of Lords in Styles V. New York Life Insurance Company (2) was held not applicable. In the present case the Memorandum of Association shows that the object with which the company was formed was to promote and regulate the business of exchange of stocks, shares, debentures, debenture stocks etc. The income, if any, which accrued from the business of the appellant company was distributable amongst the shareholders like in every joint stock company. According to the Articles of Association the members included shareholders and members of the Exchange and according to the rules and bye laws of the appellant company 'member ' means an individual, body of individuals, firms, companies, corporations or any corporate body as may be on the list of working members of the Stock Exchange for the time being. In the Articles of Association cls. 7 & 8, provision was made for the election of members by the Board of Directors and Rules 9 & 10 laid down the procedure for the election of these members. The entrance fees were payable by the trading members elected under the Rules and Bylaws of the Association, who alone with their Associates, could transact business in stocks and shares in the Association. Therefore, the body of trading members who paid the entrance fees, and the shareholders among whom the profits were distributed were not identical and thus the element of mutuality was lacking. It is the nature of the business of the company and the profits and the distribution thereof which are the determining factors and in this case it has not been shown that the appellants business was in any way different from that which was carried on in the (1) ; , 308. (2) ; 805 case reported as Liverpool Corn Trade Association vs Monks (1). In our opinion the judgment of the High Court is right and the appeals are therefore dismissed with costs. One hearing fee. Appeals dismissed.

The object with which the appellant company was formed was to promote and regulate the business in shares, stocks and securities etc., and to establish and conduct a Stock Exchange in order to facilitate the transaction of such business. Its capital was divided into shares on which dividend could be earned. it provided a building wherein business was to be transacted under its supervision and control. It made rules for the conduct of business of sale and purchase of shares in the Exchange premises. During the assessment year in question the company 's receipts consisted of certain amounts received as admission fee from Members and Authorised Assistants and the question stated to the High Court for its opinion was whether these fees in the hands of the appellant were taxable income. The High Court answered the question in the affirmative. It held that the appellant was not a mutual society, that dividends could be earned on its share capital, that any person could become a share holder but every share holder was not a member unless he paid the admission fee and the real object of the company was to carry on business of exchange of stocks and earn profits. The case of the appellant, inter alia, was that as the amount received as membership fee was shown as capital in the books of the company and there was no periodicity, it should be treated as capital receipt exempt from assessment. 799 Held, that the High Court was right in its decision and the appeals must be dismissed. It was wholly immaterial how the appellant treated the amounts in question. It is the nature of the receipt and not how the assessee treated it that must determine its taxability. AS: Since the fee received on account of Authorised Assisstants fall within the decision of this Court in Commissioner of Income tax vs Calcutta Stock Exchange Association Ltd., , it must be held to be taxable income. The question as to whether the Members ' admission fee was taxable income was to be determined by the nature of the business of the company, its profits and the distribution thereof as disclosed by its Memorandum and Articles of Association and the rules made for the conduct of business. They showed that the income of the company was distributable amongst its shareholders ;is in any other joint stock company, and the body of trading members who paid the entrance fees and share holders were not identical. The element of mutuality was, therefore, lacking. Liverpool Corn Trade Association vs Monks, (1926) 2 K. B. 110, applied. Commissioner of Income tax, Bombay City vs Royal Western India Turf Club Ltd., ; and Styles vs New York Life Insurance Co., ; , referred to.

In each of the two appeals before the court, suits had been filed by landlords under the Delhi and Ajmer Rent Control Act, 1952, for ejectment on the ground that the tenants had erected certain structures without the authority of the landlords and in violation of the conditions of ease between the landlord and the concerned authorities. However, in both these cases the tenants had removed the offending structures during be pendency of the suits and the question for decision in both the cases was whether the tenant could still be ejected after he had removed the authorised structures and there was no further danger to the landlords ' leases being forfeited. It was contended on behalf of the landlords that once a breach had been committed by a tenant within the meaning of cl. (k) of the proviso to section 13(1) of the 1952 Act, he was liable to be ejected even though the landlord may never have given him notice about the breach and may not even have required him to remove it; and that his liability to ejectment would continue even if be had removed the offending structure before the filing of the suit or while it was pending. Furthermore, by virtue of the provisions of section 57(2) of the Delhi Rent Control Act, 1958, (which repealed the 1952 Act), these two appeals fell to be governed by cl. (k) of the proviso to section 13(1) of the 1952 Act and not by cl. (k) of proviso to section 14(1) of 1958 Act or by section 14(11) of that Act which made it possible for the Controller not to make an order of eviction if the tenant complied with any requirements specified by the Controller; this was so because the first proviso to section 57(2) of the 1958 Act which required that, in certain circumstances regard shall be had to the 1958 Act, was not applicable to these two cases. HELD : (i) While considering the scope of the first proviso to section 57(2), it was held in Karam Singh vs Sri Pratap Chand, A.I.R. 1964 S.C. 1305 that where, in the 1958 Act, there was a radical departure from the 1952 Act, the latter Act would continue to apply to pending proceedings; but where the 1958 Act had slightly modified or clarified the previous provisions, then these modifications or clarifications would apply Section 14(11) of the 1958 Act did not provide a radical departure from the provisions of the 1952 Act because when the latter Act was in force, it would have been possible for the court in a suit based on cl. (k ) of the proviso to section 13(1) to give relief against forfeiture in a proper case on the analogy of section 114A of the Transfer of Property Act where the tenant has removed the offending structure before the suit was filed; or even where he had done so during the pendency of the suit if reasonable time was not allowed in the notice contemplated by cl. (k) of the provisio to section 13(1). when section 14(11) of the 1958 Act gave power to the Controller to give relief to the tenant under the conditions mentioned therein, it ,was in fact clarifying and slightly modifying what the court could 706 already do under the 1952 Act. Therefore, regard could be had to the provisions of section 14(11) of the 1958 Act and relief granted to the tenants in both appeals. [710 E F; 711 F H; 712 C E] (ii) Under the 1952 Act, the language of the proviso to section 13(1) was imperative and laid down that nothing in the Act applied when various clauses of the proviso were satisfied. Although the language of the proviso to section 14(1) of the 1958 Act is not so imperative, there is no difference in substance. Where the requirements of the proviso under the 1958 Act are satisfied, the Controller has to pass a decree for ejectment unless there is provision otherwise in section 14. L709 G H; 910 A B]

In an ejectment suit under the Delhi & Ajmer Rent Control Act, 1952, the trial Judge decreed the suit and on appeal under s.34 of the Act the Additional District Judge confirmed 934 the decision. The Act did not provide for a second appeal, and under section 35 (1) a revision was filed against the Order of the Additional District Judge The single Judge of the Punjab High Court following a previous decision of the same High Court, was of opinion that in assessment as all the evidence was not considered it was competent for him to reconsider the concurrent findings of the courts below. The question is whether the High Court in exercise of its revisional powers is entitled to re assess the value of the evidence and to substitute its own conclusions of facts in place of those reached by the courts below. ^ Held, (per Sinha, C. J., Hidayatullah and shah, JJ, that though section 35 of the Delhi and Ajmer Rent Control Act is worded in general terms, but it does not create a right to have the case re heard. The distinction between an appeal and revision is a real one. A right to appeal carries with it right of re hearing on law as well as fact, unless the statute conferring the right to appeal limits the re hearing in some way. The power to hear a revision is generally given to a superior court so that it may satisfy, itself that a particular case decided according to law. The phrase "according to law" in section 35 of the Act refers to the decision as a whole, and is not to be equated to errors of law or of fact simplicitor. All that the High Court can see is that these has been no miscarriage of justice and that the decision is according to law in the sense mentioned. per Kapur, J. The power under section 35 (1) of the Act of interference by the High Court, is not restricted to a proper trial according to law or error in regard to onus of proof or proper opportunity of being heard. It is very much wider than that when in the question of the High Court the decision is erroneous on a question of law which affects the merits of the case or decision is manifestly unjust the High Court is entitled to interfere. Bell and Co. Ltd. vs Waman Hemraj approved.

During consolidation proceedings in a village, under the Uttar Pradesh Consolidation of Holdings Act, 1954, a question of title arose, and the Consolidation Officer referred the question to the Civil Judge who referred it to an arbitrator appointed under section 37 of the Act. The Arbitrator submitted his award to the Court. The appellants filed objections under section 15 of the , and the Civil Judge modified the award. On appeal by the respondents, the District Court held that the appeal was maintainable and that the Civil Judge was not justified in modifying the award. A revision petition to the High Court filed by the appellants was dismissed. In appeal to this Court, it was contended that section 39 of the , which provides for appeals does not apply to arbitrations under section 37 of the U.P. Act. HELD:The decision of the Civil Judge modifying, the award was appealable under section 39 of the . [67 A]. The effect of section 37 of the U.P. Act read with sections 46 and 47 of the is, to apply sections 15 and 39 of the to the proceedings under the U.P. Act; and under section 12(5) of the U.P. Act what is made final is the decision of the arbitrator as it emerges after appropriate proceedings, under the provisions of the . [65 G H; 66 H]. Carju Prasad vs Civil Judge, Farrukhabad, I.L.R. [1959]. 1 All354 and Sayed Ulla Khan vs The Temporary Civil Judge, Sultanpur, , approved. Attar Singh vs State of u.p. [1959] Supp. 1 S.C.R. 928, explained.

The appellant firm M/s. Kishinchand Chellaram was assessed to tax for the assessment year 1947 48, the relevant accounting year being the year ending 6th April, 1947. The concerned Income Tax Officer on an information that a sum of Rs. 1,07,350 purported to have been sent by the assessee by a telegraphic transfer through the Punjab National Bank Ltd., Madras, to its Bombay Branch favouring one Nathirmal on 16 10 1946, has escaped assessment, called upon the assessee, through his letters dated 24th February, 1955 and 4th March, 1955 to explain the same. The Income Tax Officer did not refer to the letters dated 14th January, 1955 and 10th February, 1955 addressed by him to the Bank Manager nor the reply of the Manager dated 18th February, 1955 in the said two letters addressed to the assessee. Nor were the copies supplied to the assessee nor even made available on record before all authorities including the Supreme Court. The assessee through its letter dated 24th March, 1955 replied that as per its records no such remittance was ever sent by it from Madras to Nathirmal in Bombay. On 2nd February, 1956, the Income Tax Officer for the second time called the very same particulars to which the assessee by its letter dated 9th February, 1956 once again denied the remittance by it. Despite this, by his letter dated 4th March, 1957 addressed to the assessee, the Income Tax Officer repeated his earlier request to it to explain about the remittance, complaining at the same time of silence by the assessee to his letter dated 2nd February, 1956. The assessee in its reply dated 13th March, 1957 while inviting attention to its earlier replies dated 24th March, 1955 & 9th February, 1956 reiterated that no amount of Rs. 1,07,350 was remitted by it from Madras to Nathirmal. Disbelieving it, the Income Tax Officer, by his order brought to tax the amount of Rs. 1,07,350 on the ground that it represented the concealed income of the assessee and observed that "there was no reason to doubt the banker 's statement that the amount was remitted by M/s. Kishinchand Chellaram from Madras". The assessee preferred an appeal to the Assistant Appellate Commissioner. At this stage, it came to light that the purported telegraphic transfer was applied for by one "Tilok Chand C/o M/s. K. Chellaram, 181, Mount Road, Madras" and it was received at Bombay by one "N.B. Bani". In spite of the plea of the assessee that the transaction did not relate to its firm, the Assistant Appellate 721 Commissioner holding that the assessee has not discharged the burden of proof lying on it to explain the amount, rejected the appeal. Further appeal to the Tribunal and a reference called for by the High Court at the instance of the assessee was also answered against it. Hence the appeal after obtaining special leave of the Court. Allowing the appeal, the Court, ^ HELD: (1) There was no material evidence at all on the basis of which the Tribunal could come to the finding that the amount of Rs. 1,07,350 was remitted by the assessee from Madras and that it represented the concealed income of the assessee. [731E]. In the face of the application for remittance signed in the name of Tilok Chand, that this amount was sent by the assessee and the finding to that effect reached by the Tribunal is unreasonable and perverse. What at the highest could be said to be established by the material evidence on record is that Tilok Chand remitted the amount of Rs. 1,07,350 from Madras and this amount was received by Nathirmal in Bombay. Even if it is accepted that Tilok Chand and Nathirmal were employees of the assessee as held by the Tribunal, the utmost that could be said is that an employee of the assessee in Madras remitted the amount of Rs. 1,07,350 to another employee in Bombay. But, from this premise it does not at all follow that the remittance was made by the employee in Madras on behalf of the assessee or that it was received by the employee in Bombay on behalf of the assessee. The burden was on the Revenue to show that the amount of Rs. 1,07,350 said to have been remitted from Madras to Bombay belonged to the assessee and it was not enough for the Revenue to show that the amount was remitted by Tilok Chand, an employee of the assessee, to Nathirmal, another employee of the assessee. It is quite possible that Tilok Chand had resources of his own from which he could remit the amount of Rs. 1,07,350 to Nathirmal. It was for the Revenue to rule out this possibility by bringing proper evidence on record, for the burden of showing that the amount was remitted by the assessee was on the Revenue. [730H 731D] The two documents viz. the letters dated 18th February, 1955 and 9th March, 1957 did not constitute any material evidence which the Tribunal could legitimately have taken into account for the purpose of arriving at the finding that the amount of Rs. 1,07,350 was remitted by the assessee from Madras to Bombay because while the former was not disclosed to the assessee by the Revenue Authorities till the hearing before the Tribunal in regard to the preparation of the supplemental statement of the case, giving the assessee an opportunity to cross examine the Manager of the Bank, the latter was not disclosed to the assessee at any stage. Further, there is no explanation given by the Revenue as to how these two important documents were not traceable earlier. Even if these two letters were to be taken into account, they did not supply any reasonable basis for reaching the finding that it was the assessee which sent the remittance of Rs. 1,07,350. There can be no doubt that if the amount had been remitted by Tilok Chand on behalf of the assessee he would have signed the application for telegraphic transfer on behalf of the assessee and not in his own name. This apart it is impossible to believe that the Manager of the Bank could have failed to appear before the Income Tax Officer in answer to the summons dated 5th March, 1957 and there is no doubt that this statement must have been recorded and the said statement also withheld. [729H 730A; 729B, C; 730B, E; 729F G] 722 (2) It is true that the proceedings under the Income Tax law are not governed by the strict rules of evidence and therefore it might be said that even without calling the Manager of the Bank in evidence to prove this letter, it could be taken into account as evidence. But before the Income Tax Authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross examine the Manager of the Bank with reference to the statements made by him. Moreover, this letter was said to have been addressed by the Manager of the Bank to the Income Tax Officer on 18th February, 1955 in relation to a remittance alleged to have been sent on 16th October, 1946 and it is impossible to believe in the absence of any evidence to that effect, that the Manager who wrote this letter on 18th February, 1955 must have been incharge of the Madras Office on 16th October, 1946 so as to have personal knowledge as to who remitted the amount of Rs. 1,07,350. The Revenue authorities ought to have called upon the Manager of the Bank to produce the documents and papers on the basis of which he made the statements contained in his letter and confronted the assessee with those documents and papers but instead of doing so, the Revenue authorities chose to rely merely on the statements contained in the letter and that too, without showing the letter to the assessee. [728A F]

The appellant was a chartered accountant and a partner of a firm of auditors. This firm acted as auditors of two companies, among others, registered under the Indian , the entirety of the shares of one of which are owned by the Union Government and the entirety of the shares of the other by the West Bengal Government. The appellant was declared elected to the Lok Sabha. His election was challenged by two voters of the constituency by means of an election petition. The main ground raised was that the appellant was at the relevant period the holder of an office of profit under the Government of India as well as the State Government and hence he was disqualified from standing for election under article 102(1)(a) of the Constitution. The Election Tribunal accepted this contention and declared the election of the appellant void. The appellant filed an appeal before the High Court in which he did not succeed. The present appeal was by virtue of a certificate granted by the High Court under article 133(1)(c) of the Constitution. It was contended before this Court that on a true construction of the expression "under the Government of India or the Government of any State" occurring in cl. (a) of article 102 (I.) of the Constitution the appellant could not be said to hold an office of profit under the Government of India or the Government of West Bengal. It was argued that the various tests, namely, who has the power to appoint, who has the right to remove, who pays the remuneration, what are the functions and who exercises the control should all co exist and each must show subordination to the Government. The fulfillment of some of the tests alone, would not be sufficient to determine that a person holds an office of profit under the Government. It was contented on behalf of the respondent that the tests were not cumulative and that the court should look to the substance rather than to the form. Held : (i)For holding an office of profit, under the Government a person need not be in the service of the Government and there need not be any relationship of master and servant between them. 312 (ii)The examination of the various provisions of the Com panies Act, 1956 (sections 224, 227, 618 and 619) showed that so far as the two companies in question were concerned the appellant was appointed as an auditor by the Central Government, was removable by the Central Government, that the Comptroller and the Auditor General of India exercised full control over him and that his remuneration was fixed by the Central Government under sub section (8) of section 224 of the though it was paid by the companies concerned. (iii)Where the several elements, the power to appoint, the power to dismiss, the power to control and give directions as to the manner in which the duties of the office are to be performed and the power to determine the question of remuneration are all present in a given case then the officer in question holds the office under the authority so empowered. It is not necessary that all these must co exist nor is the fact that the source from which the remuneration is paid is not from public revenue decisive. (iv)The appellant held an office of profit under the Government of India within the meaning of article 102(1)(a) of the Constitution of India and as such he was disqualified for being chosen as a member of Parliament. Maulana Abdul Shakur vs Rikhab Chand, [1958] S.C.R. 387, distinguished. Ramappa vs Sangappa, ; , referred to.

The assessee was incorporated as a Private Limited Company in March, 1947 with G as its Managing Director and it took over the business of the trading company carried on by 'D ' in Delhi. D was the brother in law of G and was placed in charge of the management of the business of the Delhi Branch of the assessee and he was paid a salary of Rs. 1000 per month, commission at the rate of 1 per cent on the sales of the Delhi Branch and bonus equivalent to three months salary. The assessments of the assessee for the years 1949 50 to 1959 60 were finalised on the basis of the decisions of the Income Tax Tribunal and the amounts paid to the Managing Director and the other Directors including D by way of salary, commission and bonus were allowed in full as permissible deductions and so was the interest paid on the credit balances in their respective accounts. On the 28th March, 1968, the Income Tax Officer issued a notice under Section 148 of the Income Tax Act, 1961 seeking to reopen the assessment of the assessee for the assessment year 1959 60 on the ground that the income of the assessee had escaped assessment at the time of the original assessment. The Income Tax Officer, however, did not state the reasons which had led to the belief that the income of the assessee had escaped assessment by reason of omission or failure to disclose material facts nor did he give any reasons though requested by the assessee. The assessee 's writ petition challenging the validity of the notice was allowed by a Single Judge and the notice issued by the Income Tax Officer was quashed. It was held that there was no omission or failure on the part of the 565 assessee to disclose material facts relating to his assessment and that there was no reason to believe that any part of the income of the assessee had escaped assessment at the time of the original assessment by reason of wrong allowance of the remuneration paid to D as a permissible deduction. The Division Bench allowed the appeal, holding that the Income Tax Officer had reason to believe that the remuneration paid to D had been wrongly allowed as a permissible deduction by reason of omission or failure on the part of the assessee to disclose the material facts and the notice issued by the Income Tax Officer was justified. Allowing the appeal to this Court, ^ HELD: 1. (i) Neither of the two conditions necessary for attracting the applicability of Section 147(a), was satisfied. The notice issued by the Income Tax Officer is therefore without jurisdiction. [574 G] (ii) It is not possible to sustain the conclusion that the assessee omitted or failed to disclose fully and truly any material facts relating to his assessment. [574 F] 2. (i) Before the Income Tax Officer can assume jurisdiction to issue notice under Section 147(a), two distinct conditions must be satisfied. First, he must have reason to believe that the income of the assessee has escaped assessment and secondly, he must have reason to believe that such escapement is 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. If either of these conditions is not fulfilled, the notice issued by the Income Tax Officer would be without jurisdiction. [571 F] (ii) The important words under Section 147(a) are "has reason to believe" and these words are stronger than the words "is satisfied.". The belief entertained by the Income Tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The Court, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income Tax Officer, in coming to the belief, but the Court can examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the Income Tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid. [571 G 572 C] 3. Even a close relative who is in management and charge of a business on a full time basis is entitled to be paid remuneration and, in fact, it would be wholly unreasonable to expect him to work free of charge. [573 C] 566 In the instant case D was the brother in law of G the Managing Director of the assessee but this circumstance cannot lead to an inference that the payment of remuneration to D who was solely managing and looking after the business of the Delhi Bench of the assessee was sham and bogus. There is nothing unusual in D giving a loan to his brother in law, the Managing Director or making gifts to the son, wife and daughter in law of the Managing Director who were his close relatives. Any inference that the payment of remuneration to D was sham and bogus cannot be drawn merely from the manner in which he expended the amount of remuneration received by him, particularly when the persons to whom he gave a loan and made gifts were his close relatives. [573 E 574 B] 4. The statements of account of D with the assessee for the relevant accounting year as also the previous years were with the Income Tax Officer at the time of the original assessment and these statements of account clearly showed that out of the amount of remuneration credited to his account, he had made gifts to the sons of G on 31st July, 1957 and given a loan to G on the 25th August, 1958 and the Income Tax Officer was fully aware that G was the Managing Director of the assessee. The assessee could not therefore be said to be under an obligation to disclose to the Income Tax Officer in the course of its assessment as to how the director who was in sole charge of the management of the business of the assessee, and who was being paid remuneration for the services rendered by him to the assessee, had utilised the amount of remuneration received by him. [574 C F]

The appellant firm was assessed to sales tax under the pro visions of the Bihar Sales Tax, 1944, for three periods commencing from October 1, 1947, and ending on March 31, 1050. Its claim for certain deductions was disallowed, and its applications in revision under section 24 Of the Act to the Board of Revenue, Bihar, were dismissed by three orders dated August 20, 1953, September 3, 1953 and April 30, 1954. Under section 25(1) of the Act the appellant applied to the Board to state a case to the High Court of Patna on certain questions of law, but the applications were dismissed by order dated August 30, 1954, on the ground that no questions of law arose. The appellant then moved the High Court for requiring the Board to state a case on the said questions of law. The High Court dismissed the applications in respect of the first two periods of assessment, but by order dated November 17, 1934, directed the Board to state a 277 case in regard to the third period on one of the questions of law which only, in its opinion, arose. By its judgment dated January 21, 1957, the High Court answered the question against the appellant. On February 17, 1955, the appellant made applications to the Supreme Court for special leave to appeal against the orders of the Board of Revenue dated August 20, 953, and September 3, 1953, in respect of the first two periods; and on April 12, 1955, it similarly applied for special leave in respect of the third period. Leave was granted in respect of all the three applications by order dated December 23, 1955, the leave granted in regard to the third period being confined to the order of the Board dated August 30, 1954. When the appeals came up for hearing the question was raised as to whether the appeals were maintainable in view of the fact that no applications for leave to appeal were filed against the orders of the Board of Revenue and the High Court subsequent to the orders of the Board in respect of which only special leave had been granted. Held, that though the words of article 136 of the Constitution of India are wide, the Supreme Court has uniformly held as a rule of practice that there must be exceptional and special circumstances to justify the exercise of the discretion under that Article. Pritam Singh vs The State, ; , V. Govinda rajulu Mudaliar vs The Commissioner of Income tax, Hyderabad, A.I.R. 1959 S.C. 248 and Messrs Chimmonlall Rameshwarlal vs Commissioner of Income tax (Centyal), Calcutta, , relied on. Dhakeswari Cotton Mills Ltd. vs Commissioner of Income tax, West Bengal, ; and Baldev Singh vs Commis sioner of Income tax, Delhi and Ajmer, , explained. Held, further, that in the circumstances of the present case the appellant was not entitled to a grant of special leave against the orders of the Board of Revenue where the result would be to by pass the High Court by ignoring its orders. Held, also, that though special leave might have been granted on an application made under article 136, the Court is not precluded from coming to a conclusion at the time of the hearing of the appeal that such leave ought not to have been granted. Baldota Brothers vs Libra Mining Works, A.I.R. 1961 S.C.C. 100, followed.

Appeals Nos. 776 and 777 of 1957. Appeals by special leave from the judgment and order dated September 25, 1956, of the Bombay High Court in Income tax Application No. 48 of 1956; and from the judgment and order dated March 17,1954, of the Income tax Appellate Tribunal, Bombay, in E.P.T.A. Nos. 757, 903 and 944 of 1948 49, respectively. A. V. Viswanatha Sastri and G. Gopalakrishnan, for the appellants. A. N. Kripal and D. Gupta. for the respondent. November 30. The Judgment of the Court was delivered by HIDAYATULLAH, J. These are two appeals, with special leave, against an order of the High Court of Bombay rejecting a petition under section 66(2) of the Indian Income tax Act and the order of the Income tax Appellate Tribunal, Bombay, in respect of which the petition to the High Court was made. Messrs. section C. Cambatta & Co. (Private) Ltd., Bombay, have filed these appeals, and the Commissioner of Excess Profits Tax, Bombay, is the respondent. We are concerned in these appeals with three chargeable accounting periods, each ending respectively on December 31, beginning with the year, 1943 and ending with the year, 1945. 807 The appellants carry on various businesses, and one such business was the running of a theatre and restaurant, called the Eros Theatre and Restaurant. In October, 1943, a subsidiary Company called the Eros Theatre and Restaurant, Ltd. was formed. The paid up capital of the subsidiary Company was Rs. 7,91,100 divided into 7,911 shares of Rs. 100 each. 7,901 shares were allotted to the appellant Company as consideration for assets, goodwill, stock in trade and book debts which were taken over by the subsidiary Company, and the remaining 10 shares were held by the Cam batta family. The assets which were transferred were as follows: Assets: Assets transferred. Rs.1,28,968 Stock in trade. Rs.40,000 Book debts. . Rs.100 Rs.1,69,068 They together with the capital reserve of Rs. 6,21,032 made up the amount of Rs. 7,90,100. In the books of the subsidiary Company, the share capital account was shown separately as follows: Rs. 2,50,000 debited to the various assets account. Rs. 5,00,000 debited to the goodwill account. Rs. 40,000 debited to the stock in trade account. Rs. 100 debited to the book debts account. It will thus appear that goodwill was not shown separately in the appellants ' account books, but only in the accounts of the subsidiary Company. In working out the capital of the two Companies for excess profits tax, a sum of Rs. 5,00,000 was claimed as goodwill as part of the capital of the subsidiary Company. Both the Department as well as the Tribunal held that section 8(3) of the Excess Profits Tax Act applied; and the goodwill was not taken into account in working out the capital. The Tribunal declined to state a case, but the High Court directed that a reference be made on two questions, which were framed as follows: 808 "(1) Whether on the facts of the case, the Appellate Tribunal was right in applying section 8(3) of the Excess Profits Tax Act? (2). Whether in the computation of the capital employed. in the business of the assessee, the Tribunal erred in. not including the value of the goodwill or any "portion thereof?" The High Court by its judgment and order answered the first question in the negative and the second, in the affirmative. It held that sub section (5) and not sub section (3) of section 8 of the Excess Profits Tax Act was applicable. It, therefore, held that "the Tribunal should have allowed for the value of the goodwill whatever it thought was reasonable at the date of the transfer. " When the matter went before the Tribunal again, three affidavits and a valuation report by a firm of architects were filed. The goodwill, according to the report of the architects, amounted to Rs. 25 lakhs. It may be mentioned here that the subsidiary Company was using the premises under a lease granted on November 20, 1944, for three years beginning from April 1, 1944, on a rental of Rs. 9,500 per month. The Tribunal came to the conclusion that no goodwill had been acquired by the business of the Theatre as such, and that whatever goodwill there was, related to the site and building itself. They then proceeded to consider what value should be set upon the goodwill on the date of the transfer of the subsidiary Company as directed by the High Court. They took into account certain factors in reaching their conclusions. They first considered the earning capacity of the business, and held that prior to 1942 the business had not made profits, and that the name of Eros Theatre and Restaurant thus by itself had no goodwill at all. They, therefore, considered that the only goodwill which had been acquired attached to the lease, which the trustees had given to the Eros ;Theatre and Restaurant Ltd., and computing the goodwill as the value of the lease to the subsidiary Company, they felt that Rs. 2 lakhs was a liberal estimate of the value of the goodwill in the hands of Eros Theatre and Restaurant, Ltd. at the material time. 809 Petitions under sections 66(1) and 66(2) read with a. 21 of the Excess Profits Tax Act were respectively rejected by the Tribunal and the High Court; but the appellants obtained special leave from this Court, and filed these appeals. In our opinion, a question of law did arise in the case whether the goodwill of the Eros Theatre and ' Restaurant, Ltd., was calculated in accordance with law. The Tribunal seems to have taken into account only the value of the leasehold of the site to the subsidiary Company, and rejected other considerations which go to make up the goodwill of a business. No doubt, in Cruttwell vs Lye(1), Lord Eldon, L. C. observed that goodwill was "nothing more than the probability that the old customers would resort to the old place". The description given by Lord Eldon has been considered always to be exceedingly narrow. The matter has to be considered from the nature of the business, because the goodwill of a public inn and the goodwill of a huge departmental stores cannot be calculated on identical principles. The matter has been considered in two cases by the House of Lords. The first case is Trego vs Hunt (2), where all the definitions previously given were considered, and Lord Macnaghten observed that goodwill is "the whole advantage, whatever it may be of the reputation and connection of the firm, which may have been built up by years of honest work or gained by lavish expenditure of money". In a subsequent case reported in Inland Revenue Commissioners vs Muller & Co.s. Margarin, Ltd. (3), Lord Macnaghten at pp. 223 and 224 made the following observations:. "What is goodwill? It is a thing very easy to describe, very difficult to define. It is the benefit and advantage of the good name, reputation, and connection of a business. It is the attractive force which brings in custom. It is the one thing which distinguishes an old established business from a new business at its first start. . . If there is one attribute common to all cases of goodwill in it is the attribute (1) 346. (2) (3) 810 of locality. For goodwill has no independent existence. It cannot subsist by itself. 'It must be attached to a business. Destroy the business, and the goodwill perishes with it, though elements remain which may perhaps be gathered up and be revived again". These two cases and others were considered in two 'Australian cases. The first is Daniell vs Federal Com missioner of Taxation (1), where, Knox, C. J. observed: "My opinion is that while it cannot be said to be absolutely and necessarily inseparable from the premises or to have no separate value, prima facie at any rate it may be treated as attached to the premises and whatever its value may be, should be treated as an enhancement of the value of the premises". In the second case reported in Federal Commissioner of Taxation vs Williamson (2), Rich, J., observed at p. 564 as follows: "Hence to determine the nature of the goodwill in any given case, it is necessary to consider the type of business and the type of customer which such a business is inherently likely to attract as well as the surrounding circumstances. . The goodwill of a business is a composite thing referable in part to its locality, in part to the way in which it is conducted and the personality of those who conduct it, and in part to the likelihood of competition, many customers being no doubt actuated by mixed motives in conferring their custom". In Earl Jowitt 's Dictionary of English Law, 1959 Edn., "goodwill" is defined thus: "The goodwill of a business is the benefit which arises from its having been carried on for some time in a particular house, or by a particular person or firm, or from the use of a particular trade mark or trade name" It will thus be seen that the goowill of a business depends upon a variety of circumstances or a combination of them. The location, the service, the standing of the business, the honesty of those who run it, and the lack of competition and many other factors go individually or together to make up the goodwill, (1) ; (2) ; 811 though locality always plays a considerable part. Shift the locality, and the goodwill may be lost. At the same time, locality is not everything. The power to attract custom depends on one or more of the other factors as well. In the case of a theatre or restaurant, what is catered, how the service is run and what the competition is, contribute also to the goodwill. From the above, it is manifest that the matter of goodwill needs to be considered in a much broader way than what the Tribunal has done. A question of law did arise in the case, and, in our opinion, the High Court should have directed the Tribunal to state a case upon it. Civil Appeal No. 776 of 1957 is allowed. The High Court will frame a suitable question, and ask for a statement of the case from the Tribunal, and decide the question in accordance with law. The costs of this appeal shall be borne by the respondent; but the costs in the High Court shall abide the result. There will be no order in Civil Appeal No. 777 of 1957. C. A. No. 776 of 1957 allowed.

The appellant carried on various businesses and one such was the running of a Theatre and Restaurant. In October, 1943, a subsidiary company was formed which was using the premises of the Theatre under a lease granted to it from April, 1944. In working out the capital of the two companies for excess profits tax, a claim of rupees five lakhs for goodwill as part of the capital of the subsidiary company was not taken into account. On reference to the High Court it held that the Tribunal should have allowed the value of the goodwill whatever it thought was reasonable at the date of transfer. Thereafter the Tribunal took into account only the value lease hold of the site to the subsidiary company and came to the conclusion that no goodwill had been acquired by the business of the Theatre as such and whatever goodwill there was related to the site of building itself, and estimated the value of goodwill at rupees two lakhs. Petition under sections 66(1) and 66(2) read with section 21 of the Excess Profits Tax Act being rejected by the Tribunal and the High Court, the appellants came appeal by special leave. Held, that the goodwill of a business needed to be considered in a broader way. It depended upon a variety of circumstances or a combination of them. The nature, the location, the (1) 102 806 service, the standing of the business, the honesty of those who run it, and the lack of competition and many other factors went individually or together to make up the goodwill, though the locality always played a considerable part. Shift the locality, and the goodwill may be lost but it was not everything. The power to attract custom depended on one or more of the other factors as well. In the instant case a question of law did arise, whether the goodwill of the Eros Theatre and Restaurant Ltd. was calculated in accordance with law. Cruttwell vs Lye, (1810) 17 ves. 335, Trego vs Hunt, L.), Inland Revenue Commissioners vs Muller & Co. 's Margarin, Ltd., 9101 A. C. 217 (H. L.), Daniell vs Federal Commissioner of Taxation; , and Federal Commissioner of Taxation vs Williamson, ; , discussed.

The assessee was a public limited company. , Under article 37 of its. Articles of Association the Directors could at any time in their discretion and without assigning any reason decline to register any proposed transfer of shares. The question in income tax proceedings relating to the assess ment years 1952 53 and 1954 55 was whether on a true interpretation of article 37 the assessee company could be regarded as one in which the public were substantially interested within the meaning of the third proviso to section 23A(1) of the Income tax Act, 1922. In reference the High Court answered the question in favour of the revenue on the view that the shares of the company were not freely transferable and therefore it was not a company in which the public were substantially interested. In the assessee 's appeal by special leave, HELD : Article 37 could not by any stretch of reasoning be regarded by itself to be a restriction on the transfer of shares by one shareholder to another. Free transferability of shares is a normal and common feature ,of limited companies. Indeed there would hardly be any public company in the memorandum of articles of which an article similar to article 37. will not be found. This article appears even in the standard Articles of Association prescribed under the Companies Act itself. The purpose is ,only to give power to the Directors for declining to register the transfer of a share when the paramount interest of the company so require. There may be cases where it can be shown that the Directors have been exercising the power very freely and have virtually eliminated the element of free transferability. In such cases it may be possible to hold that in fact the shares were not freely transferable. But in the present case there was no evidence of the Directors having acted in the aforesaid manner nor was there any restriction in the other Articles of Association interfering with the free transfer of shares by one shareholder to another. , The High Court was therefore in error in holding that the mere existence of an article like article 37 would affect the free transferability of the shares within the meaning of the Explanation (1) to section 23A(9) of the Act. [372 C F] East India Corporation Ltd. vs Commissioner of income tax, Mad? as, and Raghuvanshi Mills Ltd. vs Commissioner of Income tax, Bombay, , approved. Commissioner of Income tax, West Bengal vs Tona litte Co. Ltd. 48 I.T.R. 902, disapproved.

The appellant held shares in a company the Board of Directors of which by a resolution dated August 30, 1950 declared interim dividends. The appellant received a dividend warrant dated December 28, 1950 for a certain amount being the interim dividend in respect of its share holdings in the company. The appellant 's year of accounting had ended on September 30, 1950. The revenue authorities brought to tax the amount so received with other income of the appellant in the assessment year 1952 53 after rejecting the objection of the appellant that it represented income for the assessment year 1951 52. In a reference made under section 66(1) of the Indian Income tax Act, 1922, the High Court agreed with the Revenue authority that the dividend was in view of article 95 of the First Schedule to Indian Companies Act, 1913, liable to be included in the assessment year 1952 53. Held: A declaration of dividend by a company in a general meeting gives rise to a debt. In re Severn and Wile and Severn Bridge Railway Co. , referred to. But a mere resolution of the Directors resolving to pay a certain amount as interim dividend does not create a debt enforceable against the company for it is always open to the Directors to rescind the resolution before payment of the dividend. The Lagunas Nitrate Company (Ltd.) vs J. Henry Schroeder and Company, 17 Times Law Reports 625, referred to. Commissioner of Income tax, Bombay vs Laxmidas Mutraj Khatau, , distinguished. (ii) The test applied by Chagla C. J. (in C.I.T., Bombay vs Laxmidas Mulraj Khatau, that because the ,dividend becomes due to the assessee who has the right to deal with or dispose of the same in any manner he likes, it is taxable in the year in which it is declared cannot be regarded as correct. (iii) Dividend may he said to be paid within the meaning of section 16(2) of the Indian Income tax Act, 1922 when the company discharges its liability and makes the amount thereof unconditionally available to the member entitled thereto. Purshottamdas Thakurdas vs C.I.T., Bombay, , referred to. I P(1)) 1 S.C.I 17 (a) 580 (iv) The declaration of interim dividend capable of being rescinded by the directors does not operate as a payment under section 16(2) of the Income tax Act before the company has parted 'with the amount of dividend or discharged its obligation by some other act.

The assessee, in CA 1546 of 1974, M/s British India Corporation Ltd. claimed capital Reserve, Stocks and Stores Reserves, Bad and doubtful debts Reserves, Obsolescence reserve, Loans and Insurance reserve, investment reserve and forfeited moneys reserves as "standard deduction" as defined in section 2(a) of the in the computation of its profits under the relevant Income Tax Act. The claim having been disallowed, the question has been referred to this Court by the Tribunal. In Civil Appeal No. 1599/74 the Saran Engineering Company Ltd. claimed similar deductions in respect of capital reserve, Rehabilitation Reserve, Stores Reserve forfeited moneys Reserve and Bad and doubtful debts reserve. The Income Tax Officer rejected the claim. On appeal the Appellate Assistant Commissioner allowed the claim in part. The Tribunal however allowed the assessee 's claim in full in further appeal while rejecting the Revenue 's appeal against A.A.C 's order. At the instance of the Revenue, the Tribunal referred the matter to the High Court. The High Court answered the reference partly in favour of the Revenue by negativing the claim as to forfeited moneys reserve and 399 restricting the quantum of amount allowed by the AAC regarding capital reserve, as the assessee did not seek a reference against it. Hence the appeal by Revenue by Special Leave. In the Special Leave Petition No. SLP (C) 4815A/77 the High Court 's rejection order of the revenue 's request under section 256(2) for calling for a case against the Tribunal 's findings regarding the Gratuity Reserve, Reserve for Sepcial Survey, Reserve for contingencies, fleet Replacement reserve, Reserve for exempted Profits under section 84 of the Income Tax Act, Reserve for Investment depreciation and Dividend Equalisation Reserve but allowing only in relation to the Reserve for special Survey come to be considered. Allowing the two civil appeals in part and dismissing the Special Leave Petition, the Court ^ HELD: 1. In the facts and circumstances of the case, except the obsolescence Reserve and the forfeited moneys reserve, all the Reserves, namely, capital Reserve, Stocks and Stores Reserve, Bad and doubtful debts reserves, Loans and Insurance Reserve, Investment reserve, and rehabilitation reserve are to be included in the computation of capital according to the provisions in the Second Schedule to the . 2. Where the liability has actually arisen or anticipated legitimately by the assessee though the quantum of the liability has not been determined, to meet such present liability cannot be treated as "reserve". A fund, however, created for payment of a liability which had not already arisen or fallen due but orly a provision with regard to the sum that might become liable to be paid is "other reserve within the meaning of rule (1) of second schedule and should be taken into account in computing the capital of the company for the purpose of the Companies (Profit) Surtax Act, 1964. Except the item relating to Reserve for special survey, it is not necessary to call for any statement of the case in respect of other items in SLP (C) 4815A/77. [406G H; 407A] Commissioner of Income Tax, Kanpur vs The Elgin Mills Ltd., Kanpur, [1986] 3 SCR P. 408, followed.

One Maganlal Parbhudas who was a Director of the assessee company held 6,344 shares out of a total of 10,000 shares of the company and he made a gift of 1000 shares to each of his five sons. During the accounting period the company had eight Directors including the said Maganlal Parbhudas and two of his sons and they held 4695 shares as between themselves. Out of the balance of the shares 4754 shares were held by the relatives of some of the Directors. Three sons of Maganlal Parbhudas were Directors of the Managing Company. The Income tax Officer applied section 23A of the Income tax Act as it stood prior to its amendment by the Finance Act, 1955 to the company holding that this was not a company in which the public were substantially interested. The order of the Income Tax Officer was confirmed on appeal both by the Assistant Commissioner and the Tribunal. The High Court remitted the case to the Tribunal for a statement whether the Directors were exercising de facto control over any of the other shareholders. The Tribunal thereupon gave the finding that the Directors, particularly the three sons of Maganlal Parbhudas who formed the Directors of the Managing Company were under the de facto control of their father. The High Court agreed with the finding of the tribunal and held that on the facts and circumstances of the case the shares held by the three sons of Maganlal Parbhudas could not be considered to be shares held by the members of the public within the meaning of the Explanation to the third proviso to section 23A of the Income Tax Act. On appeal by the assessee company, Held, that in the Explanation the word "public" is used in contradistinction to one or more persons who act in unison and among whom the voting power constitutes a block. If such a block exists and possesses more than seventy five per cent of the voting power, then the company cannot be said to be one in which the public are substantially interested. Sardar Baldev Singh vs Commissioner of Income tax, Delhi and Ajmer, ; , considered. The test is first to find out whether there is an individual or a group which controls the voting power as a block. If there is such a block the shares held by it cannot be said to be held 979 "unconditionally" or "beneficially" by the public. Only those shares which are "unconditionally" and "beneficially" held by the public uncontrolled by the controlling group can be treated as shares held by the public under the Explanation. The group may be composed of Directors or their nominees or relations in different combinations, but none can be said to belong to that c group, be he a Director or a relative unless he does not hold the shares unconditionally and beneficially for himself. It is only such a person who can fall properly outside the word "public". The view that Directors merely by reason of their being Directors stand outside the "public" is erroneous. Commissioner of Income tax vs H. Bjordal, , followed. Mere relationship is of no consequence unless it is proved that the voting power of one relative is controlled by another relative. Tatem Steam Navigation Co. vs Commissioner of Inland Reve nue, , followed.

In 1956 a notice was issued to the respondent under section 34(1)(a) of the Indian Income tax Act, calling upon him to make a return on the ground that his income had escaped assessment for the year ending 31st March, 1949 The respondent contended that notice under section 34 of the Act could not be issued to him because of the lapse of eight years from the end of the accounting year. This contention was not accepted by the Income Tax officer. The assessee then filed an application under article 226 of the Constitution. The High Court held on a construction of section 34 of the Act, that the words 'any year ' as used in section 34(1)(a) mean. not the assessment year but the accounting year. The Income tax officer appealed The contention was that the words 'any year ' in cl. (a) refer to the assessment year. ^ Held, that the correct way of interpreting section 34(1)(a) of the Indian Income tax Act, 1922, read with the provisions of the Indian Finance Act, 1948, is that the words 'for any year ' mean for any assessment year and not for any accounting year because the assessment is for the assessment year although of the income which accrued in the previous year (year of account) The Previous year for different heads of income falling under different sections of the Indian Income tax Act may vary but does not give different starting points of limitation for different sources of income. Panna Lal Nand Lal Bhandari vs Commmissioner of Income Tax, Bombay City, ; , referred to. C. W. Spencer vs Income tax officer, Madras, , approved.

An application by the respondent for permission to build a cinema on a site within the City of Bombay was rejected by the Commissioner of Police, Bombay. The respondent applied for reconsideration of his application and the Commissioner, acting on the advice of the Cinema Advisory Committee, granted the application on the 16th July, 1947, though he indicated in an affidavit flied later that but for this advice he would have refused the application again. Subse quently, under instructions from Government the Commissioner sent the following communication to the respondent: "I am directed by Government to inform you that the permission to erect a cinema at the above site granted to you under the office letter dated 16th July, 1947, is hereby canceled. " The respondent applied to the High Court of Bombay for an order under section 45 of the Specific Relief Act directing the Commissioner of Police, Bombay, to withdraw the cancellation and to grant permission for the erection of the cinema, and the High Court directed the Commissioner of Police "to withdraw the order of cancellation passed by him." The Commissioner of Police appealed to the Supreme Court. Held, (i) that there was nothing in the letter dated 16th July, 1947, to indicate that the decision was not that of the Commissioner himself given in the bona fide exercise of the discretion vested in him. The sanction was not conse quently invalid merely because the Commissioner decided to accept the advice of the Cinema Advisory Committee even though without that advice he would not have granted the permission. (ii) There was no valid cancellation of the license because (a), the order of cancellation communicated to the respondent 'was one made by the Government of Bombay and not by the Commissioner on his own authority;he acted in the matter only as a transmitting agent; (b), under the rules framed under 136 section 22 (1) (f), (1) (g) and (n) of the City of Bombay Police Act 1902 the Government of Bombay had no power to cancel of license once issued. The only person vested with authority to grant or refuse a license for the erection of a building to be used for purposes of public amusement is the Commissioner of Police. (iii) The relief sought by the respondent of an injunction to direct the Commissioner of Police to grant permission for the erection of a cinema could not be granted because he had already granted permission and there was no valid order of cancellation. (iv) The other relief asking for an injunction directing the commissioner to withdraw the cancellation also could not be granted because Rule 250 vests the Commissioner with an absolute discretion in the matter. (v) Though there was no specific provision of law compel ling the Commissioner to exercise the discretion vested in him under Rule 250, inasmuch as the enabling power vested by Rule 250 was vested in the Commissioner for the welfare of the public at large it was coupled with a duty to exercise it when the circumstances so demanded. The Commissioner could consequently be ordered under section 45 of the Specific Relief Act to exercise his discretion and decide whether the licence should or should not be cancelled. (vi) The words "any law" in section 45 do not mean statutory law alone but embrace all kinds of law whether referable to a statutory provision or otherwise. Therefore the perform ance of duties under the rules can be compelled under the provi sions of section 45. (vii) There was no other specific and adequate legal remedy open to the respondent within the meaning of section 45 for though the respondent could have ignored the so called order of cancellation , he could only have done so. at his peril as it purported to emanate from the State Government and was served by a public officer. The remedy of injunction was not a proper and adequate remedy in the circumstances of the present case. (viii) The petition was not incompetent under section 46 of the Specific Relief Act as there had been a demand of justice and a denial thereof within the meaning of the section in the circumstances of the case. (ix) Public orders, publicly made, in exercise of a statu tory authority cannot be construed in the light of explana tions subsequently given by the officer making the order of what he meant or of what was in his mind, or what he intend ed to do. As such orders are meant to have public effect and are intended to affect the acting and conduct of those to whom they are addressed ' they must be construed objec tively with reference to the language used in the order itself. 137 Julius vs Lord Bishop of Oxford (5 App. Cas, 214), Alcock, Ashdown & Co vs Chief Revenue Authority (50 I .A. 227) referred to.

The appellant was a chartered accountant and a partner of a firm of auditors. This firm acted as auditors of two companies, among others, registered under the Indian , the entirety of the shares of one of which are owned by the Union Government and the entirety of the shares of the other by the West Bengal Government. The appellant was declared elected to the Lok Sabha. His election was challenged by two voters of the constituency by means of an election petition. The main ground raised was that the appellant was at the relevant period the holder of an office of profit under the Government of India as well as the State Government and hence he was disqualified from standing for election under article 102(1)(a) of the Constitution. The Election Tribunal accepted this contention and declared the election of the appellant void. The appellant filed an appeal before the High Court in which he did not succeed. The present appeal was by virtue of a certificate granted by the High Court under article 133(1)(c) of the Constitution. It was contended before this Court that on a true construction of the expression "under the Government of India or the Government of any State" occurring in cl. (a) of article 102 (I.) of the Constitution the appellant could not be said to hold an office of profit under the Government of India or the Government of West Bengal. It was argued that the various tests, namely, who has the power to appoint, who has the right to remove, who pays the remuneration, what are the functions and who exercises the control should all co exist and each must show subordination to the Government. The fulfillment of some of the tests alone, would not be sufficient to determine that a person holds an office of profit under the Government. It was contented on behalf of the respondent that the tests were not cumulative and that the court should look to the substance rather than to the form. Held : (i)For holding an office of profit, under the Government a person need not be in the service of the Government and there need not be any relationship of master and servant between them. 312 (ii)The examination of the various provisions of the Com panies Act, 1956 (sections 224, 227, 618 and 619) showed that so far as the two companies in question were concerned the appellant was appointed as an auditor by the Central Government, was removable by the Central Government, that the Comptroller and the Auditor General of India exercised full control over him and that his remuneration was fixed by the Central Government under sub section (8) of section 224 of the though it was paid by the companies concerned. (iii)Where the several elements, the power to appoint, the power to dismiss, the power to control and give directions as to the manner in which the duties of the office are to be performed and the power to determine the question of remuneration are all present in a given case then the officer in question holds the office under the authority so empowered. It is not necessary that all these must co exist nor is the fact that the source from which the remuneration is paid is not from public revenue decisive. (iv)The appellant held an office of profit under the Government of India within the meaning of article 102(1)(a) of the Constitution of India and as such he was disqualified for being chosen as a member of Parliament. Maulana Abdul Shakur vs Rikhab Chand, [1958] S.C.R. 387, distinguished. Ramappa vs Sangappa, ; , referred to.

Appeal No.424 of 1957. Appeal by special leave from the judgment and order dated January 25, 1955, of the Patna High Court in Misc. Judicial Case No. 621 of 1953. N. C. Chatterjee and R. C. Prasad, for the appellant. K. N. Rajagopal Sastri and D. Gupta, for the respondent. 791 1960. November 30. The Judgment of the Court was delivered by KAPUR, J. This is an appeal by special leave ' against the judgment and order of the High Court at Patna answering the question referred to it by the Income tax Appellate Tribunal against the assessee who is the appellant before us. The appeal relates to three assessments made on the appellant for the respective assessment years 1945 46, 1946 47 and 1947 48. The appellant is a Zamindar and owns considerable properties. In the accounting years he granted licences to different parties to prospect for Bauxite. The particulars of the licences are: Received from Date of the Period of Assess Amount Licence Licence ment year Received. Rs. 1.Aluminium Corporation ofIndia Ltd. 20 1 1945 6 months 1945/46 15,290/ . 2.Indian Aluminium Co.Ltd. 26 5 945 1 year 1946/47 1,24,789/ . 3.Dayanand Modi. 7 5 1945 6 months 1947/48 1,500/ . 4.Indian Aluminium Co.Ltd. 14 8 1945 1 year 1947/48 70,146/ . The Income tax Officer held that these amounts were received as revenue payments and were therefore taxable. On appeal to the Appellate Assistant Commissioner the amounts were held to be capital receipts but this order was set aside by the Income tax Appellate Tribunal which held the amounts to be revenue receipts and taxable as such. At the instance of the appellant the case was referred to the High Court under section 66(1) of the Income tax Act and the following question was stated for the opinion of the Court: "Whether in the facts and circumstances of these cases the sums of Rs. 15,209, Rs. 1,24,789, Rs. 1,500 and Rs. 70,146 received by the assessee are income assessable to tax under the Indian Income tax Act?" 792 The question was answered in the affirmative and the High Court held that there was material to support the finding of the Tribunal, and it was a finding of fact; that the amounts received by the appellant were revenue receipts and not capital receipts. Against this judgment the appellant has come in appeal to this court by special leave. The question that falls for decision is whether the amounts received by the assessee are capital or revenue receipts and for that purpose it is necessary to investigate the nature of the grants made by the appellant. Under the licence the licensee was granted the sole and exclusive right and liberty to (a) to enter into and upon, to prospect, search for, mine quarry, bore, dig and prove all Bauxite lying and being in, under or within the said lands. (b) For the purposes aforesaid and all other purposes incidental thereto dig, drive, make and maintain such pits, shafts, borings, inclines, admits levels, drifts, air courses drains, water courses, roads and ways and to set up, erect and construct such temporary engines, machinery sheds and things as may be reasonably necessary for effectually carrying on the prospecting operations hereby licenced. (c) To remove, take away and appropriate samples and specimens of Bauxite of every quality, kind and description and in reasonable quantities not exceeding one hundred tons in all during the terms of this grant. (d) For the purposes aforesaid to clear undergrowth brushwood and to make use of any drains or water courses on the lands or for clearing sites of working from any water which may flow or accumulate thereon or therein. The periods of the licences were comparatively short 6 months in two cases and a year each in the other two. Under the covenants the licensees were to cause as little damage as possible to the surface of the land. They were to give full information regarding the progress of the operations and true copies of all borings to the licensor. The licensees were also 793 required to plug all holes made by them. The licensor convenanted to give a reasonable right of passage through and over the adjoining lands and properties and in consideration of the premium paid, the licensees could, at their option, after giving necessary notice and on payment of a further sum, get a mining The lease for a term of thirty years on the terms and conditions set out in the indenture attached as schedule 2 to the licence. The Income tax Appellate Tribunal found that the licensees were not granted any interest in land and the amounts received were revenue receipts and therefore, assessable to income tax A reference to some of the cases would assist in determining the nature of the transaction which was evidenced by the documents placed on the record. In Raja Bahadur Kamakshya Narain Singh of Ramgarh vs Commissioner of Income tax, Bihar & Orissa (1) the payments by way of premium were held to be capital receipts. In that case large payments by way of royalty for granting various mining leases were received by the assessee. The leases were for a period of 999 years for mining coal with liberty to search for, work, make merchantable and carry away the coal there found and with power to dig and sink pits. In consideration of these rights the lessees paid a sum by way of salami (premium) and an annual sum as royalty on the amount of coal raised subject to minimum annual royalty. The lessor had the right to reenter in case of failure to pay the royalty. It was contended by the assessee there that the sums received as salami and royalty were capital receipts representing the price of the minerals removed. It was held that salami was a single payment paid for the acquisition of the right to enjoy the benefits granted by the lease and was a capital asset and that the two other forms of royalty both minimum and per ton flowing from the covenants in the lease were not on capital account and fell within the meaning of other income under s.12 of the Act. Lord Wright said at p. 190: "The salami, has been, rightly in their Lordships ' opinion, treated as a capital receipt. It is a single (1) (1943), L.R. 70 I.A. 186. 794 payment made for the acquisition of the right of the lessees to enjoy the benefits granted to them by the lease. That general right may properly be regarded as a capital asset, and the money paid to purchase it may properly be held to be a payment on capital account. But the royalties are on a different footing. " This case was sought to be distinguished by counsel for the respondent on the ground that the lease was for a long period of 999 years but the observations above quoted were not based on this consideration but on the nature of the right which was conveyed. In Commissioner of Income tax, Bihar & Orissa vs Raja Bahadur Kamakshya Narain Singh (1) a coal company had been given by the Court of Wards a prospecting licence in respect of certain coal bearing lands with the option of renewal and also to take a mining lease on certain terms and conditions. The prospecting licence was subsequently extended on four occasions. When the assessee attained majority he claimed that the giving of the licence was ultra vires the Court of Wards but there was a settlement between the licencee and the assessee by which the latter agreed to accept the various prospecting licences, their extensions and leases in consideration of which he received by way of salami Rs. 5,25,000 and capital lump sum of Rs. 40,000 and some other payments in lieu of cesses. The question arose whether the amounts were capital or revenue and it was held that the amount of Rs. 5,25,000 received as salami and the amounts received as cesses were capital receipts and therefore not taxable. Manohar Lal, A. C. J., held that the amount was received by way of settlement and not by way of salami but section K. Das, J. (as he then was) held that salami was a lump sum payment for rights which were being given to the licensee, namely, the right to prospect for a certain number of years and also the right to get mining leases and therefore salami in question was undoubtedly a capital receipt. In The Province of Bihar vs Maharaja Pratap Udai Nath Sahi Deo of Ratugarh (2) it was contended that payments in the nature of premium or salami were (1) [1946) (2) 795 not part of the income of the assessee and were therefore not taxable and it was held that salami may, in certain cases, be regarded as a payment of rent in advance and it would in those cases be regarded as income but where it could not be so regarded it would not be income and therefore not taxable. It was also held that prima facie salami is not income. In The Member for the Board of Agricultural Income Tax, Assam vs Smt. Sindurani Chaudhurani (1) this Court defined as salami as follows: The indicia of salami are (1) its single non recurring character and (2) payment prior to the creation of the tenancy. It is the consideration paid by the tenant for being let into possession and can be neither rent nor revenue but is a capital receipt in the hands of the landlord. Thus if it is a consideration paid by the tenant or the licensee for being let into possession with the object of obtaining a tenancy or as in this case with the object of obtaining a right to remove minerals, it cannot be termed rent or revenue but is a capital receipt. In Sindurani 's case (1) salami was a lump sum payment as consideration for what the landlord was transferring to the tenant, i.e., parting with his right, under the lease, of a holding. In the instant case the terms of the covenant quoted above show that the payment has a close analogy to the payment in Sindhurani 's case(1). That case was sought to be distinguished by the respondent on the ground that there was a transfer of a tenancy which was capable of ripening into an occupancy holding but that was not the ground on which this court decided the case of salami. The definition of salami was agener alone, in that it was a consideration paid by a tenant for being let into possession for the purpose of creating a new tenancy. In Raja Bahadur Kamakshya Narain Singh 's case (2) also the Privy Council laid the definition of salami in general terms and described the characteristics of a payment by way of salami without any reference to the nature of the lease. In reply to the argument of counsel for the appellant, Mr. Rajagopal Sastri for the respondent argued (1) ; (2) (1943) L.R. 70 I.A. 180. 796 that the question was whether the licensor had allowed the licensee to take his capital or he had allowed him to use the capital. If it was the former, the receipts were in the nature of capital receipts and if latter they were in the nature of revenue. His contention was that it wag really the latter because all that the licensee was allowed to do was to enter on the lands and make use of the assets belonging to the appellant. This, in our opinion, is not a correct approach to the question. What the licence gave to the licensee was the right to enter upon the land to pros pect, search and mine quarry, bore, dig and prove all Bauxite lying in or within the land and for that purpose the licensee had the right to dig pits, shafts, borings and to remove, take away and appropriate samples and specimens of Bauxite in reasonable quantities not exceeding 100 tons in the aggregate. It cannot be said that this amounts merely to a grant of the use of the capital of the licensor but it was really a grant of a right to a portion of the capital in the shape of a general right to the capital asset. In support of this distinction between the use of capital and the taking away of capital, counsel relied upon the following observation of Lawrence, J., in Greyhound 's case(3): "The question as to what receipts are revenue and what are capital has given rise to much difference of opinion; but it is clear, in my opinion, that, if the sum in question is received for what is in truth the user of capital assets and not for their realisation, it is a revenue receipt, not capital. " That may be so but the question has to be decided on the nature of the grant. The terms of the covenant in the present case which have been quoted above show that the transaction was not one merely of the user of capital assets but of their realisation, By this test therefore the receipts were on capital account and not revenue. Counsel then referred to a judgment of the Patna High Court in R. B. H. P. Bannerji vs Commissioner of Income tax, Bihar & Orissa (2) where it was held that compensation received by the assessee (1) (2) 797 for use by the military of his lands for a short period was a revenue receipt. In that case the assessee purchased 13 bighas of land for purposes of setting up a market. That plot was requisitioned by the military A authorities under the Defence of India Rules and the assessee received compensation for the use of the The land. It was held to be a revenue receipt because it was really profit derived from the land for the use of a capital asset. Another case upon which counsel for the respondent placed reliance is Smethurst vs Davy (1). That was a case which was decided on the wording of section 31(1)(d) of the Finance Act of 1948, and therefore is not of much assistance. Reference was also made to Stow Bardolph Gravel Co., Ltd. vs Poole (2). There the assessee company, which carried on business in sand and gravel, purchased two un worked deposits. The company contended that the payments made to acquire the deposits were deductible being expenditure which was incurred in the acquisition of trading stock or otherwise of revenue character. It was held that the company had acquired a capital asset and not stock in trade. The case turned upon a finding by the Special Commissioners and is not helpful. Reliance was also placed on Rajah Nanyam Meenakshamma vs Commissioner of Income tax, Hyderabad (3). In that case certain fixed sums of money were paid as royalty for the whole period of the lease which were held to be revenue receipts as consolidated advance payments of the amount which would otherwise have been payable periodically. None of these cases is of any assistance to the respondent 's case. The question which has to be decided is what was the nature of the transaction. The covenants in the licence show that the licensee had a right to enter upon the land and take away and appropriate samples of all Bauxite of every kind up to 100 tons and therefore there was a transfer of the right the consideration for which would be a capital payment. (1) (2) (3) 101 798 In our opinion the High Court was in error and the question referred should have been decided in favour of the appellant. We therefore allow the appeal, set aside the judgment and order of the High Court and answer the question in favour of the appellant who will have his costs in this Court and the High Court. Appeal allowed.

In 1945 the appellant who was a Zamindar granted licences to different parties to prospect bauxite. Under the licence the licensee had the right to enter upon the land to prospect, dig and prove all bauxite lying in or within the land and to take away and appropriate samples of bauxite in reasonable quantities not exceeding 100 tons in the aggregate. In consideration of the premium paid, the licensees could, at their option, after giving necessary notice and on payment of a further sum, get a mining lease for a term of thirty years. The income tax authorities were of the view that the licensees were not granted any interest in land and that the amounts received by the appellant from the licensees were revenue receipts and, therefore, assess able to income tax. Held, that on its true construction the transaction of 1945 did not amount merely to a grant of the use of the capital of the licensor but was really a grant of a right to a portion of the capital. Accordingly, the amounts received by the appellant were capital receipts and, therefore, not liable to income tax. Raja Bahadur Kamakshya Narain Singh of Ramgarh vs Com missioner of Income tax, Bihar and Orissa, (1943) L.R. 70 I.A. 180,The Member for the Board of Agricultural Income tax, Assam vs Smt. Sindurani Chaudhurani, [1957] S C.R. 1019 and Commissioner of Income tax, Bihar and Orissa vs Raja Bahadur Kamakshya Narain Singh, , considered.

The State acquired the land of the appellant. The Collector made an award under the Land Acquisition Act as a result of which the appellant received Rs. 2,81,822/ , which included a sum of Rs. 48,660/ as interest upto the date of the award. 'The Income tax Officer included Rs. 48,660/ (the said interest) in the total income of the appellant on the ground that the said amount was not a capital receipt. The matter went upto the Income tax Appellate Tribunal. The Tribunal excluded the said interest from the total income of the assessee (appellant) on the ground that it was a capital receipt. On a reference the High Court held that the said interest was not a capital but a revenue receipt and as such liable to tax under the Indian Income tax Act. The High Court granted a certificate to the appellant to file an appeal to the Supreme Court. Hence the appeal. Held: (i) The scheme of the Land Acquisition Act and the express provisions thereof establish that the statutory in terest payable under section 34 is not compensation paid to the owner for depriving him of his right to possession of the land acquired, but that given to him for the deprivation of the use of the money representing the compensation for the land acquired. In other words the statutory interest paid under section 34 of the Act is interest paid for the delayed payment of the compensation amount and, therefore, is a revenue receipt liable to tax under the Income tax Act. Behari Lal Bhargava vs Commissioner of Income tax, C.P. and U.P., (1941), 9 I.T.R. and P. V. Kurien, vs Cmmissioner of Income tax, Kerala, , overruled. Westminister Bank Ltd. vs Riches, , Com missioner of Income tax, Madras vs CT. N. Narayanan Chettiar, and Commissioner of Income tax Bihar and Orissa vs Maharajadhiraj Sir Kameshwar Singh, , approved. Inglewood Pulp and Paper Co. Ltd. vs New Brunswaick Electric Power Commission, and Revenue Divisional Officer, Trichinopoly vs Venkatarama Ayyar, , distinguished. Shaw Wallace 's case, A.I.R. 1932 P.C. 138, Schulze vs Bensted, , and Commissioner of Inland Revenue vs Barnato, , referred to. (ii) The interest under section 34 of the Land Acquisition Act shall be paid on the amount awarded from the time the Collector take possession until the amount is paid or deposited. It 669 makes no difference in the legal position between a case where possession has been taken before and that where possession 'has been taken after the award, for in either case the title vests" in the Government only after possession has been taken. In no sense of the term can it (interest) be described as damages or compensation for the owner 's right to, retain Possession, for as he has no right to retain possession after possession was taken under section 16 or section 17 of the Act.

In March 1967, after obtaining the satisfaction of the Commissioner the appellant issued a notice under section 148 of the Income Tax Act, 1961 stating that he had reason to believe that the respondent 's income chargeable to tax for the assessment year 1958 59 had escaped assessment. The respondent replied that the I.T.O. had no competence or jurisdiction to reopen the assessment under section 147 of the Act on a mere change of opinion. Since there was no reply from the appellant, the respondent moved the High Court for a writ. The High Court held that the conditions precedent for the exercise of jurisdiction by the Income Tax Officer were not fulfilled because the report submitted by the Income Tax Officer to the Commissioner under section 147(a) was defective. On appeal to this Court it was contended that the High Court was not right in holding that the Income Tax Officer 's report was defective. Dismissing the appeal, ^ HELD: The High Court was right in holding that the material before the Income Tax Officer could not have led to the formation of the belief that the income of the assessee had escaped assessment because of his failure or omission to disclose fully and truly all material facts. [965H] 1. (a) The two conditions required to be satisfied before the Income Tax Officer issued a notice under section 148 of the Income Tax Act are that he must have reason to believe (i) that the income chargeable to tax had escaped assessment and (ii) that such income had escaped assessment by reason of the omission or failure on the part of assessee, to disclose fully and truly material facts necessary for assessment for that year. Both these conditions must co exist in order to confer jurisdiction on the Income Tax Officer. Further the Income Tax Officer should record his reasons before initiating proceedings under section 148(2); before issuing the notice after the expiry of four years from the end of the relevant assessment year, the Commissioner should be satisfied on the reasons recorded by the Income Tax Officer that it was a fit case for the issue of such notice. [962C D] (b) The duty cast upon the assessee does not extend beyond making a true and full disclosure of the primary facts. It is then for the Income Tax Officer to draw the correct inference from the primary facts. Where his inference subsequently appears to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening the assessment. [962F G] (c) The grounds or reasons leading to the formation of the belief under section 147(a) must have a material bearing on the question of escapement of income. Once there exist reasonable grounds for the Income Tax Officer to form the above belief, that would be sufficient to clothe him with jurisdiction to issue notice. While the sufficiency of grounds which induce the Income Tax Officer to act is not justiciable, it is open to the assessee to contend that the Income Tax Officer did not hold the belief that there was such non disclosure. The expression "reason to believe" does not mean a purely subjective satisfaction on the part of the Income Tax Officer. It is open to the Court to examine whether the reasons for the formation of the belief have a rational connection with or relevant bearing on the formation of the belief and are not extraneous or irrelevant for the purpose of the section. [962H] 957 Chhugamal Rajpal vs section P. Chaliha , Calcutta Discount Co. Ltd. vs Income Tax Officer, 41 I.T.R. 191 and section Narayanappa & Ors. vs Commissioner of Income Tax followed. In the instant case the grounds given by the Income Tax Officer for reopening the assessment were (i) that the three persons whose names were mentioned in the list of creditors, were known name lenders and (ii) that another person shown as a creditor of the assessee had since confessed that he was doing only name lending. The first ground mentioned by the Income Tax Officer could not have led to the formation of the belief that the income of the respondent had escaped assessment for that year because of his failure or omission to disclose fully and truly all material facts. The High Court was justified in excluding that ground from consideration. [963D E] As regards the second ground there is nothing to show that the confession of another person related to a loan to the assessee and not to someone else. There is no indication as to when the confession was made and whether it related to the assessment year sought to be re opened. To infer from that confession that it related to the period of assessment and that it pertained to the loan shown to have been advanced to the assessee would be far fetched. [964G] 2(a). Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income Tax Officer and the formation of his belief that there had been escapement of income of the assessee from assessment in the particular year. It is not any and every material, howsoever vague and indefinite or distant, remote and far fetched which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. The fact that the words "definite information" in section 34 of 1922 Act before its amendment in 1948 do not find a place in section 147 would not lead to the conclusion that action could now be taken for reopening assessment even if the information was wholly vague, indefinite, far fetched and remote. [965B D] (b) The powers of the Income Tax Officer to reopen assessment, though wide, are not plenary. The words are "reason to believe" and not "reason to suspect". The provisions of the Act depart from the normal rule that there should be finality about orders made in judicial and quasi judicial proceedings. It is, therefore, essential that before such action is taken the requirement of the law should be satisfied. [965E F] In the instant case the live link or close nexus between the material before the Income Tax Officer and the belief which he was to form regarding the escapement of the income was missing or at any rate the link was too tenuous to provide a legally sound basis for reopening the assessment.

The appellant, a registered dealer under the Punjab General Sales Tax Act, 1948 despatched some part of the manufactured goods outside the state, without paying the tax on the taxable raw material consumed in the manufacture of such goods. The assessing authority issued a show cause notice for the assessee 's failure to pay the said tax. Interest was also demanded on the tax amount. The assesses disputed its liability to pay penalty and interest on the amount of tax withheld on the plea that there was no wilful default on its part, as it was under a bona fide belief that no tax was to be paid on the raw material used in the manufactured goods sent outside State. The assesses further stated that it had acted on legal advice that it was not liable to pay any Purchase Tax and, therefore, in the absence of a clear intention to avoid the payment of tax, there could be no question of imposition of penalty and demand for interest. The assessee 's submissions did not find favour with the Revenue, as also the Tribunal, and the assesses sought a reference to the High Court under section 22(1) of the Act. But the Tribunal rejected application for reference. Thereafter the assesses preferred appeals to this Court, against the Tribunal 's rejection of reference as also the Tribunal 's order in appeal. On behalf of the appellants, it was contended that the main question involved in this case is concluded by several decisions of this Court, and it was not liable to pay the tax, as demanded by the Revenue. On behalf of the Revenue it was contended that the assesses was liable to pay the tax on the raw materials used in the manufactured goods sent outside the State. Allowing the appeals, this Court, 348 HELD: 1.1 Under Section 4B of the Punjab General Sales Tax Act, 1948 the tax becomes exigible not on the purchase of the raw material or on the use thereof in the manufacture of a new and distinct commodity but only after the goods so manufactured are despatched to a place outside the State. Once the goods are sent outside the State the purchaser is made liable to pay the tax at the rate prescribed on the purchase of such goods provided no tax is payable on the purchase thereof under any other provision of the Act. It is obvious that the tax though described as purchase tax is in effect a tax on consignment since it becomes effective on the happening of an event which has nothing to do with the actual purchase. Even if the raw material is used in the manufacture of any taxable goods, the purchaser does not become liable to pay tax on the raw material until the manufactured item is sent out of the State. And between the manufacture of the goods out of the purchased raw material and their actual despatch outside the State there may be a long time gap. The liability of tax only after despatch of the manufactured goods outside the State and that event may have no relation to the actual purchase or manufacture. That being so, the tax though described as a purchase tax is actually a tax on the consigmment of the manufactured goods, the levy of which is beyond the competence of the State as the power to impose such tax is vested in Parliament by virtue of clause (h) of Article 269(1) of the Constitution read with Entry 92B in Schedule 7, List 1. [352H; 353A E; 354B] 1.2. Even though the language of section 4B of the Act is not identical to section 9(1) of the Haryana Sales Tax Act, it is in substance similar in certain respects, particularly in respect of the point of time when the liability to pay tax arises. Under that provision also the liability to pay purchase tax on the raw material purchased in the State which was consumed in the manufacture of any other taxable goods arose only on the despatch of the goods outside the State. [353D E] M/s. Goodyear India Ltd. vs State of Haryana, ; ; applied. State of Tamil Nadu vs M. K. Kandaswami etc., [ 19761 1 SCR 38; referred to. Since the Revenue was not entitled to levy the tax which it purported to levy as purchase tax on the raw material, there can be no question of imposition of penalty or interest on the unpaid amount of tax. Therefore, the action taken in exercise of power under section 10(6) and section 11D of the Act cannot be allowed to stand. [354G H] 349

In respect of the accounting years ending March 31, 1957 and March 1958 respectively on the voluntary returns submitted by the respondent, the Income Tax Officer 'E ' Ward District II (1) Calcutta completed the assessment for these years (1957 58 and 1958 59) on total incomes of Rs. 7000/ and Rs. 7500/ respectively, the same having been made in the status of unregistered firm consisting of three partners, namely Asha Devi Vaid, Santosh Devi Vaid and Sugni Devi Vaid with equal shares. On August 2, 1962, the Commissioner of Income Tax issued notice to show cause why the said assessments should not be cancelled under section 33B of the Act as he felt that the completed assessments were erroneous as being prejudicial to the interests of the Revenue and the Income Tax Officer 'E ' Ward District II(1) Calcutta had no territorial jurisdiction over the case of the assessee. The notice was served on the assessee on August 3, 1962 and the hearing was fixed by the Commissioner for August 6, 1962. On the ground that none appeared and there was no application for adjournment, the Commissioner passed his order under section 33B ex parte on that date. By his said order the Commissioner cancelled the assessments made by the Income Tax Officer on three grounds (a) that some of the partners were minors and were not competent to enter into any partnership agreement with the result that the status of unregistered firm assigned to the assessee by the Income Tax Officer was clearly wrong and as such the assessments deserved to be cancelled; (b) that the books of accounts were unreliable and they were not properly examined by the Income Tax Officer with the result that the assessments made were prejudicial to the interests of the revenue and (c) that the Income Tax Officer has no territorial jurisdiction over the case which fell in the jurisdiction of Income Tax Officer, District III Calcutta and directed the Income Tax Officer having proper jurisdiction to make fresh assessments after examining the records of the assessee in accordance with law. The appeals preferred to the Appellate Tribunal under section 33B(3) were accepted. Finding that the Commissioner 's order passed at 11.30 A.M. ex parte was bad in as much as the notice served upon the assessee permitted filing of objections at any time during the course of August 6, 1962 and the objections were in fact filed later in the day, the Tribunal remanded the case with the direction to dispose it of afresh after giving due opportunity to the respondent assessee. On a reference to the High Court at the instance of the appellant, the 269 High Court held: (a) the assumption of jurisdiction by the Commissioner under section 33B of the Income Tax Act was valid in law; (b) the Tribunal acted properly in vacating or cancelling the Commissioner 's order, but, (c) the Tribunal did not act properly in directing the Commissioner to act under section 33B(1) because the period of limitation of two years prescribed under section 33(2)(b) for him to act under section 33B(1) had expired. In doing so, the High Court held that the provision of sub section 2(b) was absolute and covered even a revisional order of the Commissioner passed in pursuance of a direction given by any appellate authority. Allowing the appeal by Certificate, the Court ^ HELD: 1. Under sub section (1) of section 33B of the Income Tax Act, power has been conferred upon the Commissioner to revise Income Tax Officer 's orders but the exercise of such power is regulated by the two conditions mentioned therein namely, (a) he must consider the order sought to be revised to be erroneous as being prejudicial to the interests of the revenue and (b) he must give an opportunity to the assessee of being heard before revising it. Sub section (2)(b) prescribes a period of limitation in negative words by providing that "no order shall be made under sub s(1) after the expiry of two years from the date of the order sought to be revised". Sub s.(3) confers on the assessee a right to prefer an appeal to the Appellate. Tribunal against the Commissioners ' order made under sub s.(1) while sub section (4) indicates the power of the Appellate Tribunal in dealing with such appeal by providing that "such appeal shall be dealt with in the same manner as if it were an appeal under sub s.(1) of section 33". Two things stand out clearly on a fair reading of the two concerned provisions, namely, sub s.(2)(b) and sub s.(4). The bar of limitation contained in sub section (2)(b) is on the Commissioner 's power to pass revisional orders under sub section (1) and the same appears to be absolute in the sense that it applies to every order to be made under sub s.(1). At the same time sub s.(4) confers on the Appellate Tribunal very wide powers which it has while dealing with an appeal under section 33(1). In other words, the Appellate Tribunal has power "to pass such orders thereon (i.e. on the appeal) as thinks fit. " The word "thereon" restricts the jurisdiction of the Appellate Tribunal to the subject matter of the appeal which merely means that the Tribunal cannot adjudicate or give a finding on a question which is not in dispute and which does not form the subject matter of the appeal but the words "pass such orders thereon as it thinks fit" include all the powers (except possibly the power of enhancement) which are conferred on the Assistant Appellate Commissioner by section 31 and consequently the Tribunal has authority in exercise of its appellate powers to set aside the order appealed against and direct fresh assessment in the light of the observations made by it in its judgment. In other words, similar power is possessed by the Appellate Tribunal while dealing with the appeal under sub s.(4) of section 33B. [275 A H, 276 A] Hukamchand Mills 's case, ; applied. Two principles of construction are relating to casus omissus and the other in regard to reading the statute as a whole are well settled. Under the first principle, a casus omissus cannot be supplied by the Court except in the case of clear necessity and when reason for it is found in the four corners of the statute itself but at the same time a casus omissus should not be readily inferred and 270 for that purpose all the parts of a statute or section must be construed together and every clause of a section should be construed with reference to the context and other clauses thereof so that the construction to be put on a particular provision makes a consistent enactment of the whole statute. This would be more so if literal construction of a particular clause leads to manifestly absurd or anomalous results which could not have been intended by the Legislature. [277 B, 278 A B] Artemiou vs Procopiou, , Luke vs Inland Revenue Commissioner and 577 Quoted with approval. The object of introducing Section 33B with effect from March 30, 1948 was to confer revisional powers upon the Commissioner to correct the erroneous orders of an Income Tax Officer in so far as they were prejudicial to the interests of the revenue. The language of the sub sec.(1) clearly suggests that the said power was contemplated to be exercised suo motu by the Commissioner inasmuch as the opening words show that it was upto the Commissioner to call for and examine the record of any proceedings under the Act and on examination of the record if he were satisfied that any order passed by an Income Tax Officer was erroneous as being prejudicial to the interests of the revenue he could revise the same after giving an opportunity to the assessee of being heard. It is true that sub s.(2)(b) thereof prescribed a period of limitation on his power by providing that no order shall be made under sub s.(1) after the expiry of the two years from the date of the order sought to be revised by the Commissioner and a literal construction of sub s.(2)(b) also suggests that the bar of limitation imposed thereby was absolute in the sense that it applied to every kind of order to be made under sub s.(1) and no distinction was made between a suo motu order and an order that might be made by him pursuant to a direction given by any appellate or other higher authority. Sub s.(3) conferred on an assessee a right to prefer an appeal to the appellate Tribunal against the Commissioner 's order made under sub section (1) and under sub s.(4) the Tribunal had authority to deal with the impugned order of the Commissioner in such manner as it deemed fit in exercise of its appellate powers; for instance, it could confirm the impugned order, it could annul that order, or it could after vacating it remand the case back to the Commissioner for making a fresh assessment in the light of the observations made by it in its judgment or it could after calling for a remand report, rectify the erroneous order of the Income Tax Officer. Further there was no period prescribed within which an appeal against the impugned order of the Commissioner had to be disposed of by the Tribunal and in the normal course on rare occasions such appeals would have been heard and disposed of before the expiry of two years from the date of the Income Tax Officer 's order which was regard as erroneous by the Commissioner. More often than not such appeals would come up for hearing after the expiry of the said period of two years a fact fully known and within the contemplation of the Legislature when it introduced the section in the Act in 1948. [278 E H, 279 A D] 4. The Legislature did not intend to attenuate or curtail the appellate powers which it conferred on the appellate Tribunal in very wide terms under sub s.(4) by enacting sub section 2(b) prescribing a time limit on the Commissioner 's power to reverse an erroneous order of the Income Tax Officer when the Commissioner was seeking the exercise the same not suo motu but in pursuance of or obedience to a direction from the appellate authority. Any contrary and literal construction would lead to manifestly absurd result, because in a given 271 case, like the present one where the appellate authority (Tribunal) has found (a) the Income Tax Officer 's order to be clearly erroneous as being prejudicial to the interests of the revenue and (b) the Commissioner 's order unsustainable as being in violation of principles of natural justice; it would be difficult for the appellate authority to exercise its powers. Obviously it could not withhold its hands and refuse to interfere with Commissioner 's order altogether, for, that would amount to perpetuating the Commissioner 's erroneous order, nor could it merely cancel or set aside the Commissioner 's wrong order without doing anything about the Income Tax Officer 's order, for that, would result in perpetuating the Income Tax Officer 's order which had been found to be manifestly erroneous as being prejudicial to the revenue. Moreover, in exercise of its appellate powers it was open to the Tribunal itself to call for a remand report from either the Commissioner or the Income Tax Officer and rectify the Income Tax Officer 's erroneous order after giving opportunity to the assessee and in doing so no question of limitation would arise. It was equally open to the Tribunal to set aside the Commissioner 's order and remand the case directly to the Income Tax Officer giving requisite direction to rectify his erroneous order and thereupon the Income Tax Officer would carry out the Tribunal 's direction for, admittedly, the bar of limitation under sub s.(2)(b) was only on the Commissioner 's power to make an assessment afresh and not on the Income Tax Officer. If this be the correct position then it is gravely anomalous that the Tribunal should not be in a position to set aside the Commissioner 's order and remand the case back to the Commissioner for making a fresh assessment because in the meantime two years ' period of limitation has expired, for, it would mean that the Tribunal was prevented from achieving the desired effect directly through the Commissioner but it could do so indirectly through the Income Tax Officer. A literal construction placed on sub s.(2) (b) would lead to such manifestly absurd and anomalous results, which, were not intended by the Legislature. Therefore, the words of sub section 2(b) should be construed as being applicable to suo motu orders of the Commissioner in revision and not to orders made by him pursuant to a direction or order passed by the Appellate Tribunal under sub s.(4) or by any other higher authority. Such construction will be in consonance with the principle that all parts of the section should be construed together and every clause thereof should be construed with reference to the context and other clauses thereof so that the construction put on that particular provision makes a consistent enactment of the whole statute. [279 D H, 280 A G] Commissioner of Income Tax vs Kishoresingh Kalyan Singh Solanki, ; approved. It is well settled that the principle that the fiscal statute should be construed strictly is applicable only to taxing provisions such as a charging provision or a provision imposing penalty and not to those parts of the statute which contain machinery provisions and by no stretch could section 33B be regarded as charging provision. [281 C D] 6. A casus omissus has not to be readily inferred and it could not be inferred from the mere fact that both sections 33B and 34(3) together with the second proviso were inserted simultaneously in the Act by the same Amending Act of 1948 and that in the case of former a relaxing provision was not made as was made in the case of the latter provision, firstly because the two provisions operated in distinct fields and secondly it would be improper to do so without compar 272 ing the various stages of amendments through which each set of these Provisions had undergone since inception. The further aspect the Legislature has in the 1961 Act made the requisite provision removing or relaxing the bar of limitation, in section 263(3), is, not of much importance. Irrespective of the question whether the second proviso to section 34(3) was enacted ex majore cautella or not (over which conflicting views obtain) it is clear that section 263(3) of the 1961 Act must be regarded as an ex majore cautella provision. Admittedly, at the time when the said provision was enacted in the 1961 Act, the Bombay view held the field and there was no decision to the contrary of any other High Court. Obviously, therefore, the enactment of section 263(3) must be regarded as declaratory of the law which was already prevailing and this position has been clarified in the Notes on Clauses of the Income Tax Bill 1961 where it has been stated that sub cl. (3) of section 263 was new and had been added to get over the difficulty experienced in (wrongly stated 'caused by ') the Bombay High Court 's decision in Solanki 's case. The enactment of an ex majore cautella provision in the 1961 Act would, therefore, be a legislative recognition of the legal position that obtained as a result of judicial pronouncement qua the 1922 Act. [281 E H, 282 A] C.I.T. vs Sabitri Devi Agarwalla, over ruled. Pooran Mall 's case, ; relied on.

Under a circular issued in 1962 by the Central Board of Revenue under section 5(8) of the Indian Income tax Act, 1922 the assessing authorities were directed to permit British Shipping Companies to elect to be assessed on the basis of a ratio certificate granted by the U.K. authorities regarding the income or loss and the wear and tear allowance. In 1964 the Board instructed the taxing authorities to take into consideration the investment allowance granted by U.K. authorities in computing the taxable income of the British Shipping companies. The appellant was a non resident British ' Shipping company whose ships plied all over the world including Indian waters. For the years 1960 61 and 1961 62 the Income tax Officer computed it,, total income under the Indian Income tax Act, 1922 by taking into account the ratio certificates issued by the Chief Inspector of Taxes U.K. which were based on the assessments made on the appellant in U.K. In making assessment the Income tax Officer purported to.proceed on the basis of r. 33 of the Indian Income tax Rules, 1922. One of the points considered by the Income tax Officer and the Appellate Assistant Commissioner was whether the investment allowance was to be taken into account in assessing the Indian income. Both of them rejected the contention of the appellant that it should be taken into account. The tribunal decided in favour of the appellant but the High Court in reference took the oppo site view. In appeal to this Court by special leave. HELD : (i) The authorities under the Act proceeded on the basis that the computation of the income of the assessee had to be made on the second of the three bases mentioned in r. 33. Admittedly the profits of the assessee were not computed in accordance with the provisions of the Act. That being so, the second basis mentioned in r. 33 could not be applied. This aspect was brought to the notice of the High Court. But the High Court refused to consider the same on the ground that both the Revenue as well as the assessee had proceeded before the authorities under the Act on the assumption that the second basis mentioned r. 33 was the relevant basis. The High Court erred in adopting this approach. The fact that the authorities under the Act as well as the parties were under a mistaken impression could not alter the true position in law. [174 H 175 B] (ii) The computation of appellant 's income had to be made either under the first basis viz. the calculation of the profits and gains on such percentage of the turnover accruing or arising as the income tax Officer may consider to, be reasonable, or on the third basis i.e. 'in such other manner as the Income tax Officer may deem suitable '. [175 C] 169 From the assessment orders it did not appear that the first basis was adopted. The most appropriate basis under which the income could have been computed was the last basis viz. "in such other manner as the Income tax Officer may deem suitable". While adopting that basis the Income tax Officer is not required to rigidly apply the various conditions prescribed in the Act in the matter of granting one or the other of the permissible allowances. He may adopt any equitable basis as long as the basis does not conflict either with r. 33 or with the instructions or directions given by the Board of Revenue. The power given to the Income tax Officer on that basis is a very wide power. That power is available not only to the Income tax Officer but also to the Appellate Assistant Commissioner and the Tribunal. [175 D F] As the Tribunal had determined the tax due from the appellant on the basis of the ratio certificate given by the U.K. authorities, it could not be said that the decision reached by the Tribunal was an unreasonable one. The Tribunal 's decision was in accord with the instructions of the Board of Revenue. [175 F] The fact that the proviso to section 10(2) (vib) was incorporated into the Act after the Board issued its instructions could not affect either the validity of r. 33 or the force of the instructions issued by the Board of Revenue because neither r. 33 nor the instructions issued by the Board were strictly in accordance with section 10(2). [175 G H] Navnit Lal C. Javeri V. K. K. Sen, Appellate Asstt. Commissioner, Bombay, , applied.

On the ground that 50% of the transactions recorded in a rough note book detected and seized by the Inspecting officer from the Head office of the firm were not entered in the regular books of accounts maintained by the assessee, the Sales Tax officer made an addition of 10% to the admitted turnover and completed the assessment. In an appeal, the Appellate Assistant Commissioner, reduced the addition to 5% of the admitted turnover. The respondents preferred a second appeal before the Appellate Tribunal. But the Department neither filed an appeal against the order of the Appellate Assistant Commissioner nor raised any cross objections in the assessee 's appeal After issuing a show cause notice to the assessee, the Tribunal, under section 39(4) of the Kerala General Sales Tax Act 1963, directed the addition of a certain amount to the taxable turnover. In its Tax Revision Petition, the respondent contended before the High Court that the order of the Tribunal was wrong in that it had no jurisdiction or power to enhance the assessment in the absence of an appeal or cross objections by the Department. Setting aside the impugned order of the Tribunal the High Court remanded the case for hearing the appeal afresh. In appeal to this Court, the appellant (Department) contended that on a true construction of section 39(4) of the Act, the Appellate Tribunal should be regarded as possessing the power to enhance the assessment even in the absence of any appeal or cross objections by the Department against the Appellate Assistant Commissioner 's order. Dismissing the appeal ^ Held: (1) The Tribunal has no jurisdiction or power to enhance the assessment in the absense of an appeal or. cross objections by the Department. [543 E] (2) To accept the construction placed by the counsel for the appellant on sub section (4)(a)(i) would be really rendering sub section (2 of section 39 otiose, for if in an appeal preferred by the assesses against, the Appellate Assistant Commissioner 's order, the tribunal would have the power to enhance the assessment, a provision for cross objections by the Department was really unnecessary. [1543 D] 539 (3) The elementary principle found in the Code of Civil Procedure that the respondent who has neither preferred his own appeal nor filed cross objections in the appeal preferred by the appellant must be deemed to be satisfied with the decision of the lower authority and that he will not be entitled to seek relief against a rival party in an appeal preferred by the latter, is equally applicable to revenue proceedings.[543 G] Motor Union Insurance Co. Ltd. vs Commissioner of Income Tax Bombay and New India Life Assurance Co. vs Commissioner of Income Tax, Excess Profits Tax, Bombay City. approved. Commissioner of Sales Tax, orissa vs Chunnilal Parmeshwar Lal (1961) 12 STC 677 distinguished.

In assessment proceedings under the Wealth Tax Act for four assessment years the assessee claimed a deduction in the computation of his net wealth on account of income tax, wealth tax and gift tax liabilities. The Wealth Tax Officer allowed only part of the deductions claimed The appeal of the assessee was dismissed by the Appellate Assistant Commissioner of Wealth Tax. In the second appeal before the Appellate Tribunal, the assessee filed statements showing particulars of the income tax, wealth tax and gift tax liabilities in respect of the different assessment years. The Revenue contended that the income tax liability and the gift tax liability for one of the assessment years [1965 66] had been cancelled by the Appellate Assistant Commissioner in appeals against the assessment orders and those appellate orders of the Appellate Assistant Commissioner having become final in view of the dismissal of the Revenue 's appeals by the Appellate Tribunal, there was no outstanding demand on account of income tax and gift tax for that year and that therefore these two items do not constitute 'debts owed ' by the assessee and so would not qualify for deduction under section 2(m) of the Wealth Tax Act. The Appellate Tribunal following two judgments of this Court [Commissioner of Income Tax vs Keshoram Industries Pvt. Ltd. (1966) 59 I.T.R. 767 and H.H. Setu Parvati Bayi vs Commissioner of Wealth Tax Kerala , held that so long as the liability to pay the tax had arisen before the relevant valuation dates it was immaterial that the assessments were quantified after the valuation of dates, that the question whether a debt was owed by the assessee must be examined with reference to the position obtaining on the valuation date and that nothing happening subsequently could be considered in computing the net wealth. 491 The High Court having refused te call for a reference from the Appellate Tribunal under section 27(3) of the Act the Revenue appealed to this Court. Allowing the appeals in part. ^ HELD: 1. Whether a debt was owed by the assessee on the valuation date would depend on the fact that a liability had already crystallised under the relevant taxing statute on the valuation date. [494 D] 2. An income tax liability crystallises on the last day of the previous year relevant to the assessment year under the Income Tax Act, a wealth tax liability crystallises on the valuation date for the relevant assessment year under the Wealth Tax Act and a gift tax liability crystallises on the last day of the previous year for the relevant assessment year under the Gift Tax Act. [494 E] 3. The quantification of the income tax, wealth tax or gift tax liability is determined by a corresponding assessment order, and even if the assessment order is made after the valuation date relevant to the wealth tax assessment in which the claim to deduction is made, there is a debt owed by the assessee on the valuation date. It is the quantification of the tax liability by the ultimate judicial authority which will determine the amount of the debt owed by the assessee on the valuation date. So long as such ultimate determination indicates the existence of a positive tax liability, it must be held that there is a debt owed by the assessee on the valuation date even though such determination may be subsequent in point of time to the valuation date. If, however, it is found on such ultimate determination that there is no tax liability it cannot be said that merely because originally a tax liability could be envisaged there was a debt owed by the assessee. [495 B E] 4. Section 2(m) (iii) (a) denies deduction of an amount of tax which is outstanding on the valuation date if the assessee contends in appeal, revision or other proceeding that he is not liable to pay the tax. It presupposes that there is a subsisting tax demand and the assessee has challenged its validity. It refers to the initial stage only where an appeal, revision or other proceeding is pending merely. It does not proceed beyond that stage to the point where, in consequence of such appeal, revision or other proceeding, the tax liability has been found to be nil. Once it is determined that the tax liability is nil, it cannot be said that any amount of tax is outstanding. Such a situation does not bring section 2(m) (iii) (a) into operation at all. If upon the ultimate determination it is found that the amount of tax is nil, the assessee is denied the deduction claimed by him not on the ground of section 2(m) (iii) (a) but because the superior authority has found that there is no tax liability whatever. [496 A D] In the instant case, the income tax and the gift tax liabilities for the assessment year 1965 66 subsequently set aside on appeal after the valuation dates, cannot be regarded as debts owed by the assessee on the relevant valuation dates. [495 G] 492 Commissioner of Income Tax vs Keshoram Industries Pvt Ltd. ; ; H.H. Setu Parvati Bayi vs Commissioner of Wealth Tax, Kerala referred to. Late P. Appavoo Pillai vs Commissioner of Wealth Tax Madras reversed.

Appeal No. 264 of 1956. Appeal by special leave from the Judgment and Order dated June 29, 1954, of the Bombay High Court in Appeal No. 127 of 1953. A. V. Viswanatha Sastri, Hemendra Shah, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for,the Appellant. J. C. Bhatt, C. J. Shah and Naunit Lal, for the Respondent. 1960. November 30. The Judgment of the Court was delivered by SARKAR, J. The appellant is a commission agent and pucca aratiya and has been acting as such for the respondent since November 7, 1951, in the course of which various contracts were made between them in Greater Bombay. On February 26, 1952, two of such contracts were outstanding, one of which was in respect of groundnuts and was a forward contract. In March 1952, disputes arose between the parties as to whether these contracts had been closed, each side making a claim on the other on the basis of its own contention. Eventually, on March 18, 1952, the appellant referred the disputes to arbitration under the arbitration clause contained in the contracts. On October 7, 1952, the arbitrators made one composite award for Rs. 22,529 15 9 against the respondent in respect of the said disputes. It is not very clear whether this award covered other disputes also. This award was duly filed in the Bombay City Civil 99 782 Court under the , for a judgment being passed on it. Thereafter, on July 17, 1953, the respondent made an application to the Bombay City Civil Court for setting aside the award contending that forward contracts in groundnuts were illegal as the making of such contracts was prohibited by the Oilseeds (Forward Contract Prohibition) Order, 1943, issued under the Essential Supplies (Temporary Powers) Act, 1946, and hence the arbitration clause con tained in the forward contract in groundnuts between the parties was null and void. It was said that the award based on that arbitration clause was therefore a nullity. The appellant 's answer to this contention was that the Essential Supplies (Temporary Powers) Act did not apply to Greater Bombay where forward contracts were governed by the Bombay Forward Contracts Control Act, 1947, hereafter called the Bombay Act, and as the contract in groundnuts had been made in terms of that Act, it was legal, and, therefore, the award in terms of the arbitration clause contained in it was a valid and enforceable award. The learned Principal Judge of the Bombay City Civil Court accepted the respondent 's contention and set aside the award. An appeal by the appellant to the High Court at Bombay against the judgment of the City Civil Court failed. The appellant has now come to this Court in further appeal. The only question in this appeal is whether the Essential Supplies (Temporary Powers) Act, which was passed by the Central Legislature in 1946, applied to Bombay? If it did, then the Oilseeds (Forward Contract Prohibition) Order, 1943, hereafter called, the Oilseeds Order, issued under it would make the contract in groundnuts illegal and no award could be made under the arbitration clause contained in it. This is not in dispute. Now, the Oilseeds Order was first passed in 1943 under r. 83 of the Defence of India Rules. The Defence of India Rules ceased to be in force on September 30, 1946. In the meantime however, as the situation had not quite returned to normal in spite of the termination of the war, the British Parliament passed 783 an Act on March 26, 1946, called the India (Central Government and Legislature) Act, 1946 (9 & 10 Geo. VI, Ch. 39), hereafter called the British Act. Section 2 of this Act provided that the Central Legislature of India would have power to make laws with respect to various matters therein mentioned notwithstanding anything in the Government of India Act, 1935, and that that power could be exercised during the period mentioned in section 4 and further that the laws so made to IV he extent they could not have been otherwise made, would cease to have effect at the expiration of that period. The Governor General under the powers reserved in section 4 and subsequently, the Constituent Assembly of India, under the powers conferred on it under the Indian Independence Act, 1947, extended the period mentioned in section 4 of the British Act from time to time and eventually up to March 31, 1951. It would be unprofitable for our purposes to refer to the various statutory provisions and orders under which this was done for, the extension is not in dispute. Under the powers conferred by the British Act, the Governor General promulgated the Essential Supplies (Temporary Powers) Ordinance, 1946, which came into force on October 1, 1946. On November 19, 1946, the Central Legislature under the same powers, passe the Essential Supplies (Temporary Powers) Act, 1946, hereafter called the Central Act, repealing the Ordinance and substantially incorporating its terms. The Central Act originally provided that it would cease to have effect on the expiration of the period mentioned is section 4 of the British Act. As the life of the British Act was extended from time to time, suitable amend ments were made in the Central Act extending its life also. Our Constitution came into force on January 26, 1950 and by virtue of article 372 the Central Act was continued as one of the existing laws. On August 16, 1950, under powers conferred by article 369 of the Constitution, Parliament passed the Essential Supplies (Temporary Powers) Amendment Act, 1950, Act LII of 1950, amending the Central Act in various respects and extending its life up to December 31, 1952. By another amendment made by Act LXV of 1952, the 784 life of the Central Act was extended till January 26, 1955. Section 3(1) of the Central Act is in these terms: "The Central Government, so far as it appears to it to be necessary or expedient for maintaining or increasing supplies of any essential commodity, or for securing their equitable distribution and availability at fair prices, may by notified order provide for regulating or prohibiting the production, supply and distribution thereof, and trade and commerce therein. " Section 2 of the Act provides that foodstuffs would be an essential commodity within the meaning of the Act and would include edible oilseeds. We have earlier stated that the Oilseeds Order was originally passed under the Defence of India Rules, which expired on September 30,1946. The Ordinance of 1946 continued in force, orders issued under the Defence of India Rules in so far as they were consistent with it and provided that such orders would be deemed to be orders made under it. Section 17(2) of the Central Act provided that an order deemed to be made under the Ordinance and in force immediately before its commencement would continue in force and be deemed to be an order made under it. As a result of the Ordinance and the Central Act replacing it and the extension of the life of the latter from time to time, the Oilseeds Order so far as it related to edible oilseeds including groundnuts, continued in force after the expiry of the Defence of India Rules till January 26, 1955. That Order, as so continued, prohibited the making of forward contracts, that is to say, contracts providing for delivery at a future date, in respect of certain specified oilseeds including groundnuts. It is the respondent 's contention that it is because of this order, read with the Central Act, that the contract in groundnuts between the parties was illegal and therefore the award made under the arbitration clause contained in it was void. Now the British Act under which the Central Act was passed, provided in sub sec. (4) of section 2 that, "Sub section (2) of section 107 of the Government of India Act, 1935, and sub section (2) of section 126 785 of that Act shall apply in relation to a law enacted by virtue of this section with respect to any matter being a matter with respect to which a Province has power to make laws as if that matter were a matter specified in Part 11 of the Concurrent Legislative List. " Section 107(2) of the Government of India Act, 1935, laid down that, "Where a Provincial law with respect to one of the matters enumerated in the Concurrent Legislative List contains any provision repugnantto the provisions of an earlier Federal lawthen if the Provincial law, having been reserved for the consideration of the Governor Generalhas received the assent of the Governor Generalthe Provincial law shall in that Province prevail It would follow from these provisions that if a Provincial Act which had received the assent of the Governor General, contained anything repugnant to a Central Act passed under the powers conferred by the British Act, then in the Province concerned, the Provincial Act would apply and not the Central Act. Now, the Bombay Act which had been passed by the Provincial Legislature of Bombay in 1947, came into operation in 1948. That Legislature had power to pass the Act and the Act had received the assent of the Governor General. At that time the Central Act deriving its force from the British Act, was in, operation. If, therefore, the Bombay Act was repugnant to the Central Act, in Bombay, the Bombay Act would apply and not the Central Act. This is not in dispute. The appellant contends that the Bombay Act is so repugnant and therefore the Central Act cannot render the forward contract in groundnuts made in, Greater Bombay, illegal and void. The question, therefore, is whether the Bombay Act, contains any provision repugnant to the Central Act. The preamble of the Bombay Act states that it was enacted as it was thought expedient to regulate and control forward contracts and for certain other matters. Section 1 of this Act came into force at once and gave power to the Government to bring into force by notification the remaining sections of the Act in the 786 whole of the Province of Bombay or parts thereof on such date and in respect of such goods as might be specified. The Government of Bombay issued notifications under this section on December 19, 1950, applying the remaining provisions of the Act to the area called Greater Bombay in respect of all varieties of oilseeds as from the said date. Section 8 of the Bombay Act provides as follows: section 8. (1) Every forward contract for the sale or purchase of, or relating to, any goods specified in the notification under sub section (3) of section I which is entered into, made or to be performed in any notified area shall be illegal if it is not entered into, made or to be performed (a)In accordance with such bye laws, made under section 6 or 7 relating to the entering into, making or performance of such contracts, as may be specified in the bye laws, or (b) (i) between members of a recognised association, (ii) through a member of a recognised association, or (iii) with a member of a recognised association, provided that such member has previously secured the written authority or consent, which shall be in writing if the bye laws so provide, of the person entering into or making the contract, and no claim of any description in respect of such contract shall be entertained in any civil court. (2) Any person entering into or making such illegal contract shall, on conviction, be punishable with imprisonment for a term which may extend to six months or with fine or with both. "Recognised association" is defined in the Bombay Act as an association recognised by the Provincial Government and on December 19, 1950, the Bombay Oilseeds Exchange Limited was recognised as such an association by the Government of Bombay. The appellant is a member of this association. The contracts between the parties were all expressly made subject to the rules and regulations of this Association. The case before us has proceeded on the basis that the impugned contract in groundnut had been made in compliance 787 with the requirements of section 8 and there is no finding to the contrary by the Courts below. We have hence to proceed on the same basis. The appellant contends that section 8 of the Bombay Act and section 3 of the Central Act are repugnant to each other. Now section 8 of the Bombay Act, it will, be noticed, does not purport to make any contract legal. Its only effect is to render forward contracts in all varieties of oilseeds illegal if not made in compliance with its terms. The learned Advocate for the appellant says that the effect of section 8 was to render a forward contract in all oilseeds made in terms of it, legal and, therefore, a repugnancy arose between its terms and the terms of the Oilseeds Order issued under the Central Act which made forward contracts in edible oilseeds illegal. The learned Advocate referred to various other provisions of the Bombay Act and the bye laws of the Association made in terms of the Act to show that the Bombay Act was intended to cover the entire field of forward contracts with respect to all varieties of oilseeds and was therefore intended to oust the operation of the Central Act in Greater Bombay with regard to the forward contracts covered by the former. It does not seem to us that a reference to the other provisions in the Bombay Act or to the bye laws, is relevant in deciding the question. If the effect of section 8 of the Bombay Act was not to render forward contracts made in terms of it legal, then no question of repugnancy with the Central Act can arise whatever may be the scope of the Bombay Act and the provisions in the bye laws. Therefore, it seems to us that the question is whether section 8 of the Bombay Act by its terms makes any forward contract legal. Section 3 of the Central Act, as already seen, gives power to the Central Government to prohibit trade and commerce in oilseeds. That Act, therefore, enable& the Central Government to make forward contracts in essential commodities as defined in it, illegal. That is what the Central Government did by the Oilseeds Order in so far as edible oilseeds are concerned. We find nothing in section 8 from which it can be said 788 that it rendered any contract legal. Its only intent and effect is to declare certain forward contracts illegal. We think that the matter was very correctly put by Chagla, C. J., who delivered the judgment of the High Court. He said, "All that Sec. 8 does is to declare that forward contracts will be illegal unless they comply with the procedure laid down in Sec. 8. But it is one thing to declare a certain contract illegal. It is entirely another thing to declare an illegal contract legal. Sec. 8 does not even make an attempt to declare that forward contracts declared illegal by the Central legislation shall be legal if they comply with the technicalities laid down in Sec. 8. The assumption underlying Sec. 8, it seems to us, is that forward contracts which the Legislature is dealing with are legal contracts, but even if they are legal they are declared to be illegal unless they are performed or made or entered into in the manner laid down in Sec. 8". With these observations we fully agree. In regard to the contention that section 8 of the Bombay Act necessarily implies that contracts made in terms of it would be legal, it seems to us that there is no such necessity indicated in the Act. The Act clearly intends only to create an illegality, that is to say, as Chagla, C. J. said, it takes a legal contract and imposes on it certain conditions and makes it illegal if those conditions are not fulfilled. If a contract is already illegal, there is no scope for applying the Bombay Act. Furthermore, the Bombay Act deals with all kinds of goods. Sub section (4) of section 2 of this Act defines goods as any kind of movable property including securities but not including money or actionable claims. Now the Central Act only applies to essential commodities as defined in it. Therefore, there would be many contracts to which the Central Act would not apply and such contracts may be rendered illegal by the Bombay Act if they come within its scope and are made in disregard of the conditions laid down in section 8. We, therefore, come to the conclusion that there is no repugnancy between the Bombay Act and the Central Act. It follows that there is no scope for 789 applying the provisions of section 107(2) of the Government of India Act, 1935. That would be the position in 1948, when the Bombay Act came into force and the Central Act was already in existence. Both the Acts would then be applying to Greater Bombay as there is no inconsistency between them. Article 372 of the Constitution continued both these Acts after the Constitution came into force and there is nothing in the Constitution which provides that any one of two existing laws, both of which had applied up to the coming into force of the Constitution, would apply to the exclusion of the other. It follows that in 1951 or 1952, when the contract in groundnuts which it is not disputed, was a forward contract within the meaning of both the Acts was made, both the Acts applied to it. The Constitution had not affected such application. That being the position, the contract in groundnuts must be held to be illegal under the Central Act which clearly prohibited the making of it. The Bombay Act could not make it legal for, as we have said, it was not intended to make any contract legal. It would follow that the arbitration clause contained in that contract was of no effect. It has therefore to be held that the award made under that arbitration clause is a nullity and has been rightly set aside. The award, it will have been noticed, was however in respect of disputes under several contracts, one of which we have found to be void. But as the award was one and is not severable in respect of the different disputes covered by it, some of which may have been legally and validly referred, the whole award was rightly set aside. The appeal, therefore, fails and is dismissed with costs. Appeal dismissed. 100 619 of the Act. These rules are called the Bihar Preservation and Improvement of Animals Rules, 1960. The provisions of r. 3 have also been impugned by the. petitioners by an amendment petition filed by them. Rule 3 so far as it is material. for our purpose is in these terms: "3(1). For the purpose of section 3 of the Act, the Veterinary Officer and the Chairman or Chief Officer, as the case may be, shall be the prescribed authority: Provided that where there is no Chairman or Chief Officer in respect of any area, the Veterinary Officer shall be the sole prescribed authority. (2) Where the authority prescribed under subrule (1) or sub rule (5) refuses to issue a certificate under the proviso to section 3, it shall record the reasons for the refusal and no such refusal shall be made unless the person 'applying for the certificate has been given a reasonable opportunity of being heard. (3). . . . . . . . . . (4)A bull, bullock or she buffalo in respect of which a certificate has been issued under section 3 shall not be slaughtered at any place other than the place indicated in the certificate and it shall be slaughtered within 20 days of the date of the receipt of the certificate by the person in whose favour it is issued. (5) In case of difference of opinion between the Veterinary Officer and the Chairman or Chief Officer, the matter shall be referred to the Sub divisional Animal Husbandry Officer or the District Animal Husbandry Officer, as the case may be, and the certificate shall be issued or refused according to the decision of the Sub divisional Animal Husbandry Officer or the District Animal Husbandry Officer, as the case may be.

Various contracts for sale of goods had been made between the parties in Bombay each of which contained an arbitration clause. Disputes having arisen in March, 1952, in respect of these contracts, they were referred to arbitration and a composite award was made on October 7, 1952, against the respondent. One of these disputes had arisen out of a forward contract in groundnuts. The respondent applied to have the award set aside on the ground that the forward contract in groundnuts was illegal as such a contract was prohibited by the Oilseeds (Forward Contract Prohibition) Order, 1943, issued under the Essential Supplies (Temporary Powers) Act, 1946, passed by the Central Legislature. The appellant contended that the Essential Supplies (Temporary Powers) Act, 1946, was repugnant to the Bombay Forward Contracts Control Act, 1947, passed by the Provincial Legislature of Bombay which had received the assent of the Governor General of India and therefore under section 107(2) of the Government of India Act, 1935, which applied, the Bombay Act prevailed in Bombay in preference to the Central Act and under the Bombay Act Forward Contract in groundnut was valid. The High Court accepted the contention of the respondent and set aside the award. Section 8 of the Bombay Act provided: "Every forward con tract for the sale or purchase of, or relating to, any goods specified in the notification under sub section (3) of section 1 which is entered into, made or to be performed in any notified area shall be illegal if it is not entered into, made or to be performed" and thereafter, set out the manner in which and the persons between whom such contracts could be made and also made punishable a person making a contract declared illegal. Section 3 of the Central Act provided, "The Central Govern ment may by notified order provide for prohibiting trade and commerce" in any essential commodity. Under this section the Oilseeds (Forward Contract Prohibition) Order was passed prohibiting forward contracts in groundnuts, which was one of the essential commodities specified in the Central Act. Held, The Bombay Act did not make any contract legal. Its only effect was to render certain forward contracts illegal if not 781 made in compliance with its terms while the Central Act made the contracts to which it applied, illegal. There was, therefore, no repugnancy between the Bombay Act and the Central Act and both of them applied to Bombay. Article 372 of the Constitution continued both these Acts, and so there is no provision in the Constitution under which any one of them may be said to apply to the exclusion of the other. A composite award in respect of more than one dispute which is not severable, must be set aside as a whole if any of the disputes had been illegally referred.

% In respect of sale of raw petroleum coke by petitioner to respondent there were three agreements, providing for sale, petitioner 's right to shift raw petroleum coke at the risk and expense of the respondent in case of failure of Respondent to shift the same as agreed, and the Respondent 's liability to pay interest on the value of stock not uplifted. There was default in payment and petitioner stopped supplies to respondent, filed a suit and obtained an order of attachment of stocks of raw petroleum coke, to the extent of Rs.6 crores, of the Respondent. The respondent filed an appeal as also an application for stay of the suit under Section 34 of the . Meanwhile the petitioner terminated the agreement. Thereafter the respondent filed a suit and the Court passed an order for restoration of supplies. On an appeal by the petitioner, this Court stayed the order of restoration of supplies, and recorded the compromise terms, pursuant to which all proceedings were withdrawn by the parties. The petitioner 's claim were referred to an Arbitrator, who passed an interim award, according to which the petitioner was not entitled to any interest nor any shifting charges. The petitioner challenged the said award, when it was filed in High Court. The High Court dismissed the petition and this special leave petition is against the High Court 's order. It was contended before this Court that the Arbitrator has failed to give a reasoned award and so it is bad in law. Dismissing the special leave petition, this Court, ^ HELD: 1. It is obligatory in England now after the Arbitration , that the award should give reasons. The purpose of Section 12 of the Act requiring the tribunal to furnish a statement of reasons if requested to do so before it gave its decision is to enable the person whose property or whose interests were affected, to know, if the decision was against him, what the reasons were. [435B C] 'Law of Arbitration ' by Justice R.S. Bachawat. First Edition 1983 pp. 320 and 321, referred to. 2.1 In India, there has been a trend that reasons should be stated in the award. The reasons that are set out must be reasons which will not only be intelligible but also deal with the substantial points that have been raised. When the arbitration clause required the arbitrator to give a reasoned award, the sufficiency of the reasons depend upon the facts of the particular case. He is not bound to give detailed reasons. [435C D] 2.2 The Court does not sit in appeal over the award and review the reasons. The Court can set aside the award only if it is apparent from the award that there is no evidence to support the conclusions or if the award is based upon any legal proposition which is erroneous.[435D E] 2.3 The award in question is unassailable. According to the Arbitrator, because of the letter dated 18th October, 1982 of the petitioner addressed to the Respondent stating that if the outstandings and interest are not paid, further supplies would not be made, has been acted upon by the petitioner, which had not delivered any coke to the respondent, or made any offer to do so, the petitioner was not entitled to the interest in respect of the period from 18th October, 1982 onwards, nor to shifting charges in respect of any shifting on or after 18th October, 1982. On this reasoning, he had given the award. How the Arbitrator has drawn inference is apparent from the reasons. No proposition was stated in the aforesaid reasons, which could be objected to as an error of law. The reasons given by the Arbitrator meet the requirements of a reasoned award. It is apparent that the arbitrator has not acted irrelevantly and unreasonably. [432E G; 434G H] 2.4 Arbitration procedure should be quick and that quickness of the decision can always be ensured by insisting that short intelligible indications of the grounds should be available to find out the mind of the arbitrator for his action. This was possible in the instant case where the arbitrator has spoken his mind, and he is clear as to how he acted 428 and why he acted in that manner.[434H; 435A] Champsey Bhara and Company vs Jivraj Balloo Spinning and Weaving Company Ltd., AIR, ; Hindustan Steelworks Construction Ltd. vs Shri C. Rajasekhar Rao, 3 S.C. 239; Siemens Engineering and Manufacturing Company of India Ltd. vs Union of India, [1976] Suppl. S.C.R. 489; Rohtas Industries Ltd. and Another vs Rohtas Industries Staff Union and others; , and Dewan Singh vs Champat Singh, ; , referred to Bremer Handelsgesellschaft vs Westzucker, [1981] 2 Lloyd 's Law Reports 130, referred to.

The appellants migrated to India in 1947 from West Pakistan. To begin with, they were given temporary allotment of land in two villages. In 1949, land was allotted to them on quasi permanent basis, and they have remained in possession of the same eversince. Originally, land was classified into two kinds: urban and agricultural land. Later on, a third classification was introduced, known as sub urban land. The two villages in which land was allotted to the appellants were not included in the notification with respect to sub urban land. In February, 1952, the Director of Rehabilitation passed and order declaring those villages as 734 sub urban land. The result of the order was that the allotment made to the appellants was to be reduced. The appellants went in revision to the Custodian General, and their revision petitions were dismissed on the ground that the view of Rule 14(6)(iii)(d) of the Rule it was open to the Central Government by a special order to direct cancellation or variation of the allotment made in favour of the appellants, and the Central Government has on the representation of the Punjab Government agreed to declare the two villages in question as sub urban by its order dated October 11, 1955. The appellants filed a writ petition in the High Court but that was dismissed summarily. The have come in appeal to this Court by special leave. ^ Held, that when the notification of March 24, 1955, was made under section 12 of the placed Persons (Compensation and Rehabilitation) Act, 1954, the evacuee property in those villages ceased to be evacuee property and became a part of the compensation pool. That property could only be dealt with under the Act of 1954. If any variation or cancellation of allotment was to he made that could be done only under the provisions of section 19 of Act of 1954. There was no power left in the Central Government to act under Rule 14(6)(iii)(d) of the Rules framed under the with respect to that land after the notification of March 24, 1955. Balmukand vs The State of Punjab, I.L.R. 1957 Punjab 712 and Major Gopal Singh vs Custodian of Evacuee Property, ; , followed.

In 1945 the first respondent Trustees of Port of Bombay, granted lease of plot owned by them for the purpose of erecting a godown for carrying on commercial activities at a monthly rent of Rs. 925. In 1946 the lessee erected a permanent godown. In 1958, he granted lease of the said godown to the petitioners. The first respondent filed a suit against the heirs of the original lessee for eviction on the ground of termination of tenancy, and obtained a decree. When warrant of possession was sought to be executed, the petitioners obstructed the execution of the decree. The first respondent thereupon took out a Chamber Summons for removal of obstruction under order 21 Rule 97 101 C.P.C. The petitioners contended that as they were lessees under the original lessee they were entitled to protection of the Bombay Rent, Hotel and Lodging Houses Rates (Control) Act, 1947 the Bombay Rent Act which applied to the building erected by a lessee from the local authority. The trial court rejected the petitioners ' objection and allowed the Chamber Summons. The appeal of the petitioners was dismissed by the Single Judge of the High Court holding that they were not entitled to the benefit of the Bombay Rent Act. The contentions arising out of the Easement Act and alleged acquiescence of the first respondent were negatived. The Letters Patent Appeal was also dismissed by the Division Bench. On the question whether the petitioners were entitled to protection under section 4(1)(a) of the Bombay Rent Act. 484 dismissing the Special Leave Petition, ^ HELD: Where a building was erected by the lessee not pursuant to or not under any agreement with the lessor then the case did not fall under section 4(1)(a) of the Bombay Rent, Hotel and Lodging Houses Rates (Control) Act, 1947. [486G] Section 4(1) gives immunity to the local authority in respect of the land which it has let out to the lessee and that immunity cannot be taken away merely because the lessor on his own volition and without being in obligation under any agreement choses to put up structures on that land. Therefore, if the premises belonged to the Government or a local authority then the Act would not apply. [486H; 487A, D] In the instant case, The lands belong to the local authority but the structures were put on by the lessees of the first respondent not under any building lease, and such protection cannot be claimed in respect of these premises. In view of the fact that the original lease was only a monthly tenancy and not a building lease, the High Court was right in dismissing the objections on behalf of the petitioners. Since the petitioners have been in possession of the premises for some time, the petitioners are allowed to continue to remain in the premises upto 15th September, 1988. [489F, H] Kanji Manji vs The Trustees of the Port of Bombay, [1962] Suppl. 3 S.C.R. 461 applied.

A drilling contract was entered into by the appellant and the respondent which provided that in the case of dif ferences arising out of the aforesaid contract, the matter shall be referred to arbitration, that the arbitration proceedings shall be held in accordance with the provisions of the Indian , and that the validity and interpretation thereof shall be governed by the laws of India. The agreed venue for hearing was London. A dispute arose between the parties and it was referred to Arbitration. Consequent upon the inability of the two Arbitrators to agree on the matters outstanding in the reference, the Umpire entered upon the arbitration and straight away rendered his interim award, without affording any hearing to the parties and the same was lodged in the 1025 High Court at the instance of the respondent. Subsequently, the Umpire rendered a final award relating to costs. About a mouth after the lodging of the award in the High Court, the respondent filed a plaint in the U.S. District Court seeking an order confirming the interim and final awards and a judgment against the appellant for the payment of a sum of $ 256,815.45 by way of interest until the date of judgment and costs etc. The appellant, however, instituted a Petition under Sections 30 and 33 of the for setting aside the aforesaid awards and for an interim order restraining the respondent from proceeding further with the action instituted in the U.S. Court. A Single Judge of the High Court granted exparte interim restraint order but vacated the same after hearing the parties. The High Court held that the action to enforce the award as a foreign award in the U.S. Court was quite in order and that the mere fact that a petition to set aside the award had already been instituted in the Indian Court and was pending at the time of the institution of the action in the U.S. Court was a matter of no consequence for the purposes of consideration of the question as to whether or not the respondent should be restrained from proceeding further with the action in the U.S. Court, that it was open to the respondent to enforce the award in the U.S. Court and, therefore, it would not be appropriate to grant the injunction restraining enforcement, and that it was open to the appellant to contend before the U.S. Court that the petition for setting aside the award cannot be said to be vexatious or oppressive. In the appeal to this Court it was submitted on behalf of the appellant that the award sought to be enforced in the U.S. Court may itself be set aside by the Indian Court and in that event, an extremely anomalous situation would be created, that since the validity of the award in question and its enforceability have to be determined by an Indian Court which alone has jurisdiction under the Indian Arbitra tion Act of 1940, the American Court would have no jurisdic tion in this behalf, that the enforceability of the award must be determined in the context of the Indian Law as the Arbitration proceedings are subject to the Indian Law and are governed by the Indian of 1940, and that if the award in question is permitted to be enforced in U.S. Court without its being confirmed by a court in India or U.S. Court it would not be in conformity with law, justice or equity. 1026 On behalf of the respondent it was contended that the action in the U.S.A. Court could not be considered as being oppressive to the appellant and that even if it is so, the High Court has no jurisdiction to grant such a restraint order, and that the appellant had suppressed the fact that it had appeared in the USA Court and succeed in pursuading the USA Court to vacate the seizure order obtained by the respondent and thereby disentitled itself to seek any equi table order. Allowing the appeal, this Court, HELD: 1. I Under the Indian law, an arbitral award is unenforceable until it is made a rule of the Court, and a judgment and consequential decree are passed ' in terms of the award. Till an award is transformed into a judgment and decree under Section 17 of the Indian , it is altogether lifeless, from the point of enforceability. Life is infused into the award in the sense of its becoming enforceable only after it is made a rule of the Court upon the judgment and decree in terms of the award being passed. [1042D E] 1.2 In the instant case, the arbitration proceedings are governed by the Indian of 1940 and a pro ceeding under the Act for affirming the award and making it a rule of the Court or for setting it aside can be institut ed only in an Indian Court. The expression "Court" as de fined by Section 2(e) of the Act leaves no room for doubt on this score and the Indian Court alone has the jurisdiction to pronounce on the validity or enforceability of the award. [1038A B] 2.1 Article V(1)(e) of the New York Convention provides that recognition and enforcement of the award will be re fused if the award "has not yet become binding on the par ties or has been set aside or suspended by a competent authority of the country in which or under the law of which that award was made." [1043A B] 2.2 The significance of the expression "not yet become binding on the parties" employed in Article V(1)(e) cannot be lost sight of. The expression postulates that the Conven tion has visualised a time later than the making of the award. [1044A B] 2.3 The award which is sought to be enforced as foreign award will have to be tested with reference to the key words contained in Article V(1)(e) of the Convention and the question will have to be answered whether the award has become binding on the parties or has not yet become binding on the parties. The test has to be applied in the 1027 context of the law of the country governing the arbitration proceedings or the country. under the law of which the award has been made. [1044C D] 2.4 The enforceability must be determined as per the law applicable to the award. French, German and Italian Courts have taken the view that the enforceability as per the law of the country which governs the award is the essential pre condition for asserting that it has become binding under Article V(1)(e). [1047B C] 2.5 India has acceded to the New York Convention. One of the Objects of the New York Convention was to evolve consen sus amongst the covenanting nations in regard to the execu tion of foreign arbitral awards in the concerned Nations. The necessity for such a consensus was felt with the end in view to facilitate international trade and commerce by removing technical and legal bottle necks which directly or indirectly impede the smooth flow of the river of interna tional commerce. Since India has acceded to this Convention it would be reasonable to assume that India also subscribes to the philosophy and ideology of the New York Convention as regards the necessity for evolving a suitable formula to overcome this problem. The Court dealing with the matters arising out of arbitration agreements of the nature envi sioned by the New York Convention must, therefore, adopt an approach informed by the spirit underlying the Convention. [1050G H; 1051A B] 3. Section 41 (b) of the Specific Relief Act will be attracted only in a fact situation where an injunction is sought to restrain a party from instituting or prosecuting any action in a Court in India which is either of co ordi nate jurisdiction or is higher to the Court from which the injunction is sought in the hierarchy of Courts in India. [1049B C] 4.1 There cannot be any doubt that the respondent can institute an action in the U.S. Court for the enforcement of the award in question notwithstanding the fact that the application for setting aside the award had already been instituted and was already pending before the Indian Court and that the appellant can approach the U.S. Court for seeking a stay of the proceedings initiated by the respond ent for procuring a judgment in terms of the award in ques tion. Merely on this ground the relief claimed by the appel lant cannot be refused. [1035B D] 4.2 As per the contract, while the parties are governed by the Indian and the Indian Courts have the exclusive jurisdiction to affirm or set aside the award under the said act, the respondent is seeking to violate the very arbitration clause on the basis of 1028 which the award has been obtained by seeking confirmation of the award in the New York Court under the American Law. This amounts to an improper use of the forum in American in violation of the stipulation to be governed by the Indian law which by necessary implication means a stipulation to exclude the USA Court to seek an affirmation and to seek it only under the Indian from an Indian Court. If the restraint order is not granted, serious prejudice would be occasioned and a party violating the very arbitra tion clause on the basis of which the award has come into existence will have secured an order enforcing the order from a foreign court in violation of the very clause. [1038D G] 5.1 The respondent has prayed for confirmation of award. The American Court may still proceed to confirm the award, and in doing so it would take into account the American law and not the Indian law or the Indian of 1940. The American Court will be doing so at the behest and at the instance of the respondent which has in terms agreed that the arbitration proceedings will be governed by the Indian of 1940. Not only the matter will be decided by a court other than the court agreed upon between the parties but it will be decided by a court under a law other than the law agreed upon. Such an unesthetic situation should not be allowed. Even though it was conceded by the respondent that the American Court has no jurisdiction to confirm the award in view of the New York Convention, in the event of the award rendered by the Umpire, the validity of which is not tested either by an American Court or an Indian Court, being enforced by an American Court, it will be an extremely uphill task to pursuade the Court to hold that a foreign award can be enforced on the mere making of it without it being open to challenge in either the country of its origin or the country where it was sought to be enforced. [1041H; 1042A, B C] 5.2 In the event of the award rendered by the Umpire being set aside by the Indian Court, an extremely anomolous situation would arise inasmuch as the successful party may well have recovered the amount awarded as per the award from the assets of the losing party in the USA after procuring a judgment in terms of the award from the USA Court, which would result in an irreversible the damage being done to the losing party for the Court in USA would have enforced a non existing award under which nothing could have been recovered. It would also result in the valuable court time in the USA being invested in a nonissue and the said Court would have acted on and enforced an award which did not exist in the eye of law. The USA Court would have done something which could not have been done if the respondent company 1029 had waited during the pendency of the proceedings in the Indian Court. The losing party in that event would be obliged to initiate fresh proceedings in the USA Court for the amount already recovered from it, pursuant to the judg ment rendered by the USA Court in enforcing the award which is set aside by the Indian Court. All this would happen if the restraint order as prayed by the losing party is not granted and this can be avoided if it is granted. [1037D H] 5.3 The American Court would have enforced an award which is a lifeless award in the country of its origin and under the law of the country of its origin which law governs the award by choice and consent. [1042E F] 6. I It would neither be just nor fair on the part of the Indian Court to deny relief to the appellant when it is likely to be placed in such an awkward situation if the relief is refused. It would be difficult to conceive of a more appropriate case for granting such relief. [1042G H] 6.2 The facts of this case are eminently suitable for granting a restraint order. No doubt, this Court sparingly exercises the jurisdiction to restrain a party from proceed ing further with an action in a foreign court. However, the question is whether on the facts and circumstances of this case it would not be unjust and unreasonable not to restrain the respondent from proceeding further with the action in the American Court. This is one of those rare cases where the Court would be failing in its duty if it hesitated in granting the restraint order, for, to oblige the appellant to face the aforesaid proceedings in the American Court would be oppressive in the facts and circumstances of the case. [1048C F] 6.3 It would be unfair to refuse the restraint order in a case like the present one for the action in the foreign court would be oppressive in the facts and circumstances of the case and in such a situation the courts have undoubted jurisdiction to grant such a restraint order, whenever the circumstances of the case make it necessary or expedient to do so or the ends of justice so require. [1049D E] 6.4 There was no deliberate suppression by the appel lant, and it would, therefore, not be proper to refuse relief to the appellant on this account. [1050B C] 6.5 While this Court is inclined to grant the restraint order, fairness demands that it should not be unconditional. There are good and valid reasons for making the restraint order conditional in the sense 1030 that the appellant should be required to pay the charges payable in respect of the user of rig belonging to the respondent Company at the undisputed rate regardless of the outcome of the petition instituted by it the High Court for setting aside the award rendered by the Umpire. [1050E G]. 6.6 It is no doubt true that if the arbitral award is set aside by the Indian Court no amount would be recoverable under the said award. That, however, does not mean that the liability to pay the undisputed amount which has already been incurred by the appellant disappears. It would not be fair on the part of the appellant to withhold the amount which in any case is admittedly due and payable. The re spondent can accept the amount without prejudice to its rights and contentious, to claim a larger amount. No preju dice will he occasioned to the appellant by making the payment of the admitted amount regardless of the fact that the respondent is claiming a larger amount. In any case the appellant which seeks an equitable relief cannot be heard to say that it is not prepared to act in a manner just and equitable regardless of the niceties and nuances Of legal arguments. [1051B E] [The order passed by the High Court on April 3, 1986 set aside, and the earlier order passed by it on January 20, 1986 restored subject to certain conditions imposed by the Court.] Cotton Corporation of India vs United Industrial Bank, ; ;V/O Tractoroexport, Moscow vs M/s Tarapore England Vol. 24 page 579 para 1039 referred to.

The respondents were lessees of the appellants for a period of 5 years from March 1, 1943. They were protected tenants under the Bombay Tenancy and Agricultural Lands Act, 1948. They contended that the appellants landlords could not claim eviction, because, being protected tenants their lease was extended by statute up to February 28, 1953, and as a result of the amendment of section 5 of the 1948 Act by amending Act of 1952 the period of lease was further extended upto February 28, 1963. On the question whether a protected tenant could claim the benefit of section 5 as amended by amending Act of 1952, HELD : Section 5 of the 1948 Act as amended in 1952 did not apply to protected tenancy. The principal reason was that the tenancy of a protected tenant under the 1948 Act was of unlimited time. Whereas a tenant other than a protected tenant had a security only for 10 years and it was only under section 5 as amended in 1952 that a tenant other than a protected tenant became entitled to renewal of the tenancy for a period of 10 years in succes sion as mentioned in the said section. Any such renewal, for periods of ten years, of a protected tenancy, would be destructive of the protected tenant 's unlimited security as to duration of tenancy. Secondly, if section 5 as amended in 1952 applied to protected tenants the manner of termination of tenancy mentioned in section 5, namely, by giving one year 's notice in writing before the end of each period of ten years would have been totally inconsistent with the manner of termination of tenancy of a protected tenant. The tenancy of a protected tenant could be terminated by one year 's notice on the grounds mentioned in section 34 whereas the tenancy of one other than a protected tenant, could be terminated on the grounds mentioned in section 34(1) only at the end of each period of ten years. Thirdly, if the word tenancy occurring in s.5as amended in 1952 related to protected tenancy the words "as if such atenant was a protected tenant in section 5(2) would not have been necessary". And finally, section 5 as amended in 1952 was in Ch. II which contained general provisions regarding tenancies and sections 31 and 34 of 1948 Act which related, to protected tenants occurred in Ch. III of the 1958 Act. [341 H 342 H] Trimbak Damodhar Rajpukar vs Assaram Patil, [1962] Supp. 1 S.C.R. 700, referred 'to.

The appellant company was engaged in the manufacturing of airconditioning and refrigeration equipment under a proper licence. On January 21, 1970 the appellant cleared from the factory cooling coils, condensers and compressors and supplied the same to M/s. Ravi Cold Storage, Ahmedabad for putting up a cold storage and paid duty of Rs.13,547.20 P in respect thereof. Again on January 21, 1969, the appel lant cleared from the factory various parts of refrigerating and air conditioning appliances and machinery for an Ice factory plant to one M/s. Gujarat Industrial Investment Corporation Ltd., Ahmedabad and paid a duty of Rs. 19,336.87P. Both the aforesaid goods were manufactured at the appellant 's factory. Thereafter the appellant filed two refund applications of the said excise duty before the Assistant Collector of Customs, contending that the refrig erating and air conditioning appliances which they had removed on the aforesaid dates were not excisable goods failing under Tariff Item No. 29A(3). The Assistant Collec tor of Customs rejected both the applications holding that the assessment was correctly made. The appellant company preferred two appeals against these orders before the Col lector of Customs and Central Excise, Chandigarh, who dis missed both the appeals. Thereupon the appellant filed a writ petition in the High Court. The learned single Judge who heard the petition dismissed the same holding that the goods supplied are parts of a refrigerating and air condi tioning appliances, that a complete cold storage plant was not supplied to M/s. Ravi Cold Storage, Ahmedabad or M/s. Gujarat Industrial Investment Corporation Ltd., Ahmedabad and that they would fail clearly within the purview of Tariff sub item (3) of Tariff Item 29 A. An appeal preferred against this judgment was dismissed by a Division Bench in limine. Hence this appeal. Before this Court also the appellant inter alia contended that 571 though in its sweep sub item (3) may appear to cover all and every part of refrigerating and air conditioning appliances and machinery of all sorts, the words "and parts thereof" in the heading controlled the meaning and restrict it in the context only to parts of a completed unit which as such completed unit would have come under sub items (1) and (2) of item 29 A. Dismissing the appeal, this Court, HELD: The legislative history and the notifications of the Government show that sub item (3) of item 29 A is a comprehensive provision encompassing within it all sorts of air conditioning and refrigerating appliances and machinery and the Government of India was issuing notifications of exemptions on the understanding that such parts are covered by sub item (3). The language used in sub item (3) is also wide and comprehensive in its application and could not be given a restricted meaning. Sub items (1), (2) and (3) are independent of each other and mutually exclusive. The scope of sub item (3) is neither restricted nor controlled by the provisions of sub items (1) and (2). [576C D] Whether the manufacturer supplies the refrigerating or airconditioning appliances as a complete unit or not is not relevant for the levy of duty on the parts specified in sub item (3) of item 29 A. [576F G] Complete plants which are covered by items (1) and (2) cannot be considered as parts of machinery and such complete plants would not be classifiable under sub item (3) of Item 29 A. [580B C] Mother India Refrigeration Industries Pvt. Ltd. vs Supdt. of Central Excise and Ors., All, overruled. Blue Star Ltd. vs Union of India and Anr., Bom. ; Joy Ice Cream, Bombay vs Union of India, Bom.; Calicut Refrigeration Co. vs Collector of Customs & Central Excise, Cochin and Ors. , Ker.; Chhibramau Cold Storage vs CEGAT, ; Goptal Cold Storage & Ice Factory vs Union of India and Ors., and Anil Ice Factory & Anr. vs Union of India and Ors., , referred to.

The appellant and the, respondent nominated their arbitrator who heard the matter at length and the proceedings had reached a stage when an award might have been pronounced. It was then that the appellant chose to obstruct the further progress of the proceedings by raising the plea that there was no, concluded contract. The appellant refused to apply under section 33 and so a stalemate issued because the arbi trators were, not entitled to proceed further, with the arbitration proceedings. , The respondent moved the court under section 28 along with section 33, for a decision of the question about the existence and validity of the. arbitration agreement and also prayed that extension of time be granted to ' the arbitrators for. making the award. The appellant pleaded in defence that ' there was no concluded contract, and there was no jurisdiction in the court to, grant extension under section 28 of the Act. The High Court confirmed the finding of the trial court that there was a concluded contract which contained a valid arbitration agreement. As for jurisdiction it held that since the petition had been filed as composit application under sections 28 and 33, it was open to the court under section 28 to enter upon the question of the existence or validity of the contract and so there was no substance in the point of jurisdiction raised by the appellant. It is against this decision that the appellant came up by special leave. Section 33 of the Arbitration, Act, :1940 consists of two parts the first part deals with a challenge to the existence or validity. of an arbitration agreement or an award and it provides that only persons who challenge the existence of the arbitration agreement that; can. apply under the first part of the section. The second. part of the section refers to the application made to have the effect of either the arbitra 770 an application can be made to have the effect or purport of the agreement determined but not its existence. That means that an application to have the effect of the agreement can be made provided the existence of the agreement is not disputed. The question is whether a person affirming an arbitration agreement can apply under the latter part of section 33 about the existence of the agreement or its validity. Held, that a party affirming the existence of an arbitration agreement cannot apply under section 33 for obtaining a decision that the agreement in question exists. An application to have the effect of the arbitration agreement determined can however, legitimately cover the dispute as to the existence of the said arbitration agreement. Section 32 of the Act creates a bar against the institution of suits with regard to an arbitration agreement or award on any ground whatsoever. Thus if a party affirms the existence of an arbitration agreement or its validity it is not open to the party to file a suit for the purpose of obtaining a declaration about the existence of the said agreement or its validity. The bar to the suit thus created by section 32. inevitably raises the question as to what remedy is open to a party to adopt in order to obtain a appropriate declaration about the existence or validity of an arbitration agreement. Held, that having regard to the scheme of sections 31, 32, 33 of the Act in matters which fall within the bar created by section 32, if a suit cannot be filed it is necessarily intended that an application can be made under the court 's powers provided for by section 31 and impliedly recognised by section 32 of the Act. Held, further that in holding that section 32 impliedly recogniscs the inherent jurisdiction of the court to entertain an application made by parties affirming the existence of an arbitration agreement the provisions of section 32 is brought it line with the provisions of sections 33 and 20 of the Act. Indeed section 33 is a corollary of section 32 and in a sense deals with the most usual type of cases arising in arbitration proceedings. A question arises whether an application ran be made under such inherent jurisdiction for declaration that the contract which includes the arbitration agreement includes cases where the arbitration agreement is made a part of the contract itself. Held, that where the challenge to the contract made in defence to the claim, is a challenge common to both the contract and the arbitration agreement, the petition in substance is a petition for a declaration as to the existence of a valid arbitration agreement and a suit to obtain such a declaration is clearly barred by section 32. The fact that an incidental declaration is claimed about the existence and validity of the main contract does not affect the essential 771 character of the application. It is an application for obtaining a declaration about the existence and validity of an arbitration agreement. Held, also that the powers to enlarge time for making the award which is the subject matter of section 28 does not include a power to entertain a petition for declaration that there was a concluded contract between the parties containing a valid arbitration agreement. Hayman vs Darwins. Ltd., , referred to. Messrs. M. Gulamali Abdulhussain & Co. vs Messrs. Vishwambharlal Buiya, I.L.R. , approved. Bajranglal Laduram vs Agarwal Brothers, A.I.R. 1950 Cal. 267 and State of Bombay vs Adamjeee Hajee Dawood & Co. Ltd. I.L.R. (1 952) , disapproved.

Appeals Nos. 187 and 190 of 1960. Appeals from the judgment dated 22nd January, 1957, of the Punjab High Court (Circuit Bench), Delhi, in Civil Reference No. 6 of 1953. Veda Vyasa, section K. Kapur and K. K. Jain, for the appellant. B. Ganapathi Iyer and D. Gupta, for the respondent. November 30. The Judgment of the Court was delivered by KAPUR, J. These appeals are brought by the assessee company against a common judgment and order of the Punjab High Court by which four appeals were decided in Civil Reference No. 6 of 1953. The appeals relate to four assessment years, 1947 48, 1948 49, 1949 50 and 1950 51. Two of these assessments, i.e., for the years 1947 48 and 1948 49 were made on the 800 appellant as successor to the two limited companies hereinafter mentioned. Briefly stated the facts of the case are that the appellant company was incorporated in the year 1947. Its objects inter alia were to acquire as a going concern activities, functions and business of the Delhi Stock & Share Exchange Limited and the Delhi Stock and Share Brokers Association Limited and to promote and regulate the business of exchange of stocks and shares, debentures and debenture stocks, Government securities, bonds and equities of any description and with a view thereto, to establish and conduct Stock Exchange in Delhi and/or elsewhere. Its capital is Rs. 5,00,000 divided into 250 shares of Rs. 2,000 each on which dividend could be earned. The appellant company provided a building and a hall wherein the business was to be transacted under the supervision and control of the appellant. The appellant company also made rules for the conduct of business of sale and purchase of shares in the Exchange premises. The total income for the year 1947 48 was Rs. 29,363 out of which a sum of Rs. 15,975 shown as admission fees was deducted and the income returned was Rs. 13,388. In the profit and loss account of that year Members ' admission fees were shown as Rs. 9,000 and on account of Authorised Assistants admission fees Rs. 6,875. The Income tax Officer who made the assessment for the year 1947 48 disallowed this deduction. The return for the following year also was made on a similar basis but the return for the years 1949 50 and 1950 51 did not take into account the admission fees received but in the Director 's report the amounts so received were shown as having been taken directly into the balance sheet. The Income tax Officer, however, disallowed and added back the amount so received to the income returned by the appellant. Against these orders appeals were taken to the Appellate Assistant Commissioner who set aside the additional assessments made under section 34 in regard to the assessment years 1947 48, 1948 49 and 1949 50 and the 4th appeal in regard to the year 1950 51 was decided against the appellant. Both sides appealed 801 to the Income tax Appellate Tribunal against the respective orders of the Appellate Assistant Commissioner and the Tribunal decided all the appeals in favour of the appellant. It was held by one of the members of the Tribunal that the amounts received as entrance fees were intended to be and were in fact treated as capital receipts and were therefore excluded from assessment and by the other that as there was no requisite periodicity, those amounts were not taxable. At the instance of the respondent a case was stated to the High Court on the following question: "Whether the admission fees of Members or Authorised Assistants received by the assessee is taxable income in its hands?" The High Court answered the question in favour of the respondent. The High Court held that the appellant was not a mutual society and therefore was not exempt from the payment of income tax; that it had a share capital on which dividend could be earned and any person could become a shareholder of the company by purchasing a share but every shareholder could not become a member unless he was enrolled, admitted or elected as a member and paid a sum of Rs. 250 as admission fee. On becoming a member he was entitled to exercise all rights and privileges of membership. It also found that the real object of the company was to carry on business as a Stock Exchange and the earning of profits. It was held therefore that the admission fees fell within the ambit of the expression "profits and gains of business, profession or vocation". The further alternative argument which was raised, i.e., that the income fell under section 10(6) of the Act, was therefore not decided. Mr. Veda Vyasa contended on behalf of the appellant that there were only 250 members of the appellant company; that the amount received as membership fees was shown as capital in the books of the company and there was no periodicity and therefore the amounts which had been treated as income should have been treated as capital receipts and therefore exempt from assessment. It was firstly contended that the question did not arise out of the order of the 802 Tribunal and that a new question had been raised but the objection is futile not only because of the absence of any such objection at the stage of the drawing up the statement of the case but also because of failure to object in the High Court; nor do we see any validity in the objection raised. That was the only matter in controversy requiring the decision of the court and was properly referred by the Tribunal. It was then contended that the question had to be answered in the light of facts admitted or found by the Tribunal and that the nature of the appellant 's business or the rules in regard to membership could not be taken into consideration in answering the question. That again is an unsustainable argument. The statement of the case itself shows that all these matters were taken into consideration by one of the members of the Tribunal and the learned judges of the High Court also decided the matter on that material which had been placed before the Income tax authorities and which was expressly referred to in their orders and which again was placed before the High Court in the argument presented there on behalf of the appellant company. It is wholly immaterial in the circumstances of the present case to take into consideration as to how the appellant treated the amounts in question. It is not how an assessee treats any monies received but what is the nature of the receipts which is decisive of its being taxable. These amounts were received by the appellant as membership admission fees and as admission fees paid by the members on account of Authorised Assistants. As far as the latter payment is concerned that would fall within the decision of this Court in Commissioner of Income tax. vs Calcutta Stock Exchange Association Ltd. (1) and therefore is taxable income. The former, i.e., members admission fees has to be decided in accordance with the nature of the business of the appellant company, its Memorandum and Articles of Association and the Rules made for the conduct of business. The appellant company was an association which carried on a trade and its profits were divisible as dividend amongst the shareholders. (1) 803 The object with which the company was formed was to promote and regulate the business in shares, stocks and securities etc., and to establish and conduct the business of a Stock Exchange in Delhi and to facilitate the transaction of such business. The business was more like that in Liverpool Corn Trade Association vs Monks (1). In that case an association was formed with the object of promoting the interest of corn trade with a share capital upon which the association was empowered to declare a dividend. The Association provided a Corn Exchange market, newsroom and facilities for carrying on business and membership was confined to persons engaged in the corn trade and every member was required to be a shareholder and had to pay an entrance fee. The Association also charged the members and every person making use of facilities a subscription which varied according to the use made by them. The bulk of the receipts of the Association was derived from entrance fees and subscriptions. It was therefore contended that the Association did not carry on a trade and that it was a mutual association and entrance fees and subscriptions should be disregarded in computing assessment of the assessable profits. It was held that it was not a mutual association whose transactions were inca pable of producing a profit; that it carried on a trade and the entrance fee paid by members ought to be included in the associations receipts for purposes of computing the profit. Rowlatt, J. said at p. 121: "I do not see why that amount is not a profit. The company has a capital upon which dividends may be earned, and the company has assets which can be used for the purpose of obtaining payments from its 'members for the advantages of such use, and one is tempted to ask why a profit is not so made exactly on the same footing as a profit is made by a railway company who issues a traveling ticket at a price to one of its own shareholders, or at any rate as much a profit as a profit made by a company from a dealing with its own shareholders in a line of business which is restricted to the shareholders." (1) 804 In Commissioner of Income tax, Bombay City vs Royal Western India Turf Club Ltd. (1) this Court rejected the applicability of the principle of mutuality because there was no mutual dealing between members inter se. There was no putting up a common fund for discharging a common obligation undertaken by the contributors for their mutual benefit and for this reason the case decided by the House of Lords in Styles V. New York Life Insurance Company (2) was held not applicable. In the present case the Memorandum of Association shows that the object with which the company was formed was to promote and regulate the business of exchange of stocks, shares, debentures, debenture stocks etc. The income, if any, which accrued from the business of the appellant company was distributable amongst the shareholders like in every joint stock company. According to the Articles of Association the members included shareholders and members of the Exchange and according to the rules and bye laws of the appellant company 'member ' means an individual, body of individuals, firms, companies, corporations or any corporate body as may be on the list of working members of the Stock Exchange for the time being. In the Articles of Association cls. 7 & 8, provision was made for the election of members by the Board of Directors and Rules 9 & 10 laid down the procedure for the election of these members. The entrance fees were payable by the trading members elected under the Rules and Bylaws of the Association, who alone with their Associates, could transact business in stocks and shares in the Association. Therefore, the body of trading members who paid the entrance fees, and the shareholders among whom the profits were distributed were not identical and thus the element of mutuality was lacking. It is the nature of the business of the company and the profits and the distribution thereof which are the determining factors and in this case it has not been shown that the appellants business was in any way different from that which was carried on in the (1) ; , 308. (2) ; 805 case reported as Liverpool Corn Trade Association vs Monks (1). In our opinion the judgment of the High Court is right and the appeals are therefore dismissed with costs. One hearing fee. Appeals dismissed.

The object with which the appellant company was formed was to promote and regulate the business in shares, stocks and securities etc., and to establish and conduct a Stock Exchange in order to facilitate the transaction of such business. Its capital was divided into shares on which dividend could be earned. it provided a building wherein business was to be transacted under its supervision and control. It made rules for the conduct of business of sale and purchase of shares in the Exchange premises. During the assessment year in question the company 's receipts consisted of certain amounts received as admission fee from Members and Authorised Assistants and the question stated to the High Court for its opinion was whether these fees in the hands of the appellant were taxable income. The High Court answered the question in the affirmative. It held that the appellant was not a mutual society, that dividends could be earned on its share capital, that any person could become a share holder but every share holder was not a member unless he paid the admission fee and the real object of the company was to carry on business of exchange of stocks and earn profits. The case of the appellant, inter alia, was that as the amount received as membership fee was shown as capital in the books of the company and there was no periodicity, it should be treated as capital receipt exempt from assessment. 799 Held, that the High Court was right in its decision and the appeals must be dismissed. It was wholly immaterial how the appellant treated the amounts in question. It is the nature of the receipt and not how the assessee treated it that must determine its taxability. AS: Since the fee received on account of Authorised Assisstants fall within the decision of this Court in Commissioner of Income tax vs Calcutta Stock Exchange Association Ltd., , it must be held to be taxable income. The question as to whether the Members ' admission fee was taxable income was to be determined by the nature of the business of the company, its profits and the distribution thereof as disclosed by its Memorandum and Articles of Association and the rules made for the conduct of business. They showed that the income of the company was distributable amongst its shareholders ;is in any other joint stock company, and the body of trading members who paid the entrance fees and share holders were not identical. The element of mutuality was, therefore, lacking. Liverpool Corn Trade Association vs Monks, (1926) 2 K. B. 110, applied. Commissioner of Income tax, Bombay City vs Royal Western India Turf Club Ltd., ; and Styles vs New York Life Insurance Co., ; , referred to.

The appellant firm M/s. Kishinchand Chellaram was assessed to tax for the assessment year 1947 48, the relevant accounting year being the year ending 6th April, 1947. The concerned Income Tax Officer on an information that a sum of Rs. 1,07,350 purported to have been sent by the assessee by a telegraphic transfer through the Punjab National Bank Ltd., Madras, to its Bombay Branch favouring one Nathirmal on 16 10 1946, has escaped assessment, called upon the assessee, through his letters dated 24th February, 1955 and 4th March, 1955 to explain the same. The Income Tax Officer did not refer to the letters dated 14th January, 1955 and 10th February, 1955 addressed by him to the Bank Manager nor the reply of the Manager dated 18th February, 1955 in the said two letters addressed to the assessee. Nor were the copies supplied to the assessee nor even made available on record before all authorities including the Supreme Court. The assessee through its letter dated 24th March, 1955 replied that as per its records no such remittance was ever sent by it from Madras to Nathirmal in Bombay. On 2nd February, 1956, the Income Tax Officer for the second time called the very same particulars to which the assessee by its letter dated 9th February, 1956 once again denied the remittance by it. Despite this, by his letter dated 4th March, 1957 addressed to the assessee, the Income Tax Officer repeated his earlier request to it to explain about the remittance, complaining at the same time of silence by the assessee to his letter dated 2nd February, 1956. The assessee in its reply dated 13th March, 1957 while inviting attention to its earlier replies dated 24th March, 1955 & 9th February, 1956 reiterated that no amount of Rs. 1,07,350 was remitted by it from Madras to Nathirmal. Disbelieving it, the Income Tax Officer, by his order brought to tax the amount of Rs. 1,07,350 on the ground that it represented the concealed income of the assessee and observed that "there was no reason to doubt the banker 's statement that the amount was remitted by M/s. Kishinchand Chellaram from Madras". The assessee preferred an appeal to the Assistant Appellate Commissioner. At this stage, it came to light that the purported telegraphic transfer was applied for by one "Tilok Chand C/o M/s. K. Chellaram, 181, Mount Road, Madras" and it was received at Bombay by one "N.B. Bani". In spite of the plea of the assessee that the transaction did not relate to its firm, the Assistant Appellate 721 Commissioner holding that the assessee has not discharged the burden of proof lying on it to explain the amount, rejected the appeal. Further appeal to the Tribunal and a reference called for by the High Court at the instance of the assessee was also answered against it. Hence the appeal after obtaining special leave of the Court. Allowing the appeal, the Court, ^ HELD: (1) There was no material evidence at all on the basis of which the Tribunal could come to the finding that the amount of Rs. 1,07,350 was remitted by the assessee from Madras and that it represented the concealed income of the assessee. [731E]. In the face of the application for remittance signed in the name of Tilok Chand, that this amount was sent by the assessee and the finding to that effect reached by the Tribunal is unreasonable and perverse. What at the highest could be said to be established by the material evidence on record is that Tilok Chand remitted the amount of Rs. 1,07,350 from Madras and this amount was received by Nathirmal in Bombay. Even if it is accepted that Tilok Chand and Nathirmal were employees of the assessee as held by the Tribunal, the utmost that could be said is that an employee of the assessee in Madras remitted the amount of Rs. 1,07,350 to another employee in Bombay. But, from this premise it does not at all follow that the remittance was made by the employee in Madras on behalf of the assessee or that it was received by the employee in Bombay on behalf of the assessee. The burden was on the Revenue to show that the amount of Rs. 1,07,350 said to have been remitted from Madras to Bombay belonged to the assessee and it was not enough for the Revenue to show that the amount was remitted by Tilok Chand, an employee of the assessee, to Nathirmal, another employee of the assessee. It is quite possible that Tilok Chand had resources of his own from which he could remit the amount of Rs. 1,07,350 to Nathirmal. It was for the Revenue to rule out this possibility by bringing proper evidence on record, for the burden of showing that the amount was remitted by the assessee was on the Revenue. [730H 731D] The two documents viz. the letters dated 18th February, 1955 and 9th March, 1957 did not constitute any material evidence which the Tribunal could legitimately have taken into account for the purpose of arriving at the finding that the amount of Rs. 1,07,350 was remitted by the assessee from Madras to Bombay because while the former was not disclosed to the assessee by the Revenue Authorities till the hearing before the Tribunal in regard to the preparation of the supplemental statement of the case, giving the assessee an opportunity to cross examine the Manager of the Bank, the latter was not disclosed to the assessee at any stage. Further, there is no explanation given by the Revenue as to how these two important documents were not traceable earlier. Even if these two letters were to be taken into account, they did not supply any reasonable basis for reaching the finding that it was the assessee which sent the remittance of Rs. 1,07,350. There can be no doubt that if the amount had been remitted by Tilok Chand on behalf of the assessee he would have signed the application for telegraphic transfer on behalf of the assessee and not in his own name. This apart it is impossible to believe that the Manager of the Bank could have failed to appear before the Income Tax Officer in answer to the summons dated 5th March, 1957 and there is no doubt that this statement must have been recorded and the said statement also withheld. [729H 730A; 729B, C; 730B, E; 729F G] 722 (2) It is true that the proceedings under the Income Tax law are not governed by the strict rules of evidence and therefore it might be said that even without calling the Manager of the Bank in evidence to prove this letter, it could be taken into account as evidence. But before the Income Tax Authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross examine the Manager of the Bank with reference to the statements made by him. Moreover, this letter was said to have been addressed by the Manager of the Bank to the Income Tax Officer on 18th February, 1955 in relation to a remittance alleged to have been sent on 16th October, 1946 and it is impossible to believe in the absence of any evidence to that effect, that the Manager who wrote this letter on 18th February, 1955 must have been incharge of the Madras Office on 16th October, 1946 so as to have personal knowledge as to who remitted the amount of Rs. 1,07,350. The Revenue authorities ought to have called upon the Manager of the Bank to produce the documents and papers on the basis of which he made the statements contained in his letter and confronted the assessee with those documents and papers but instead of doing so, the Revenue authorities chose to rely merely on the statements contained in the letter and that too, without showing the letter to the assessee. [728A F]

The Income tax Officer, by his order dated October 9, 1952, assessed the respondent for the assessment year 1952 53 and gave him credit for Rs. 50,603 15 0 as representing interest on tax paid in advance under section 18 A(5) of the Income tax Act. On May 24, 1953, the Indian Income tax (Amendment) Act, 1953, came into force adding a proviso to s.18 A(5) of the Act to the effect that the assessee was entitled to interest not on the whole of the advance tax paid by him but only on the difference between the payment made and the amount assessed. The Amendment Act provided that it shall be deemed to have come into force on April 1, 1952. The Income tax Officer, acting under section 35 of the Act, rectified the assessment order holding that the assessee was entitled to a credit of only Rs. 21,157 6 0 by way of interest on tax paid in advance as a result of the retrospective operation of the amendment in section 18 A(5), and issued a notice of demand against the assessee for the balance of Rs. 29,446 9 0. The assessee filed a petition in the High Court of Bombay. under article 226 of the Constitution praying for a writ prohibiting the appellants from enforcing the rectified order and notice of demand. The High Court issued the writ holding that section 35 was not applicable to the case as the mistake mentioned in section 35 had to be apparent on the face of the order and the question could only be judged in the light of the law as it stood on the day when the order was, passed: Held, that the Income tax Officer was justified in exercising his powers under section 35 and rectifying the mistake. As a result of, the legal fiction about the retrospective operation of the Amendment Act, the subsequently inserted proviso must be read as. forming part of section 18 A(5) of the principal Act as from April 1, 1952, and consequently the order of the income tax Officer dated October 9, 1952, was inconsistent with the provisions of the proviso, and suffered from a mistake apparent from the record. Commissioner of Income tax, Bombay Presidency and Aden vs 704 Khemchand Ramdas, (1938) L.R. 65 I.A. 236 and Moka Venkatap paiah vs Additional Income tax Officer, Bapatla, (1957)32 I.T.R. 274, referred to. The order passed by the Income tax Officer under section 18 A was not final in the literal sense of the word; it was and con tinued to be liable to be modified under section 35. It is also not correct to say that the retrospective operation of the amended s.18 A(5) was not intended to affect concluded transactions.

The appellant company which carried on business in tea garden tools and requisites and also acted as agents for selling tea, derived the bulk of its income from selling commission on tea. The assessment year in question is 1950 60. In the relevant previous year which ended on June 30, 1958 the assessee for the first time in its history entered into certain transactions in jute. On April 17, 1958 the assessee had contracted to purchase 1100 bales of B Twill and 2500 bales of corn sacks. the contract for B Twill was with two parties, M/s. Raghunath Sons (P) Ltd. for 500 bales and M/s. Mahadeo Ramkumar for 600 bales. The corn sacks were all purchased from Tulsider Jewaraj under three contracts for 800 bales, 1000 bales and 700 bales respectively. On June 18, 1958 the assessee entered into a contract with M/s. Lachhminarain Kanoria & Co. to sell the aforesaid quantities of B Twill and corn sacks. The assessee had no godown for keeping the goods and had not handled them. The goods were in the godown of the mills and only the delivery orders addressed to the mills changed hands. The amount realised on sale to M/s. Lachhminarain Kanoria & Co. came to Rs. 10,49,865/=. The assessee had however purchased the corn sacks and D Twill for Rs. 11,48,399/ . The transactions thus resulted in a loss of Rs, 98,534/=/ to the assessee and the assessee claimed adjustment of this loss in the computation of its income for the assessment year 1959 60. The Income tax officer held that the transactions involving mere transfer of delivery notes and not actual delivery of the goods were of a speculative character as contemplated in explanation 2 to sec. 24(1) and the loss could be set off only against speculation profits, and as there were no speculation profits is that year, he held that the loss would be carried forward and set off against speculation profits in the future. The appellate Commissioner on appeal by the assessee held that the transaction were not speculative and the loss should be treated as business loss. In appeal by the Department, the Tribunal held that this case came within the scope of Sec. 24(1 ) read with explanation 2 and restored the order of the Income tax officer. In reference, the High Court answered the question formulated by the Tribunal in the affirmative and against the assessee. Section 24(1) of the Indian Income tax Act, 1922, provides 'that where an assessee sustains a loss under any of the heads of income chargeable to income tax as enumerated in 9. 6 of the Act in any year, he shall be entitled to have the loss set off against his income, profits or gains under any other head in that year. This general provision is qualified by the first proviso which permits the set off of a loss in speculative business against the assessee 's profit and gains, if any, in a similar business only. Explanation 1 says that where the speculative transactions are of such a nature as to constitute a business, the business shall be deemed to be distinct and separate from any other business. Explanation 2 defines a speculative transaction as a transaction in which a contract for purchase and sale of any commodity is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity. This appeal has been preferred by the assessee company after obtaining special leave from this Court, Dismissing the appeal, 181 ^ HELD: The words actual delivery in explanation 2 means real as opposed to notional delivery. For the income tax purposes speculative transaction means what the definition of that expression in explanation 2 says. Whether a transaction is speculative in the general sense or under the Contract Act is not relevant for the purpose of this explanation. The definition of "delivery" in section 2(2) of the which has been held to include both actual and constructive or symbolical delivery has no bearing on the definition of speculative transaction in the explanation. A transaction which is otherwise speculative would not be a speculative transaction within the meaning of explanation 2 if actual delivery of the commodity or the scrips has taken place; on the other hand, a transaction which is not otherwise speculative in nature may yet 'be speculative according to explanation 2 if there is no actual delivery of the commodity or the scrips. The explanation does not invalidate speculative transactions which are otherwise legal but gives a special meaning to that expression for purpose of income tax only. The question referred to the High Court in the present case has been correctly answered. [186E G; 187D] D. M. Wadhwana vs Commissioner of Income tax West Bengal , approved. Raghunath Prasad Poddar vs Commissioner of Income fax, Calcutta , over ruled. Duni Chand Rataria vs Bhuwalka Brothers Ltd. ; Bayana Bhimayya and Sukhdevi Rathi vs The Government of Andhra Pradesh ; and The State of Andhra Pradesh vs Kolla Sreeramamurthy, ; , held inapplicable. Manalal M. Varma & Co. (P) Ltd. vs Commissioner of Income tax, and Butterworty vs Kingsway, , referred

The respondent company purchased certain machinery for Rs. 89,000 and sold it for the same value, but in the books of account the written down value of the machinery was shown in the year of account as Rs. 73,392. The Income Tax Officer in computing the assessable income of the company added the difference, i.e. Rs. 15,608, between the actual value and the written down value to the profit of the company. The Income Tax Officer also passed an order under section 23A of the Income Tax Act, and directed that the undistributed portion of the assessable income, shall be deemed to have been distributed amongst the shareholders as dividend. Appeals against the order of the Income tax Officer proved unsuccessful and the Appellate Tribunal referred the following question to the High Court under section 66(1): "Whether the sum of Rs. 15,608 should have been included in the assessee company 's "profit" for the purpose of deter mining whether the payment of a larger dividend than that declared by it would be unreasonable. " The High Court answered the question in the negative. On appeal by special leave, Held, that the view taken by the High Court was correct. 494 By the fiction in section 10(2)(Vii) second proviso, read with s.2(6C), what is really not income is, for the purpose of computation of assessable income, made taxable income: but on that account, it does not become commercial profit, and if it is not commercial profit, it is not liable to be taken into account in assessing whether in view of the smallness of profits a larger dividend would be unreasonable. "Smallness of profit" should not be equated with "smallness of assessable income" but should be determined in accordance with commercial principles. Sir Kasturchand Ltd. vs Commissioner of Income tax, Bombay City, (1949) XVII I.T.R. 493, Ezra Proprietary Estates Ltd. vs Commissioner of Income tax, West Bengal, (1950) XVIII I.T.R. 762 and Commissioner of Income tax Bombay City vs F. L. Smith & Co. (Bombay) Ltd., (1959) XXXV I.T.R. 183, referred to.

The appellant assessee filed a memorandum of appeal to the Assistant Commissioner, Sales Tax, stating therein that the amount of admitted tax had been paid and forfeited the statement by an affidavit. Before the hearing, he produced a certificate from the Sales Tax Officer that the tax had been paid. The Assistant Commissioner relying on the Allahabad High Court 's decision in Swastika Tannery, Jaimau vs Commissioner of Sales tax, U.P. rejected as defective the memorandum of appeal, holding that it was not accompanied by the challan showing the deposit of admitted tax under section 9 of the Uttar Pradesh Sales Tax Act, 1948 and r. 66 of the U.P. Sales tax Rules. Against this order the assessee directly filed special leave to appeal to this Court without exhausting the remedies of revision and reference provided in the Act. This Court granted Special Leave and; HELD:The appeal must be allowed. (i) By the word "entertain" in the proviso to section 9 is meant the first occasion on which the Court take up the matter for consideration. It may be at the admission stage or if by the rules of that Tribunal, the appeals are automatically admitted, it will be the time of hearing of the appeal. But on the first occasion when the court takes up the matter for consideration, satisfactory proof must be presented that the tax was paid within the period of limitation available for the appeal. Rule 66(2) lays down one uncontestable mode of proof which the Court will always accept but it does not exclude the operation of the proviso when equally satisfactory proof is made available to the officer hearing the appeal and it is proved to his satisfaction that the payment of the tax has been duly made and in time. [512E F; 513E G] In the present case, when the Assistant Commissioner took tip the appeal for consideration, satisfactory proof was available in the shape of a certificate. Swastika Tannery of Jaimau vs Commissioner of Sales tax, U.P. Lucknow, (1963) 14 S.T.C. 518, disapproved. Kundan Lal vs Jagannath Sharma, A.I.R. 1962 All. 547; Dhoom Chand Jain vs Chaman Lal Gupta and Anr. A.I.R. 1962 All. 42: Haji Rahim Bux & Sons & Ors. vs Firm Samiullah & Sons, A.I.R. 1963 All. 320, approved. (ii) Though this Court would not ordinarily grant special leave to appeal against an order when other remedies were available and had not been exhausted, there is no inflexible rule that this Court will never entertain such an appeal. It would have been futile in this case for the assessee to have gone to the court of revision which was bound by the decision in Swastika Tannery of Jaimau vs Commissioner of Sales tax, U.P. and it would have been equally 506 futile to have gone to the High Court on a reference. The matter was more easily disposed of by giving special leave in this Court and this was one of those extra ordinary cases in which the ends of justice would be better served, by avoiding a circuity of action and by dealing with this matter in this Court directly. [513H 514C]

For the assessment years 1956 57 and 1957 58, the appellant was, assessed to sales tax in respect of Vanaspati and oil under the U.P. Sales Tax Act, 1948. By a notification issued on March 31, 1956 under section 3 A(2), the rate of tax on Vanaspati was fixed at one anna per rupee at the point of sale by the manufacturer. The appellant and section P. Bhasin, a shareholder of the company, filed a writ petition in the High Court challenging the validity of the U.P. Sales Tax Validation Act, 1958 and also prayed for the quashing of the assessment order dated October 15, 1960 and the order dated February 1, 1961, of the Sales Tax Judge (Appeals), Meerut, in connection with the assessment of tax on the sale of Vanaspati and other articles both on the ground that the sale tax was assessed at a higher rate than was permissible under a valid law and that the tax had been assessed at the rate of one anna and not at 6 Naya Paisa per rupee. The writ petition was dismissed by a single Judge of the High Court and the Letters Patent Appeal was also dismissed by High Court. The appellant came to this Court by special leave. The only point urged before this Court was that the tax should have been calculated at the rate of 6 Naya Paisa per rupee and not at the rate of one anna per rupee as laid down in the relevant provisions of the U.P. Sales Tax Act and the notice issued under its provisions. Dismissing the appeal, Held (per P, B. Gajendragadkar, C.J., M. Hidayatullah, K. C. Das Gupta and Raghubar Dayal, JJ.): The High Court was right in construing the provisions of sub section (3) of section 14 of Indian to mean that references to values in any enactment, notification, rule or order under any enactment or in any contract, deed or instrument, expressed in old coins should be construed to be references to values expressed in new coins by converting the old values at the rate of16 annas, 64 pice and 192 pies to 100 Naya Paisa. The values expressed in new coins must be absolutely equivalent to the value of the, old coins. Per Shah, J. The liability for sales tax after the amendment of the will be at the rate of 6 new coins for every rupee of sale price and not one anna. By the notification issued on March 31, 1956, the liability for payment of sales tax was to be computed at the rate of one anna in a rupee of the turnover. By virtue of section 14(3), for an anna mentioned in the notification, 6 1/4 new coins are to be substituted. As the substituted rate involves a fraction, by the process of rounding off at the rate specified in section 14(2), the fraction of new coins has to be omitted and the nearest new coins, i.e., 6 new coins are to be deemed to be substituted in the statute. J. K. Jute Mills Co. Ltd. vs State of Uttar Pradesh, ; , Ram Kishan Sunder Lal vs State of Uttar Pradesh, 13 S.T.C. 923, 315 M/s. Mangalore Ganesh Beedi Works vs State of Mysore, [1963] Supp. 1 S.C.R. 275, referred to.

The appellant, a sterling company carrying on business in tea with its Head office in the United Kingdom, invested in the shares of other tea companies in different parts of the world, and had a hundred per cent share holding in an Indian subsidiary. The appellant was assessed under the Indian Income Tax Act 1922. For the assessment year 1955 56 the appellant was assessed on its total world income on the basis of provisional figures of its business loss including depreciation, and its income from individuals. As its Indian income exceeded its income outside India it was assessed as a resident. Meanwhile the appellant had already been assessed for the subsequent assessment year 1956 57 in the status of a 'non resident ' and its income from dividends was assessed under the head 'Income from other Sources '. The loss determined for the assessment year 1955 56 could not be carried forward and set off against the income for the assessment year 1956 57, as the latter assessment was made subsequent to the farmer. The appellant preferred two revision applications, one each for the assessment years 1955 56 and 1956 57 under sub section (2) of section 33A. In the revision application for the assessment year 1955 56, the appellant claimed that the quantum of loss determined for that year having been based on provisional figures should be revised on the basis of final figures certified by an Inspector of Taxes in the United Kingdom, that the loss should be ascertained for the purpose of carrying it forward, and that the loss should be bifurcated between an unabsorbed deprecia 981 tion and other loss. In the revision application for the assessment year 1956 57, the appellant claimed a set off of the loss determined for the assessment year 1955 56 against the income of the assessment year 1956 57 on the ground that the shares held by it in different companies constituted its trading assets and the dividend income accruing therefrom should be regarded as income from accruing therefrom should be regarded as income from business. During the pendency of these revision petitions the assessment for the assessment year 1957 58 was completed as a non resident, and the income was determined as receipt by way of dividends on its share holdings. In the appeal to the Appellate Assistant Commissioner, it was claimed that the loss for the assessment year 1955 56 should be carried forward and set off against the income of the assessment year 1957 58 under sub section (2) of section 24 because both the losses and the income arose from business carried on by the appellant, but the appeal was dismissed holding that there would be no loss if the loss for the assessment year 1955 56 was set off against the income for the assessment year 1956 57 and that the loss could not be legally set off directly in the assessment year 1957 58. In further appeal, the Income Tax Appellate Tribunal set aside the order of the Appellate Assistant Commissioner and directed it to dispose of the appeal afresh after determining whether the appellant was entitled to set off a business loss arising outside the taxable territories for the assessment year 1955 56 against the dividend income arising in the taxable territories for the assessment year 1957 58. The reference to the High Court was declined by the Appellate Tribunal. The revision application pertaining to the assessment year 1955 56 was allowed subject to the claim being verified in regard to the figures and calculation of depreciation by the Income Tax Officer. The revision application pertaining to the assessment year 1956 57, however, was rejected holding that the dividends earned by the appellant from the investments in shares of companies carrying on the tea business could not be said to be a part of the appellant 's business because the investments were not incidental to the appellant 's business activities and were not held as trading assets, that the companies from which the dividend was earned were not companies of which the appellant was managing agent, that a set off cannot be allowed to the extent of the 982 unabsorbed depreciation brought forward from the assessment year 1955 56 against the business income derived during the assessment year 1956 57, and that there was no business income in the assessment year 1956 57. A Petition under article 226 filed by the appellant against the disposal of his revision application for the assessment year 1956 57 was dismissed by a Single Judge, and the appeal against that order as well as dismissed. In the appeal to this Court on behalf of the appellant it was contended: (1) that if this Court clarified that the Appellate Assistant Commissioner can proceed in the appeal relating to the assessment year 1957 58 pending before him without being influenced by the observations of the Commissioner of Income Tax and the High Court in the case relating to the assessment year 1956 57 on the aspect of carry forward of loss under sub section (2) of section 24, the appeal would not be pursued, and that if such clarification is not possible then this Court should confine itself to the case relating to the assessment year 1956 57; (2) that the Commissioner of Income Tax had conceded in an earlier proceeding that the dividend income was income from business; (3) that the loss should be carried forward under sub section (2) of section 24 from the assessment year 1955 56, to the assessment year 1956 57 and it is not necessary that the business carried on in the assessment year 1956 57 should be the same as that carried on in the assessment year 1955 56, and (4) that the claim of the appellant to carry forward of unabsorbed depreciation under sub section (2) of section 10 should be allowed. Partly allowing the Appeal, ^ HELD: 1. The order of the Division Bench and of the Single Judge as well as the order of the Commissioner of Income Tax on the revision application for the assessment year 1956 57 are set aside in regard to the claim of the appellant to the carry forward of unabsorbed depreciation and the Commissioner is directed to dispose of the revision application afresh. As to the rest of the reliefs the appeal is dismissed. [992C D] 2. Income tax is a single charge on the total income of an assessee. For the purpose of computation the statute recognises different classes of income which it classifies under different heads of income. For each head of income the statute has provided the mode of computing the quantum of such income. The mode of computation varies with 983 the nature of class of such income, for the deductions permissible under the law in computing the income under each head bear a particular relevance to the nature of the income. [988B C] 3. The statute operates on the principle that it is the net income under each head which should be considered as a component of the total income. The statute permits specified deductions from the gross receipt in order to compute the net income. The net income under the different heads is then pooled together to constitute the total income. The process of computation at this stage takes in the provisions relating to the carry forward and setting off of losses and of unabsorbed depreciation. On the conclusion of the entire process of assessment what emerges is the figure of taxable income, the quantum of income which is assessed to tax. [988C E] 4. Ordinarily when income pertains to a certain head, the source of such income is peculiar to that head, but it is not unusual that commercial considerations may properly describe the source differently. For instance, a banking concern may hold securities in the course of its business. The securities constitute its trading assets and income from them would in the commercial sense be regarded as business income. However, for the purposes of computation under the income tax, the income from such securities would be computed not under the head 'Income from Business ' but under the head 'Interest on Securities '. [988E G] 5(i) Business income is broken up under different heads only for the purpose of computation of the total income, and that by such breakup the income does not cease to be the income of the business. [988G] 5(ii) Section 6 of the Indian Income Tax Act 1922, which classified the taxable income under different heads made such classification only for the purpose of computation of the net income of the assessee. [989C] United Commercial Bank Ltd. vs Commissioner of Income Tax, ; Commissioner of Income Tax, Bombay City vs Chugandas and Co., ; ; Commissioner of Income tax, Andhra Pradesh vs Cocandada Radhaswami Band Ltd., and O.RM.M.SP.SV. Firm vs Commissioner of Income tax, Madras, , 410 followed. The mere circumstance that the appellant showed the dividend income under the head 'Income from other Sources ' in its returns can 984 not in law decide the nature of the dividend income. It must be determined from the evidence whether having regard to the true nature and character of the income it could be described as income from business, even though it is liable to fall for computation under another head. [989F G] 7. In the instant case, the appellant placed material before the Commissioner of Income tax showing that it held shares in companies carrying on the tea business, and that in India it enjoyed a hundred per cent share holding in the Indian subsidiary. But in order that the share holdings in tea companies should be regarded as the business assets of the appellant there must be material evidence indicating that the ownership of the share holdings is necessarily incidental to the business of tea carried on by the appellant or that the share holdings are held as business assets. [989H; 990A B] 8. From the material placed before the Court, the Revenue cannot be said to have admitted that the dividend income received by the appellant from its share holdings in other companies can be regarded as part of the appellant 's income from business. [990F G] 9. The loss cannot be carried forward under sub section (2) of section 24 from the assessment year 1955 56 to the assessment year 1956 57 because the shares held by the appellant cannot be regarded as its trading assets. [991A B]

Appeal No. 264 of 1956. Appeal by special leave from the Judgment and Order dated June 29, 1954, of the Bombay High Court in Appeal No. 127 of 1953. A. V. Viswanatha Sastri, Hemendra Shah, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for,the Appellant. J. C. Bhatt, C. J. Shah and Naunit Lal, for the Respondent. 1960. November 30. The Judgment of the Court was delivered by SARKAR, J. The appellant is a commission agent and pucca aratiya and has been acting as such for the respondent since November 7, 1951, in the course of which various contracts were made between them in Greater Bombay. On February 26, 1952, two of such contracts were outstanding, one of which was in respect of groundnuts and was a forward contract. In March 1952, disputes arose between the parties as to whether these contracts had been closed, each side making a claim on the other on the basis of its own contention. Eventually, on March 18, 1952, the appellant referred the disputes to arbitration under the arbitration clause contained in the contracts. On October 7, 1952, the arbitrators made one composite award for Rs. 22,529 15 9 against the respondent in respect of the said disputes. It is not very clear whether this award covered other disputes also. This award was duly filed in the Bombay City Civil 99 782 Court under the , for a judgment being passed on it. Thereafter, on July 17, 1953, the respondent made an application to the Bombay City Civil Court for setting aside the award contending that forward contracts in groundnuts were illegal as the making of such contracts was prohibited by the Oilseeds (Forward Contract Prohibition) Order, 1943, issued under the Essential Supplies (Temporary Powers) Act, 1946, and hence the arbitration clause con tained in the forward contract in groundnuts between the parties was null and void. It was said that the award based on that arbitration clause was therefore a nullity. The appellant 's answer to this contention was that the Essential Supplies (Temporary Powers) Act did not apply to Greater Bombay where forward contracts were governed by the Bombay Forward Contracts Control Act, 1947, hereafter called the Bombay Act, and as the contract in groundnuts had been made in terms of that Act, it was legal, and, therefore, the award in terms of the arbitration clause contained in it was a valid and enforceable award. The learned Principal Judge of the Bombay City Civil Court accepted the respondent 's contention and set aside the award. An appeal by the appellant to the High Court at Bombay against the judgment of the City Civil Court failed. The appellant has now come to this Court in further appeal. The only question in this appeal is whether the Essential Supplies (Temporary Powers) Act, which was passed by the Central Legislature in 1946, applied to Bombay? If it did, then the Oilseeds (Forward Contract Prohibition) Order, 1943, hereafter called, the Oilseeds Order, issued under it would make the contract in groundnuts illegal and no award could be made under the arbitration clause contained in it. This is not in dispute. Now, the Oilseeds Order was first passed in 1943 under r. 83 of the Defence of India Rules. The Defence of India Rules ceased to be in force on September 30, 1946. In the meantime however, as the situation had not quite returned to normal in spite of the termination of the war, the British Parliament passed 783 an Act on March 26, 1946, called the India (Central Government and Legislature) Act, 1946 (9 & 10 Geo. VI, Ch. 39), hereafter called the British Act. Section 2 of this Act provided that the Central Legislature of India would have power to make laws with respect to various matters therein mentioned notwithstanding anything in the Government of India Act, 1935, and that that power could be exercised during the period mentioned in section 4 and further that the laws so made to IV he extent they could not have been otherwise made, would cease to have effect at the expiration of that period. The Governor General under the powers reserved in section 4 and subsequently, the Constituent Assembly of India, under the powers conferred on it under the Indian Independence Act, 1947, extended the period mentioned in section 4 of the British Act from time to time and eventually up to March 31, 1951. It would be unprofitable for our purposes to refer to the various statutory provisions and orders under which this was done for, the extension is not in dispute. Under the powers conferred by the British Act, the Governor General promulgated the Essential Supplies (Temporary Powers) Ordinance, 1946, which came into force on October 1, 1946. On November 19, 1946, the Central Legislature under the same powers, passe the Essential Supplies (Temporary Powers) Act, 1946, hereafter called the Central Act, repealing the Ordinance and substantially incorporating its terms. The Central Act originally provided that it would cease to have effect on the expiration of the period mentioned is section 4 of the British Act. As the life of the British Act was extended from time to time, suitable amend ments were made in the Central Act extending its life also. Our Constitution came into force on January 26, 1950 and by virtue of article 372 the Central Act was continued as one of the existing laws. On August 16, 1950, under powers conferred by article 369 of the Constitution, Parliament passed the Essential Supplies (Temporary Powers) Amendment Act, 1950, Act LII of 1950, amending the Central Act in various respects and extending its life up to December 31, 1952. By another amendment made by Act LXV of 1952, the 784 life of the Central Act was extended till January 26, 1955. Section 3(1) of the Central Act is in these terms: "The Central Government, so far as it appears to it to be necessary or expedient for maintaining or increasing supplies of any essential commodity, or for securing their equitable distribution and availability at fair prices, may by notified order provide for regulating or prohibiting the production, supply and distribution thereof, and trade and commerce therein. " Section 2 of the Act provides that foodstuffs would be an essential commodity within the meaning of the Act and would include edible oilseeds. We have earlier stated that the Oilseeds Order was originally passed under the Defence of India Rules, which expired on September 30,1946. The Ordinance of 1946 continued in force, orders issued under the Defence of India Rules in so far as they were consistent with it and provided that such orders would be deemed to be orders made under it. Section 17(2) of the Central Act provided that an order deemed to be made under the Ordinance and in force immediately before its commencement would continue in force and be deemed to be an order made under it. As a result of the Ordinance and the Central Act replacing it and the extension of the life of the latter from time to time, the Oilseeds Order so far as it related to edible oilseeds including groundnuts, continued in force after the expiry of the Defence of India Rules till January 26, 1955. That Order, as so continued, prohibited the making of forward contracts, that is to say, contracts providing for delivery at a future date, in respect of certain specified oilseeds including groundnuts. It is the respondent 's contention that it is because of this order, read with the Central Act, that the contract in groundnuts between the parties was illegal and therefore the award made under the arbitration clause contained in it was void. Now the British Act under which the Central Act was passed, provided in sub sec. (4) of section 2 that, "Sub section (2) of section 107 of the Government of India Act, 1935, and sub section (2) of section 126 785 of that Act shall apply in relation to a law enacted by virtue of this section with respect to any matter being a matter with respect to which a Province has power to make laws as if that matter were a matter specified in Part 11 of the Concurrent Legislative List. " Section 107(2) of the Government of India Act, 1935, laid down that, "Where a Provincial law with respect to one of the matters enumerated in the Concurrent Legislative List contains any provision repugnantto the provisions of an earlier Federal lawthen if the Provincial law, having been reserved for the consideration of the Governor Generalhas received the assent of the Governor Generalthe Provincial law shall in that Province prevail It would follow from these provisions that if a Provincial Act which had received the assent of the Governor General, contained anything repugnant to a Central Act passed under the powers conferred by the British Act, then in the Province concerned, the Provincial Act would apply and not the Central Act. Now, the Bombay Act which had been passed by the Provincial Legislature of Bombay in 1947, came into operation in 1948. That Legislature had power to pass the Act and the Act had received the assent of the Governor General. At that time the Central Act deriving its force from the British Act, was in, operation. If, therefore, the Bombay Act was repugnant to the Central Act, in Bombay, the Bombay Act would apply and not the Central Act. This is not in dispute. The appellant contends that the Bombay Act is so repugnant and therefore the Central Act cannot render the forward contract in groundnuts made in, Greater Bombay, illegal and void. The question, therefore, is whether the Bombay Act, contains any provision repugnant to the Central Act. The preamble of the Bombay Act states that it was enacted as it was thought expedient to regulate and control forward contracts and for certain other matters. Section 1 of this Act came into force at once and gave power to the Government to bring into force by notification the remaining sections of the Act in the 786 whole of the Province of Bombay or parts thereof on such date and in respect of such goods as might be specified. The Government of Bombay issued notifications under this section on December 19, 1950, applying the remaining provisions of the Act to the area called Greater Bombay in respect of all varieties of oilseeds as from the said date. Section 8 of the Bombay Act provides as follows: section 8. (1) Every forward contract for the sale or purchase of, or relating to, any goods specified in the notification under sub section (3) of section I which is entered into, made or to be performed in any notified area shall be illegal if it is not entered into, made or to be performed (a)In accordance with such bye laws, made under section 6 or 7 relating to the entering into, making or performance of such contracts, as may be specified in the bye laws, or (b) (i) between members of a recognised association, (ii) through a member of a recognised association, or (iii) with a member of a recognised association, provided that such member has previously secured the written authority or consent, which shall be in writing if the bye laws so provide, of the person entering into or making the contract, and no claim of any description in respect of such contract shall be entertained in any civil court. (2) Any person entering into or making such illegal contract shall, on conviction, be punishable with imprisonment for a term which may extend to six months or with fine or with both. "Recognised association" is defined in the Bombay Act as an association recognised by the Provincial Government and on December 19, 1950, the Bombay Oilseeds Exchange Limited was recognised as such an association by the Government of Bombay. The appellant is a member of this association. The contracts between the parties were all expressly made subject to the rules and regulations of this Association. The case before us has proceeded on the basis that the impugned contract in groundnut had been made in compliance 787 with the requirements of section 8 and there is no finding to the contrary by the Courts below. We have hence to proceed on the same basis. The appellant contends that section 8 of the Bombay Act and section 3 of the Central Act are repugnant to each other. Now section 8 of the Bombay Act, it will, be noticed, does not purport to make any contract legal. Its only effect is to render forward contracts in all varieties of oilseeds illegal if not made in compliance with its terms. The learned Advocate for the appellant says that the effect of section 8 was to render a forward contract in all oilseeds made in terms of it, legal and, therefore, a repugnancy arose between its terms and the terms of the Oilseeds Order issued under the Central Act which made forward contracts in edible oilseeds illegal. The learned Advocate referred to various other provisions of the Bombay Act and the bye laws of the Association made in terms of the Act to show that the Bombay Act was intended to cover the entire field of forward contracts with respect to all varieties of oilseeds and was therefore intended to oust the operation of the Central Act in Greater Bombay with regard to the forward contracts covered by the former. It does not seem to us that a reference to the other provisions in the Bombay Act or to the bye laws, is relevant in deciding the question. If the effect of section 8 of the Bombay Act was not to render forward contracts made in terms of it legal, then no question of repugnancy with the Central Act can arise whatever may be the scope of the Bombay Act and the provisions in the bye laws. Therefore, it seems to us that the question is whether section 8 of the Bombay Act by its terms makes any forward contract legal. Section 3 of the Central Act, as already seen, gives power to the Central Government to prohibit trade and commerce in oilseeds. That Act, therefore, enable& the Central Government to make forward contracts in essential commodities as defined in it, illegal. That is what the Central Government did by the Oilseeds Order in so far as edible oilseeds are concerned. We find nothing in section 8 from which it can be said 788 that it rendered any contract legal. Its only intent and effect is to declare certain forward contracts illegal. We think that the matter was very correctly put by Chagla, C. J., who delivered the judgment of the High Court. He said, "All that Sec. 8 does is to declare that forward contracts will be illegal unless they comply with the procedure laid down in Sec. 8. But it is one thing to declare a certain contract illegal. It is entirely another thing to declare an illegal contract legal. Sec. 8 does not even make an attempt to declare that forward contracts declared illegal by the Central legislation shall be legal if they comply with the technicalities laid down in Sec. 8. The assumption underlying Sec. 8, it seems to us, is that forward contracts which the Legislature is dealing with are legal contracts, but even if they are legal they are declared to be illegal unless they are performed or made or entered into in the manner laid down in Sec. 8". With these observations we fully agree. In regard to the contention that section 8 of the Bombay Act necessarily implies that contracts made in terms of it would be legal, it seems to us that there is no such necessity indicated in the Act. The Act clearly intends only to create an illegality, that is to say, as Chagla, C. J. said, it takes a legal contract and imposes on it certain conditions and makes it illegal if those conditions are not fulfilled. If a contract is already illegal, there is no scope for applying the Bombay Act. Furthermore, the Bombay Act deals with all kinds of goods. Sub section (4) of section 2 of this Act defines goods as any kind of movable property including securities but not including money or actionable claims. Now the Central Act only applies to essential commodities as defined in it. Therefore, there would be many contracts to which the Central Act would not apply and such contracts may be rendered illegal by the Bombay Act if they come within its scope and are made in disregard of the conditions laid down in section 8. We, therefore, come to the conclusion that there is no repugnancy between the Bombay Act and the Central Act. It follows that there is no scope for 789 applying the provisions of section 107(2) of the Government of India Act, 1935. That would be the position in 1948, when the Bombay Act came into force and the Central Act was already in existence. Both the Acts would then be applying to Greater Bombay as there is no inconsistency between them. Article 372 of the Constitution continued both these Acts after the Constitution came into force and there is nothing in the Constitution which provides that any one of two existing laws, both of which had applied up to the coming into force of the Constitution, would apply to the exclusion of the other. It follows that in 1951 or 1952, when the contract in groundnuts which it is not disputed, was a forward contract within the meaning of both the Acts was made, both the Acts applied to it. The Constitution had not affected such application. That being the position, the contract in groundnuts must be held to be illegal under the Central Act which clearly prohibited the making of it. The Bombay Act could not make it legal for, as we have said, it was not intended to make any contract legal. It would follow that the arbitration clause contained in that contract was of no effect. It has therefore to be held that the award made under that arbitration clause is a nullity and has been rightly set aside. The award, it will have been noticed, was however in respect of disputes under several contracts, one of which we have found to be void. But as the award was one and is not severable in respect of the different disputes covered by it, some of which may have been legally and validly referred, the whole award was rightly set aside. The appeal, therefore, fails and is dismissed with costs. Appeal dismissed. 100 619 of the Act. These rules are called the Bihar Preservation and Improvement of Animals Rules, 1960. The provisions of r. 3 have also been impugned by the. petitioners by an amendment petition filed by them. Rule 3 so far as it is material. for our purpose is in these terms: "3(1). For the purpose of section 3 of the Act, the Veterinary Officer and the Chairman or Chief Officer, as the case may be, shall be the prescribed authority: Provided that where there is no Chairman or Chief Officer in respect of any area, the Veterinary Officer shall be the sole prescribed authority. (2) Where the authority prescribed under subrule (1) or sub rule (5) refuses to issue a certificate under the proviso to section 3, it shall record the reasons for the refusal and no such refusal shall be made unless the person 'applying for the certificate has been given a reasonable opportunity of being heard. (3). . . . . . . . . . (4)A bull, bullock or she buffalo in respect of which a certificate has been issued under section 3 shall not be slaughtered at any place other than the place indicated in the certificate and it shall be slaughtered within 20 days of the date of the receipt of the certificate by the person in whose favour it is issued. (5) In case of difference of opinion between the Veterinary Officer and the Chairman or Chief Officer, the matter shall be referred to the Sub divisional Animal Husbandry Officer or the District Animal Husbandry Officer, as the case may be, and the certificate shall be issued or refused according to the decision of the Sub divisional Animal Husbandry Officer or the District Animal Husbandry Officer, as the case may be.

Various contracts for sale of goods had been made between the parties in Bombay each of which contained an arbitration clause. Disputes having arisen in March, 1952, in respect of these contracts, they were referred to arbitration and a composite award was made on October 7, 1952, against the respondent. One of these disputes had arisen out of a forward contract in groundnuts. The respondent applied to have the award set aside on the ground that the forward contract in groundnuts was illegal as such a contract was prohibited by the Oilseeds (Forward Contract Prohibition) Order, 1943, issued under the Essential Supplies (Temporary Powers) Act, 1946, passed by the Central Legislature. The appellant contended that the Essential Supplies (Temporary Powers) Act, 1946, was repugnant to the Bombay Forward Contracts Control Act, 1947, passed by the Provincial Legislature of Bombay which had received the assent of the Governor General of India and therefore under section 107(2) of the Government of India Act, 1935, which applied, the Bombay Act prevailed in Bombay in preference to the Central Act and under the Bombay Act Forward Contract in groundnut was valid. The High Court accepted the contention of the respondent and set aside the award. Section 8 of the Bombay Act provided: "Every forward con tract for the sale or purchase of, or relating to, any goods specified in the notification under sub section (3) of section 1 which is entered into, made or to be performed in any notified area shall be illegal if it is not entered into, made or to be performed" and thereafter, set out the manner in which and the persons between whom such contracts could be made and also made punishable a person making a contract declared illegal. Section 3 of the Central Act provided, "The Central Govern ment may by notified order provide for prohibiting trade and commerce" in any essential commodity. Under this section the Oilseeds (Forward Contract Prohibition) Order was passed prohibiting forward contracts in groundnuts, which was one of the essential commodities specified in the Central Act. Held, The Bombay Act did not make any contract legal. Its only effect was to render certain forward contracts illegal if not 781 made in compliance with its terms while the Central Act made the contracts to which it applied, illegal. There was, therefore, no repugnancy between the Bombay Act and the Central Act and both of them applied to Bombay. Article 372 of the Constitution continued both these Acts, and so there is no provision in the Constitution under which any one of them may be said to apply to the exclusion of the other. A composite award in respect of more than one dispute which is not severable, must be set aside as a whole if any of the disputes had been illegally referred.

The respondent company was a manufacturer of edible and non edible oils and was registered as a " dealer " under the United Provinces Sales Tax Act, 1948. Its year of account commenced on June 1, and ended on May 31 of the next year. Under section 7(1) of the Act read. with rule 39 of the rules framed thereunder the respondent exercised the option of being assessed on the turnover of the previous year and submitted its return for the assessment year 1948 49 on its taxable turnover of the previous year ending May 31, 1947. The Sales Tax Officer assessed the turnover in respect of edible oil at 3 pies per rupee under section 3, but in respect of non edible oil he held that since a notification dated June 8, 1948, issued under section 3(A) had come into force from June 9, of the assessment year providing for the levy of tax at 6 pies per rupee, the assessee was liable to be assessed at 3 pies per rupee on the turnover during the first 69 days of the year and at 6 pies per rupee for the remaining days of the year. On appeal by the assessee the appellate authority modified the order and directed that the tax be levied at a flat rate of 3 Pies on both edible and non edible oils. This order was set aside by the revising authority and the order of the Sales Tax Officer was restored. On a direction made by the High Court the revising authority submitted a question for opinion. The High Court held that the assessee was liable to pay the tax at a flat rate of 3 pies per rupee. On appeal by the Commissioner of Sales Tax by special leave, Held (per Hidayatullah, Das Gupta and Sliah, jj.), affirming the view of the High Court, that the assessee who elected to submit his return on the turnover of the previous year, is liable to be assessed to sales tax at the rate in force on the first day of the year of assessment because the liability arises on that date, and any subsequent enhancement of the rate by virtue of a notification under section 3(A) does not alter that liability. A taxing statute must be interpreted in the light of what 190 is clearly expressed therein and nothing can be implied nor can provisions be imported into them so as to supply an assumed deficiency. Per section K. Das and Ayyangar, JJ. The rate of tax as applied by the sales tax officer was in accordance with law. Having regard to the scheme underlying the option to elect for a previous year turnover conferred by section 7(1) of the Act the change in the law and in the rate of tax effected during the assessment year must apply to the turnover of the previous year which is deemed to be the turnover of the assessment year and sales effected during that period have to be assessed at the rate prevailing in that year. Although the notification was prospective and was made with the object of changing the rate of taxation during the assessment year, the date mentioned therein did not prevent the application of the assessment year rate to the opted previous year turnover. It is not correct to say that there is absence of machinery for reassessment and refund of tax to justify the conclusion that the basis of the tax liablity for an assessment year is that which prevailed on the first day of that year since there are provisions in the Act such as for instance sections 10 and 22 which provide for reductions, refunds and rectification of errors regarding taxation and even for enhancement of the tax already levied. There was no ambiguity in the notification and the principle of resolving ambiguities in favour of the assessee could not be applied in this case.

Certain lands were situated in the erstwhile State of Baroda before it became a part of the State of Bombay by merger. The Bombay Tenancy and Agricultural Lands Act, 1948, was extended to Baroda on August 1, 1949. Suits were filed in the Civil Court by appellants landlord , against the respondents who were their tenants on the ground that the latter became trespassers with effect from the beginning of the new agricultural season in May, 1951. Decrees for possession were passed by the Civil Court in favour of landlords and the same were confirmed by the first appellate court. However, the High ' Court accepted the appeals and dismissed the suits. It was held that under the provisions of section 3 A(1) of the Bombay Tenancy Act, 1939, as amended, a tenant would be deemed to be a protected tenant from August 1, 1950 and that vested right could not be affected by the notification dated April 24, 1951 issued under section 89 (1) (d) of the Act of 1948 by which the land in suit was excluded from the operation of the Act. The notification dated April 24, 1931 had no retrospective effect and did not take away the protection 708 afforded to tenants by section 3A. The landlords came to this Court by special leave. It was conceded that the appellants ' suits for possession would fail if the Act applied to the tenancies in question, because in that case only revenue courts had jurisdiction to try them. However, reliance was placed on notification dated April 24,1951 which excluded the land in suit from the operation of the Act. It was also contended on behalf of appellants that the subsequent notification cancelling the first one, could not take away the rights which had accrued to them as a result of the first notification. Held, that the notification dated April 24, 1951 was cancelled by another notification dated January 12, 1953. The second notification was issued when the matter was still pending in the first court of appeal. The suits had therefore to be decided on the basis that there was no notification in existence which would take the disputed lands out of the operation of the Act. The first appellate court was wrong in holding that the suits had to be decided on the basis of facts in existence on the date of filing of the suits. Held, further, that the second notification cancelling the first one did not take away any rights which had accrued to the landlords. If the landlords had obtained an effective decree and had succeeded in ejecting the tenants as a result of that decree which may have become final between the parties, that decree may not have been re opened and the execution taken thereunder may not have been recalled. However, it was during. the pendency of the suit at the ap pellate stage that the second notification was issued cancelling the first and the court was bound to apply the law as it was on the date of its judgment. Held, also, that clauses (a), (b) and (c) of section 88(1) applied to things as they were on the date of the commence ment of the Act of 1948 whereas clause (d) authorised the State Government to specify certain areas as being reserved for urban non agricultural or industrial development, by notification in the Official Gazette, from time to time. It was specifically provided in clauses (a) to (c) that the Act, from its inception, did not apply to certain areas then identified, whereas clause (d) had reference to the future. The State Government could take out of the operation of the Act such areas as in its opinion should be reserved for urban nonagricultural or 'industrial development. Clause (d) would come into operation only upon such a notification being issued by the State Government. In Sukharam 's case, this Court never intended to lay down that the provisions of 709 clause (d) were only prospective and had no retrospective operation. Unlike clauses (a) to (c) which were clearly prospective, clause (d) had retrospective operation in the sense that it would apply to land which would be covered by the notification to be issued by the Government from time to 2 time so as to take that land out of the operation of the Act of 1948, granting the protection. So far as clauses (a) to (c) were concerned, the Act of 1948 would not apply at all to lands covered by them, but that would not take away the rights conferred by the Act of 1939 which was repealed by the Act of 1948. Section 89(2) specifically preserved the existing rights under the repealed Act. Sukharam 's case was about the effect of clause (c) on the existing rights under the Act of 1939 and it was in that connection that this Court observed that section 88 was prospective. However clause (d) is about the future, and unless it has the limited retrospective effect indicated earlier, it will be rendered completely nugatory. The intention of the legislature obviously was to take away all the benefits arising out of the Act of 1948 (but not those arising from the Act of 1939) as soon as the notification was made under clause (d). Sakharam vs Manikchand Metichand Shah, ; , explained.

This appeal to the Supreme Court was from a reversing decree of the Bombay High Court in a suit for possession of certain immovable properties. The suit was dismissed by the trial court on 20 12 1946, the value of properties being found to be over Rs. 10,000. The decree of the High Court allowing the plaintiff 's claim was passed on the 8th November 1949. The defendants applied to the High Court for leave to appeal to the Federal Court on 6 1 1950 which was granted on 1 10 1951. One of the questions for determination was whether article 133 of the Constitution applied to the case and the appeal was competent to the Supreme Court. Held, that article 133 did not apply as it relates expressly to appeals against any judgment, decree or final order in a civil proceeding of a High Court in the "territory of India". Held further that on the date of the decree of the High Court, the defendants had a vested right of appeal to the Federal Court as the properties were of the requisite value and on 6 1 1950 a certificate of leave to appeal was bound to be granted. Held also that the appeal was competent to the Supreme Court by virtue of the provisions of article 135 of the Constitution as the jurisdiction and powers in relation to the matter in dispute were exercisable by the Federal Court immediately before the commencement of the Constitution under an existing law inasmuch as the Federal Court had jurisdiction to entertain and hear appeals from a decree of a High Court which reversed the lower court 's decree as regards properties of the value of more than Rs. 10,000. The construction contended for by the respondent that the jurisdiction was exercisable under article 135 by the Federal Court only if the matter was actually pending before the Federal Court and that it could not be said to be pending until the appeal is declared admitted under Order XLV of the Civil Procedure Code is 873 too narrow and does not give full and proper scope to the meaning of the word 'exercisable ' in the Article.

% A contract was entered into by the parties in 1970 71. The award was made by the Arbitrator in 1982. The award was challenged before the subordinate Judge who upheld the same. Appeal to the High Court against the order of the Subordinate Judge was dismissed. The petitioners moved this Court by special leave against the order of the High Court and contended inter alia that since a similar matter of unreasoned award had been referred by the Court to a Constitution Bench of the Court, this petition for special leave be also similarly referred to the Constitution Bench. Dismissing the petition with a modification of the award, the Court, ^ HELD: In the facts and circumstances of this peculiar case, the matter is not referred to the Constitution Bench. [147B] It appears from the order of the High Court that the point of unreasoned award, though taken in the petition of appeal, was not pressed before the High Court. Further, the Arbitrator had been appointed by the Court out of the panels submitted by the contesting parties. Also, in the case of an allied contract in respect of another flat in the same building, an award had been made and the same had been made the rule of the Court subject to the certain conditions. [146G H] The award is modified to the extent that the interest awarded from the commencement of the reference before the Arbitrator to the date of the award, is set aside, which is in consonance with the views expressed by this Court in Executive Engineer Irrigation Galimala and Ors. vs Abaaduta Jena, ; [147C D]

A mortgage deed was executed by the respondent company and one of its directors in favour 'of the State of Kerala. It was provided inter alia by the terms of the deed that in consideration of the State granting a loan of a sum of Rs. 2.5 lakhs to the company, the latter would supply to the State 3,000 tons of ground ,nut cake within a specified period and make deliveries in accordance with instructions to be given by the State, and the account for this supply will be adjusted against the loan amount and the interest thereon. It was common ground however that the loan amount, though acknowledged in the mortgage deed as received by the company, was never in fact advanced by the State. The respondent company arranged for the supply of goods as agreed and sought the necessary instructions for delivery, but, these we 're never given. The company instituted a suit in March 1953 against the appellant State for damages for failure to, advance the loan amount and for breach of contract to purchase the groundnut cake. The trial court decreased the suit for Rs. 36,000 being damages for failure to advance the loan and for Rs. 1,23,000 as damages for breach of contract. An appeal to the High Court challenging the liability of the State to compensate the company for failure to take delivery of the goods was dismissed. It was contended on behalf of the State that the obligation to take delivery of the goods agreed to be purchased was contingent upon the Government 's advancing the loan amount, so long as the amount was not advanced by the State, the mortgage was not in law effective and the Company could not enforce the contract relating to ground nut cake a. reed to be purchased by the State. , HELD : Dismissing the appeal) A transaction of mortgage formally executed does not become void or ineffective merely because the mortgagee fails to advance the amount of money undertaken to be advanced by him. Under the terms of the mortgage deed liability of the State to purchase the groundnut cake. from the Company was not made conditional upon the State advancing the loan. By failing to advance the loan amount the State could not avoid liability to carry out the obligation to purchase the goods contracted to be purchased. Even if it be assumed that the indenture incorporated reciprocal promises, in the absence of any express provision to that effect the contract could not be terminated by the default of the State. Breach of contract by one party does not automatically terminate the obligation under the contract : the injured party has the option either to treat the contract as still in existence, or to regard himself as discharged. If he accepts the discharge of the contract by the other party, the contract is 557 at an end. If he does not accept the discharge, he may insist on performance. [560 C D; 561 D]. Tatia v Babaji, I.L.R. , Rashik Lal vs Ram Narain and Others, I.L.R. 34 All. 273, Dip Narain Singh V. Nageshar Prasad and Others, I.L.R. 52 All. 338, White and Carter (Councils) Ltd., vs Mc Gregor, ; referred to. There was no substance in the, contention, that the State was by its default liable to, compensate the Company only for loss arising out of its failure to advance the money, and not out of its 'failure to purchase the goods. The State 's undertakings to advance the loan and to take delivery of ground nut cake were two independent, though inter related transactions; and by committing a breach of its own obligation to advance the loan, the State did not absolve itself from liability for the breach arising from its refusal to take delivery of the goods offered [561 F H].

The appellant in the appeals was the tenant of the demised premises who was inducted as a monthly tenant for the purpose of conducting the ice cream business carried on by her husband. The letting was done on an agreement dated December 29, 1975 by the landlord respondent which was to become effective from January 1, 1976. The landlord alleged that in breach of the agreement and the terms of the tenancy, as also in violation of the prohi bition prescribed under section 13(1) of the Bombay Rents, Hotels & Lodging House Rates (Control) Act, 1947 the tenant had indulged in several acts of commission by which not only there had been permanent alterations of major nature, but the entire structure of the demised premises was completely changed. it was also alleged that the tenant had indulged in acts of waste and damage to the property, and that she had changed the user of the premises when some of the employees started residing there. On the basis of the aforesaid allegations the landlord gave a notice to quit dated 20th September, 1978 to the tenant. Thereafter in 1979 the landlord fried a suit against the tenant in the Small Causes Court for possession of the demised premises. The Trial Court on 11th November, 1982 decreed the suit upholding the allegation that the tenant had made 307 alterations of permanent nature in the demised premises and had committed acts or waste and damage. Aggrieved by the aforesaid decision the tenant filed an appeal before the Appellate Bench of the Small Causes Court on 28th September, 1985, and the respondent 's suit for eviction was dismissed on the ground that the suit was barred by lapse of time under Article 113 of the Limitation Act, 1973, which prescribed a period of three The landlord thereafter filed a writ petition under Article 227 which was allowed by the High Court which held that Article 66 or Article 67 was applicable which pre scribed a period of 12 years. The writ petition filed by the tenant was however dismissed. In the appeals by the tenant to this Court the only question for consideration was: whether Article 113 or either of Articles 66 or 67 of the Limitation Act would be applicable, and what would he the date of the accrual of the cause of action. On behalf of the tenant appellant it was contended that on the facts of the case Article 113 of the Limitation Act alone would apply and that neither Article 66 nor Article 67 would have any application. Article 67 of the Limitation Act had no application inasmuch as time begins to run only when the tenancy is determined and that determination of tenancy which takes place under the Transfer of Property Act is wholly irrelevant for cause of action in ejectment. That Article 66 contemplates an immediate right to recover pos session. Breach of a condition only leads to an immediate right to possession without more, and not a determination in law. That Article 66 is a general article which does not apply to landlord or tenant, and that when a specific Arti cle applied the general Article should not be applied spe cially when it was not free from doubt. On behalf of the respondent landlord it was however submitted that for any suit by a landlord against the tenant for recovery of possession under the Rent Act the Limitation Act was inherently inapplicable. Dismissing the Appeals, HELD: 1. Recovery of possession is by a suit and there is no section in the scheme of the Limitation Act to indicate that the Limitation Act was inherently inapplicable. In the scheme of the Rent Act or in 308 the various contingencies contemplated under the Rent Act, there is nothing to indicate or warrant that there would be no limitation of any period. [311E F] 2. Sections 12 and 13 of the Bombay Rent Act co exist and must be harmonised to effect the purpose and intent of the legislature for the purpose of eviction of the tenant. In that view of the matter Article 113 of the Limitation Act has no scope of application. [316C D] 3. Article 67 indicates that time begins to run only when the tenancy is determined. It comprehends suit by a landlord and deals with the right to recover possession from the tenant. Therefore it deals with landlord and tenant. [31 IF G] 4. On the strict grammatical meaning Article 67 of the Limitation Act would be applicable. This is indubitably a suit by the landlord against the tenant to recover posses sion from the tenant. Therefore, the suit clearly comes within Article 67 of the Limitation Act. The suit was flied because the tenancy was determined by the combined effect of the operation of Sections 12 and 13 of the B ombay Rent Act. At the mast it would be within Article 66 of the Limitation Act if it is held that forfeitures have been incurred by the appellant in view of the breach of the conditions mentioned in Section 13 of the Bombay Rent Act, and on lifting of the embargo against eviction of tenant in terms of section 12 of the said Act. That being so, either of the two, Article 66 or Article 67 would be applicable to the facts of the instant case. There is no scope for the application of Article 113 of the Limitation Act in any view of the matter. The period of limitation in this case would therefore be 12 years. The suit was therefore not barred. [315H; 316A E] Dhanpal Chettiar vs Yesodai Ammal, ; ; Pradesh Kumar Bajpai vs Binod Behari Sarkar, [1980] 3 S.C.R. 93, Gian Devi Anand vs Jeevan Kumar & Other, [1985] 2 S.C.C. 683; Hiralal Vallabhram vs Kastorbhai Lalbhai & Others, ; at 349 and 350; Bahadur Singh & Anr. vs Muni Subrat Dass & Anr., at 436, Kau shaiaya Devi & Others vs Shri K.L. Bansal, [1969] 2 S.C.R. 1048 at 1050; Ferozi LaIJain vs Man Mal and another, A.I.R. at 795 aud 796; aud Haji Suleman Haji Ayub Bhiwandiwala vs Narayan Sadashiv Ogale, [1967] 84 Bombay Law Report p. 122, referred to.

This was an appeal by certain textile mills of Ahmedabad against a scheme for gratuity awarded by the Industrial Court. The Labour Association, the respondent, gave a notice of change under section 42(2) of the Bombay Industrial Relations Act, 1946 (Bom. XI of 1947), intimating the Mill Owners ' Association that they wanted a scheme for gratuity and mentioned four categories of termination of service in the annexure. This demand was refused and so referred to the Industrial Court under section 73A of the Act. Pending the reference the Employees ' Provident Funds Act, 1952 (19 of 1952), came into operation and the Industrial Court, on an objection by the Mill Owners ' Association, held that it was inadvisable to proceed with the reference and that a fresh application should be made, if necessary, after the scheme envisaged by the Act is introduced and rejected the respondent 's demand. Thereafter a fresh notice of change was given by the respondent and there were certain references to the Industrial Court in respect of the demand. The parties came to an agreement to refer all their disputes to arbitration, the references were withdrawn and the disputes were referred to the Board of Arbitrators. Before the Board the Mill Owners ' Association took the objection that so long as the award of the Industrial Court dismissing the earlier reference subsisted, the claim for gratuity could not be considered by it. That objection was upheld by the Board and it made no provision for gratuity. Thereupon the respondent applied for the modification of the award under section 116A of the Act, and the Industrial Court by its award, which is the subject matter of the present appeal, framed a scheme for gratuity on an industry cum region basis: Held, that the decision of the Industrial Court was correct and must be upheld. Regard being had to the true nature of its earlier award and the scope of the application for its modification, it could not be said that the respondent was seeking to alter the framework or change any of the principles of that award and the application under section 116A of the Act must be held to be competent. 330 A scheme for gratuity is by its nature an integrated scheme and covers all classes of termination of service where gratuity benefit can be legitimately claimed and the refusal of the Industrial Court in the earlier award amounted to a refusal to frame any scheme at all. The statutory provident fund created by the Employees ' Provident Funds Act, 1952, could be no bar to the respondent 's claim for a gratuity scheme although there can be no doubt that in awarding such a scheme Industrial Courts must make due allowance for it. Provisions of section 17 of the said Act clearly indicate that the statutory benefits under the Act are the minimum to which the employees are entitled and that they are no bar to additional benefits claimed by the employees. Indian Hume Pipe Co. Ltd. vs Their Workmen, [1960] 2 S.C.R. 32, referred to. It was not correct to say that the claim for gratuity was essentially similar to a claim for profit bonus and must always be considered on unitwise basis. The benefit of gratuity is in the nature of a retiral benefit and before framing such a scheme industrial adjudication has to, take into account such relevant factors as the financial condition of the employer, his profit making capacity, the profits earned by him in the past, the extent of his reserves and the chances of his replenishing them as well as the claims for capital invested by him, and in evolving a long term scheme a long view of the employer 's financial condition should be taken and on that basis alone the feasibility of a scheme and the extent of the benefit to be given should be determined. Arthur Butler & Co. (Muzaffarpur) Ltd. and Arthur Butler Workers Union, and Boots Pure Drug CO. (India) Ltd. vs Their Workmen, , referred to. Even assuming that gratuity is no part of deferred wage, it would not be reasonable to assimilate the scheme for gratuity to that of profit bonus or to apply the principles of the Full Bench formula applicable to the latter. A claim for gratuity is strictly not a claim to receive a share of the profits at all. Express Newspapers (Private) Ltd. vs The Union of India, and Indian Oxygen and Acetylene Co. Ltd. Employees ' Union vs Indian Oxygen and Acetylene Co. Ltd., , referred to. It was not correct to say that an industry wise basis is wholly inappropriate in dealing with gratuity or that the Industrial Court was in error in adopting that basis. Although some hardship to the weaker units in the industry may not be avoided, there were several factors in its favour both from the point of view of employers and employees. Since in the present state of economic development in the country the propriety of the adoption of an all India basis for a scheme of gratuity may be open to doubt no exception can on principle be taken to the industry cum region basis adopted in the instant case. 331 Express Newspapers (Private) Ltd. vs The Union of India, , applied.

Appeal No. 30 of 1958. Appeal by special leave from the judgment and order dated March 24, 1955, of the Punjab High Court in Civil Reference No. 3 of 1953. Gopal Singh, for the appellants. K. N. Rajagopala Sastri and D. Gupta, for the respondent. 212 1960. August 17. The Judgment of the Court was delivered by HIDAYATULLAH J. This appeal, by special leave of this Court, is against the judgment 'and order dated March 24, 1955, of the Punjab High Court by which the High Court, purporting to act under section 66(4) of the Indian Income tax Act, called for a supplemental statement of the case from the Income tax Appellate Tribunal. The special leave granted by this Court is limited to the question whether the High Court had jurisdiction in this case to call for the supplemental statement. The assessee, Messrs. section Zoraster & Co., Jaipur, consists of three partners. Two of them are coparceners of a joint Hindu family, and the third is a stranger. They had formed this partnership in June, 1940, for the manufacture and sale of blankets, felts and other woollen articles. A deed of partnership was also executed on March 16, 1944. The assessee entered into contracts with Government for the sup ply of goods, and in the assessment year 1942 43, Rs. 10,80,658 0 0 and in the assessment year 1943 44, Rs. 17,45,336 0 0 were assessed as its income by the Income tax Officer, Contractor 's Circle, New Delhi. The supplies to Government were made for. Jaipur by the assessee, and payment was by cheques which were received at Jaipur and were endorsed in favour of the joint Hindu family, which acted as the assessee 's bankers. The contention of the assessee was that this income was received at Jaipur outside the then taxable territories. This contention was not accepted by the Income tax Appellate Tribunal, Delhi. The assessee then applied for a reference to the High Court under section 66(1) of the Indian Income tax Act, and by its order dated December 10, 1952, the Income tax Appellate Tribunal referred the following question for the decision of the High Court: " Whether on the facts and circumstances of the case the profits and gains in respect of the sales made to the Government of India were received by the assessee in the taxable territories ? " 213 The Tribunal had stated in the statement of the case as follows: "The payment was made by the Government of India by cheques drawn on the Reserve Bank of India, Bombay Branch. These cheques were received in Jaipur. " It may be pointed out that in the contract of sale between the assessee and the Government of India, the following clause was included to determine the system of payment: " 21. System of payment: Unless otherwise agreed between the Purchaser and the Contractor payment for the delivery of the stores will be made by the Chief Auditor, Indian Stores Department, New Delhi, by cheque on a Government treasury in India or on a branch of the Imperial Bank of India or the Reserve Bank of India transacting Government business. " In dealing with the Reference, the High Court passed an order under section 66(4) of the Income tax Act observing, ". . it would be necessary for the Appellate Tribunal to find, inter alia, whether the cheques were sent to the assessee firm by post or by hand and what directions, if any, had the assessee firm given to the Department in the matter ". The High Court thereafter remanded the case to the Tribunal for a supplemental statement of the case on the lines indicated. This order is questioned on the authority of the decision of this Court in The New Jehangir Vakil Mills Ltd. vs The Commissioner of Income tax(1) which, it is claimed, completely covers this case. In that case also, the High Court of Bombay had called for a supplemental statement of the case, and it was ruled by this Court that the High Court had exceeded its jurisdiction. Before dealing with this question, it is necessary to go back a little, and refer briefly to some cases decided earlier than The New Jehangir Vakil Mills case (1) and Jagdish Mills Ltd. vs Commissioner of Income tax (2), on which reliance has been placed in this case. ID (1) ; (2) ; 214 Keshav Mills Co., Ltd. vs Commissioner of Income tax (1), the High Court of Bombay called for a supplemental statement of the case, but it expressed the view that if a cheque was received by a creditor on a British Indian Bank and he gave the cheque to his bank for collection, the bank must be treated as his agent and that, on the realisation of the amount of the cheque in the taxable territory, the creditor must be regarded as having received it in the taxable territory, even if he was outside it. In Sir Sobha Singh vs Commissioner of Income tax (2), it was held by the Punjab High Court that where cheques were given to a bank for purposes of collection, the receipt of the money was at the place where the bank on which the cheques were drawn was situated. These views found further amplification, and were applied in two other cases by the Bombay If high Court. They are Kirloskar Bros. Ltd. vs Commissioner of Income tax (3 ) and Ogale Glass Works Ltd. vs Commissioner of Income tax (4). In both these cases, it was held that unless the payee expressly constituted the post office as his agent, the mere posting of the cheque did not constitute the post office the agent of the payee, and that the amount of the cheque was also received at the place where the cheque was received. In Kirloskar Bros. Ltd. vs Commissioner of Income tax(3), it was held that the mere posting of the cheque in Delhi was not tantamount to the receipt of the cheque in Delhi, because the payee had not requested the Government to send the cheque by post. In Ogale Glass Works case (4), the Bombay High Court asked for a supplementary statement of the case from the Tribunal as to whether there was any express request by the assessee that the cheque should be sent by post, and held that as there was no such express request, the receipt of the money was not where the cheque was posted but at the place where the money was received. (1) (2) (3) (4) I. Tax Reference No. 10 of 1949 of the Bombay H. C. decided on September 17, 1951. 215 The last two decisions of the Bombay High Court were reversed by this Court, and it was held that an intimation to the payer " to remit " the amount by cheque was sufficient nomination of the post office as the agent of the payee: vide Commissioner of Income tax vs Ogale Glass Works Ltd. (1) and Commissioner of Income tax vs Kirloskar Bros. Ltd. (2). Later, the principle was extended still further by this Court in Jagdish Mills case(3). It was held that where the bills had an endorsement Government should pay the amount due by cheque and the cheques were received in full satisfaction unconditionally, this constituted a sufficient implied request for the purpose of the application of the rule in Ogale Glass Works case of this Court. Jagdish Mills case (3) and the New Jehangir Vakil Mills case (4) were decided by this Court on the same day. In the latter case, the Department had to deal with a non resident Company which, at all material times, was situate at Bhavnagar, one of the Indian States. Cheques in payment for supplies to Government were sent from British India to Bhavnagar. The Department contended in the case that though the cheques were received at Bhavnagar, they were, in fact, cashed in British India and until such encashment, income could not be said to have been received but that on encashment in British India, the receipt of income was also in British India. The Tribunal held that the cheques having been received at Bhavnagar the income was also received there. In doing so, the Tribunal followed the Bombay decision in Kirloskar Brothers case (5). The Tribunal, however, observed that if the Bombay view which was then under appeal to this Court were not upheld, then an enquiry would have to be made as to whether the Mills ' bankers at Ahmedabad acted as the Mills ' agents for collecting the amount due on the cheques. The question whether the posting of the cheques from British India to Bhavnagar at the request, express or (1) (3) ; (2) (4) ; (5) 216 implied, of the Mills or otherwise, made any difference was not considered at any stage before the case reached the High Court of Bombay. This was expressly found to be so by this Court in these words: " The only ground urged by the Revenue at all material stages was that because the amounts which were received, from the merchants or the Government were received by cheques drawn on banks in British India which were ultimately encashed in British India, the monies could not be said to have been received in Bhavnagar though the cheques were in fact received at Bhavnagar. " The reference was held back by the Tribunal till the decision of this Court in Ogale Glass Works case (1) and Kirloskar Brothers ' case (2). Even after seeing that in those two cases the request for payment by cheques to be sent by post made all the difference, the Tribunal did not frame its statement of the case or the question to include this aspect, because that aspect of the matter was never considered before. ' The question referred was thus limited to the legal effect of the receipt of the cheques at Bhavnagar without advertence to the fact whether the cheques were so sent by post at the request, express or implied, of the Mills. The question framed was: " Whether the receipt of the cheques in Bhavnagar amounted to receipt of the sale proceeds in Bhavnagar ? " The question as framed and the statement which accompanied it brought into controversy the only point till then considered by the Tribunal and the taxing authorities. When the case *as heard by it, the High Court desired to consider it from the angle of the Kirloskar Brothers(2) and Ogale Glass Works (1) cases. It called for a supplemental statement of the case. In doing so, the High Court went beyond the ambit of the controversy as it had existed till then and also the statement of the case and the question. The High Court directed the Tribunal as follows: "On the finding of the Tribunal that all the cheques were received in Bhavnagar, the Tribunal to find (1) (2) 217 what portion of these cheques were received by post, whether there was any request by the assessee, express or implied, that the amounts which are the subject matter of these cheques should be remitted to Bhavnagar by post." In repelling the objection that such an enquiry was alien to the point decided by the Tribunal and might require fresh evidence, the High Court justified itself by saying: " But we cannot shut out the necessary inquiry which even from our own point of view is necessary to be made in order that we should satisfactorily answer the question raised in the Reference. It must not be forgotten that under section 66(4) of the Income tax Act we have a right independently of the conduct of the parties to direct the Tribunal to state further facts so that we may properly exercise our own advisory jurisdiction. " This Court pointed out that the High Court exceeded its jurisdiction under section 66(4) of the Indian Income tax Act. It was observed: " If the question actually referred does not bring out clearly the real issue between the parties, the High Court may reframe the question so that the matter actually agitated before the Tribunal may be raised before the High Court. But section 66(4) does not enable the High Court to raise a new question of law which does not arise out of the Tribunal 's order and direct the Tribunal to investigate new or further facts necessary to determine this new question which had not been referred to it under section 66(1) or section 66(2) and direct the Tribunal to submit a supplementary statement of the case. " It was also pointed out that the facts admitted and/ or found by the Tribunal could alone be the foundation of the question of law which might be said to arise out of the Tribunal 's order. The case thus set two limits to the jurisdiction of the High Court under section 66(4), and they were that the advisory jurisdiction was confined (a) to the facts on the record and/or found by the Tribunal and (b) the question which 28 218 would arise from the Tribunal 's order. It was pointed out by this Court that it was not open to the High Court to order a fresh enquiry into new facts with a view to amplifying the record and further that it was equally not open to the High Court to decide a question of law, which did not arise out of the Tribunal 's order. This was illustrated by comparing the question as framed by the Tribunal with the question which the High Court desired to decide. Whereas the Tribunal had only referred the question: " Whether the receipt of the cheques at Bhavnagar amounted to receipt of sale proceeds in Bhavnagar ?", what the High Court intended deciding was: " Whether the posting of the cheques in British India at the request express or implied of the appellant, amounted to receipt of sale proceeds in British India ?" These were two totally different questions, and it was held that the High Court could not decide a matter which was different from that decided by the Tribunal, nor call for a statement of the case bearing on this new matter. The proposition laid down in the Jehangir Vakil Mills case (1), finds support from yet another case of this Court decided very recently. In Kusumben D. Mahadevia vs Commissioner of Income tax Bombay (2), it was observed: " In our opinion, the objection of the assessee is well founded. The Tribunal did not address itself to the question whether the Concessions Order applied to the assessee. It decided the question of assessability on the short ground that the income had not arisen in Baroda but in British India. That aspect of the matter has not been touched by the Bombay High Court. The latter has, on the other hand, considered whether the Concessions Order applies to the assessee, a matter not touched by the Tribunal. Thus, though the result is the same so far as the assessment is concerned, the grounds of decision are entirely different. (1) ; (2) ; ,421. 219 Section 66 of the Income tax Act which confers jurisdiction upon the High Court only permits a reference of a question of law arising out of the order of the Tribunal. It does not confer jurisdiction on the High Court to decide a different question of law not arising out of such order. It is possible that the same question of law may involve different approaches for its solution, and the High Court may amplify the question to take in all the approaches. But the question must still be the one which was before the Tribunal and was decided by it. It must not be an entirely different question which the Tribunal never considered. " It follows from this that the enquiry in such cases must be to see whether the question decided by the Tribunal admits the consideration of the new point as an integral or even an incidental part thereof. Even so, the supplemental statement which the Tribunal is directed to submit must arise from the facts admitted and/or found by the Tribunal, and should not open the door to fresh evidence. The fact that in Ogale Glass Works case (1), the Bombay High Court had asked for a supplemental statement in the same way as in the Jehangir Vakil Mills case (2 ), and this Court did not rule out the new matter, cannot help the assessee in the present case, because the jurisdiction of the High Court was not questioned, as it had been done in the Jehangir Vakil Mills case, or has been done here. We have thus to see whether in this case the question which was decided and which has been referred to the High Court admits the return of the case for a supplemental statement on the lines indicated by the High Court in the order under appeal. At the very start, one notices a difference in the question of law in this case and the Ogale Glass Works case (3), on the one hand, and the question of law in the Jehangir Vakil Mills case (2), on the other. In the former two cases, the question is very wide, while in the latter it is extremely narrow. This can be Been by placing the three questions side by side as below : (1) I. Tax Reference No. 19 of 1949 of the Bombay H. C. decided on September 17, 1951. (2) ; (3) 220 Jehangir Vakil Mills case " Whether the receipt of the cheques in Bhav nagar amounted to receipt of the sale proceeds in Bhavnagar ?" Ogale Glass Works case " Whether on the facts of the case, income, profits and gains in respect of sales made to the Government of India was received in British India within the meaning of Section 4(1)(a) of the Act ?" This case "Whether on the facts and circumstances of the case the profits and gains in respect of the sales made to the Government of India were received by the assessee in taxable territories ?" It is thus quite plain that the question as framed in this case can include an enquiry into whether there was any request, express or implied, that the amount of the bills be paid by cheques so as to bring the matter within the dicta of this Court in the Ogale Glass Works case (2) or Jagdish Mills case (3). The first limit to the jurisdiction of the High Court as laid down by this Court is thus not exceeded by the High Court in exercising its powers under section 66(4) of the Income tax Act. The question is wide enough to include the alternative line of approach that if there was a request, express or implied, to send the amount due under the bills by cheque, the post office would be the agent of the assessee, and the income was received in the taxable territory when the cheques were posted. (1) ; (2) (3) ; 221 The next question is whether the High Court has transgressed the second limitation implicit is section 66(4), that is to say, that the question must arise out of the facts admitted and/or found by the Tribunal. The High Court has observed that, ". . it would be necessary for the Appellate Tribunal to find inter alia whether the cheques were sent to the assessee firm by post or by hand and what directions, if any, bad the assessee firm given to the Department in that matter. " If the Tribunal has to make a fresh enquiry leading to the admission of fresh evidence on the record, then this direction offends against the ruling of this Court in the Jehangir Vakil Mills case (1). If, however, the direction be interpreted to mean that the Tribunal in giving the finding must confine itself to the facts admitted and/or found by it, the direction cannot be described as in excess of the jurisdiction of the High Court. It would have been better if the High Court had given directions confined to the record of the case before the Tribunal; but, in the absence of anything expressly to the contrary, we cannot bold that the direction would lead inevitably to the admit ting of fresh evidence. This, at least, now cannot be done, since the Jehangir Vakil Mills case (1), has prohibited the admission of fresh evidence. In our opinion, the present case does not fall within the rule in the Jehangir Vakil Mills case (1), and is distinguishable. In the result, the appeal fails, and is dismissed with costs. Appeal dismissed.

The appellant entered into contract with Government for the supply of goods, and in the assessment year 1942 43 Rs. 10,80,653 and in the assessment year 1943 44, Rs. 7,45,336 were assessed as its income by the Income tax Officer. The supplies to Government were made for. Jaipur by the appellant, and payment was by cheques which were received at Jaipur. The contention of the appellant was that this income was received at Jaipur outside the then taxable territories. This contention was not accepted by the Income tax Appellate Tribunal, Delhi. The appellant then applied for a reference to the High Court under section 66(1) of the Indian Income tax Act, and by its order dated December 10, 1952, the Tribunal referred the following question for the decision of the High Court. " Whether on the facts and circumstances of the case the profits and gains in respect of the sales made to the Government 211 of India were received by the assessee in the taxable terri tories ?" The High Court remanded the case to the Tribunal for a supplemental statement of case calling for a finding on the question " whether the cheques were sent to the assessee firm by post or by hand and what directions, if any, had the assessee firm given to the department in the matter ". The appellant questioned the order of the High Court relying on the decision in New Jehangir Vakil Mill 's case; , Held, that the enquiry in such cases must be to see whether the question decided by the Tribunal admits of the consideration of the new point as an integral or an incidental part thereof. The supplemental statement which the Tribunal is directed to submit must arise from the facts admitted and/or found by the Tribunal and should not open the door to fresh evidence. Held, further, that the question as framed in this case was wide enough to include an enquiry into whether there was any request, express or implied, that the amount of the bills be paid by cheques so as to bring the matter within the dicta of this Court in the Ogale Glass Works case, [1955] 1 S.C.R. 185 or Jagdish Mills case; , In the absence of anything expressly said in the Order of the High Court to the contrary, it cannot be held that the direction given would lead inevitably to the admitting of fresh evidence as that has been prohibited by the New Jehangir Vakil Mills case. The New Jehangir Vakil Mills Ltd. vs The Commissioner of Income tax, ; , distinguished. Jagdish Mills Ltd. vs Commissioner of Income tax, ; , Keshav Mills Co. Ltd., vs Commissioner of Income tax, , Sir Sobha Singh vs Commissioner of Income tax, , Kirloskar Bros. Ltd.v. Commissioner of Income tax, [1952] 21 I.T.R. 82, Commissioner of Income tax vs Ogale Glass Works Ltd. , Commissioner of Income tax vs Kirloskar Bros. Ltd., and Mrs. Kusumben D. Mahadevia, Bombay vs Commissioner of Income tax, Bombay, ; , referred to.

The appellant assessee was a cooperative society engaged in the business of banking The previous year relevant to the assessment year 1963 64 was the year ending June 30, 1962. The business income of the assessee was exempt under the provisions of Section 80(1) as it then stood. During the aforesaid accounting yew, the assessee received a sum of Rs. 19 being the interest on the deposit made by it with an Electricity Distribution Company. This deposit had to be made by the assessee as it was required by the conditions notified by the electricity company for supply of energy, and it carried interest. It was on account of the said deposit that the sum of Rs. 19 was received by the assessee, by way of interest. The Income tax Officer treated the amount of Rs. 19 as income from other sources, and on that basis, he levied additional surcharge, in a sum of Rs. 81,920. The assessee appealed to the Appellate Assistant Commissioner who upheld the assessee 's contention that the said sum of Rs. 19 constituted its business income and, was therefore, exempt. He held that the levy of surcharge was unsustainable. The Revenue appealed to the Appellate Tribunal which held that it was 'income from business ', and accordingly dismissed the Revenue 's 997 998 appeal. At the instance of the Revenue, the Tribunal referred the question to the High Court. The High Court held, that the assumption made by the Appellate Assistant Commissioner and the Tribunal that the liability of surcharge was not attracted in case the said sum of Rs. 19 represented business income may not be warranted and that in such a situation the High Court does possess the power to correct the error so long as the point arose out of the Tribunal 's order. It returned the reference unanswered and directed the Tribunal to consider the case on all points that require consideration of the question whether additional surcharge was attracted. In the assessee 's appeal to this Court, it was submitted that the High Court exceeded its jurisdiction in making the aforesaid direction, that the High Court widened the scope of enquiry which it was not empowered to do in a reference under Section 256 and that the matter should be sent back to the High Court for answering the question of law as stated by the Tribunal. Dismissing the appeal, this Court, HELD : All that the High Court has asked the Tribunal to do is to consider whether the liability of surcharge is not attracted even if the said sum of Rs. 19 is treated as income from business. The fact that the revenue was also a party to the said erroneous assumption before the Tribunal cannot stand in the way of the Revenue resiling from an er roneous assumption of law. [1004 D F] In the instant case, the question was whether additional surcharge was leviable for the assessment year 1963 64 under the relevant Finance Act. The assessee 's contention was that it had no income which was liable to be assessed to income tax inasmuch as its entire income was exempt under Section 81 (1) (a), and it was submitted that the sum of Rs. 19 was also a business income and, therefore, the liability of additional surcharge did not attach to the assessee. The I.T.O. took the view that the said sum of Rs. 19 represented income from other sources and, therefore, liability of additional surcharge was attracted. The Appellate Assistant Commissioner upheld this contention. The High Court, however, thought that having regard to the language of the provisions of the relevant Finance Act, the Tribunal ought to examine whether the liability to additional 999 surcharge was attracted even if the said sum of Rs. 19 was treated as income from business. The High Court was of the opinion that this legal submission, though raised for the first time, did call for serious consideration. This was done to arrive at a correct decision in law relating to the liability to additional surcharge. If really, additional surcharge was chargeable according to the Finance Act even In case the said sum of Rs. 19 represented business income, the High Court cannot be called upon to act on the assumption that it is not so chargeable and answer the question stated. Such a course would neither be in the interest of law or justice. That the Revenue was also a party to the erroneous assumption of law makes little difference to the principle. [1004 B F] C.I.T. Bombay vs Scindia Steam Navigation Ltd., 42 I.T.R. 589, relied on.[1004 H] V.R.Y.K.N. Kallappa Chettiar vs Commissioner of Income Tax, ; C.L T. vs Ogale Glass Works Ltd., 25 I.T.R. 529; Keshav Mills Co. Ltd. vs Commissioner of Income Tax, Bombay North, Ahmedabad, ; Commissioner of Income Tax, Bihar and Orissa vs Kirkend Coal Co., 74 I.T.R. 67 and Kusumben D. Mahadevia vs Commissioner of Income Tax, Bombay City , not applicable. [1004 H]

Respondent, an Income tax Officer, called an assessee to his house and took a sum of Rs. 800 from him. Immediately afterwards a search was made and the respondent, after some evasion, produced the money. The respondent 's defence was that he had taken the money as a loan and not as illegal, gratification. The Special judge who tried the respondent found him guilty under section 16i, Indian Penal Code, and sen tenced him to six months simple imprisonment. On appeal, the High Court acquitted the respondent. The State obtained special leave and appealed. Held, that the words used in article I36 of the Constitution show that in criminal matters no distinction can be made as a matter of construction between a judgment of conviction and one of acquittal. The Supreme Court will not readily interfere with the findings of fact given by the High Court but if the High Court (i) A.I.R. (1954) S.C. 680. 581 acts perversely or otherwise improperly interference will be called for. The findings of the High Court are halting and its approach to the case has been erroneous as it disregarded the special rule of burden of proof under section 4 Of the Prevention of Corruption Act (II Of 1947). The judgment of the High Court shows that certain salient pieces of evidence were missed or were not properly appreciated. In this situation the Supreme Court can interfere in an appeal by special leave. Where it is proved that a gratification has been accepted, the presumption under s 4 Of the Prevention of Corruption Act shall at once arise. It is a presumption of law and it is obligatory on the Court to raise it in every case brought under section 4. The evidence and circumstances in this case lead to the conclusion that the transaction was not one of loan but of illegal gratification.

The Income tax Officer issued a notice to the assessee under section 34 on the ground that two items of the assessee 's income, namely forest income and interest income, were not included in the original assessment for the year 1942 43. In response the assessee filed a return fully disclosing his interest income but raised the plea that his forest income was not taxable. The, Income tax Officer however, assessed both items to tax. On appeal, the Appellate Tribunal in its order dated April 25, 1961, although dealing only with the forest income and holding that the Income tax Officer had no jurisdiction to initiate proceedings under section 34 in respect of such income, by inadvertence or by mistake, set aside the entire order of reassessment both in respect of forest income, as well as the interest income. The Department did not take any steps to rectify the mistake under section 35 or to have the question of illegality referred to the High Court. Having allowed the order of the Tribunal to become final, the Income tax Officer initiated fresh proceedings under section 34 in respect of the interest income and made a revised assessment order which included this income. The Appellate Tribunal confirmed the assessment but the High Court, on a reference to it under section 66(1), took the view that fresh proceedings under section 24 could not be taken for the reason, inter alia, that the Tribunal 's order dated April 25, 1949 had become final. HELD : The Tribunal had committed a mistake in setting aside the reassessment order in respect of interest income also, but the income tax Officer did not resort to the obvious remedy of having the mistake rectified as provided for under section 35 and allowed the Tribunal 's order dated April 25, 1949 to become final. He could not in the circumstances, reopen the assessment by initiating proceedings under section 34, as otherwise there would be an unrestricted power of review in the hands of the Income tax Officer to go behind the findings of a hierarchy of Tribunals and Courts. [995 E F; 996 F H] C.I.T. Bombay and Aden vs Khemchand Ramdas, (1938)6 I.T.R. 414 and C.I.T. West Punjab vs The Tribune Trust, Lahore, (1948)16 I.T.R. 214, referred to. R. K. Das & Co. vs C.I.T., West Bengal, (1956)30 I.T.R. 439 and C.I.T., Bihar & Orissa vs Maharaja Pratapsingh Bahadur of Gidhaur, distinguished.

The Karta of a Hindu undivided family was assessed to Incometax from year to year until the assessment year 1953 54 either as an individual or as the Karta. But later, the Income Tax Officer issued notices to him under section 34(1) of the Income tax Act, 1922, for the assessment years 1951 52 to 1953 54 and under section 22(2) for the years 1954 55 to 1956 57 for assessment of the income as having been received by an association of persons consisting of the Karta and his minor son in 1951 52, and the Karta, his minor son and a firm in the years 1952 53 to 1956 57, and assessed the income received as income and associations of persons. The Appellate Assistant Commissioner and the Tribunal, in appeals filed before them, substantially confirmed the order of the Income tax Officer. The High Court, upon a reference. held that the income for the assessment year 1951 52 did E not accrue to an association of persons, but confirmed the view taken by the Income tax Officer in respect of the income for the year 1952 53 to 1956 57. The Karta then moved the High Court under article 226 of the Constitution and contended that section 3 of the Income tax Act, 1922, invested the Income tax Officer with arbitrary and unguided power to assess the income of an association of persons in the hands either of the association or of the persons constituting that association and it therefore offended article 14 of the Constitution. The High Court rejected the petitions. In appeals to this Court against the decisions of the High Court in the writ petition and the reference under section 66 of the Income tax Act. HELD:(i) section 3 of the Income tax Act, 1922, was not violative of article 14 of the Constitution. The duty of the Income tax Officer is to administer the provisions of the Act in the interests of public revenue, and to prevent evasion or escapement of tax legitimately ,due to the State. Though an executive Officer engaged in the administration of the Act. the function of the Income tax Officer is fundamentally quasi judicial. His decision to bring to tax either the income of the association collectively or the shares of the members of the association separately is not final: it is subject to appeal to the Appellate Assistant Commissioner and to the Tribunal. The nature of the authority exercised by the Income tax Officer in a proceeding to assess to tax income, and his duty to prevent evasion or escapement of liability to pay tax legitimately due to the State, con stitute adequate enuciation of Principles and policy for the guidance of the Income tax Officer. [72B H] 66 Suraj Mall Mohta & Co. vs A. V. Visvanatha Sastri and Anr. , distinguished. Shri Ram Krishna Dalmia vs Shri Justice S.R. Tendolkar and Ors. ; , Jyoti Pershad vs The Administrator for the Union Territory of Delhi. ; and Commissioner of Income tax U.P. vs Kanpur Coal Syndicate, referred to, There is no force in the contention that section 23A of the Income tax Act, as it was incorporated by Act 21 of 1930 laid down certain principles for the guidance of the Income Tax Officer in exercising his option, but since the repeal of that section by Act 7 of 1939, the discretion vested in the Income tax Officer to select either the income of the association or the individual member is unfettered. By the repeal of section 23A(1) the essential nature of the power of the Incometax Officer was not altered. He remained as before under a duty to administer the Act, for the benefit of public revenue, but his powers were to be exercised judicially and so as to avoid double taxation of the same income. [73A B; 74F G] (ii) There was abundant material on the record to prove that the Karta, his minor son and the firm formed an association in the years 1952 53 to 1956 57. Under section 2(9) of the Income tax Act, 1922, read with el. (42) of 3 of the General Clauses Act, a firm is a person within the meaning of the Income tax Act and a firm and an individual or group of individuals may form an association of persons within the meaning of section 3 of the Income tax Act. [75F, G] There is nothing in the Act to indicate that a minor cannot become a member of an association of persons for the purposes of the Act. In any event the High Court had rightly held that the mother and guardian of the minor son must, on the facts, be deemed to have given her implied consent to the participation of the minor in the association of persons. [75H] Commissioner of Income tax, Bombay vs Laxmidas & Anr. and Commissioner of Income tax, Bombay North, Kutch Saurashtra vs Indira Balkrishna, , referred to. (iii)The doctrine of res judicata does not apply so as to make a decision on a question of fact or law in a proceeding for assessment in one year binding in another year. The assessment and the facts found are conclusive only in the year of assessment: the finding on questions of fact may be good and cogent evidence in subsequent years, when the same question falls to be determined in another year but they are not binding and conclusive. The finding recorded by the High Court that in the year 1951 52 there was no association of persons constituted by the Karta and his minor son did not in 'the present case have any effect on the finding of the Tribunal that in year 1952 53 and the subsequent years such an association existed. Furthermore, the association of persons which traded in 1952 53 and the subsequent years was different from the association in 1951 52 because in 1952 an association was formed of the Karta, his son and a firm. [75B C] (iv)If the person described as a principal officer of an. association is duly served with a notice under section 23(2) in the manner prescribed by section 23(2), an adjudication of his status as the principal officer, before assessment proceedings may take place, is not obligatory. The order assessing the association containing a finding that the per. son served is the principal officer is sufficient compliance with the 67 requirements of the statute. It is open to the association to challenge the finding of the Income tax Officer in appeal before the Appellate Assistant Commissioner and in further appeal to the Appellate Tribunal. But the order declaring him as the principal officer of an association of persons will not be deemed to be void merely because the proceeding for assessment was not preceded by a declaration of his status as the principal officer. [80G 81B] Commissioner of Income tax, Punjab & N.W.F.P. vs Nawal Kishore Kharaiti Lal, (1938) 6 I.T.R. 61, referred to.

The respondent assessee built up a factory for the manufacture of paper and paper boards, which started production on 7.5.1964. The respondent claimed that the duty in respect of the paper boards manufactured in the factory during the period 7.5.1964 to June 1966 was payable at the concessional rates allowed by the Government of India notification dated 1st March, 1964. The claim was however rejected by the Revenue on the ground that the factory had not come into existence on or before the 9th day of November, 1963 as stipulated in clause (a) of Proviso (3) of the said notification. The respondent 's writ application before the High Court was allowed by the Single Judge and the appellant 's Letters Patent appeal was dismissed in limine. The High Court has accepted the respondent 's contention that the date '9th of November, 1963 ' mentioned in the notification was arbitrary. On behalf of the Revenue it was contended that the date (9.11.1963) was selected because an earlier notification bearing No. 110 had required applications to be made on or after 9.11.1963. It was further contended that a statutory provision had necessarily to be arbitrary in the choice of date and it could not be challenged on that ground. On behalf of the respondent it was contended that the said date did not have any significance whatsoever and did not bear any rational relationship to the object sought to be achieved by the notification. PG NO 1051 PG NO 1052 Dismissing the appeal, it was HELD: 1. A rule which makes a difference between past and present cannot be condemned as arbitrary and whimsical. [1056D] 2. In cases where choice of the date is not material for the object to be achieved. the provisions are generally made prospective in operation. [1056D] 3. The Revenue has not been able to produce notification No. l 10. Unless the nature and contents of notification No. 110 and its relevance with reference to the present notification are indicated, it is futile to try to defend of the choice of the date in clause (a) on its basis. [1055A;1056E] 4. In the present case, the benefit of concessional rate was bestowed upon the entire group of assesses referred therein and by clause (a) of Proviso (3) the group was divided into two classes without adopting any differentia having a rational relation to the object of the Notification. [1057F] 5. Clause (a) of the Proviso (3) of the Notification was ultra vires and the benefit allowed by the Notification would be available to the entire group including the respondent. [1057G] Union of India vs M/s. P. Match Works [1975]2 SCR 573 Jagdish pandey vs The chancellor, University of Bihar. [19681 I SCR 237 and U.P. M. T. S.N.A. Samiti, Varanasi vs State of U.P.,[1987]2 SCR 453, distinguished. Dr .Sushma Sharma vs State of Rajasthan, [1985] Supp. SCC 45; and D.S. Nakara vs Union of lndia, [1983] I SCC 365 referred to.

The appellant company was carrying on business in Bombay as commission agents. In the course of assessment proceedings for the year 1954 55, the Income tax Officer noticed from the ssee 's boo s of account that the assessee had business connections with certain nonresident parties and found that the transactions disclosed that through the assessee those non resident parties were receiving income, profits and gains. He considered that section 43 of the Indian Income tax Act, 1922, was applicable to the assessee and issued on March 27, 1957, a notice under section 34 of the Act for assessment of the assessee as an agent of the said non resident parties. The assessee pleaded, inter alia, that the proceedings intiated by the Income tax Officer under section 34 were barred since the notice issued by him was after the expiry of one year from the end of the assessment year 1954 55, but the Income tax Officer rejected the contention relying on the amendment made to the proviso to section 34(l)(b)(iii) by the Finance Act, 1956, under which the period of one year was changed to two years. The amendment was given retrospective operation upto April 1, 1956, but since the power to issue a notice under the unamended Act had come to an end on March 31, 1956, the question was whether the Income tax Officer could issue a notice of assessment to a person as an agent of a non resident party under the amended provision when the period prescribed for such a notice had before the amended Act came into force expired. HELD:The proceedings initiated by the Income tax Officer by the notice dated March 27, 1957, were barred; the authority of the Incometax Officer under the Indian Income tax Act before it was amended by the Finance Act of 1956 having come to an end, the amending provision would not entitle him to commence a proceeding even though at the date when he issued the notice it was within the period provided by the amendment. Notwithstanding the fact that there was no determinable point of time between the expiry of the time provided under the old Act and the commencement of the Amendment Act, in the absence of an express provision or clear implication, the legislature could not be said to have intended to attribute to the Amending provision a greater retros pectivity than was expressly mentioned.

Prior to the constitution of the assessee firm, its partners were members of a Hindu undivided family which carried on money lending business in India and in Malaya and which was assessed to tax under the Income Tax Act, 1918. There was a partition in the family on June 2, 1938, and thereafter its members continued the business as partners in the assessee firm. The firm was dissolved on March 2, 1952. In the assessment for the year 1952 53, the assessee applied for relief under section 25(3) of the Income Tax Act., 1922. This claim was rejected by the Income Tax Officer and an appeal to the Appellate Assistant Commissioner was dismissed on the view that in the case of business carried on in foreign territory, the business as such was not assessed under section 3 of the 1918 Act and only income received in India was so assessed; consequently, no relief could be claimed under section 25(3) of the 1922 Act. A further appeal to the Appellate Tribunal was partly allowed as the Tribunal considered that the assessee was entitled to relief under section 25(3) except in respect of the income received by the assessee firm from certain house properties in Malaya. The High Court, upon a reference, disagreed with the Tribunal and held in favour of the department. On appeal to this Court, HELD : (1) The High Court was in error in holding that the foreign business of the assessee was not charged under the provisions of the 1918 Act. The assessee was therefore entitled to relief under section 25(3). When section 25(3) refers to tax charged on any business, it is intended to refer to tax charged on the owner of any business. If tax is shown to have been charged in respect of the income of the business under the 1918 Act, the owner or successor in interest in relation 'to the business will be entitled to get the benefit of the exemption under section 25(3) if the business is discontinued. In the context of the finding by the lower courts that the entire income of the foreign business was remitted to the assessee and tax imposed on that income under the 1918 Act, the foreign business of the assessee must be held to have been charged under the provisions of the 1918 Act within the meaning of section 25(3) of the 1922 Act. [911 F H] (ii)The assessee was also entitled to relief under section 25(3) on the rental income from the house properties owned by the foreign firm which was discontinued in the year of account. M17Sup C.I./66 12 906 Business income is broken up under different heads only for the purpose of computation of the total income. By that breaking up the income does not cease to be the income of the business. [912 E F] Commissioner of Income tax, Madras vs S.V.R.M. Palaniappa Chettiar A Others. , disapproved, Commissioner of Income tax, Bombay city 1 vs Chugandas & Co., ; , referred to.

y of the view that the almost unanimous opinion of experts is that after the age of 15, bulls. bullocks and buffaloes are no longer useful for breeding, draught and other purposes and whatever little use they may have then is greatly offset by the economic disadvantages of feeding and maintaining unserviceable cattle disadvantages to which we had referred in much greater detail in Md. Hanif Quareshi 's case (1). Section 3 of the Bihar Act in so far as it has increased the age limit to 25 in respect of bulls, bullocks and she buffaloes, imposes an unreasonable restriction on the fundamental right of the petitioners, a restriction moreover which cannot be said to be in (1) ; 623 the interests of the general public, and to that extent it is void. We may here repeat what we said in Chintaman Rao vs The State of Madhya Pradesh (1): "The phrase 'reasonable restriction ' connotes that the limitation imposed on a person in enjoyment of the right should not be arbitrary or of an excessive nature, beyond what is required in the interests of the public. The word 'reasonable ' implies intelligent care and deliberation, that is, the choice of a course which reason dictates. Legislation which arbitrarily or excessively invades the right cannot be said to contain the quality of reasonableness and unless it strikes a proper balance between the freedom guaranteed in article 19(1)(g) and the social control permitted by clause (6) of article 19, it must be held to be wanting in that quality. " As to r. 3 the grievances of the petitioners are these. Under the rule the prescribed authority for the purpose of section 3 of the Act consists of the Veterinary Officer and the Chairman or Chief Officer of a District Board, Municipality etc. Unless both of them concur, no certificate for slaughter can be granted. It is pointed out that the Chairman or Chief Officer would be a layman not in a position to judge the age or usefulness of cattle. The result would be that the animal in respect of which a certificate is required may have to be shown to the Veterinary Officer as also the Chairman or Chief Officer, who may not be staying at the same place as the Veterinary Officer. If the two differ, the matter has to be referred to the Sub divisional Animal Husbandry Officer. This procedure, it is contended, will involve the expenditure of so much money and time that it will not be worthwhile for the petitioners to ask for a certificate, or having got a certificate, to slaughter the animal. An animal which is above 15 or which has become useless generally costs much less than a young, serviceable animal. If the petitioners have to incur all the expenditure which the procedure laid down by r. 3 must necessarily cost them, then they must close down their trade. As to the right of appeal from an order refusing to grant a (1) ; ,763. 624 certificate, it is contended that that right is also illusory for all practical purposes. To take the animal to the Deputy Director of Animal Husbandry or the District Animal Husbandry Officer or the Sub divi sional Animal Husbandry Officer, as the case may be, and to keep and feed the animal for the period of the appeal and its hearing will cost more than the price of the animal itself. We consider that these grievances of the petitioners have substance, and judged from the practical point of view, the provisions of r. 3 impose disproportionate restrictions on their right. It is difficult to understand why the Veterinary Officer, who has the necessary technical knowledge, cannot be trusted to give the certificate and why it should be necessary to resort to a complicated procedure to resolve a possible difference of opinion between two officers, later followed by a still more expensive appeal. We, therefore, hold r. 3 also to be bad in so far as it imposes disproportionate restrictions indicated above, on the right of the petitioners. (2) We now proceed to consider the Uttar Pradesh Prevention of Cow Slaughter (Amendment) Act, 1958. After the decision of this Court in Md. Hanif Quareshi vs The State of Bihar (1) an Ordinance was passed called the Uttar Pradesh Prevention of Cow Slaughter (Amendment) Ordinance, 1958. This Ordinance was later repealed and replaced by the Act. The petitioners say that in the Bill as originally drafted the age limit below which slaughter was not permissible was put at 15 years; but the Select Committee increased it to 20 years. It will probably be best, for clearness sake, to set forth not the whole provisions of the Act, for that would be too lengthy, but those which form most directly the subject matter on which the controversy turns. Section 3 of the Act reads (omitting portions not relevant for our purpose) "section 3(1) Except as hereinafter provided, no person shall slaughter or cause to be slaughtered or offer or cause to be offered for slaughter (a). . . . . . . (1) ; 625 (b) a bull or bullock, unless he has obtained in respect thereof a certificate in writing, from the competent authority of the area in which the bull or bullock is to be slaughtered, certifying that it is fit for slaughter. (2) No bull or bullock, in respect of which a certificate has been issued under sub section (1)(b) shall be ' slaughtered at any place other than the place indicated in the certificate or within twenty days of the date of issue of the certificate. (3) A certificate under sub section (1)(b) shall be issued by the competent authority, only after it has, for reasons to be recorded in writing, certified that(a) the bull or bullock is over the age of twenty years; and (b) in the case of a bull, it has become permanently unfit and unserviceable for the purpose of breeding and, in the case of a bullock, it has become permanently unfit and unserviceable for the purposes of draught and any kind of agricultural operation: Provided that the permanent unfitness or unserviceability has not been caused deliberately. (4) The competent authority shall, before issuing the certificate under sub section (3) or refusing to issue the same, record its order in writing. Any person aggrieved by the order of the competent authority, under this section, may, within twenty days of the date of the order, appeal against it to the State Government, which may pass such orders thereon as it may deem fit. (5) The State Government may, at any time, for the purposes of satisfying itself as to the legality or propriety of the action taken under this section, call for and examine the record of any case and may pass such orders thereon as it may deem fit. (6) Subject to the provisions herein contained any action taken under this section, shall be final and conclusive and shall not be called in question. " On behalf of the petitioners it has been argued that section 3 imposes a number of unreasonable restrictions. Firstly, it is urged that the age limit with regard to bulls or bullocks is put too high, viz. at 20 years. This is an 626 aspect which we have already considered in relation to the Bihar Act. What we have said about the age s limit in that connexion applies equally to the Uttar Pradesh Act. The 8th Live stock Census, 1956 shows that in Uttar Pradesh bulls and bullocks over 3 years of age, not in use for breeding or work, numbered as many as 126,201 in 1956 as compared to 162,746 in 1951. The Municipal Manual, Uttar Pradesh, Vol. 1, contains a direction that for slaughter of animals, bullocks and male buffaloes in good state of health below ten years of age should be included. Secondly, it is pointed out that not being content with fixing an unreasonably high age limit, the impugned provision imposes a double restriction. It says that the animal must be over twenty years in age and must also be permanently unfit and unserviceable; and in the case of a bullock, the unfitness must be for "any kind of agricultural operation" and not merely for draught purposes. The result of this double restriction, it is stated, is that even if the animal is permanently unserviceable and unfit at an earlier age, it cannot be slaughtered unless it is over twenty years in age. Before a certificate can be given, the animal must fulfil two conditions as to (1) age and (2) permanent unfitness. We consider this to be a demonstrably unreasonable restriction. In Md. Hanif Quareshi 's case (1) this Court had said that a total ban on the slaughter of bulls and bullocks after they had ceased to be capable of breeding or working as draught animals was not in the interests of the general public. Yet this is exactly what the impugned provision does by imposing a double restriction. It lays down that even if the animal is permanently unserviceable, no certificate can be given unless it is more than 20 years in age. The restriction will in effect put an end to the trade of the petitioners. Thirdly, the impugned provision provides (1) that the animal shall not be slaughtered within 20 days of the date of the issue of the certificate and (2) that any person aggrieved by the order of the competent authority may appeal to the State Government within 20 days. It is to be noted that the right of appeal is not (1) 627 confined to a refusal to grant a certificate as in the Bihar Act, but the right is given to any person aggrieved by the order of the competent authority. In other words, even when a certificate is given, any person, even a member of the public, who feels aggrieved by it may prefer an appeal and hold up the slaughter of the animal for a long time. From the practical point of view these restrictions really put a total ban on the slaughter of bulls and bullocks even after they have ceased to be useful, and we must hold, following our decision in Md. Hanif Quareshi 's case (1) that section 3 of the Uttar Pradesh Act in so far as it imposes unreasonable restrictions on the right of the petitioners as to slaughter of bulls and bullocks infringes the fundamental right of the petitioners and is to that extent void. (3) Now, we come to the Madhya Pradesh Act. Several provisions of this Act have been challenged before us as imposing unreasonable restrictions on the fundamental right of the petitioners. Section 4 deals with prohibition of slaughter of agricultural cattle. The expression 'agricultural cattle ' means an animal specified in the schedule: it means cows of all ages; calves of cows and of she buffaloes; bulls; bullocks; and male and female buffaloes. As we have stated earlier, we are concerned in these cases with the validity of the restrictions placed on the slaughter of bulls, bullocks and buffaloes. Now, section 4 is in these terms: "section 4(1) Notwithstanding anything contained in any other law for the time being in force or in any usage or custom to the contrary, no person shall slaughter or cause to be slaughtered or offer or cause to be offered, for slaughter (a) cows, calves of cows, or calves of she buffaloes, or (b) any other agricultural cattle unless he has obtained in respect of such cattle a certificate in writing issued by the Competent Authority for the area in which the cattle is to be slaughtered that the cattle is fit for slaughter. (1) [1959] S.C.R.29. 628 (2) No certificate under clause (b) of sub section (1) shall be issued by the Competent Authority .unless the Veterinary Officer after examining the cattle certifies that (a) the cattle is over twenty years of age and is unfit for work or breeding or has become permanently incapacitated from work or breeding due to age, injury, deformity or an incurable disease; and (b) the cattle is not suffering from any disease which makes its meat unwholesome for human consumption. (3) The Competent Authority shall, before issuing or refusing to issue a certificate under this section, record its order in writing. Any person aggrieved by the order of the Competent Authority under this section, may, within ten days of the date of the order, prefer an appeal against such order to the Collector of the district or such other officer as may, by notification, be authorised in this behalf by the State Government, and the Collector or such other officer may pass such orders thereon as he thinks fit. (4) Subject to the orders passed in appeal, if any, under sub section (3), the order of the Competent Authority shall be final and shall not be called in question in any Court. " Section 5 places a restriction as to the place and time for slaughter and the objection taken before us relates to the time rather than to the place of slaughter. It says in effect that no cattle in respect of which a certificate has been issued under section 4 shall be slaughtered within ten days of the date of issue of the certificate and where an appeal is preferred against the grant of such certificate, till the time such appeal is disposed of. The provision of appeal is contained in sub section (3) of section 4 of the Act which we have quoted earlier. That sub section lays down that any person aggrieved by the order of the Competent Authority, may, within ten days of the date of the order, prefer an appeal against the order to the Collector of the district or such other officer as may, by notification, be authorised in this behalf by the State Government. 629 Section 6 imposes a restriction on the transport of agricultural cattle for slaughter and reads: "section 6. No person shall transport or offer for transport or cause to be transported any agricultural cattle from any place within the State to any place outside the State, for the purpose of its slaughter in contravention of the provisions of this Act or with the knowledge that it will be or is likely to be, so slaughtered. " Section 7 prohibits the sale, purchase or disposal otherwise of certain kinds of animals. It reads . "section 7. No person shall purchase, sell or otherwise dispose of or offer to purchase, sell or otherwise dispose of or cause to be purchased, sold or otherwise disposed of cows, calves of cows or calves of shebuffaloes for slaughter or knowing or having reason to believe that such cattle shall be slaughtered. " Section 8 relates to possession of flesh of agricultural cattle and is in these terms: "section 8. Notwithstanding anything contained in any other law for the time being in force, no person shall have in his possession flesh of any agricultural cattle slaughtered in contravention of the provisions of this Act. " Section 10 imposes a penalty for a contravention of section 4(1)(a) and section 11 imposes penalty for a contravention of any of the other provisions of the Act. On behalf of the petitioners it has been pointed out, and rightly in our opinion, that cl. (a) of sub section (2) of section 4 of the Act imposes an unreasonable restriction on the right of the petitioners. That clause in its first part lays down that the cattle (other than cows and calves) must be over 20 years of age and must also be unfit for work or breeding; and in the second part it says, "or has become permanently incapacitated from work or breeding due to age, injury, deformity or an incurable disease. " It is a little difficult to understand why the two parts are juxtaposed in the section. In any view the restriction that the animal must be over 20 years of age and also unfit for work or breeding is an excessive or unreasonable restriction as we have 80 630 pointed out with regard to a similar provision in the Uttar Pradesh Act. The second part of the clause would not be open to any objection, if it stood by itself. If, however, it has to be combined with the agelimit mentioned in the first part of the clause, it will again be open to the same objection; if the animal is to be over 20 years of age and also permanently incapacitated from work or breeding etc. ,then the agelimit is really meaningless. Then, the expression 'due to age ' in the second part of the clause also loses its meaning. It seems to us that cl. (a) of sub section (2) of section 4 of the Act as drafted is bad because it imposes a disproportionate restriction on the slaughter of bulls, bullocks and buffaloes it is a restriction excessive in nature and not in the interests of the general public. The test laid down is not merely permanent incapacity or unfitness for work or breeding but the test is something more than that, a combination of age and unfitness ' Learned Counsel for the petitioners has placed before us an observation contained in a reply made by the Deputy Minister in the course of the debate on the Bill in the Madhya Pradesh Assembly (see Madhya Pradesh Assembly Proceedings, Vol. 5 Serial No. 34 dated April 14, 1959, page 3201). He said that the age fixed was very much higher than the one to which any animal survived. This observation has been placed before us not with a view to an interpretation of the section, but to show what opinion was held by the Deputy Minister as to the proper agelimit. On behalf of the respondent State our attention has been drawn to a book called The Miracle of Life (Home Library Club) in which there is a statement that oxen, given good conditions, live about 40 years. Our attention has also been drawn to certain extracts from a Hindi book called Godhan by Girish Chandra Chakravarti in which there are statements to the effect that cows and bullocks may live up to 20 or 25 years. This is an aspect of the case with which we have already dealt. The question before us is not the maximum age upto which bulls, bullocks and buffaloes may live in rare cases. The question before us is what is their average longevity and at what age 631 they become useless. On this question we think that the opinion is almost unanimous, and the opinion which the Deputy Minister expressed was not wrong. Section 5 in so far as it imposes a restriction as to the time for slaughter is again open to the same objection as has been discussed by us with regard to a similar provision in the Uttar Pradesh Act. A right of appeal is given to any person aggrieved by the order. In other words, a member of the public, if he feels aggrieved by the order granting a certificate for slaughter, may prefer an appeal and hold up for a long time the slaughter of the animal. We have pointed out that for all practical purposes such a restriction will really put an end to the trade of the petitioners and we are unable to accept a restriction of this kind as a reasonable restriction within the meaning of cl. (6) of article 19 of the Constitution. Section 6 standing by itself, we think, is not open to any serious objection. It is ancillary in nature and tries to give effect to the provision of the Act prohibiting slaughter of cattle in contravention of the Act. Section 7 relates to the prohibition of sale, purchase etc., of cows and calves and inasmuch as a total ban on the slaughter of cows and calves is valid, no objection can be taken to section 7 of the Act. It merely seeks to effectuate the total ban on the slaughter of cows and calves (both of cows and she buffaloes). Section 8 is also ancillary in character and if the other provisions are valid no objection can be taken to the provisions of section 8. Sections 10 and 11 impose penalties and their validity cannot be seriously disputed. However, we must say a few words about section 12 of the Act which has also been challenged before us. Section 12 is in these terms: "section 12. In any trial for an offence punishable under section 11 for contravention of the provision of sections 5, 6 or 7 of this Act the burden of proving that the slaughter, transport or sale of agricultural cattle was not in contravention of the provisions of this Act shall be on the accused. " The argument is that section 12 infringes the fundamental 632 right of the petitioners inasmuch as it puts the burden of proof on an accused person not only for his own knowledge or intention but for the knowledge or intention of other persons. We do not think that this contention is correct. The accused person, so far as sections 5 and 7 are concerned, must be the person who has slaughtered the animal or who has purchased, sold or otherwise disposed of the animal etc. Therefore, the only question will be his knowledge and the legislature was competent to place the burden of proof on him. So far as section 6 is concerned, it specifically refers to the knowledge of the person who has transported or offered for transport or caused to be transported any agricultural cattles from any place within the State to any place outside the State. Therefore, when the section talks of knowledge, it talks of the knowledge of that person who has transported or offered for transport etc. The knowledge of no other person comes into the purview of section 6. We are, therefore, ' of the view that section 12 is not invalid on the ground sug gested by the petitioners. Therefore, the result of our examination of the various provisions of the Act is that the impugned provisions in cl. (a) of sub section (2) of section 4, in sub section (3) of section 4 relating to the right of appeal by any person aggrieved by the order, and in section 5 relating to the time of slaughter, impose unreasonable and disproportionate restrictions which must be held to be unconstitutional. As to the Madhya Pradesh Agricultural Cattle Preservation Rules, r. 3 says "that an application for a certificate under section 4 shall be made to the competent authority," and r. 4 says that on receipt of the application, the competent authority shall by an order direct the person keeping the animal to submit it for examination by the Veterinary Officer Rule 5 reproduces the provisions of cls. (a) and (b) of sub section (2) of section 4 and in so far as we have held that the provision in el. (a) of sub section (2) of section 4 is unconstitutional, the rule must also fall with it. There is one other aspect of these cases which has been emphasized before us, to which a reference must 633 now be made. It is open to the legislature to enact ancillary provisions to give effect to the main object of the Act, namely, the prevention of slaughter of animals like bulls, bullocks or buffaloes which are still useful for the purposes for which they are generally used. It is pointed out that acts innocent in themselves may be prohibited and the restrictions in that regard would be reasonable, if the same were necessary to secure efficient enforcement of valid provisions. For example, it is open to the legislature, if it feels it necessary, in order to reduce the possibilities of evasion to a minimum, to enact provisions which would give effect to the main object of the legislation. We have not ignored this aspect and have kept in mind the undisputed right of the legislature to decide what provisions are necessary to give effect to the main object of the legislation. In these cases the petitioners have complained that the main object of the impugned provisions is not the prohibition of slaughter of animals which are still useful; the impugned provisions as they are worded really put a total ban on the slaughter of bulls, bullocks and buffaloes and for all practical purposes they put a stop to the profession and trade of the petitioners. We have held that this complaint is justified in respect of the main provisions in the three Acts. We, therefore, allow the three writ petitions and direct, as we directed in Md. Hanif Quareshi 's case (1) the respondent States not to enforce the Acts or the rules made thereunder in so far as they have been declared void by us. The petitioners will be entitled to their costs of the hearing in this Court. Petitions allowed.

In order to put the sugar industry on a stable footing, for which it was necessary to develop the cane area, the Ruler of the erstwhile Gwalior State by an order dated 27 7 1946 sanctioned the levy of cess of one anna per maund on all sugar cane purchased by the respondent company. When the Government of Madhya Bharat, which was the successor state of the former Gwalior State, made a demand for payment of the cess, the respondent filed a petition before the High Court of Madhya ,Bharat challenging the legality of the levy on the grounds (1) that the order dated 27 7 1946 was only an executive order and not a law under article 265 of the Constitution of India and that, therefore, there was no authority for the imposition of the cess after January 26, 1950, and (2) that the levy was discriminatory and violated article 14 inasmuch as while the respondent was made liable to pay the cess the other sugar factories in the State were exempt. It was found that at the time when cess was first levied there was no sugar factory in existence in the Gwalior State other than that of the respondent. Held, that (i) the Ruler of an Indian State was an absolute monarch in which there was no constitutional limitation to act in any manner he liked, he being the supreme legislature, the supreme judiciary and the supreme head of the executive. I Consequently, the order dated 27 7 1946 issued by the Ruler of Gwalior State amounted to a law enacted by him and became an existing law under article 372 of the Constitution of India. The levy of cess was therefore by authority of law within the meaning of article 265; Madhaorao Phalke vs The State of Madhya Bharat, ; , followed. (2) the levy of cess did not contravene article 14 because (a) the object was cane development in the particular area and a geographical classification based upon historical factors was a permissible mode of classification, and (b) a tax could not be struck down as discriminatory unless it was found that it was imposed with a deliberate intention of differentiating between 620 (ii) where the order is passed by the Sub divisional Animal Husbandry Officer, under sub rule (5), to the District Animal Husbandry Officer and (iii) where the order is passed by the authority prescribed under sub rule (1) to the Sub divisional Animal Husbandry Officer, if there is one; if not, to the District Animal Husbandry Officer; (b) The appeal shall not be decided against the appellant unless he has been given a reasonable opportunity of being heard. " The argument on behalf of the petitioners is that they are "Kassais" by profession and they earn their living by slaughtering cattle only (not goats or sheep which are slaughtered by "Chiks"); that they have the fundamental right to carry on their profession and trade; and that section 3 of the Act read with r. 3 imposes unreasonable restrictions restrictions not in the interests of the general public on their fundamental right and therefore they are not saved by cl. (6) of article 19 of the Constitution. Some of these arguments were considered by this Court in Md. Hanif Quareshi vs The State of Bihar (1) and it was pointed out that the test of reasonableness should be applied to each individual statute impugned and no abstract standard, or general pattern, of reasonableness can be laid down as applicable to all cases. It referred to the decision in State of Madras vs V. G. Row (2) and repeated what was said therein that "the nature of the right alleged to have been infringed, the underlying purpose of the restrictions imposed, the extent and urgency of the evil sought to be remedied thereby, the disproportion of the imposition, the prevailing conditions at the time, should all enter into the judicial verdict." 'Another consideration which has to be kept in mind is that "the legislature is the best judge of what is good for the community,. by whose suffrage it comes into existence. . . . (See The State of Bihar vs Maharajadhiraja Sir Kameshwar Singh of Darbhanga (3)). But the ultimate responsibility for determining the validity of the law must rest with the (1) (2) ; (3) 621 Court and the Court must not shirk that solemn duty cast on it by the Constitution. We must, therefore, approach the problem before us in the light of the principles laid down by this Court. The most pertinent question is having regard to all the relevant circumstances, is the age of 25 years laid down in section 3 a reasonable restriction on the right of the petitioners in the interests of the general public ? We are unable to say that it is. Apart from the affidavits made on behalf of the petitioners and the respondent State, a large volume of authoritative and expert opinion has been placed before us which shows beyond any doubt that a bull, bullock or she buffalo does not remain useful after 14 or 15 years and only a few of them live up to the age of 25. In the Report of the Cattle Preservation and Development Committee, published by the Ministry of Agriculture, it is recommended by the Committee that the slaughter of animals over 14 years of age and unfit for work as also animals of any age permanently unable to work owing to injury or deformity, should be allowed. In the Report on the Marketing of Meat in India (published by the Ministry of Food and Agriculture) there is a reference to a draft Bill circulated by the Ministry of Agriculture (page 112 of the Report) which contains a clause that animals over 14 years of age and unfit for work may be slaughtered on a certificate from a Veterinary Officer. In the Report on the Marketing of Cattle in India, again published by the Ministry of Food and Agriculture, occurs the following passage as to the price of animals with reference to their age: "Young draught animals up to the age of 4 years being raw and untrained fetch comparatively low prices. Between 4 and 8 years of age, the animals are in the prime of their youth and tender best service, and fetch maximum prices. From the 8th year onwards old age sets in, and a graded decline is observed in their capacity to work and consequently prices depreciate considerably." . In a Food and Agricultural Organisation study of cattle in India and Pakistan (Zebu Cattle of India and 79 622 Pakistan, page 94) it is stated that the active breeding life of a bull is estimated to be about 10 years. In Black 's Veterinary Dictionary (edited by W. C. Miller and G. P. West, fifth edition) it is stated that pedigree ,bulls may reach 12 or 14 years of age before being discarded; and cattle seldom live longer than 15 or 16 years, and when they do, their age is usually of no immediate importance. In another publication of the Ministry of Agriculture called 'Problems of Cattle Insurance ' under Indian conditions, it is stated that the life of cattle is comparatively much shorter, the maximum age being only about 15 years. There is an interesting chart relating to the determination of age in cattle in a publication called 'Cattle Development in Uttar Pradesh ' by R. L. Kaura, Director of Animal Husbandry; that chart shows that at II years incisors appear smaller due to wearing out; at 12 years space appears between the teeth, and after 12 teeth wear out constantly and roots remain far apart from one another. As against all this expert opinion the respondent State has relied on the chart embodying some useful data about domestic animals, prepared by Major A. C. Aggarwala, Director of Veterinary Services, Punjab, and R. R. Gulati, Superintendent, Veterinary Department, Jullandur, which shows the sterility age of a buffalo at 15 and average age at 25, and of a cow sterility at 15 and 16 years and average life 22 years.

The petitioners carry on business as Shroffs and Bankers. The Income tax Department searched various premises of the petitioners and seized a sum of Rs. 12 lakhs in cash from the petitioners, under section 132 and 132A of the Income tax Act. The petitioners contended that the said amount represented the stock in trade of the petitioners. The petitioners also contended that the provisions of section 132 and 132A of the Income tax Act, 1961, as well as rules 112, 112A, 112B and 112C of the Income Tax Rules, 1962, were unconstitutional as violative of Article 14, 19(1)(f) and (g) and 31(1) of the Constitutional. Section 132 and 132A were further challenged on the ground of conferring naked, abitrary, unguided, discriminatory and uncanalised power on the executive authority. Dismissing the petition, ^ HELD: (1) This Court has already upheld in Pooran Mal 's case the validity of section 132 and 132A as well as rules 112 and 112A. [893 A & C] (2) Rules 112B and 112C relate to the release of the articles seized and are therefore beneficial rules and as such cannot be challenged. [893D]

The respondents who were licensees for the whole sale vend of denatured spirit in their writ petitions before the High Court contended that levy of fees on denatured spirit was not justified because (i) the State was not providing any service to the trade and (ii) since it is the Parliament which has the power to levy excise duty or tax on denatured spirit, the State was incompetent to levy the fees. Rejecting the contentions, the High Court held that the State had exclusive privilege to deal with any intoxicating liquor which included denatured spirit, that it had the right to vend liquor either in retail or wholesale and that therefore its power to levy fees cannot be questioned. In appeal to this Court it was contended on behalf of the licensees that (1) levy of vend fee on denatured spirit by the State was without legislative competence (2) with the enactment of Industrial (Development and Regulation) Act, 1951 the Union had taken under its control industries including fermentation of industrial alcohol and, therefore, it is only the Union which could levy the fees on denatured spirit or industrial alcohol. Allowing the State 's appeal, ^ HELD: The levy of vend fee is for parting with the exclusive right of the State with regard to intoxicating liquors and for conferring a right on the licensees to sell such liquors. A conspectus of the decisions of this Court establishes (i) that there is no fundamental right of a citizen to carry on trade or to do business in liquor because under its police power, the State can enforce public morality, prohibit trade in noxious or dangerous goods (ii) the State has power to enforce an absolute prohibition on manufacture or sale of intoxicating liquors pursuant to Article 47 of the Constitution and (iii) the history of excise laws in the country shows that the State has the exclusive right or privilege to manufacture or sell liquors. [549 F H] State of Bombay and Anr. vs F. N. Balsara [1951] S.C.R. 682 referred to. (iv) The terms "intoxicating liquor" is not confined to potable liquor alone but would include alliquors which contain alcohol. [537 G] Nashirwar vs State of Madhya Pradesh [1975] 2 S.C.R. 861; Har Shankar vs The Deputy Excise and Taxation Commissioner ; ; State of Bombay and Anr. vs F. N. Balsara & Ors. ; ; Bhola Prasad vs The King Emperor at p. 25 referred to. (v) The term "liquor" used in Abkari Acts not only covers alcoholic liquor which is generally used for beverage purposes and which produces intoxication but would also include liquids containing alcohols. [537 B C] 532 Cooverjee B. Bharucha vs The Excise Commissioner and Chief Commissioner, Ajmer & Anr. ; ; M/s. Guruswamy & Co. etc. vs State of Mysore & Ors. ; State of Orissa & Ors. vs Harinarayan Jaiswal & Ors. ; ; Amar Chandra Chakraborty vs Collector of Excise, Government of Tripura and Ors. ; ; Har Shankar & Ors. vs The Dy. Excise & Taxation Commissioner & Ors. ; referred to. 2(a) The power to regulate the notified industries is not exclusively within the jurisdiction of Parliament as Entry 33 in the Concurrent List enables a law to be made regarding production, supply and distribution of products of notified industries. The exclusive power of the State to provide for manufacture, distribution, sale and possession of intoxicating liquors is vested in the State. The power of the State Government to levy a fee for parting with its exclusive right regarding intoxicating liquors has been recognized as could be seen from the various State Acts regulating the manufacture, sale, etc. of intoxicating liquors. [544 C, A B] Ch. Tika Ramji and Ors. vs The State of Uttar Pradesh and Ors. ; ; Baijnath Kedai vs State of Bihar & Ors. ; distinguished. (b) The term "foreign liquor" cannot be given a restricted meaning because the word consumption cannot be confined to consumption of beverages only. When liquor is put to any use such as manufacture of other articles, the liquor is all the same consumed. The State is empowered to declare what shall be deemed to be country liquor or foreign liquor. "Foreign liquor" is defined as meaning all rectified, perfumed, medicated and denatured spirit wherever made. Therefore, the plea that the Excise Commissioner had no right to accept payment in consideration for the grant of licence for the exclusive privilege for selling in wholesale or retail, foreign liquor which includes denatured spirit cannot be accepted. [548 H, 549 A B] (c) The definition of "alcohol" includes both ordinary as well as specially denatured spirit. The specially denatured spirit for industrial purposes is different from denatured spirit only because of the difference in the quantity and quality of the denaturants. Specially denatured spirit and ordinary denatured spirit are classified according to their use and denaturants used. Therefore, the contention that specially denatured spirit for industrial purposes is different from the ordinary denatured spirit has no force. [551 B, 550 H 551 A]

Some of the proprietors of the former State of Madhya Pradesh granted to the several petitioners rights to take forest produce, mainly tendu leaves, from the forests included in the Zamindaris belonging to the proprietors. The agreements conveyed to the petitioners in addition to the tendu leaves other forest produce like timber, bamboos, etc., the soil for making bricks, and the right to build on and occupy land for the purpose of their business. These rights were spread over many years, but in the case of a few the period during which the agreements were to operate expired in 1955. Some of the agreements were registered and the others unregistered. After the coming into force of the Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act, 1950, the Government disclaimed the agreements and auctioned the rights afresh, acting under section 3 of the Act under which " all proprietary rights in an estate . . in the area specified in the notification, vesting in a proprietor of such estate. or in a person having interest in such proprietary right through the proprietor, shall pass from such proprietor or such other person to and vest in the State for the purposes of the State free of all encumbrances". The petitioners filed petitions under article 32 of the Constitution of India challenging the legality of the action taken. by the Government on the ground that it was an invasion of their fundamental rights. They contended (1) that the Government stepped into the shoes of the quondam proprietors and was bound by the agreements into which the latter had entered, before their proprietary rights were taken over by the Government, (2) that the petitioners were not proprietors as defined in the Act and therefore sections 3 and 4 of the Act did not apply to them, (3) that the agreements were in essence and effect licenses granted to them to cut, gather and carry away the produce in the shape of 340 tendu leaves, or lac, or timber or wood, (4) that the agreements granted no 'interest in land ' or 'benefit to arise out of land ' and that object of the agreements could only be described as sale of goods as defined in the Indian Sale of Goods Act, and (5) that the interest of the petitioners was not proprietary right but only a right to get goods in the shape of leaves, etc The petitioners relied on the decision in Firm Chhotabhai jethabai Patel and Co. vs The State of Madhya Pradesh; , Held : (1) that the agreements required registration and in the absence of it the rights could not be entertained. Srimathi Shantabai vs State of Bombay, ; , followed. (2)that in cases where the period stipulated in the agree ment had expired, the only remedy, if any, was to sue for breach of contract and no writ to enforce expired agreements could issue. , (3) that on their true construction the agreements in question were not contracts of sale of goods. (4) that both under the Act in question and the Central Provinces Land Revenue Act, 1917, the forests and trees in the Zamindari area belonged to the proprietors and they were items of proprietary rights. Consequently, the rights conveyed to the petitioners under the agreements were proprietary rights, which under sections 3 and 4 of the Act, became vested in the State. (5)that assuming that the agreements did not amount to grant of any proprietary right by the proprietors to the petitioners, the latter could have only the benefit of their respective contracts or licenses. In either case, the State had not, by the Act, acquired or taken possession of such contracts or licenses and, consequently, there had been no infringement of the petitioners ' fundamental rights which alone could support a petition under article 32 of the Constitution. Chhotabai jethabai Patel and Co. vs The State of Madhya Pradesh, ; , not followed. Ananda Behera vs The State of Orissa, [1955] 2 S.C.R. gig, followed.

The petitioner is a Judicial Member of the Central Administrative Tribunal. In this writ petition he claims equality of the Members of the Administrative Tribunal with the Judges of the High Court, or even the Vice Chairman of the Tribunal, in the matter of pay, and age of superannua tion. The Central Administrative Tribunal (Salaries and Allow ances and Conditions of Service of Chairman, Vice Chairman and Members) Rules, 1985 were framed in exercise of the powers conferred by section 35(2)(c) of the . Rule 3 of the Rules specifies Rs.8,000 p.m. as the pay of the Vice Chairman and the pay scale of Rs.7300 100 7600 p.m. for a Member. Rule 8 prescribes the age of superannuation for the Chairman and Vice Chairman at 65, and for any other Member 62 years. It was contended on behalf of the petitioner that an arbitrary distinction had been made in the conditions of service, particularly in regard to pay and age of superannu ation, between the Vice Chairman and the Members; that the judicial functions discharged by the Vice Chairman and the Members of the Central Administrative Tribunal were the same and, therefore, the principle of "equal pay for equal work" applied, and on that basis Article 14 had been violated; and that the Administrative Tribunal being a substitute for the High Court for adjudicating disputes relating to service matters, the Members of the Tribunal should be equated with the High Court Judges for all purposes 947 including their pay and age of Superannuation. S.P. Sampath Kumar vs Union of India, ; , relied upon. On behalf of the respondent it was contended that all the functions of the Vice Chairman and the Members were not the same in as much as the Vice Chairman, in addition to filling the casual vacancy in the office of the Chairman, also discharged certain administrative functions entrusted to him by the Chairman. Dismissing the writ petition, this Court, HELD: (1) It is the law enacted by Parliament constitut ing the Administrative Tribunal which has to be first seen for the purpose of ascertaining the real nature and status of the Tribunal and the persons constituting it. [1953 E] (2) It is not possible for the Administrative Tribunal to shed off or abandon its heritage and substitute its genes with those of its choice of a different heritage. [956G] (3) There is no ambiguity in the provisions of the , and the exact status and service conditions of the Chairman, Vice Chairman and Mem bers of the Administrative Tribunal together with the quali fications for appointment to these offices have been clearly spelt out in the Act. [953F] (4) From the scheme of the Act and the rules flamed thereunder it is quite clear that their enactment is in the manner laid down in Article 323 A of the Constitution. From the scheme it is evident that the Chairman, Vice Chairman and Members are not treated as one class for this purpose by the very enactment which provides for the establishment of the Tribunals. Such elaborate provisions were unnecessary if the Tribunal was to be equated with the High Courts and its members with High Court Judges. 1953D; 954C] (5) Article 323 A and 323 B themselves require the law constituting these Tribunals to provide for the pay and other conditions of service of its Members and, therefore, the same would he governed in the case of each Tribunal by the provisions of the statute giving birth to the Tribunal. These statutes being different, the provisions therein in this behalf can also be different, which has been left to the legislative wisdom to decide. [955G H] 948 (6) Equation of the Tribunal with the High Court was only as the forum for adjudication of disputes relating to service matters and not for all purposes such as the one arising for decision in the present case. [956C] S.P. Sampath Kumar vs Union of India, ; , distinguished & explained. (7) The foundation of initial equality on which the argument of discrimination is based, is non existent. The parent statute itself shows that they were not born equals. [956E]

(14 of 1947) section 18 Applicability of. The appellant company had its establishments in a number of States in the country. In its establishment at Kanpur there were two unions, one of which, the Shramik Sangh, was affiliated to the Federal Union comprising of some of the trade unions in the various establishments while the other, the Karamachari Union, was not. A demand relating to revision of dearness allowance among others, was raised by both the Unions at Kanpur. The Shramik Sangh and the appellant entered into a settlement. Karamchari Union which was not a party to the settlement, made an application to the State Government to constitute a conciliation board for reference of the dispute. The Board was constituted. In the meantime, however, to bring the settlement within the purview of the U.P. the Shramik Sangh applied for the constitutation of a conciliation board. A conciliation board was constituted and the memorandum of settlement arrived at between the parties was registered even though the dispute on the same point raised by the Karamchari Union was pending before the Conciliation Board all the while. The dispute raised by the Karamchari Union was, therefore, referred to a Tribunal under s 4K of the Act. The Tribunal rejected the appellant 's contention that it had no jurisdiction to adjudicate on the dispute. On appeal to this Court it was contended that it was implicit in the various provisions of the U.P. Act that a settlement arrived at before a Conciliation Board by a Union of the majority of workmen was binding on all the workmen and that in the absence of a provision like section 18 of the it was not permissible for the Karamchari Union to contend that the settlement would bind only the members of the Shramik Sangh and in any event reference of the dispute to a Tribunal was without jurisdiction. Dismissing the appeal, ^ HELD: 1. The State Government rightly took the view that the controversy raised by the Karamchari Union was an industrial dispute. [922 G H] 2. A reading of the relevant provisions of the U.P. , clearly shows that there is nothing in the Act to require that the dispute 912 or difference should be raised by all the workmen of the industry, or by everyone of them, or even by a majority of them. It is enough if the controversy is between the employer on the one side and workmen on the other. There is also nothing in the Act to require that the workmen raising the controversy should form a majority of the employees, the reason being that where it is found that the controversy affects, or will affect, the interests of workmen as a class, the law envisages that, in the interest of industrial peace, it should be examined and decided in one of the modes provided by it. [917 D F] 3. An individual dispute cannot, however, be said to be an industrial dispute unless the other workmen associate themselves with it. No hard and fast rule can be laid down to decide when and by how many workmen an industrial dispute could be raised within the meaning of the Act, or whether a minority union or even an unrecognised union, could raise an industrial dispute. It is enough if there is a potential cause of disharmony which is likely to endanger industrial peace, and a substantial number of workmen raise a dispute about it, for then it is permissible to view it as an industrial dispute within the meaning of clause (1) of section 2 of the Act, and to refer it for adjudication to a tribunal. [917 F H] 4. The settlement arrived at with the Federal Union did not bind the Karamchari Union as it was not a party to it and was not affiliated to the Federal Union. Section 18 of the Central Act provides that a settlement arrived at by agreement between the parties otherwise than in the course of conciliation proceedings shall be binding on the parties to the agreement. [918 E] 5. Moreover, the settlement arrived at with the Shramik Sangh was under the provisions of the U.P. Act and, therefore, section 18 of the Central Act had no application. There is no provision similar to it in the U.P. Act. [918 G] 6. There was no occasion for invoking section 7 of the U.P. Act. That section is mainly intended to serve the purposes contemplated by section 3 of the Act, namely, securing the public safety or convenience or the maintenance of public order or supplies and services essential to the life of the community or for maintaining employment etc. It cannot therefore be said that the settlement arrived at by the Sangh became binding on all workmen including the Karamchari Union which was not a party to it nor is there any other provision in the Act or the Rules making the settlement binding on the Karamchari Union. Nor again can it be said that section 3(d) of the U.P. Act justifies the argument that merely because a union, consisting of a majority of workers, can represent all the workmen, the settlement arrived at before a conciliation board would bind those who are not parties to it. [919 B, C, F G] 7. In the absence of any prohibitory provision in the Act it cannot be said that the State Government had no jurisdiction to make a general reference under section 4K of the U.P. Act merely because the settlement was made by a majority union and was binding on the Shramik Sangh. The Tribunal has found it as a fact that the Karamchari Union represented a substantial number of the workmen of the company at Kanpur, and there is no reason why they should be debarred from raising a dispute for the benefit of all the workmen as a class. It is well recognised, that "collective bargaining" can take place between the employer and a bona fide labour union and there is nothing on the record to show that the Karamchari Union was not a bona fide union. [920 A C] 913 In the instant case the Shramik Sangh entered into the settlement in collusion with the company and the Conciliation Board finalised the settlement even though the Karamchari Union 's dispute was still pending. No effort was made to make it a party to the proceedings. Although, to begin with, a both the Shramik Sangh and the Karamchari Union were opposed to the settlement earlier arrived at by the Federal Union the Shramik Sangh changed its stand and endorsed the settlement of the Federal Union when it was placed on the notice board. The Tribunal also found as a fact that the settlement was not even put on the notice board of the company. In these circumstances if the State Government had decided to make a reference of the dispute to the Tribunal it could not be said that it did not apply its mind to the controversy or committed an illegality in doing so. [920 H 921 C] 8. Even assuming that the earlier settlements were in the nature of a package deal arrived at between the company and the Federal Union it cannot be said that there was any legal bar to the reference of the dispute regarding one particular item of the package deal for adjudication by the tribunal so as to vitiate the reference. The company brought this aspect of the matter specifically to the notice of the State Government. The point does not, however, relate to the jurisdiction or the maintainability of the reference under section 4K for it is essentially a matter for the Tribunal 's examination with due regard to the evidence before it. [921 F G] Herbertsons Ltd. vs Workmen of Herbertsons Ltd. & Ors. ; and New Standard Engg. Co. Ltd. vs M. L. Abhyankar & Ors., ; held inapplicable.

The election of the appellant to the Madhya Pradesh Legislative Assembly from Khategaon constituency was challenged on two grounds: (1) That the nomination paper of one of the contesting candidates was wrongly rejected by the Returning Officer; and (2) that there was a violation of section 123 of the Representation of the People Act, 1951, in that the appellant and his election agent made speeches, wherein they stated, that Congress had not abolished cow slaughter in India and that to vote for the Congress therefore was to commit the sin of gohatya. The trial Judge of the High Court allowed the petition on both the grounds. In appeal to this Court under section 116 A the Act, HELD: (1) The candidate whose nomination paper was rejected was not registered as a voter in the Electoral Roll relating to Khategaon constituency but to a different constituency. Under section 33(5) of the Act, he had to produce before the Returning Officer at the time of scrutiny, a copy of the Electoral Roll of that constituency, or of the relevant part thereof, or a certified copy of the relevant entry in such Roll, or should have filed any of those documents earlier with his nomination paper. He did not do any of these but instead, filed with his nomination paper a certificate giving only a gist of an entry from the Electoral Roll of the other constituency, and that too from an officer who was not proved to have the authority to issue a certified copy of the Electoral Roll. The provisions of the section were thus not complied with and the Court had no power to dispense with the requirement. Therefore, the rejection of the nomination paper of the candidate, by the Returning Officer, was justified and the trial Judge erred in holding that it was wrongly rejected [501 F H; 502 A E] (2) By stating that if the voters voted for congress they would be committing the sin of gohatya, the appellant and his agent attempted to induce the voters to believe that they would become objects of divine displeasure or spiritual censure and thus committed an election offence under section 123 of the Act. [506 G; 507 B] Since the witnesses who spoke about the speeches were believed by the trial Judge not on the probabilities of the case, but, on his observation of their demeanour this Court would be slow to depart from the trial Judge 's assessment of the evidence. According to that evidence, the voters were reminded that they would be committing the sin of gohatya. Since the cow is venerated in this Country and it is also beleved that gohatya is one of the cardinal sins, such a reminder would be equivalent to reminding them that they would be objects of divine displeasure of spiritual censure. The case therefore fell within section 123(2)(ii) and the 500 trial Judge was right in holding that the election of the returned candidate should be set aside. [505 D E; 506 H]

The firsf petition is on behalf of one thousand Dairy Mates and the other on behalf of 280 workers as Junior Plant Operatives and semiskilled Operatives. The grievance of Dairy Mates is that although they perform the duties of semi skilled workers they have been wrongly classified as unskilled workers and paid salaries as such. Similarly the grievance of the Junior Plant Operatives and semi skilled Operatives is that they are actually doing the work of skilled workers but are classified as unskilled workers and paid salary as such. In view of the disputed questions relating to the nature and functions of the workmen involved, the Court referred the matter to the Central Govt. Industrial Tribunal cum Labour Court to report to the Court as to what would be appropriate pay scales admissible to the concerned workers. On the basis of additional material and evidence produced by the workers, the Tribunal made its report and recommended that taking into consideration all the facts and circum stances, the Mates and JPOs may be given the pay scale of Rs.800 1150, the semi skilled operatives may be given the scale of Rs.825 1200 and the skilled operatives may be given the scale of Rs.950 1400. The Union of India criticised the pay scale recommended to the Mates contending that their work was of unskilled nature. Accepting the report of the Tribunal while allowing the Petitions in terms of the re port, this Court, HELD: There is no roster of duties and functions of the Mates in any Unit and all Mates have to do the work of the Units to which they are assigned on any particular day. The Mates have thus to be versatile with the work in all the Units, both unskilled and semi skilled. This is certainly not the case with the Sweepers, Chowkidars and Malls who are categorised as unskilled workers. This being the case, there is no merit in the contention of the Union of India that the Mates should be 324 treated on par with the unskilled workers. [328C D]

Appeal No. 51 of 1951. Appeal from the Judgment and Decree dated the 11h September, 1945, of the High Court of Judicature at Allaha bad (Brand and Waliullah JJ.) in First Appeal No. 212 of 1942 arising out of the Judgment and Decree dated the 28th February, 1942, of the Court of the Civil Judge of Azamgarh in Original Suit No. 4 of 1941. S.P. Sinha (Shaukat Hussain, with him) for the appel lants. C.K. Daphtary (Nuruddin Ahmed, with him) for the re spondents. Oct. 22. The judgment of the Court was delivered by BHAGWATI J. This is an appeal from the judgment and decree of the High Court of judicature at Allahabad which set aside a decree passed by the Civil Judge of Azamgarh decreeing the plaintiff 's claim. One Haji Abdur Rahman, hereinafter referred to as Haji" a Sunni Mohammedan, died on the 26th January, 1940, leaving behind him a large estate. He left him surviving the plain tiffs 1 to 3, his sons, plaintiff 4 his daughter and plain tiff 5 his wife, defendant 6 his sister, defendant 7 his daughter, by a predeceased wife Batul Bibi and defendants 1 to 4 his nephews and defendant 5 his grand nephew. Plain tiffs case is that immediately after his death the defendant 1 who was the Chairman, Town Area qasba Mubarakpur and a member of the District Board, Azamgarh and defendant 5 who was an old associate of his started propaganda against them, that they set afloat a rumour to the effect that the plain tiffs 1 to 4 1135 were not the legitimate children of Haji and that the plain tiff 5 was not his lawfully wedded wife, that the defendants 1 to 4 set up an oral gift of one third of the estate in their favour and defendant 5 set up an oral will bequeathing one third share of the estate to him and sought to interfere with the possession of the plaintiffs over the estate and nearly stopped all sources of income. It was alleged that under these circumstances a so called deed of family settle ment was executed by and between the parties on the 5th April, 1940, embodying an agreement in regard to the distri bution of the properties belonging to the estate, that plaintiff 3 was a minor of the age of about 9 years and he was represented by the plaintiff 1 who acted as his guardian and executed the deed of settlement for and on his behalf. On these allegations the plaintiffs filed on the 25th Novem ber, 1940, in the Court of Civil Judge of Azamgarh the suit out of which the present appeal arises against the defend ants 1 to 5 and defendants 6 and 7 for a declaration that the deed of settLement dated 5th April, 1940, be held to be invalid and to establish their claim to their legitimate shares in the estate of Haji under Mohammedan Law. The defendant 8 a daughter of the plaintiff 5 whose paternity was in dispute was added as a party defendant to the suit, the plaintiffs claiming that she was the daughter of the plaintiff 5 by Haji and the defendants 1 to 5 alleging that she was a daughter of the plaintiff 5 by her former husband Alimullah. The only defendants who contested the claim of the plaintiffs were the defendants 1 to 5. They denied that the plaintiff 5 was the lawfully wedded wife and the plaintiffs 1 to 4 were the legitimate children of Hail. They also contended that the deed of settlement embodied the terms of a family settlement which had been bona fide arrived at between the parties in regard to the disputed claims to the estate of Haji and was binding on the plaintiffs. It is significant to observe that the defendants 6 and 7 who were the admitted heirs of Haji did not contest the plaintiffs ' claim at all. 1136 The two issues which were mainly contested before the trial Court were, (I) Whether the plaintiffs 1 to 4 are the legitimate issue of and the plaintiff 5 is the wedded wife of Abdul Rahman deceased; (2) Whether the agreement dated 5th April, 1940, was executed by the plaintiffs after understanding its contents fully or was obtained from them by fraud or undue influence ? Was the said deed insufficiently stamped? Was it benefi cial to the minor plaintiffs ? As regards the first issue there was no document evi dencing the marriage between the plaintiff 5 and Haji. The plaintiff 5 and Haji had however lived together as man and wife for 23 to 24 years and the plaintiffs 1 to 4 were born of that union. There was thus a strong presumption of the marriage of Haji with plaintiff 5 having taken place and of the legitimacy of plaintiffs 1 to 4. The trial Court did not attach any importance to the question of onus or pre sumption, examined the evidence which was led by both the parties with a view to come to a finding in regard to this issue, and found as follows: "So far as Musammat Rahima 's marriage with Alimullah or another Abdul Rahman is concerned the evidence of both the parties stands on the same level and is not worthy of much credit. I have however, not the least hesitation to observe that so far as the oral evidence and the circumstances of the case are concerned, they all favour the plaintiffs. I, however, find it difficult to ignore the testimony of the defendants ' witnesses Shah Allaul Haq and Molvi Iqbal Ahmad . . . . Owing to the voluminous oral evidence adduced by the plaintiffs and the circumstances that apparently favour them, I gave my best attention to this case, but upon a careful consideration of the whole evidence on the record, I am not prepared to hold that the plaintiffs 1 to 4 are the legitimate issues of the plaintiff No. 5, the lawfully wedded wife of the deceased, Haji Abdul Rahman. I frankly admit that the matter iS not free from difficulty and 1137 doubt but to my mind the scale leans away from the plain tiffs and I am not satisfied that their version is correct. " On the second issue the learned trial Judge came to the conclusion that the disputed compromise amounted to a family settlement; that it was beneficial to the interests of the minor plaintiff and that it was made by the parties willing ly and without any fraud or undue influence. On these find ings the suit was dismissed with costs. The plaintiffs filed an appeal to the High Court of Judicature at Allahabad. After considering the several authorities on the binding nature of family settlements cited before it came to the conclusion that it did not bind the plaintiffs. As regards defendants 1 to 5 it was held that there was no consideration whatsoever which could in any way support the arrangement. Plaintiffs 4 and 5 being Purdanashin ladies, it was found that they had no chance at any stage of the transaction of getting independent advice in regard to the contents or the effect of the document which they were executing and that even if the deed were valid otherwise it would not be binding on them. It was further held that the plaintiff 3 who would be about 9 years of age at the time of the execution of the deed was repre sented in the transaction by his brother who could not be the legal guardian of his property and that the deed in so far as it adversely affected the interest of plaintiff 3 would not be binding on him. On the question of marriage and legitimacy the High Court came to the conclusion that ii the trial Court had considered the question of onus in its proper light and given the plaintiffs the benefit of the initial presumption in favour of legitimacy and lawful wedlock under the Mahomedan law, he would have recorded a finding in their favour. The defendants to 5 had alleged that at the time of the commencement of sexual relations between the plaintiff 5 and Haji, plaintiff 5 was the wife of one Alimullah who was alive and that therefore the con nection between the 1138 plaintiff 5 and Haji was in its origin illicit and continued as such, with the result that the presumption in favour of a marriage between the plaintiff 5 and Haji and in favour of the legitimacy of plaintiffs 1 to 4 would not arise. The learned trial Judge disbelieved the evidence led by the defendants 1 to 5 in regard to this marriage between the plaintiff 5 and Alimullah. The High Court upheld the finding and said: "All these circumstances, to my mind, strongly militate against the theory of a first marriage of Musammat Rahima Bibi with the man called Alimullah. In this state of the evidence one cannot but hold that this story of the marriage with Alimullah was purely an after thought on the part of the defendants 1 to 5 and it was invented only to get rid of the strong presumption under the Mahomedan law in favour of the paternity of plaintiffs 1 to 4 and the lawful wedlock of the plaintiff 5. " Having thus discredited the theory of the first mar riage of the plaintiff 5 with Alimullah the High Court came to the conclusion that it was fully established that Musam mat Rahima Bibi was the lawfully wedded wife and that the plaintiffs 1 to 4 are the legitimate children of Haji. The defendants 1 to 5 obtained leave to appeal to His Majesty in Council and the appeal was admitted on the 10th January, 1947 Shri S.P. Sinha who appeared for the defendants 1 to 5 before us has urged the self same two questions, namely, (1) Whether the deed of settlement is binding on the plaintiffs and (2) Whether the plaintiff 5 was the lawfully wedded wife and the plaintiffs 1 to 4 are the legitimate children of Haji. In regard to the first question, it is unnecessary to discuss the evidence in regard to fraud, undue influence, want of independent advice etc., as the question in our opinion is capable of being disposed of on a short point. It is admitted that the plaintiff 3 Ishtiaq Husan was a minor of the age of about 9 years at the date of the deed, and he was not represented as 1139 already stated by any legal guardian in this arrangement. The minor 's brother had no power to transfer any right or interest in the immovable property of the minor and such a transfer if made was void. (See Mulla 's Mahomedan Law, 13th Edition, page 303,section 364). Reference may be made to the decision of their Lord ships of the Privy Council in Imambandi vs Mut saddi(1). In that case the mother who was neither the legal guardian of her minor children nor had been appointed their guardian under the Guardian and Wards Act had purported to transfer the shares of her minor children in the property inherited by them from their deceased father. Mr. Ameer Ali who deliv ered the judgment of the Board observed at page 82 as follows : The question how far, or under what circumstances according to Mahomedan law,a mother 's dealings with her minor child 's property are binding on the infant has been frequently before the courts in India. The decisions, howev er, are by no means uniform, and betray two varying tenden cies: one set of decisions purports to give such dealings a qualified force; the other declares them wholly void and ineffective. In the former class of cases the main test for determining the validity of the particular transaction has been the benefit resulting from it to the minor; in the latter the admitted absence of authority or power on the part of the mother to alienate or incumber the minor 's property. " The test of benefit resulting from the transaction to the minor was negatived by the Privy Council and it was laid down that under the Mahomedan law a person who has charge of the person or property of a minor without being his legal guardian, and who may, there fore, be conveniently called a "defacto guardian," has no power to convey to another any right or interest in immovable property which the transferee can enforce against the infant. (1) (1918) 45 1. A. 73. 1140 Shri S.P. Sinha relied upon a decision of the Calcutta High Court reported in Mahomed Keramutullah Miah vs Keramutulla (1) where it was held that there was nothing in the doctrine of family arrangements opposed to the general principle that when it was sought to bind a minor by an agreement entered into on his behalf, it must be shown that the agreement was for the benefit of the minor;that if improper advantage had been taken of the minor 's position, a family arrangement could be set aside on the ground of undue influence or inequality of position or one or other of the grounds which would vitiate such arrangement in the case of adults; but where there was no defect of this nature, the settlement of a doubtful claim was of as much advantage to a minor as to an adult, and where a genuine dispute had been fairly settled the dispute could not be reopened solely on the ground that one of the parties to the family arrangement was a minor. This decision was reached on the 19th July, 1918, i.e., almost 5 months after the decision of their Lordships of the Privy Council, but it does not appear that the ruling was brought to the notice of the learned Judges of the Calcutta High Court. The test of the benefit resulting from the transaction to the minor which was negatived by their Lord ships of the Privy Council was applied by the learned Judges of the Calcutta High Court in order to determine whether the family arrangement which was the subject matter of the suit before them was binding on the minor. Shri S.P. Sinha next relied upon a decision of the Chief Court of Oudh, Ameer Hasan vs Md. Ejaz Husain(2). In that case an agreement to refer to arbitration was entered into by the mother for her minor children and an award was made by the arbitrators. The scheme of distribu tion of properties promulgated in the award was followed without any objection whatever for a long period extending over 14 years and proceedings were taken at the instance of the minors for recovery of possession by actual partition of their shares in the properties. The Court held (1) A.I.R. 1919 Cal. 218. (2) A.I.R. 1929 Oudh 134. 1141 that the reference to arbitration could not be held binding on the minors and the award could not be held to be an operative document, but if the scheme of distribution pro mulgated in the award was in no way perverse or unfair or influenced by any corruption or misconduct of the arbitra tors and had been followed without any objection whatever for a long period extending over 14 years, it would as well be recognised as a family settlement and the court would be extremely reluctant to disturb the arrangement arrived at so many years ago. This line of reasoning was deprecated by their Lordships of the Privy Council in Indian Law Reports 19 Lahore 313 at page 317 where their Lordships observed "it is, however, argued that the transaction should be upheld, because it was a family settlement. Their Lordships cannot assent to the proposition that a party can, by describing a contract as a family settlement, claim for it an exemption from the law governing the capacity of a person to make a valid contract. " We are therefore unable to accept this case as an authority for the proposition that a deed of settlement which is void by reason of the minor not having been properly represented in the transaction can be rehabil itated by the adoption of any such line of reasoning. If the deed of settlement was thus void it could not be void only qua the minor plaintiff 3 but would be void altogether qua all the parties including those who were sui juris. This position could not be and was not as a matter of fact contested before us. The contention of the defendants 1 to 5 in regard to the lawful wedlock between plaintiff 5 and Haji and the legitimacy of the plaintiffs 1 to 4 is equally untenable. The plaintiffs had no doubt to prove that the plaintiff 5 was the lawfully wedded wife and the plaintiffs 1 to 4 were the legitimate children of Haji. Both the Courts found that the factum of the marriage was not proved and the plaintiffs had therefore of necessity to fall back upon the presump tion of marriage arising in Mahomedan law. If that presump tion of marriage arose, there would be no difficulty in 1142 establishing the status of the plaintiffs 1 to 4 as the legitimate children of Haji because they were admittedly born by the plaintiff 5 to Haji. The presumption of marriage arises in Mahomedan law in the absence of direct proof from a prolonged and continual cohabitation as husband and wife. It will be apposite in this connection to refer to a passage from the judgment of their Lordships of the Privy Council in Khajah Hidayut Oollah vs Rai Jan Khanurn(1). Their Lord ships there quoted a passage from Macnaghten 's Principles of Mahomedan Law: "The Mahomedan lawyers carry this disinclination (that is against bastardizing) much further; they consider it legitimate of reasoning to infer the existence of marriage from the proof of cohabitation . . None but children who are in the strictest sense of the word spurious are considered incapable of inheriting the estate of their putative father. The evidence of persons who would, in other cases, be considered incompetent witnesses is admitted to prove wedlock, and, in short, where by any possibility a marriage may be presumed, the law will rather do so than bastardize the issue, and whether a marriage be simply voidable or void ab initio the offspring of it will be deemed legitimate . . . . . This I apprehend, with all due deference, is carrying the doctrine to an extent unwarranted by law; for where children are not born of women proved to be married to their father, or of female slaves to their fathers, some kind of evidence (however slight) is requisite to form a presumption of matrimony. . . . . . . The mere fact of casual concubinage is not sufficient to establish legiti macy ;and if there be proved to have existed any insurmount able obstacle to the marriage of their putative father with their mother, the children, though not born of common women, will be considered bastards to all intents and purposes. " Their Lordships deduced from this passage the principle that where a child had been both to a father, of a mother where there had been not a mere casual (1) (1844) 3 Moore 's indian Appeals 295 at p. 317. 1143 concubinage, but a more permanent connection, and where there was no insurmountable obstacle to such a marriage, then according to the Mahomedan law, the presumption was in favour of such marriage having taken place. The presumption in favour of a lawful marriage would thus arise where there was prolonged and continued cohabita tion as husband and wife and where there was no insurmount able obstacle to such a marriage, eg., prohibited relation ship between the parties, the woman being an undivorced wife of a husband who was alive and the like. Further illustra tions are to be found in the decisions of their Lordships of the Privy Council in 21 Indian Appeals 56 and 37 Indian Appeals 105 where it was laid down that the presumption does not apply if the conduct of the parties was incompatible with the existence of the relation of husband and wife nor did it apply if the woman was admittedly a prostitute before she was brought to the man 's house (see Mulla 's Mahomedan Law, p. 238, section 268). If therefore there was no insur mountable obstacle to such a marriage and the man and woman had cohabited with each other continuously and for a pro longed period the presumption of lawful marriage would arise and it would be sufficient to establish that there was a lawful marriage between them. The plaintiff 5 and Haji had been living as man and wife for 23 to 24 years openly and to the knowledge of all their relations and friends. The plaintiffs 1 to 4 were the children born to them. The plaintiff 5, Haji, and the children were all staying in the family house and all the relations including the defendant I himself treated the plaintiff 5 as a wife of Haji and the plaintiffs 1 to 4 as his children. There was thus sufficient evidence of habit and repute. Haji moreover purchased a house and got the sale deed executed in the names of the plaintiffs 1 and 2 who were described therein as his sons. The evidence which was led by the defendants 1 to 5 to the contrary was dis carded by the High Court as of a negative character 1144 and of no value. Even when the deed of settlement was exe cuted between the parties the plaintiff 5 was described as the widow and plaintiffs 1 to 4 were described as the chil dren of Haji. All these circumstances raised the presumption that the plaintiff 5 was the lawfully wedded wife and the plaintiffs 1 to 4 were the legitimate children of Haji. The result therefore is that both the contentions urged by the defendants 1 to 5 against the plaintiffs ' claim in suit fail and the decree passed in favour of the plaintiffs by the High Court must be affirmed. It was however pointed out by Shri S.P. Sinha that the High Court erred in awarding to the plaintiffs mesne profits even though there was no demand for the same in the plaint. The learned Solicitor General appearing for the plaintiffs conceded that there was no demand for mesne profits as such but urged that the claim for mesne profits would be included within the expression "awarding possession and occupation of the property aforesaid together with all the rights appertaining thereto. " We are afraid that the claim for mesne profits cannot be included within this expression and the High Court was in error in awarding to the plaintiffs mesne profits though they had not been claimed in the plaint. The provision in regard to the mesne profits will therefore have to be deleted from the decree. We dismiss the appeal of the defendants 1 to 5 and affirm the decree passed by the High Court in favour of the plain tiffs, deleting therefrom ' the provision in regard to mesne profits. The plaintiffs will of course be entitled to their costs throughout from the defendants 1 to 5. Appear dismissed. Agent for the appellants ': V.P.K. Nambiyar.

Under Mahomedan law a person who has charge of the person or property of a minor without being his legal guardian, i.e., a de facto guardian, has no power to convey to another any right or interest in immoveable property which the transferee can enforce against the minor. The question whether the transaction has resulted in a benefit to the minor is immaterial in such cases. Where disputes arose relating to succession to the estate of a deceased Mahomedan between his 3 sons, one of whom was a minor, and other relations, and a deed of settle ment embodying an agreement in regard to the distribution of the properties belonging to the estate was executed by and between the parties, the eldest son acting as guardian for and on behalf of the minor son: Held, that the deed was not binding on the minor son as his brother was not his legal guardian; as the deed was void it cannot be held as valid merely because it embodied a family arrangement; and the deed was void not only qua the minor, but with regard to all the parties including those who were sui juris. Imambandi vs Mutsaddi [1918] 45 I.A.73 relied on Mohemed Keramatullah Miah vs Keramatulla (A.I.R. Ameer Hassan vs Md. Ejay Hussain (A.I.R. 1929 Oudh 134) commented upon. 1134 Under Mahomedan law if there was no insurmountable obstacle to a marriage and the man and woman had cohabited with each other continously and for a prolonged period/he presumption of lawful marriage would arise and it would be sufficient to establish a lawful marriage between them. Khaja Hidayut Oollah vs Rat Jan Khanam (1844, 3 Moo I.A. 295) referred to.

The respondents, who were the Khadims of the tomb of Hazrat Khwaja Moin ud din Chishti of Ajmer challenged the constitutional validity of the Durgah Khwaja Saheb Act, 1955 (XXXVI of 1955) and certain specified sections by a petition filed under article 226 of the Constitution in the Rajasthan High Court. The High Court substantially found in their favour and made a declaration that the impugned provisions of the Act were ultra vires and restrained the appellants from enforcing them. The respondents claimed to represent the Chishti Soofies who, according to them, constituted a religious denomination or a section thereof to whom the Durgah belonged and their case was that the impugned Act had interfered with their fundamental right to manage its affairs. Their further case was that the Nazars (off erings) of the pilgrims constituted their customary and main source of income and were their property, recognised by judicial decisions including that of the Privy Council in Syed Altaf Hussain vs Dewan Syed Ali Rasul Ali Khan, A.I.R. , that the impugned Act and its material provisions violated their fundamental rights guaranteed by articles 14, 19(1) (f) and (g), 25, 26, 30(1) and (2) and 32 of the Constitution. It was contended that sections 4 and 5 of the Act, which provided for the setting up and composition of the Durgah Committee consisting of Hanafi Muslims none of whom might belong to the Chishtia order, infringed the rights of the. denomination guaranteed by Art, 26(b), (c) and (d) that cl. (v) of section 2(d) of the Act, by which all such Nazars as were received on behalf of the Durgah by the Nazim or any person authorised by him were to be included in the Durgah Endowment, infringed their fundamental right to property, that sections 11(f) and (h) which empowered the committee to determine the privileges of the Khadims and the functions and powers of the Sajjadanashin and section 13(1) which authorised the committee to make provisional interim arrangement in case the office of Sajjadanashin fell vacant, infringed 384 their fundamental rights under article 25(1), that section 14 by creating a statutory right in the Nazim or his agent. to solicit and receive offerings on behalf of the Durgah and prohibiting the Khadims and the Sajjadanashin from doing so, violated their right to property and section 118 which provided for the enforcement of the orders of the committee as orders and decrees of a civil court violated articles 14 and 32 of the Constitution. The past history of the Endowment for centuries showed that its management was always vested in Mutawallis appointed by the State, some of whom were Hindus, and that the pilgrims who visited the Durgah and made offering were not confined to Moslems alone but belonged to all communities. Held, that the contentions of the respondents must be nega tived. Although this Court has laid down what is a religious deno mination and what are matters of religion, it must not be overlooked that the protection of article 26 of the Constitution can extend only to such religious practices as were essential and integral parts of the religion and to no others. Commissioner, Hindu Religious Endowments, Madras vs Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, ; and Sri Venkataramana Devaru vs The State of Mysore, ; , discussed. Assuming that the Chishti order of Soofies constituted such a denomination or section of it whom the respondents represented, it was obvious that cls. (c) and (d) of article 26 could not create any rights which the denomination or the section never had; they could merely safeguard and guarantee the continuance of such rights which the denomination or section had. Where right to administer properties had never vested in the denomination or had been surrendered by it or had otherwise been effectively and irretrievably lost to it, article 26, could not be successfully invoked. In the instant case, since Chishti Soofies never had any rights of management over the Durgah Endowment for centuries since it was created, the attack on SS. 4 and 5 of the Act must fail. Asrar Ahmed vs Durgah Committee, Ajmer, A.I.R. 1947 P.C. 1, referred to. It was not correct to say that SS. 2(d)(v) and 14 of the impugned Act infringed article 19(1)(f) and (g) of the Constitution. Those sections, properly construed, meant that offerings earmarked generally for the Durgah belonged to the Durgah and could be received only by the Nazim or his 'agent. These offerings, as found by judicial decisions, never belonged to the respondents and the impugned sections did not affect what was found to belong to them. Syed Altaf Hussain vs Dewan Syed Ali Rasul Ali Khan, A.I.R. , referred to. 385 There could be no doubt as to the competency of the Legis lature to regulate matters relating to the property of the Durgh by providing that the said Offerings could be solicited by the Nazim or hi,, agent. It was, liower, not correct to say that the omission of the word explicitly ' contained in the definition in the earlier Act from the present Act enlarged the scope of the definition in any way. The powers conferred on the committee by section 11(f) and (h), which must be read in the light of the mandatory provisions of section 15 which made it obligatory on the committee to observe Muslim Law and the tenets of the Chishti saint and which had to be exercised within the limits laid down by section 16, could not be said to violate article 25(1) of the Constitution. section 16 in providing for the setting up of a Board of Arbitration, embodied a healthy and unexceptionable principle, obviously in the interest of the institution as well as the parties, and could not be said to infringe Arts 14 or 32 of the Constitution. Section 13(1) could not be read apart from the other provi sions of section 13. That section really intended to lay down the procedure for determining disputes relating to succession to III Office of Sajjadanashin and it was therefore fertile to contend that section 13(1) offended against article 25(1). since section 18 was confined to such final orders as were within the jurisdiction of the committee and passed against persons who did not object to them but failed to comply with them, it did not contravene articles 14 or 32 of the Constitution.

The Raja of an impartible Estate in U.P. executed certain Gujaranama deeds in 1949 including one in favour of the respondent, his younger brother. After the U.P. Zamindari and Land Reforms Act, 1950 (U.P. Act 1 of 1951) came in force the respondent made an application before the Rehabilitation Grants Officer under section 79 of the Act. The Rehabilitation Grants Officer held that the respondent was entitled to the Grant and the order was upheld by the higher courts including the High Court. In appeal by the State of U.P. before this Court it was contended that the Gujaranama executed by the Raja in favour of the respondent was. a transfer by way of sale or gift within the meaning of section 23(1 ) of the Act and therefore could not be recognised for purposes of assessing the amount of Rehabilitation Grant. HELD: (i) After the decision of the Privy Council in Shiba Prasad Singh 's case it must be taken to be well settled that an estate which is impartible by custom cannot be said to be the separate or exclusive property of the holder of the estate If the holder has got the estate as an ancestral estate and he has succeeded to it by primogeniture it will be a part of the joint estate of the undivided Hindu family. In the case Of an ordinary joint family property the members o.f the family can claim four rights: (1) the right of partition; (2) the right to restrain alienations by the head of the family except for necessity; (3) the right of maintenance; and (4) the right of survivorship. It is obvious from the very nature of the property which is impartible that the first of these rights cannot exist. The second is also incompatible with the custom of impartibility. The right of maintenance and the right of survivorship, however, still remain and it is by reference to these rights that the property, though impartible has, in the eve of law, to be regarded as joint family property. The right of survivorship, unlike mere spes successionis can be surrendered. The right of maintenance to junior members out of an impartible estate is based on joint ownership of the junior members of the family. [361 H 362 D] Shiha Prasad Singh vs Rant Prayag Kumari Devi, 59 I.A. 331, Rani Sartaj Kuari vs Deoraj Kuari, 15 I.A. 51, First Pittapur case. 26 I.A. 83, Collector of Gorakhpur vs Ram Sunder Mal, 61 I.A. 286 and Baijnath Prasad Singh vs Tej Bali Singh, 48 I.A. 195, applied. Raja Yarlagadda Mallikarjuna Prasad Nayadu vs Rain Yarlagadda Durga Prasad Nayadu, 27 I.A. 151 and Protap Chandra Deo vs Jagadish Chandra Deo, 54 I.A. 289, referred to. (ii) In the present case there was the statement of the Raja in the Gujaranama deed that according to the law and custom of the estate the 356 eldest son of the Raja becomes the owner of the estate on the death the earlier Raja and that the "younger sons have right to maintenance and they are given reasonable share of the estate in lieu of right of maintenance. In view of this admission of the Raja it was not possible to hold that the transfer of the properties in the Gujaranama deed was a transfer by way of gift. It was also not a sale of the properties for there is no money consideration. It was manifest that the transaction was by way of a settlement to the respondent by the Raja in lieu of the right of maintenance of the respondent which was obligatory upon the holder of impartible estate. The Gujaranama was therefore not hit by the pro vision of section 23 of the Act. [363 D F] (iii) The plea on behalf of the appellant that the case must be remanded to the Rehabilitation Officer because no issues were framed or evidence taken in the case had no force because there were no questions of fact raised in the written statement on which evidence could be taken. [364 A]

A mortgagor executed two deeds of mortgage in favour of the father of the appellants for Rs. 1600 and Rs. 1000 in respect of certain lands. Both the mortgages were possessory mortgages but the land was leased back to the mortgagor for a stipulated rent. The mortgagor died leaving behind him three sons, one adult and two minors. The adult son borrowed a further sum of Rs. 131 by executing a simple mortgage and purporting to act as the Manager of the joint family and the guardian of his minor brothers, executed a deed of sale in favour of the father of the appellants in respect of four out of ten items of land previously mortgaged. The consideration for the sale was Rs. 3050 which was made up of Rs. 1600. Rs. 1000 and Rs. 131 due under three previous mortgages respectively and Rs. 200 received in cash on the date of sale. The minor sons on becoming major filed a suit out of which this appeal arises, for a declaration that the sale deed executed was not for legal necessity, nor for the benefit of the estate and, therefore, not binding on them. They also prayed for joint possession of their 2/3rd share. The trial court found that there was legal necessity for the sale to the extent of Rs. 2600 only, the consideration of Rs. 3050 for the sale was inadequate as the lands were worth about Rs. 400 and that there was no compelling pressure on the estate to justify the sale and therefore the sale was not for the benefit of the family and hence not binding on the plaintiffs. A decree was granted in their favour for joint possession of 2/3rd share of the lands subject to certain payment to the second defendant. On appeal by the second defendant, the Assistant Judge held the suit of the first plaintiff to be barred by time and therefore modified the decree in favour of the second plaintiff. On appeal by the first plaintiff and second defendant, the High Court allowed the appeal by the first plaintiff and dismissed the appeal filed by the second defendant. Accepting the appeal of the legal representatives of the second defendant. ^ HELD: Out of the sale consideration of Rs. 3050 there was undoubted legal necessity to the extent of Rs. 2600 the total amount due under the two deeds of mortgage executed by the father of the plaintiffs. Out of the ten items which were mortgaged, only four were sold and the remaining six items were released from the burden of the mortgages. The family was also relieved from one burden of paying rent to the mortgagee under the lease. All this 817 was for the benefit of the family. The value of the land sold under the deed of sale was found by the Courts below to be Rs. 4000. Even if that be so it cannot possibly be said that the price of Rs. 3000 was grossly inadequate. Further there were continuous dealings between the family of the plaintiffs and the family of the second defendant over a long course of years. In these circumstances it is impossible to say that the sale was not binding on the plaintiffs. The Courts below appeared to think that notwithstanding the circumstance that there was legal necessity to a large extent it was incumbent on the second defendant to establish that he made enquiry to satisfy himself that there was sufficient pressure on the estate which justified the sale. When the mortgagee was himself the purchaser and when the greater portion of the consideration went in discharge of the mortgages no question of enquiry regarding pressure on the estate would arise at all. Where ancestral property is sold for the purpose of discharging debts incurred by the father and the bulk of the proceeds of the sale is so accounted, the fact that a small part of the consideration is not accounted for will not invalidate the sale. [819 A E] Gauri Shankar & Ors. vs Jiwan Singh & Ors. A.I.R. 1927 P.C. 246 Niamat Rai & Ors. vs Din Dayal & Ors. 1927 A.I.R. P.C. 121, Ram Sunder Lal & another vs Lacchmi Narain and another ; Hanooman Persaud Pandey vs Mt. Babooee Munrai Koonweree ; Radhakrishendas and another vs Kaluram A.I.R. 1967 S.C. 574, referred to. Balmukand vs Kamla Wati & Ors. A.I.R. 1964 S.C. 1385 held inapplicable.

The respondent No. 1, a Central Board constituted under the United Provinces Muslims Waqf Act, 1936, by a notification under section 5(1) Of the Act dated February 26, 1944, took into ' management the properties of a Darga Sharif and on October 18, 1946, the appellants, three of the five members of the Managing Committee of the said Darga Sharif, brought the suit, out of which the present appeal arises, for a declaration that the Darga properties did not constitute a waqf within the meaning of the Act and that the respondent No. 1 had no lawful authority to, issue the notification and assume management of the said properties. It was urged on behalf of respondent No. 1 that the suit had not been brought within one year as prescribed by section 5(2) of the Act, and was as such barred by limitation; and, that since the notice prescribed by section 53 Of the Act had admittedly not been served on the respondent, the suit was incompetent. It was found that in an earlier suit, brought with the sanction of the Advocate General, against the Managing Committee for their removal and the framing of a fresh scheme, a decree had been passed against the appellants on October 16 1941, and it directed them not to interfere with the affairs of the Darga as members of the said Committee and to comply with the direction removing them from office. On appeal the said decree was set aside by the Chief Court on March 7, 1946. It was contended on behalf of the appellants that section 5(2) Of the Act had no application and even if it had, the suit was within time by virtue of the provisions of section 15 of the Limitation Act. Held, that the contentions raised on behalf of the appellants must be negatived. The expression " any person interested in a waqf " used in section 5(2) Of the United Provinces Muslims Waqf Act, 1936, pro perly construed, means any person interested in a transaction that is held to be waqf by the Commissioner of Waqfs appointed under the Act and as such the appellants fell within that category. Where a literal construction defeats the object of the statute and makes part of it meaningless, it is legitimate to adopt a liberal construction that gives a meaning to the entire provision and makes it effective. Chaturbhuj Mohanlal vs Bhicam Chand Choroyia & Sons, , Mathu Kutty vs Varoe Kutty, A.I.R. 1950 Mad. 4 and Lal Chand vs Messrs. Basanta Mal Devi Dayal & Ors., , referred to. Rules of limitation are arbitrary in nature and in construing hem it is not permissible to import equitable considerations, and effect must be given to tile strict grammatical meaning of he words used. Section 15 of the Limitation Act can be attracted only where a suit has been stayed by an injunction or order and the test would be whether its institution would or would not be an act in contempt of the court 's order. Nagendra Nath Dey V. Suresh Chandra Dey, (1932) 34 Bom. R. 1065, Narayan Jivangouda vs Puttabai, (1944) 47 Bom. L.R. Beti Maharani vs The Collector of Etawah, All. 198 and Sundaramma vs Abdul Khader, Mad. 490, relied on. Musammat Basso Kaur vs Lala Dhua Singh, (1888) 15 I.A. 211, held inapplicable. The order of the court in the earlier suit was neither an injunction nor an order of the nature contemplated by section 15 Of the Limitation Act and so that section was inapplicable. Offerings made from time to time by the devotees visiting the Darga Sharif were by their very nature an income of the Darga, and failure to mention them in the notification under section 5(1) Of the Act, did not render the notification defective. The provision as to notice under section 53 Of the Act was applicable to suits in respect of acts of the Central Board as well as suits for any relief in respect of the waqf.

A Hindu widow in the Punjab came into possession of her husband 's land on his death in 1917. She continued in possession till 1954 when on an application made by certain collaterals of her late husband the Naib Tehsildar effected a mutation in favour of the collaterals. On the basis of the Naib Tehsildar 's order the collaterals dispossessed the widow. She filed a suit for recovery of possession of the land. After the institution of the suit the , came into force. During the pendency of the suit, in 1958, the widow died and her daughter was substituted as legal representative. The defendants pleaded that the widow had lost her right to the land because of her karewa marriage with one of the collateral&,, and that the daughter could not succeed to the land as she was not in possession of the land on the coming into force of the so as to become full owner of the land under section 14 thereof. The trial court dismissed the suit but the first appellate court decreed it, holding that there was no karewa marriage as alleged by the defendants, and that section 14 was applicable to the case. The High Court dismissed the appeal filed by the defendants who came to this court by special leave. HELD : (i) The finding of fact by the first appellate court that there was no karewa marriage was binding on the defendants, and the High Court rightly accepted it. It was not open to the defendants to challenge the finding in this Court. [457H] (ii) The use of the expression "possessed by" instead of the expression "in possession of" in section 14(1) was intended to enlarge the meaning of this expression to cover cases of ion in law. On the language of section 14(1) the provision will become applicable to any property which is owned by a female Hindu even though she is not in actual physical or constructive possession of the property. [459C D; 460D] The section however will not apply to cases where the Hindu female may have parted with her rights so as to place herself in a position where she could in no manner exercise her rights in that property any longer. [465C] On the facts of the case the plaintiff widow had acquired full rights of ownership of the land under s 14 of the . On her death in 1958 the property passed to her daughter. The High. Court, rightly dismissed the defendants, appeal. [465G] Gimmalapura Taggina Matada Kotturuswami vs Setra Veerayya & Ors, [1959] Supp. 1 S.C.R. 968 and Brahmdeo Singh vs Deomani Missir C.A. No. 130/1960 dated 15 10 1962, distinguished. 455 section section Munna Lal vs section section Rajkumar, [1962] Supp. 3 S.C.R. 418 and Eramma vs Veerupana, A.I.R. 1965 S.C. 1879, applied. Gaddam Venkayamma vs Gaddanz Veerayya, A.I.R. 1957 A.P. 280, Sansir Patelin & Anr. vs Satyabati Naikani & Anr. A.I.R. 1958 Orissa 75, Gajesh Mahanta vs Sukria Bewa, A.I.R. 1963 Orissa 167, Hapak Singh vs Kailash Singh & Anr. A.I.R. 1958 Patna 581, Ram Gulam Singh vs Palakdhari Singh, A.I.R. 1961 Patna 60. ' Nathuni Prasad Singh vs Mst. Kachnar Kuer, A.I.R. 1965 Patna 160 and Mst. Mukhtiar Kaur vs Mst. Kartar Kaur & Ors., A.I.R. 1966 Pun. 31, referred to.

The appellant 's father, a Talukdar of the Estate of Khajur gaon, executed a simple mortgage of his proprietary interest in the estate consisting of sixty seven villages to the Allahabad Bank Ltd. While execution proceedings were pending, the U. P. Zamindari Abolition and Land Reforms Act, 1950, came into force from July 1952. As a result, the Zamindari rights of the appellant judgment debtor were abolished and it was no longer possible to sell these rights in the 67 villages. The respondent Bank made an application before the executing court that as the Zamindari rights could not be sold, only such rights of the judgment debtor as remained in him after coming into force of the Act might be sold along with certain other rights. Objections were taken and finally the matter came up by appeal to the High Court and it, inter alia, upheld the view of the executing court that the execution could proceed against the Bhumidari rights created in favour of the appellant under section 18 of the Act. The question was whether the Bhumidari rights created under section 18 of the Act could also be sold in execution of the decree in view of the fact that the proprietary rights bad vested in the State. Held, that the intention of the U. P. Zamindari Abolition and Land Reforms Act was to vest the proprietary rights in the Sir and Khudkast land and grove land in the Estate by virtue of section 6(a)(i) and resettle it on the intermediary not as compensation but by virtue of his cultivatory possession of lands comprised therein and on a new tenure and confer upon the intermediary a new and special right of Bhumidari, which he Dever had before, by section 18 of the Act. The proprietary rights in Sir, Khudkast land and grove land which were mortgaged were extinguished, and the Bhumidari right which was altogether a new right could not be con sidered to be included under the mortgage. 442 The mortgagee could only enforce his rights against the mortgagor in the manner as provided by section 6(h) of the Act read with section 73 of the Transfer of Property Act and follow the compensation money; and so far as the Sir, Khudkast land and grove land were concerned, he could not enforce his rights under the mortgage by the sale of the Bhumidari rights created in favour of the mortgagor against them as a substituted security. In the instant case the Bhumidari rights created in favour of the appellant could not be sold in execution of the decree held against him by the respondent under the mortgage Of 1914.

The father of respondent No. 1, who was the Zamindar, filed a suit for the eviction of Ramprasad, the father of appell ants, from certain plots of land. The suit was decreed and the Zamindar took possession of the land. Ramprasad filed an appeal before the Additional Commissioner but the same was dismissed . He preferred a second appeal before the Board of Revenue during the pendency of which the matter was compromised whereunder he was recognised as tenant of the land in dispute and the order of eviction was; thus nullified. He applied for restitution of possession under section 144 of the Code of Civil Procedure. The application was resisted by Dataram and others who had been inducted as tenants on these plots of land during the pendency of the appeals. The trial court allowed the application but its order was reversed by the Additional Commissioner who held that the newly inducted tenants could not be dispossessed. Its order was affirmed by the Board of Revenue in revision. Thereafter fie filed a petition under article 226 of the Constitution in the High Court challenging the decision of the Board of Revenue, but that petition was dismissed on merits. No appeal was attempted to be filed against the order of the High Court either by applying for a certificate or moving this Court for special leave under article 136. The appellants have instead come to this Court in appeal by special leave against the order of the Board of Revenue. A preliminary objection was raised on behalf of of the respondent that the appeal was not maintainable as it was barred by res judicata. Held, that the appeal was barred by res judicata as the decision of the High Court was on merits and would bind the parties unless it was modified or reversed in appeal or by other appropriate proceedings. 829 Daryao vs State of U. P., [19621 1 section C. R. 574 and Indian Aluminium Co. Ltd. V. The Commissioner of Income tax, West Bengal, (1961) 43 , relied on. Chandi Prasad Chokhani vs State of Bihar, [1962] 2 section C. R. 276, explained.

Appeal No. 328 of 1959. Appeal by special leave from the judgment and order dated 23rd February, 1956, of the Bombay High Court in Income tax Reference No. 34 of 1955. K. N. Rajagopala Ayyangar and D. Gupta, for the appellant. Rameshwar Nath, section N. Andley, J. B. Dadachanji and P. L. Vohra, for the respondent. December 1. The Judgment of the Court was delivered by HIDAYATULLAH, J. The Commissioner of Incometax has filed this appeal, with special leave, against the judgment and order of the High Court of Bombay, by which the High Court answered two questions referred to it in favour of the respondents, Messrs. Dwarkadas Khetan & Co., Bombay. These questions were: "(1) Whether the instrument of partnership dated 27 3 1946 created a deed of partnership? (2). If the answer to question No. 1 is in the affirmative, whether the fact that on 1 1 1946 there was no firm in existence would be fatal to the application for registration of the firm under Section 26A of the Indian Income tax Act or whether the firm could be registered with effect from 26 3 1946 if it is held that the firm was genuine?" Prior to January 1, 1945, there was a firm called Dwarkadas Khetan & Co. On that date, the firm ceased to exist, because the other partners had previously withdrawn, and it came to be the sole proprietary concern of Dwarkadas Khetan. On February 12, 1946, Dwarkadas Khetan obtained the selling agency of Seksaria Cotton Mills, Ltd. On March 27, 1946, he entered into a partnership, with three others 823 by an instrument of partnership executed that day. Those three others were Viswanath Purumul, Govindram Khetan and Kantilal Kasherdeo. Dwarkadas Khetan 's share in the partnership was 7 annas in the rupee, while the remaining 9 annas ' share was divided equally among the three others. Though Kantilal Kasherdeo was a minor, he was admitted as a full partner and not merely to the benefits of the partner ship, as required by section 30 of the Indian Partnership Act. To the instrument of partnership, Kantilal Kasherdeo was also a signatory, though immediately after his signature there was the signature of one Kasherdeo Rungta, the natural guardian of the minor. In the instrument, Kantilal Kasherdeo was described as a full partner entitled not only to a share in the profits but also liable to bear all the losses including loss of capital. It was also provided that all the four partners were to attend to the business, and if consent was needed, all the partners including the minor had to give their consent in writing. The minor was also entitled to manage the affairs of the firm, including inspection of the account books, and was given the right to vote, if a decision on votes had to be taken. In short, no distinction was made between the adult partners and the minor, and to all intents and purposes, the minor was a full partner, even though under the partnership law he could only be admitted to the benefits of the partnership and not as a partner. The deed of partnership was produced before the Registrar of Firms showing the names of the four partner,%. The Registrar of Firms granted a registration certificate, and in the certificate, Kantilal Kasherdeo was shown as a full partner and not as one entitled merely to the benefits of the,, partnership. Banks were also informed about the four partners, and. it does not appear that to them intimation was sent that one of the named partners was a minor. Though the partnership came into existence on March 27, 1946, the firm was stated to have started retrospectively from January 1, 1946. It may be pointed out that the firm has the calendar year as its account year, and the matter before us refers to the account year, 1946 corresponding to the assessment year, 1947 48. 824 For purposes of that year, registration of the firm was sought under section 26A of the Indian Income tax Act. The Income tax Officer refused to accord registration on the ground that a minor had been admitted as a partner contrary to law, and that the deed could not, therefore, be registered. The appeal to the Appellate Assistant Commissioner also failed, the Commissioner holding that registration could only be of a legal or valid document and not of a document which was invalid in law. An appeal was then taken to the Tribunal, and it was contended that the document must be construed as showing only that the minor was admitted not as a full partner but to the benefits of the partnership. The Accountant Member hold that the order of the Appellate Assistant Commissioner was correct, giving two reasons. The first was that the construction sought to be placed upon the document was not open, and the second, that since retrospective operation was given to the firm even though no firm existed from January 1, 1946, registration could not be granted. The Judicial Member differed from the Accountant Member, holding, as was contended, that the document must be construed as showing merely that the minor had been admitted to the benefits of the partnership. The appeal was then placed before the President, who agreed with the conclusion of the Accountant Member, with the result that the refusal to register the firm under section 26A by the authorities was upheld. Two questions were then posed for the decision of the High Court. The High Court differed from the Tribunal, and answered both the questions in favour of the assessee. In so far as the second question is concerned, the matter is now settled by the decision of this Court in B. C. Mitter & Sons vs Commissioner of Income tax (1). But, in our opinion, the decision of the High Court on the first question was not correct, and the correct answer does not leave the second quest ion open at all. There is a distinct cleavage of opinion among the High Courts on this point. The Bombay, Madras and (1) 825 Patna High Courts have held that where a minor is admitted as a full partner by adult partners, the document can be registered after interpreting it to mean that the minor has been admitted to the benefits of partnership and not as a full partner. The Calcutta, Allahabad and Punjab High Courts have taken a contrary view. The Bombay case is the one which is under appeal, and the Patna High Court followed that decision and the two earlier decisions of the Madras High Court. The Madras High Court decisions are of the same Divisional Bench, and were pronounced on the same day. The leading case in support of the respondents is the Madras decision reported in Jakka Devayya and Sons vs Commissioner of Income tax (1), and that case alone needs to be considered, because all the reasons on which the cases on this side have proceeded are given there. In that case, there were three partners, one of whom was a minor. They formed a Hindu undivided family; later, a deed of partnership was executed in which the minor was represented by his father in law. It was held that the fact that the minor was included as a partner did not make the partnership as between the two adult partners invalid, and that the minor must be deemed to have been admitted to the benefits of the partnership by the two adults. The learned Judges referred to the provision of section 2 (6 B) of the Income tax Act, where it is provided: " "Partner" includes any person who being a minor has been admitted to the benefits of partnership;", and observed that in view of this definition and the fact that a minor could be admitted to the benefits of partnership under section 30, the document was not invalid, but must be read as giving to the minor the rights laid down by the Partnership Act. They also observed that too rigid a construction need not be put upon the deed, and referred to Lindley on Partnership, 11th Edn., p. 87 and A. Khorasany vs C. Acha and Others (2). The other cases which we need not examine are Vincent and Others vs Commissioner of (1) (2) Ran. 826 Income tax and Sahai Brothers vs Commissioner of Income tax On the other hand, there is a decision of the Calcutta High Court reported in Hoosen Kassam Dada vs Commissioner of Income tax, Bengal (3), in which Costello and Panckridge, JJ. have held that under section 26A of the Income tax Act and the Rules, the Income tax Officer is only. empowered to register a partnership which is specified in the instrument of partnership and of which registration is asked for. The learned Judges, therefore, hold that it is not open to the Department to 'register partnership different from that which is formed by the instrument. In Hardutt Ray Gajadhar Ram vs Commissioner of Income tax(4) Malik, C. J. and Seth, J. hold that where a minor is admitted as a full partner with equal rights and obligations with adults, the deed is invalid. It is pointed out that the English law on the subject is different. In that case, however, there was one other ground for invalidating the deed, because the minor had been adopted into another family and his natural father who had signed as his guardian in the deed could not do so, as he had ceased to be the natural guardian. The decision, however, supports the case of the Commissioner. In Banka Mal Lajja Ram & Co. vs Commissioner of Income tax (5), it is held that a minor cannot be a partner, and that the partnership which admits a minor as full partner cannot be registered. It is true that in that case the High Court did not consider the question whether the partnership should have. been taken to be a valid partnership consisting of the adult partners, because no such question was referred. The decision, however, is against a claim for registration of such a document. In our opinion, the Calcutta vie ' is preferable to the view taken by the Madras High Court. The error in the Madras view is in using the definition to show that a deed including a minor as a competent partner (1)[1952] (3)[1937] (2)[1950] (4)[1950] (5)[1953] 827 is valid. What the definition does is to apply to a minor admitted to the benefits of partnership all the 2 provisions of the Income tax Act applicable to partners. The definition cannot be read to mean that in every case where a minor has, contrary to law, been admitted as a full partner, the deed is to be regarded as valid, because, under the law, a minor can be admitted to the benefits of partnership. The Rules which have been framed under section 26A quite clearly show that a minor who is admitted to the benefits of partnership need not sign the application for registration. The law requires all partners to sign the application, and if the definition were to be carried to the extreme, even a minor who is admitted to the benefits of partnership would be competent to sign such an application. The definition is designed to confer equal benefits upon the minor by treating him as a partner; but it does not render a minor a competent and full partner. For that purpose, the law of Partnership must be considered, apart from the definition in the Income tax Act. Section 30 of the Indian Partnership Act clearly lays down that a minor cannot become a partner, though with the consent of the adult partners, he may be admitted to the benefits of partnership. Any document which goes beyond this section cannot be regarded as valid for the purpose of registration. Registration can only be granted of a document between persons who are parties to it and on the covenants set out in it. If the Income tax Authorities register the partnership as between the adults only contrary to the terms of the document, in substance a new contract is made out. It is not open to the Income tax authorities to register a document which is different from the one actually executed and asked to be registered. In our opinion, the Madras view cannot be accepted. The judgment under appeal has followed the Madras view, and, in our opinion, it falls into the same error in which the Madras High Court had fallen earlier. The answer to the first question should, therefore, have been in favour ;of the Department. The answer given by the High Court is vacated, and 828 the question will now be answered in the negative. As already stated, there is no need to answer the second question, which does not arise. The appeal is allowed with costs here and in the High Court. Appeal allowed.

One of the persons who entered into a partnership was a minor and in the instrument of partnership he was described as a full partner with equal rights and obligations with the other adult partners. The deed of partnership which was signed by the minor was produced before th e Registrar of Firms f or registration and he granted a certificate showing the minor as a full partner and not as one entitled merely to the benefits of the partnership. The Income tax Officer, however, refused to register the firm under section 26A of the Indian Income tax Act and his decision was upheld by the Income tax Authorities and the Income tax Appellate Tribunal. The High Court differed from the Tribunal and held that the firm should be registered. On appeal by the Commissioner of Income tax, Held, that the Rules framed under section 26A quite clearly show that a minor who is admitted to the benefits of partnership need not sign the application for registration. The law requires all partners to sign the application, and if the definition were to be carried to the extreme, even a minor who is admitted to the benefits of partnership would be competent to sign such an application. The definition is designed to confer equal benefits upon the minor by treating him as a partner; but it does not render a minor a competent and full partner. For that purpose, the law of Partnership must be considered, apart from the definition in the Income tax Act. Section 30 of the Indian Partnershi Act clearly lays down that a minor. cannot become a partner, I tough with the consent of the adult. .partners, he may be admitted to the benefits of partnership. . .Any document which goes beyond this section cannot be regarded as valid for the purpose of registration. Registration can only be granted of a document between persons who are parties to it and on the covenants set out in it. If the Income tax Authorities register the:partnership as between the adults only contrary to the terms of the document, in substance a new contract is made out. It is tot open to the Incometax Authorities to register a document which is different from the one actually executed and asked to be registered. Hoosen Kassam Dada vs Commissioner of Income tax, Bengal, [1937]5 I.T.R. 182, Hardutt Ray Gajadhar Ram vs Commissioner of 104 822 Income tax, , Banka Mal Lajja Ram and Co. vs Commissioner of Income tax, , approved. Jakka Devayya and Sons vs Commissioner of Income tax, [1952) , disapproved.

In 1956 a notice was issued to the respondent under section 34(1)(a) of the Indian Income tax Act, calling upon him to make a return on the ground that his income had escaped assessment for the year ending 31st March, 1949 The respondent contended that notice under section 34 of the Act could not be issued to him because of the lapse of eight years from the end of the accounting year. This contention was not accepted by the Income Tax officer. The assessee then filed an application under article 226 of the Constitution. The High Court held on a construction of section 34 of the Act, that the words 'any year ' as used in section 34(1)(a) mean. not the assessment year but the accounting year. The Income tax officer appealed The contention was that the words 'any year ' in cl. (a) refer to the assessment year. ^ Held, that the correct way of interpreting section 34(1)(a) of the Indian Income tax Act, 1922, read with the provisions of the Indian Finance Act, 1948, is that the words 'for any year ' mean for any assessment year and not for any accounting year because the assessment is for the assessment year although of the income which accrued in the previous year (year of account) The Previous year for different heads of income falling under different sections of the Indian Income tax Act may vary but does not give different starting points of limitation for different sources of income. Panna Lal Nand Lal Bhandari vs Commmissioner of Income Tax, Bombay City, ; , referred to. C. W. Spencer vs Income tax officer, Madras, , approved.

The appellants were shareholders of a company known as Navjivan Mills Ltd. which held a large number of shares of the Bank of India. The Bank with the object of increasing their share capital offered some more shares to the Mills for a price including premium which was about half the market value. The Mills purchased a small number of the shares so offered with their own funds and distributed their right to acquire the remaining shares to their shareholders in the proportion of two shares of the Bank for one share held by them. The assessment of the appellant was reopened by the Income Tax Officer under section 34(1)(a) of the Income tax Act on the footing that the release of the right to the shares of the Bank of India amounted to distribution of dividend. Appeals against the order of the Income Tax Officer having failed, the High Court at the instance of the appellants framed the following question: "Whether on the facts and circumstances of the case, the distribution of the right to apply for the shares of the Bank of India by Navjivan Mills Ltd. in favour of the assessees amounted to a distribution of "dividend"? 585 The High Court answered the question in the affirmative. On appeal with a certificate of the High Court, Held, that the view taken by the High Court was correct. The distribution to the shareholders of the Mills of the right to obtain two shares of the Bank of India for each share held by them at half the market value amounted to distribution of "dividend" which was liable to be taxed.

Two joint stock companies entered into agreements with a former Princely State for the grant of agricultural land on payment of fair and equitable land revenue. Later the two companies formed into a partnership firm. On the merger of the State with the Union of India, the Assessing Authority under the U.P. Agricultural Income tax Act issued notices to the two companies to submit their returns of agricultural income, which the companies did. In writ petitions filed by the companies challenging the assessment orders, the High Court accepted the contention that since the lands were neither assessed to land revenue nor were they assessed to any local rate or cess as required by section 2(a) of the Act, they were not assessable to agricultural income tax and remanded the cases to the Assessing Authority for determination of this question. Before the Assessing Authority, on remand the companies raised for the first time the contention that since no notice had been issued to the firm of which they were partners, the assessment was invalid. The Assessing Authority rejected this contention. He also held that the lands satisfied the requirements of s.2(a). In writ petitions filed by the two companies a single Judge of the High Court upheld the contention that the Assessing Authority committed an error of law in assessing the two partners without assessing the firm. This view was affirmed by a Division Bench on appeal. On further appeal to this Court it was contended that in the absence of a prohibition in the Act, the two companies could be validly assessed to tax without assessing the firm. Allowing the appeal, ^ HELD: 1. The Assessing Authority was not in error in assessing tax on the returns submitted by the two companies and therefore the argument that assessment of the companies, without assessing the firm, was not legal, is without substance. [425 H 426 A] 2. "Person" defined in the section means an individual and includes a firm or a company. [423 G] 3. There is nothing in the Act prohibiting the Assessing Authority from proceeding against individuals forming a partnership. Section 18 enables the authorities, while proceeding with assessment of a firm or a company, not to 420 determine the tax payable by the firm or the company but to proceed to determine the agricultural income of each member of the firm. The provisions do not apply to a case where the returns were submitted by the partners and the assessment made on that basis. The section would be applicable if assessment proceedings against a firm are stopped and the share of the individual is to be determined under the provisions of section 18. [424 F] 4. The well established position under the Income Tax Act (Central Act) with regard to assessment of firms is that where a firm has not made a return it is open to the department to assess a partner directly in respect of his share of the firm 's income without resorting to the machinery provided under the Act and without making an assessment on the firm, the only prohibition being against double taxation. [424 H] C.I.T. vs Murlidhar Jhawar & Purna Ginning & Pressing Factory, SC; referred to. Secondly, the plea that assessment proceedings ought to have been taken against the firm, was not taken by them in the first instance either before the Assessing Authority or before the High Court. This plea cannot be allowed to be taken at a later stage. The assessees submitted their returns on the basis of their respective incomes. [425 F 426 A] 6. The Assessing Authority has correctly come to the conclusion that the agreement between the parties provided for payment of land revenue. [426 F G]

The appellant firm which carried on business as forest lessees and timber merchants in the former Kapurthala State was assessed to, and paid, income tax, for the account year 1945 46 under the Income tax law which was then in force in the said State. Subsequently Kapurthala State integrated into what was known as Pepsu and the Patiala Income tax Act, 2001, was made applicable and, came into force in the integrated State. Later still the Indian Finance Act, 1950 (26 of 1930), applied the Indian Income tax Act to Part B States which had emerged as a result of political changes and section 13 Of the Indian Finance Act repealed the Income tax laws obtaining in Part B States except for the purposes of levy assessment and collection of income tax and Super tax relating to the period mentioned therein. On November 4, 1953, the Commissioner of Income tax, Punjab (i) etc. purporting to act under section 5, sub sections (5) and (7A) of the Indian Income tax Act ordered the assessment of the appellant firm to be done by the Income tax Officer, Special Circle, Ambala and not by the Income tax Officer, B Ward, Patiala, who would ordinarily be the competent assessing authority for the firm under section 64 Of the Indian Income tax Act. On March 12, 1953, the Income tax Officer, Special Circle, Ambala, issued a notice purporting to be under the Patiala Income tax Act of Samvat 2001 to the appellant firm for filing a return of its income and total world income as he believed that the income had been underassessed. The appellant then filed an application under article 226 of the Constitution in the High Court for writs of prohibition, certiorari, quo warranto etc. against the Income tax Officer, Special Circle, Ambala, and the Commissioner of Income tax, Punjab (i) etc. regarding the reassessment of the income of the firm for the account year 1945 46. The High Court dismissed the said petition and this appeal was filed on a certificate granted by the High Court. The contentions of the appellant inter alia, were that the Income tax Officer, Special Circle, Ambala, had no jurisdiction to issue a notice under section 34 893 of the Patiala Income tax Act of Samvat 2001, and that only the Income tax Officer, B Ward, Patiala, was the competent authority as he was the locally situated Income tax Officer and would have jurisdiction under section 64(1) of the Income tax Act. The transfer of the case by the Commissioner of Income tax by his order of November 4, 1954, was characterised as ultra vires and incompetent. The argument that the words of section 13 Of the Indian Finance Act, 1950, did not include reassessment was abandoned in view of the decisions of this Court in Lakshmana Shenoy vs The Income tax Officer, Ernakulam, [1959] S.C.R. 751. It was further contended that the Commissioner in acting under section 5(5) of the Patiala Income tax Act was required to consult the Minister in Charge whose place was taken by the Central Board of Revenue under the Indian Finance Act, 1950. Held, that although the Commissioner of Income tax was required to consult the Central Board of Revenue his failure to do so did not render his order ineffective however wrong it might be from the administrative point of view. The provision about consultation must be treated as directory and the Commissioner 's power could not be questioned by the assessee on the ground of failure to consult the Central Board of Revenue. State of U.P. vs Manbodhan Lal Srivastava, [1958] S.C.R. 553, K. section Srinivasan vs Union of India, ; , Montreal Street Railway Company vs Normandin, L.R. 1917 A. C. 170 and Biswanath Khemka vs The King Emperor, , followed. The Commissioner while transferring the case may have referred to the Indian Income tax Act and not to the Patiala income tax Act but the exercise of the power would be referable to a jurisdiction which conferred validity upon it and not to a jurisdiction under which it would be nugatory. Pitamber Vajirshet vs Dhandu Navlapa, I.L.R. , followed. A case which was not pending at the time of transfer could not be transferred under sub section (7A) of section 5 of the Patiala Act but it could be transferred from one Income tax Officer to another under sub section (5) Of section 5 of the Patiala Act which was kept alive for assessment and reassessment relating to previous years. Sub section (7A) makes special provision for transfer of pending cases and is not prejudicial to the general powers granted by sub section Bidi Supply Co. vs Union of India, ; , refer red to.

The appellants, in execution of a decree passed in a suit filed by them under section 180 of the U.P. Tenancy Act, 1939, on December 2, 1948 took back possession of the land in dispute from the respondent Nos. 4 and 5 (respondents for short). On the advent of the U.P. Zamindari Abolition and Land Reforms Act, 1950 ( '1950 Act ' for short) the respondents moved an application under section 232 of the 1950 Act to regain possession of the land on the ground that they hand acquired the status of adhivasis udder that Act. The Assistant Collector dismissed the application. The respondents appealed to the Additional Commissioner. The appellants contended that since the village in which the land in dispute was situated was put into consolidation under the U.P. Consolidation of Holdings Act, 1953 ( '1953 Act ' for short), the Additional Commissioner had no jurisdiction to hear the appeal. The appellants also submitted that a statement under section 8 and 8A of the 1953 Act was published in which they were shown as bhumidars of the land in question and the respondents had not objected to the entries. The Additional Commissioner, by his order dated June 15, 1956, allowed the appeal. Pursuant to that order the entries in the said statement were corrected and the respondents acquired possession of the land. The Board of Revenue, before whom the Additional Commissioner 's order was challenged, held that the Additional Commissioner had no jurisdiction to hear the appeal on merits. On September 11, 1958 the appellants moved an application under section 144 of the Code of Civil Procedure before the Sub Divisional officer praying for restitution of possession. This application and the subsequent appeals were rejected by the authorities. Dismissing a writ petition filed by the appellants the High Court held that the proceedings under section 144 of the Code of Civil Procedure could not succeed, but since the decision recorded by the authorities under the 1953 Act had become final, it was always open 288 to the petitioners to move the first appellate court to decide the appeal in terms of the decision of the consolidation authorities. Thereupon, in August 1966, the appellants filed a suit under sections 209 and 229 (b) of the 1950 Act against the respondents for a decree for possession on the ground that they were bhumidhars of the land in question under the 1950 Act. The Assistant Collector decreed the suit. The Additional Commissioner allowed the appeal filed by the respondents. The Board of Revenue dismissed the appellants ' second appeal. The appellants filed a writ petition in the High Court. A single Judge of the High Court dismissed the writ petition. A Division Bench of the High Court dismissed the special appeal filed by the appellants. Hence this appeal. The respondents contended: (i) that the suit was barred by limitation and the appellants were not entitled to the benefit of section 14(1) of the ; and (ii) that the suit was barred by section 49 of the 1953 Act. Dismissing the appeal, ^ HELD. 1. The party seeking benefit of section 14 (1) of the must satisfy the three conditions laid down in the section, namely, (i) that the Party as the plaintiff was prosecuting another civil proceeding with due diligence (ii) that the former proceeding and the later proceeding relate to the same matter in issue; and (iii) that the former proceeding was being prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it.[297G H] 2. The expression 'other cause of a like nature ' will have to be read ejusdem generis with the expression 'defect of jurisdiction '. So construed the expression other cause of a like nature must be so interpreted as to convey something analogous to the preceding words from defect of jurisdiction '. The defect of jurisdiction goes to the root of the matter as the court is incompetent to entertain the proceeding. The proceeding may as well fail for some other defect. Not all such defects can be said to be analogous to defect of jurisdiction. Therefore, the expression other cause of a like nature on which some light is shed by the Explanation (C) to section 14 which provides "misjoinder of parties or causes of action shall be deemed to be a cause of like nature with defect of jurisdiction", must take its colour and content from the just preceding expression, defect of jurisdiction '. Prima facie it appears that there must be something taking to a preliminary objection which if it succeeds, the court would be incompetent to entertain the proceeding on merits. Such defect could be said to be of the like nature ' as defect of jurisdiction. Coversely if the party seeking benefit of the provision of section 14 failed to get the relief in earlier proceeding not with regard to anything connected with the jurisdiction of the court or some other defect of a like nature, it would not be entitled to the benefit of s 14. [300C G] India Electric Works Ltd. vs James Mantosh & Anr., ; , referred to. In a proceeding under section 144 of the Code of Civil Procedure, the party applying for restitution has to satisfy the court of first instance that a decree under which it was made to part with the property is varied or reversed or modified in appeal or revision or other proceeding or is set aside or modified in any suit instituted for the purpose and therefore, restitution 289 must be ordered. In such a proceeding, the party seeking restitution is not required to satisfy the court about its title or right to the property save and except showing its deprivation under a decree and the reversal or variation of the decree. [298C D; E] 4. In the instant case, the High Court rightly declined to grant benefit of the provision of sec 14 of the to the appellants because the second and third condition laid down in section 14 (1) were not satisfied. It may be assumed that the earlier proceeding under section 144 of Civil Procedure Code was a civil proceeding for the purpose of section 14 (1) and that the appellants were prosecuting the same with due diligence. But it is difficult to accept that the subsequent proceeding relates to same matter in issue as was involved in the earlier proceeding. The appellants merely claimed in their application under section 144 that in view of the reversal of the order by the Board of Revenue the respondents are not entitled to retain possession and that restitution should be evicted because the appellants lost possession under the order of the Additional Commissioner which was reversed by the Board of Revenue. The cause of action was the reversal of the order of the Additional Commissioner. When they failed to obtain restitution, the appellants filed a substantive suit under sections 209 and 229 (b) of the 1950 Act. It was a suit on title as bhumidars for possession against respondents alleging unauthorised retention of possession. It had nothing to do with the order of the Additional Commissioner. Moreover, the appellants failed in the earlier proceeding not on the ground that the authority had no jurisdiction to entertain the application nor on the ground that there was any other defect of a like nature, but on merits inasmuch as the authorities and the High Court held that in view of the decision of the authorities under 1953 Act, the appellants are not entitled to restitution. [301B; 299A; 298G H; 299A] 5. Once an allotment under section 49 of the U.P. Consolidation of Holdings Act, 1953 became final, a suit would not lie before a civil or revenue court with respect to rights in lands or with respect to any other matter for which a proceeding could or ought to have been taken under that Act. [301G] 6. In the instant case, once the village was denotified, as found by the authorities and the High Court the allotment made under the 1953 ACI became final and it could not be questioned in a suit before civil or revenue Court in view of the bar enacted in section 49. [302A B] 7. The appellants ' submission that after reversal of the Additional Commissioner 's order dated June 15, 1956 the respondents had neither a legal nor equatable right to be in possession, has no force. Assuming that the appellants had acquired the status of bhumidars the same was subject to the provision contained in section 20 (b) read with Explanation I of the U.P. Zamindari Abolition and Land Reforms Act, 1950 according to which, as correctly found by single Judge of the High Court, the respondents would become adhivasis of the land. Such adhivasis if they had lost possession were entitled to regain the same by making an appropriate application under section 232 of that Act. The respondents did move such an application which ultimately was accepted by the Additional Commissioner. Therefore, primarily, legally and additionally in equity, respondents have an iron clad case to be in possession against appellants. [294H; 296D G] 290

The appellant encashed high denomination currency notes of the value of Rs. 87,5oo and was called upon by the Incometax Officer to submit a return for the relevant year. The appellant made three statements, discrepant in material particulars, at different stages as to how he received the amount. The Income tax Officer held that the true nature of the receipt had not been disclosed, treated it as income from an undisclosed source and assessed him accordingly. The Assistant Commissioner of Income tax upheld that order on appeal. On a further appeal, the Appellate Tribunal reviewed the facts, considered the discrepancies in the appellant 's case and affirmed the order of assessment. An application for a reference to the High Court having been made under section 66 of the Indian Income tax Act, the Tribunal held that no question of law arose from its order and dismissed the same. The High Court thereafter summarily dismissed the application made by the appellant under section 66(2) of the Act. Against that order of summary dismissal special leave to appeal was obtained from this court and the sole question for determination in the appeal was whether the order of the Tribunal on the face of it disclosed any question of law and if the High Court was right in summarily dismissing the application under section 66(2) of the Act. Held, that no question of law arose from the order of the Tribunal and the appeal must fail. In order to decide whether the principles laid down by this court in Dhirajlal Girdharilal vs Commissioner of Income tax, Bombay, and Omar Salay Mohamed Sait vs Commissioner of Income tax, Madras, (1959) 37 I.T.R. 151, applied to a particular case, it was necessary to read the order of the Tribunal as a whole for determining whether or not it had properly considered the material facts and the evidence, for and against, in coming to its final conclusion and whether any irrelevant consideration or matter of prejudice had vitiated such conclusion. Those decisions do not require that the order of the Tribunal must be examined sentence by sentence so as to discover a minor lapse here or an incautious opinion there and rest a question of law thereon. 771 Dhirajlal Girdharilal vs Commissioner of Income tax, Bombay, and Omar Saley Mohamed Sait vs Commis sioner of Income tax, Madras, , explained. Although a mere rejection of an explanation given by the assessee does not invariably establish the nature of a receipt. , where the circumstances of the rejection are such as to properly raise the inference that the receipt is an income, the assessing authorities are entitled to draw that inference. Such an inference is one of fact and not of law.

Held (Per section R. DAs, ACTING C.J., VIVIAN BOSE, BHAGWATI and B.P. SINHA, JJ. JAGANNADHADAS J., dissenting) that section 5(1) of the Taxation on Income (investigation Commission) Act, 1947 (Act XXX of 1947) is ultra vires the Constitution as it is discriminatory and violative of the fundamental right guaranteed by article 14 of the Constitution by reason of two amendments which were made in section 34 of the Indian Income Tax Act, 1922 (Act XI of 1922) one in 1948 by the enactment of the Income Tax and Business Profits Tax 1248 (Amendment) Act, 1948 (Act XLVIII of 1948) and the other in 1954 by the enactment of the Indian Income Tax (Amendment) Act, 1954 (Act XXXIII of 1954). If the provisions of section 34(1) of the Indian Income tax Act as it stood before its amendment by Act XLVIII of 1948 had been the only provisions to be considered, the Court would have reached the same conclusion as it did in A. Thangal Kunju Musaliar vs M. Venkitachalam Potti & Anr., ([1955] 2 S.C.R. 1196), but the position was materially affected by reason of two amendments made in that section by two Acts, one in 1948 and the other in 1954. Amended section 34(1) of the Indian Income tax Act was substantially different from the old section 34(1) which was in operation up to the 8th September 1948. The words "if in consequence of definite information which has come into his possession the lncome tax. Officer discovers that income, profits or gains chargeable to income tax have escaped assessment in any year. . . which appear in the old section were substituted by the words "if the Income tax Officer has reason to believe that by reason of the omission or failure on the part of the assessee. . income, profits or gains chargeable to income tax have escaped The requisites of (i)"definite" information (ii) which had " come into" possession of the Income tax Officer and in consequence of which (iii) he "discovers" that income, profits or gains chargeable to income tax bad escaped assessment, were no longer necessary and the only thing which was required to enable the Income tax Officer to take proceedings under section 34(1) as amended was that he should have reason to believe that by reason of the omission or failure on the part of the assesses income, profits or gains chargeable to income tax had escaped assessment for a particular year. Whereas before this amended section 34(1) came to be substituted for the old section 34(1) there was no com parison between the provisions of section 5(1) of Act XXX of 1947 and section 34(1) of the Indian Income tax Act as it then stood, the provisions of section 34(1) as amended after the 8th September 1948 could stand comparison with the provisions of section 5(1) of Act XXX of 1947 and the cases which were covered by section 5(1) of Act XXX of 1947 could be dealt with under the procedure laid down in section 34(1) of the Indian Income tax Act. After the 8th September 1948, therefore, even in the case of substantial evaders of income tax who were a distinct class by themselves intended to be treated by the drastic and summary procedure laid down by Act XXX of 1947, some cases that were already referred by the Central Government for investigation by the Commission could be dealt with under that Act and other cases, though falling within the same class or category, could be dealt with under the procedure prescribed in the amended section 34(1) of the Indian Income tax Act. The persons who were thus dealt with under section 34(1) of the Indian Income tax Act had available to them the whole procedure laid down in that Act including the right to inspect documents and the right to question the findings of fact arrived at 1249 by the Income tax Officer by the procedure of appeal and revision and ultimate scrutiny by the Income tax Appellate Tribunal which was denied to those persons whose cases had been referred by the Central Government for investigation by the Commission under s.5(1) of Act XXX of 1947. Different persons, though falling under the same class or category of substantial evaders of income tax, would, therefore, be subject to different procedures, one a summary and drastic procedure and the other a normal procedure which gave to the assessees various rights which were denied to those who were specially treated under the procedure prescribed in Act XXX of 1947. Per JAGANNADHADAS J. The class of persons falling under section 5(1) of the Taxation on Income (Investigation Commission) Act, 1947 (Act XXX of 1947) is totally different from that which falls within amended section 34 of the Indian Income Tax Act 1922 (Act XI of 1922) and therefore section 5(1) of Act XXX of 1947 is not unconstitutional as offending article 14 of the Constitution. Suraj Mall Mohta vs A. V. Visvanatha Sasttrii and Another ([1955] 1 S.C.R. 448), Shree Meenakshi Mills Ltd. vs A. V. Visvanatha Sastri and Another ([1955] 1 S.C.R. 787), A. Thangal Kunju Musaliar vs M. Venkitachalam Potti & Anr. and M. Venkitachalam Potti & Anr. vs A. Thangal Kunju Musaliar, ([1955] 2 S.C.R. 1196), Syed Qasim Bazvi vs The State of Hyderabad and Others ([1953] S.C.R. 581), Habeeb Mohamed vs The State of Hyderabad ([1953] S.C.R. 661) and Gangadhar Baijnath and others vs Income tax Investigation Commission, etc. (A.I.R. 1955 All. 515), referred to.

Appeal No. 328 of 1959. Appeal by special leave from the judgment and order dated 23rd February, 1956, of the Bombay High Court in Income tax Reference No. 34 of 1955. K. N. Rajagopala Ayyangar and D. Gupta, for the appellant. Rameshwar Nath, section N. Andley, J. B. Dadachanji and P. L. Vohra, for the respondent. December 1. The Judgment of the Court was delivered by HIDAYATULLAH, J. The Commissioner of Incometax has filed this appeal, with special leave, against the judgment and order of the High Court of Bombay, by which the High Court answered two questions referred to it in favour of the respondents, Messrs. Dwarkadas Khetan & Co., Bombay. These questions were: "(1) Whether the instrument of partnership dated 27 3 1946 created a deed of partnership? (2). If the answer to question No. 1 is in the affirmative, whether the fact that on 1 1 1946 there was no firm in existence would be fatal to the application for registration of the firm under Section 26A of the Indian Income tax Act or whether the firm could be registered with effect from 26 3 1946 if it is held that the firm was genuine?" Prior to January 1, 1945, there was a firm called Dwarkadas Khetan & Co. On that date, the firm ceased to exist, because the other partners had previously withdrawn, and it came to be the sole proprietary concern of Dwarkadas Khetan. On February 12, 1946, Dwarkadas Khetan obtained the selling agency of Seksaria Cotton Mills, Ltd. On March 27, 1946, he entered into a partnership, with three others 823 by an instrument of partnership executed that day. Those three others were Viswanath Purumul, Govindram Khetan and Kantilal Kasherdeo. Dwarkadas Khetan 's share in the partnership was 7 annas in the rupee, while the remaining 9 annas ' share was divided equally among the three others. Though Kantilal Kasherdeo was a minor, he was admitted as a full partner and not merely to the benefits of the partner ship, as required by section 30 of the Indian Partnership Act. To the instrument of partnership, Kantilal Kasherdeo was also a signatory, though immediately after his signature there was the signature of one Kasherdeo Rungta, the natural guardian of the minor. In the instrument, Kantilal Kasherdeo was described as a full partner entitled not only to a share in the profits but also liable to bear all the losses including loss of capital. It was also provided that all the four partners were to attend to the business, and if consent was needed, all the partners including the minor had to give their consent in writing. The minor was also entitled to manage the affairs of the firm, including inspection of the account books, and was given the right to vote, if a decision on votes had to be taken. In short, no distinction was made between the adult partners and the minor, and to all intents and purposes, the minor was a full partner, even though under the partnership law he could only be admitted to the benefits of the partnership and not as a partner. The deed of partnership was produced before the Registrar of Firms showing the names of the four partner,%. The Registrar of Firms granted a registration certificate, and in the certificate, Kantilal Kasherdeo was shown as a full partner and not as one entitled merely to the benefits of the,, partnership. Banks were also informed about the four partners, and. it does not appear that to them intimation was sent that one of the named partners was a minor. Though the partnership came into existence on March 27, 1946, the firm was stated to have started retrospectively from January 1, 1946. It may be pointed out that the firm has the calendar year as its account year, and the matter before us refers to the account year, 1946 corresponding to the assessment year, 1947 48. 824 For purposes of that year, registration of the firm was sought under section 26A of the Indian Income tax Act. The Income tax Officer refused to accord registration on the ground that a minor had been admitted as a partner contrary to law, and that the deed could not, therefore, be registered. The appeal to the Appellate Assistant Commissioner also failed, the Commissioner holding that registration could only be of a legal or valid document and not of a document which was invalid in law. An appeal was then taken to the Tribunal, and it was contended that the document must be construed as showing only that the minor was admitted not as a full partner but to the benefits of the partnership. The Accountant Member hold that the order of the Appellate Assistant Commissioner was correct, giving two reasons. The first was that the construction sought to be placed upon the document was not open, and the second, that since retrospective operation was given to the firm even though no firm existed from January 1, 1946, registration could not be granted. The Judicial Member differed from the Accountant Member, holding, as was contended, that the document must be construed as showing merely that the minor had been admitted to the benefits of the partnership. The appeal was then placed before the President, who agreed with the conclusion of the Accountant Member, with the result that the refusal to register the firm under section 26A by the authorities was upheld. Two questions were then posed for the decision of the High Court. The High Court differed from the Tribunal, and answered both the questions in favour of the assessee. In so far as the second question is concerned, the matter is now settled by the decision of this Court in B. C. Mitter & Sons vs Commissioner of Income tax (1). But, in our opinion, the decision of the High Court on the first question was not correct, and the correct answer does not leave the second quest ion open at all. There is a distinct cleavage of opinion among the High Courts on this point. The Bombay, Madras and (1) 825 Patna High Courts have held that where a minor is admitted as a full partner by adult partners, the document can be registered after interpreting it to mean that the minor has been admitted to the benefits of partnership and not as a full partner. The Calcutta, Allahabad and Punjab High Courts have taken a contrary view. The Bombay case is the one which is under appeal, and the Patna High Court followed that decision and the two earlier decisions of the Madras High Court. The Madras High Court decisions are of the same Divisional Bench, and were pronounced on the same day. The leading case in support of the respondents is the Madras decision reported in Jakka Devayya and Sons vs Commissioner of Income tax (1), and that case alone needs to be considered, because all the reasons on which the cases on this side have proceeded are given there. In that case, there were three partners, one of whom was a minor. They formed a Hindu undivided family; later, a deed of partnership was executed in which the minor was represented by his father in law. It was held that the fact that the minor was included as a partner did not make the partnership as between the two adult partners invalid, and that the minor must be deemed to have been admitted to the benefits of the partnership by the two adults. The learned Judges referred to the provision of section 2 (6 B) of the Income tax Act, where it is provided: " "Partner" includes any person who being a minor has been admitted to the benefits of partnership;", and observed that in view of this definition and the fact that a minor could be admitted to the benefits of partnership under section 30, the document was not invalid, but must be read as giving to the minor the rights laid down by the Partnership Act. They also observed that too rigid a construction need not be put upon the deed, and referred to Lindley on Partnership, 11th Edn., p. 87 and A. Khorasany vs C. Acha and Others (2). The other cases which we need not examine are Vincent and Others vs Commissioner of (1) (2) Ran. 826 Income tax and Sahai Brothers vs Commissioner of Income tax On the other hand, there is a decision of the Calcutta High Court reported in Hoosen Kassam Dada vs Commissioner of Income tax, Bengal (3), in which Costello and Panckridge, JJ. have held that under section 26A of the Income tax Act and the Rules, the Income tax Officer is only. empowered to register a partnership which is specified in the instrument of partnership and of which registration is asked for. The learned Judges, therefore, hold that it is not open to the Department to 'register partnership different from that which is formed by the instrument. In Hardutt Ray Gajadhar Ram vs Commissioner of Income tax(4) Malik, C. J. and Seth, J. hold that where a minor is admitted as a full partner with equal rights and obligations with adults, the deed is invalid. It is pointed out that the English law on the subject is different. In that case, however, there was one other ground for invalidating the deed, because the minor had been adopted into another family and his natural father who had signed as his guardian in the deed could not do so, as he had ceased to be the natural guardian. The decision, however, supports the case of the Commissioner. In Banka Mal Lajja Ram & Co. vs Commissioner of Income tax (5), it is held that a minor cannot be a partner, and that the partnership which admits a minor as full partner cannot be registered. It is true that in that case the High Court did not consider the question whether the partnership should have. been taken to be a valid partnership consisting of the adult partners, because no such question was referred. The decision, however, is against a claim for registration of such a document. In our opinion, the Calcutta vie ' is preferable to the view taken by the Madras High Court. The error in the Madras view is in using the definition to show that a deed including a minor as a competent partner (1)[1952] (3)[1937] (2)[1950] (4)[1950] (5)[1953] 827 is valid. What the definition does is to apply to a minor admitted to the benefits of partnership all the 2 provisions of the Income tax Act applicable to partners. The definition cannot be read to mean that in every case where a minor has, contrary to law, been admitted as a full partner, the deed is to be regarded as valid, because, under the law, a minor can be admitted to the benefits of partnership. The Rules which have been framed under section 26A quite clearly show that a minor who is admitted to the benefits of partnership need not sign the application for registration. The law requires all partners to sign the application, and if the definition were to be carried to the extreme, even a minor who is admitted to the benefits of partnership would be competent to sign such an application. The definition is designed to confer equal benefits upon the minor by treating him as a partner; but it does not render a minor a competent and full partner. For that purpose, the law of Partnership must be considered, apart from the definition in the Income tax Act. Section 30 of the Indian Partnership Act clearly lays down that a minor cannot become a partner, though with the consent of the adult partners, he may be admitted to the benefits of partnership. Any document which goes beyond this section cannot be regarded as valid for the purpose of registration. Registration can only be granted of a document between persons who are parties to it and on the covenants set out in it. If the Income tax Authorities register the partnership as between the adults only contrary to the terms of the document, in substance a new contract is made out. It is not open to the Income tax authorities to register a document which is different from the one actually executed and asked to be registered. In our opinion, the Madras view cannot be accepted. The judgment under appeal has followed the Madras view, and, in our opinion, it falls into the same error in which the Madras High Court had fallen earlier. The answer to the first question should, therefore, have been in favour ;of the Department. The answer given by the High Court is vacated, and 828 the question will now be answered in the negative. As already stated, there is no need to answer the second question, which does not arise. The appeal is allowed with costs here and in the High Court. Appeal allowed.

One of the persons who entered into a partnership was a minor and in the instrument of partnership he was described as a full partner with equal rights and obligations with the other adult partners. The deed of partnership which was signed by the minor was produced before th e Registrar of Firms f or registration and he granted a certificate showing the minor as a full partner and not as one entitled merely to the benefits of the partnership. The Income tax Officer, however, refused to register the firm under section 26A of the Indian Income tax Act and his decision was upheld by the Income tax Authorities and the Income tax Appellate Tribunal. The High Court differed from the Tribunal and held that the firm should be registered. On appeal by the Commissioner of Income tax, Held, that the Rules framed under section 26A quite clearly show that a minor who is admitted to the benefits of partnership need not sign the application for registration. The law requires all partners to sign the application, and if the definition were to be carried to the extreme, even a minor who is admitted to the benefits of partnership would be competent to sign such an application. The definition is designed to confer equal benefits upon the minor by treating him as a partner; but it does not render a minor a competent and full partner. For that purpose, the law of Partnership must be considered, apart from the definition in the Income tax Act. Section 30 of the Indian Partnershi Act clearly lays down that a minor. cannot become a partner, I tough with the consent of the adult. .partners, he may be admitted to the benefits of partnership. . .Any document which goes beyond this section cannot be regarded as valid for the purpose of registration. Registration can only be granted of a document between persons who are parties to it and on the covenants set out in it. If the Income tax Authorities register the:partnership as between the adults only contrary to the terms of the document, in substance a new contract is made out. It is tot open to the Incometax Authorities to register a document which is different from the one actually executed and asked to be registered. Hoosen Kassam Dada vs Commissioner of Income tax, Bengal, [1937]5 I.T.R. 182, Hardutt Ray Gajadhar Ram vs Commissioner of 104 822 Income tax, , Banka Mal Lajja Ram and Co. vs Commissioner of Income tax, , approved. Jakka Devayya and Sons vs Commissioner of Income tax, [1952) , disapproved.

The appellant was a company registered in the erstwhile Baroda State. In connection with the assessment year 1942 43 the Income tax Officer Ahemdabad held that certain sale proceeds were received by the appellant in British India and the profit thereon was taxable under the Indian income tax Act, 1922. One of the items in dispute related to the sale proceeds collected by collecting cheques on British India Shroffs and Merchants. In respect of the said item the Appellate Assistant Commissioner as well as the Appellate Tribunal decided against the appellant, and thereafter, reference was made to the High Court. The High Court felt that it required further facts to decide the reference and twice remanded the case to the Tribunal for investigation of those facts. The Tribunal after taking evidence submitted a supplementary Statement of Case on each occasion. Finally the High Court decided the question against the appellant, but granted it a certificate of fitness to appeal to the Supreme Court. It was contended on behalf of the appellant that the High Court had no jurisdiction to direct the Tribunal to collect additional material and make it a part of the supplementary Statement of Case under section 66(4) as had been decided by this Court in the cases of the Petlad Co. and the New Jahangir Mills. On behalf of the Revenue it was contended that these two cases required reconsideration. The Court therefore had to consider whether it should review and revise its earlier view taken in the said two cases. HELD : (i) The view contended for on behalf of the Revenue namely, that the High Court had power to ask the Tribunal to investigate further facts and submit a supplementary Statement of Case was a reasonably possible view. But on the other hand the opposite view taken by this Court in the Petlad Co. case and the New jahangir Mills case was also reasonably possible. The latter view had been followed by this Court on several occasions and it had regulated the procedure in reference proceedings in the High Courts ever since the decision in the New Jahangir Mills case was pronounced. Besides, no reported decision had been cited at the bar where the question about the constitution of section 66(4) was considered and decided in favour of the view con tended for by the Revenue. No case therefore was made out for a revision or review of the Court 's decisions in the Petlad Co. and New Jahangir Mills cases. [928 C F] Case law discussed. The New jahangir Vakil Mills Ltd. vs Commissioner of Income tax, Bombay North; , and ' The Petlad Turkey Red Dye 909 Works Co. Ltd. Petland vs Commissioner of Income tax, Bombay, Ahemdabad, [1963] Supp. 1 S.C.R. 871, affirmed. (ii) The principle of stare decisis cannot be pressed into service in cases where the power of this Court to reconsider and revise its earlier decisions is invoked, because that power is inherent in this Court; but nevertheless the normal principle that judgments pronounced by this Court would be final cannot be ignored. Unless considerations of a subs tantial and compelling character make it necessary to do so this Court should and would be reluctant to review and revise its earlier decisions. [923 B D] Bengal Immunity Company Ltd. vs State of Bihar , distinguished. (iii) If the Court is satisfied that its earlier decision was clearly erroneous, it should not hesitate to correct the error; but before a previous decision is pronounced to be plainly erroneous, the Court must be satis fied with a fair amount of unanimity amongst its members that a revision of the said view is fully justified. It is not possible or desirable, and in any case it would be inexpedient to lay down any principles which should govern the approach of the Court in dealing with the question of reviewing and revising its earlier decisions. It would always depend upon several relevant considerations What is the nature of the infirmity or error on which a plea for a review and revision of the earlier view is based ? On the earlier occasion, did some patent aspects of question remain unnoticed, or was the attention of the Court not drawn to any relevant and material statutory provision, or was any previous decision of this Court bearing on the point not noticed ? Is the Court hearing such plea fairly unanimous that there is such an error in the earlier view? What would be the impact of the error on the general administration of law or on public good ? Has the earlier decision been followed on subquent occasions either by this Court or by the High Courts ? And, would the reversal of the earlier decision lead to public inconvenience, hardship or mischief ? These considerations become still more significant when the earlier decision happens to be a unanimous decision of a Bench of five learned Judges of this Court [922 B F]

The respondent, a firm consisting of four partners, was registered under the Indian Income tax Act, 1922. For the assessment year 1946 47 it claimed to set off a sum of Rs. 1,05,641, as its share of the loss in respect of certain transactions said to have been carried on in the name of D by another partnership between it and D, which was not registered. The income tax authorities rejected the claim and the Appellate Tribunal agreed with their decision on the grounds (1) that it being admitted that the ankdas were in the name of D, there was no satisfactory evidence that the assessee did business in the joint account, and (2) that, in any case, the assessee could not claim the set off as the loss was suffered by an unregistered firm. 610 On a reference, the High Court held (1) that there was no legal admissible evidence to justify the Tribunal 's finding that the transactions in question were not those of the assessee, and (2) that the assessee firm could claim a set off in respect of the share of loss in the unregistered firm "if the income tax authorities did not proceed to determine the losses of the unregistered firm and did not bring it to tax as permitted by section 23 (5) (b). " Held, that the High Court erred in its view that the asses see firm could claim a set off in respect of the loss incurred in the unregistered firm. Held, further (per Kapur and Hidayatullah,. JJ.) : (1) that if under section 66 of the Indian Income tax Act, 1922, a finding given by the Appellate Tribunal is to be considered final, it is necessary that the reasons for reaching it should be stated by the Tribunal with sufficient fullness to inform all concerned what they are. (2) that there could not be a partnership between D and the registered firm. If there was a partnership it was between D and the four partners of the assessee firm in their individual capacity, and under the provisions of section 24 of the Act the loss of Rs. 1,05,641 could not be set off against the profits of the registered firm. Per Sarkar, J. In view of the decision in Dulichand Laksh minarayan vs The Commissioner of Income tax, Nagpur, [1956] section C R. 154, that a firm as such is not entitled to enter into partnership with another firm or individuals, the assessee firm could not in law enter into partnership with D, and the questions answered by the High Court did not really arise in the present case.

The respondent manufactures cigarettes at its factory upon which Excise Duty is levied by the Assistant Collector of Central Excise, Calcutta Division. The rates varied according to the provisions of Finance Act, 1951, and 1956 and the Additional Duty of Excise (Goods of Special Importance) Act, 1957. The Company was required to furnish quarterly consolidated price lists and the particulars of cigarettes to be cleared were furnished by the Company as required by Rule 9 of the Central Excise Rules. For facilitating collection of duty, the Company maintained a large sum of money in a Current Account with the Central Excise authorities, who used to debit this account for the duty leviable on each stock of cigarettes allowed to be removed. The Company used, to furnish its quarterly price lists to the Collector ,on forms containing nine columns and until July 1957, so long as this form was used by the Company, no difficulty was experienced in checking prices. But after this column was dropped from the new form of six, columns, the Excise authorities encountered some difficulty in valuing the cigarettes for levying Excise Duty. They therefore, changed the basis of assessment from the Distributors selling price to the wholesale cash selling price at which stockists or agents were selling the same in the open market. The authorities informed the Company of this change of basis on 5 11 58 by letter, which also asked the Company to furnish its price lists immediately for determining the correct assessable value of its cigarettes. Two days thereafter, the authorities served a notice upon the Company demanding payment of Rs. 1,67,072,40 P. as Basic Central Excise Duty and Rs. 74,574,85 P. as Additional Central Excise Duty on ground of short levy for a certain brand of cigarettes cleared from Company 's Factory between 10th August 1958, After another five days, the authorities sent another notice demanding more than Rs. 6 lakhs as Basic Central Excise Duty and more than Rs. 2 lakhs as Additional Central Excise Duty. On the following day, the authorities sent a third notice under Rule 10 A of the Central Excise Rules, demanding more than Rs. 40,000/as Central Excise Duty and more than Rs. 16,000/ as Additional Duty. The Company challenged these notices by a writ before the High Court. , The High Court quashed the notices on the ground that the Company had not been given an opportunity of being heard. No appeal was filed by the other side against this decision, but when the case went back to the Collector, he issued P. fresh notice on 24 4 1960. By this notice, for certain periods, a sum of more than Rs. 10 lakhs was levied as Basic Central Excise Duty and a total sum of more than Rs. 3 lakhs as Additional Duty, and this amount had been provisionally debited in the Company 's Account on the basis of the price list supplied by the Company and the Company was informed that if it desired a personal hearing, it 823 can appear before the authorities to make the final assessment in accordance with law. The Company challenged the validity of this notice dated 24 4 60 on the ground that the notice was barred by limitation and was 'issued without jurisdiction, so that no proceedings could be taken. The learned single Judge, as well as the Divisional Bench of the High Court allowed the petition on the ground that the notice was barred by time under Rule 10 of the Central Excise Rules because the notice was held to be fully covered by Rule 10 and by no other rule. The case was certified under article 33(a), (b) and (d) for an appeal to this Court. Rule 10 of the Central Excise Rules provides that when duties or charges have been short levied through inadvertence or misconstruction etc., the person chargeable with the duty so short levied, shall pay the deficiency or pay the amount paid to him in excess on written demand by the proper officer within three months from the date on which the duty or charge is paid or adjusted in the owner 's account, if any, or from the date of making the refund. It was contended that this was substantially a provisional assessment covered by Rule 10 B. The Division Bench of the High Court, however, refused to agree that the impugned notice of 24 460 fell under Rule, 10 A. The reason given for this refusal was that such a case was neither taken before the learned single Judge, nor could be found in the grounds, of the appeal despite the fact that the appellant had ample opportunity of amending its Memorandum of Appeal. Allowing the appeal. HELD : (i.) That the High Court erroneously refused to consider whether the impugned notice fell under Rule 10 A. The applicability of Rule 10 A was very much in issue because the Collector in his affidavit denied that Rule 10 A of the said rules had any application to the facts of the case. (ii) It cannot be accepted that merely because the current account kept under Rule 9 indicated that an accounting had taken place, there was necessarily a legally valid or complete levy. The making of debit entries was only on ground of collection of the tax. Even if payment or actual collection of tax could be spoken of as a defective levy, it was only provisional and not fINal. It could only be closed or invested with validity after carrying out the obligation to make an assessment that really determines whether the levy is short or complete. It is not a faCtual or presumed levy which could prove an assessment. This has to be done by proof of the actual steps taken which constitute assessment. [836D] A mechanical adjustment, or settlement of accounts by making debit entries was gone through in the present case, but it cannot be said that any such adjustment is assessment which is a quasi judicial process and involves due application of mind to the facts, as well as to the requirements of law. Rule 10 and 10 A seems to be so widely worded as to cover any inadvertence error etc.; whereas Rule 10 A would appear to cover any deficiency in duty if the duty has for any reason, been short levied, except that it would be outside the purview of Rule 10 A if its collection is expressly provided or by any rule. Both the rules as they stood at the relevant time, deal with collection, and not with assessment. In N. B. Sanjana 's case ; this Court indicated that Rule 10 A which was residual. in character, would be inapplicable if a case fell within a specified category of cases mentioned in Rule 10. It was pointed out in Sanjana 's case that the reason for the addition 824 of the new rule 10 A was a decision of the Nagpur (Chotabhai Jethabhai 's case; A.I.R. 1952 Nagpur 139), so that a fresh demand may be made on a basis altered by law. The excise authorities had made a fresh demand under Rule 10 A, the validity of which was challenged, but it was upheld by a Full Bench decision of the High Court of Nagpur. This Court, in Chotabhai Jethabhai 's case also rejected the assessee 's claim that Rule 10 A was inapplicable after pointing out that the new rule was specifically designed for the enforcement of the demand like the present one. [836F 837E] (iii)The present case, therefore, falls within the residuary clause of unforeseen cases from the provisions of section 4 of the Act, read with Rule 10 A, an implied power to carry out or complete an assessment, not specifically provided for by the rules, can be inferred. Therefore, it is wrong to hold that the case falls under Rule 10 and not under Rule 10 A.

Two joint stock companies entered into agreements with a former Princely State for the grant of agricultural land on payment of fair and equitable land revenue. Later the two companies formed into a partnership firm. On the merger of the State with the Union of India, the Assessing Authority under the U.P. Agricultural Income tax Act issued notices to the two companies to submit their returns of agricultural income, which the companies did. In writ petitions filed by the companies challenging the assessment orders, the High Court accepted the contention that since the lands were neither assessed to land revenue nor were they assessed to any local rate or cess as required by section 2(a) of the Act, they were not assessable to agricultural income tax and remanded the cases to the Assessing Authority for determination of this question. Before the Assessing Authority, on remand the companies raised for the first time the contention that since no notice had been issued to the firm of which they were partners, the assessment was invalid. The Assessing Authority rejected this contention. He also held that the lands satisfied the requirements of s.2(a). In writ petitions filed by the two companies a single Judge of the High Court upheld the contention that the Assessing Authority committed an error of law in assessing the two partners without assessing the firm. This view was affirmed by a Division Bench on appeal. On further appeal to this Court it was contended that in the absence of a prohibition in the Act, the two companies could be validly assessed to tax without assessing the firm. Allowing the appeal, ^ HELD: 1. The Assessing Authority was not in error in assessing tax on the returns submitted by the two companies and therefore the argument that assessment of the companies, without assessing the firm, was not legal, is without substance. [425 H 426 A] 2. "Person" defined in the section means an individual and includes a firm or a company. [423 G] 3. There is nothing in the Act prohibiting the Assessing Authority from proceeding against individuals forming a partnership. Section 18 enables the authorities, while proceeding with assessment of a firm or a company, not to 420 determine the tax payable by the firm or the company but to proceed to determine the agricultural income of each member of the firm. The provisions do not apply to a case where the returns were submitted by the partners and the assessment made on that basis. The section would be applicable if assessment proceedings against a firm are stopped and the share of the individual is to be determined under the provisions of section 18. [424 F] 4. The well established position under the Income Tax Act (Central Act) with regard to assessment of firms is that where a firm has not made a return it is open to the department to assess a partner directly in respect of his share of the firm 's income without resorting to the machinery provided under the Act and without making an assessment on the firm, the only prohibition being against double taxation. [424 H] C.I.T. vs Murlidhar Jhawar & Purna Ginning & Pressing Factory, SC; referred to. Secondly, the plea that assessment proceedings ought to have been taken against the firm, was not taken by them in the first instance either before the Assessing Authority or before the High Court. This plea cannot be allowed to be taken at a later stage. The assessees submitted their returns on the basis of their respective incomes. [425 F 426 A] 6. The Assessing Authority has correctly come to the conclusion that the agreement between the parties provided for payment of land revenue. [426 F G]

The appellant, a firm of Surat, had a branch at Bangkok, to which it exported cloth, and the branch also made purchases locally and sold them. During the war the business of the branch had been in abeyance, but was re started after the termination of the hostilities. in its return for the assessment year 1949 50 the appellant did not include any profit of the branch, but stated that the books of account of branch were not available, and therefore its profits might now be assessed on an estimate basis subject to 561 action under s.34 or 35.The assessment was made on the basis of profit at 5 % on the export to the branch appearing in the Surat books. A similar estimate was made for year 1950 51. For the year 1951 52 also the business profits of the branch were not shown but the Income tax officerissued a notice to the assessee to produce the relevant accountsand books. The appellant excused itself by promising that in thefollowing year these accounts for the year 1950 would be produced. Thereupon the Income tax Officer made an estimate of the sales of the branch and of the net profits at 5 % thereon, amounting to Rs. 37,500/ , and the same day he issued a notice to show cause why a penalty for concealment of the particulars of the income of 1951 52 should not be levied. Subsequently, the Income tax Officer imposed a penalty of Rs. 20,000/ on it as its explanation was not acceptable. In the meantime assessment proceedings for the year 1952 53 had commenced and the appellant adopted a similar attitude. The Income tax Officer was insistent and, therefore, appellants had to produce the accounts and books of the branch, from which it appeared that for the year 1951 52 the appellant had made a profit of Rs. 1,25,520/ . The Income tax Officer issued a further notice to the appellant to show cause why penalty should not be levied for deliberately concealing income for the year 1951 52. Pursuant to this notice the Income tax Officer passed another order imposing a penalty of Rs. 68,501/ . The appellant 's appeal to the Appellate Assistant Commissioner against both the orders of penalty was rejected. On appeal, the Tribunal cancelled the first order of penalty but confirmed the second one. This hereafter, the appellant obtained a reference to the High Court on the question: "Whether the levy of Rs. 68,501/ as penalty for concealment in the original return for the assessment year 1951 52 is legal?" The High Court answered the question in the affirmative. On the appeal by special leave it was urged that the second order for penalty was illegal because there was one concealment and in respect of that a penalty of Rs. 20,000/ had earlier been imposed, that there was no jurisdiction to make the second order of penalty while the first order stood and for that reason the second order must be treated as a nullity; and that the fact that the first order was subsequently cancelled by the Tribunal would not set the second order on its feet for it was from the beginning a nullity as having been made when the first order stood. Held: (i) The contentions must be rejected. The Income tax Officer had full jurisdiction to make the second order and he would not lose that jurisdiction because he had omitted to recall the earlier order, though it may be that the two orders in respect of the same concealment could not be enforced simultaneously or stand together. When the Income tax Officer ascertained the true facts and realised that a much higher penalty could have been imposed, he was entitled to recall the earlier order and pass another order imposing the higher penalty. If he had omitted to recall the earlier order that would not make the second order invalid, 1 SCI/64 36 562 (ii)In the present case the earlier order having been cancelled and no objection to the cancellation having been taken, there is only one order, which is a legal order. C.V. Govindarajulu Iyer vs Commissioner of Income tax, Madras, , distinguished.

The appellant company, carrying on business as manufacturer of iron and steel, with its factory and works at Jamshedpur in Bihar, was assessed to sales tax for two periods prior to the Constitution, under the Bihar Sales Tax Act, 1947 (No. XIX Of 1947), enacted by the Bihar Legislature in exercise of its exclusive power under the Government of India Act, 1935. The company used to send its goods from Jamshedpur to various parts of India. In the railway receipt the company itself figured as the consignee, it paid the freight and the receipt was sent either to its branch offices or bankers to be handed over to the purchaser when he paid the price. From the amounts shown as gross turn over in the two returns for the two periods, the company claimed deduction of certain amounts, being the valuable consideration for the goods manufactured in Bihar but sold, delivered and consumed outside, on the ground that in none of the transactions in respect of the said sums did property in the goods pass to the purchasers in Bihar. The appellant claimed further deductions on account of the railway freight paid by it. The Sales Tax Officer disallowed both the claims and added the amounts of sales tax realised by the appellant from its purchasers to the taxable turnover. The company appealed against the orders of assessment, but the Commissioner of Sales Tax dismissed its appeals. The Board of Revenue, in revision, confirmed the orders of the Commissioner with certain modifications and remanded the matters to the Sales Tax Officer. On the appellant 's application for reference of certain questions of law, the Board referred them to the High Court. One of them related to the legality of adding the Sales Tax to the turn over and was answered in favour of the appellant and the respondent did not appeal. The other questions decided by the High Court against the appellant related to the vires of the Act and the validity of retrospective levy of sales tax under section 4(1) of the Act. The appellant 's contentions in the appeals were that the tax levied under section 4(1) read with section 2(g) second proviso, cl. (II), of the Act, was not a sales tax within the meaning of Entry 48 in List II of the Seventh Schedule to the Govern ment of India Act, 1935, but was in the nature of excise duty 172 1356 which a provincial legislature had no power to impose, that the theory of territorial nexus was inapplicable to sales tax and, in any case, there was no real or sufficient nexus in the present cases and that retrospective levy of the sales tax under section 4(1) Of the Act destroyed the indirect nature of the tax, thus making it a direct tax on the dealer which could not be passed on to the consumer: Held, (per Das, C. J., Venkatarama Aiyar, section K. Das and A.K. Sarkar, jj., Bose, J. dissenting), that the contentions raised on behalf of the appellant must be negatived. The provisions of section 4(1) read with section 2(g), second proviso, of the Bihar Sales Tax Act, as amended by the Bihar Sales Tax (Amendment) Act, 1948, (VI Of 1949), were within the legislative competence of the Legislature of the Province of Bihar. Both before and after the amendment, the word 'sale ' as used in section 4(1) and as defined by section 2(g) of the Act, meant the transfer of property in the goods sold. The second proviso added by the amending Act did not extend that meaning so as to include a contract of sale. What it actually did was to lay down certain circumstances in which a sale, although completed elsewhere, was to be deemed to have taken place in Bihar. Those circumstances did not constitute the sale, but only located the situs of the sale. Sales Tax Officer, Pilibhit vs Messrs. Budh Prakash jai Prakash; , , distinguished. Nor was it correct to contend that the tax levied under section 4(1) read with section 2(g) Of the Act was in the nature of excise duty. Under cl. (ii) of the second proviso to section 2(g) of the Act the producer or manufacturer became liable to pay the tax not because he produced or manufactured the goods but because he sold them. Province of Madras vs Boddu Paidanna and Sons, [1942] F.C.R. go and Governor General vs Province of Madras, (1945) L.R. 72 I.A. 91, referred to. There can be no doubt that the theory of territorial nexus does apply to sales tax legislation. Although sales tax can be levied only on a completed sale, this theory has its use in indicating the circumstances in which the tax may be enforced in a particular case. One or more of the several ingredients of a sale may furnish the connection between the taxing State and the sale. State of Bombay vs United Motors (India) Ltd., [1953] S.C.R. 1069, Poppatlal Shah vs The State of Madras, [1953] S.C.R. 677 and The State of Bombay vs R.M.D. Chamarbaugwala, ; , relied on. Bengal Immunity Co. Ltd. vs The State of Bihar, , considered. Case law reviewed. 1357 As in a sale of goods, the goods must necessarily play an important part, the circumstances mentioned in the proviso to section 2(g) of the Act, namely, the presence of the goods in Bihar at the date of the agreement of sale or their production or manufacture there must be held to constitute a sufficient nexus between the taxing province and the sale wherever that might take place. Governor General vs Raleigh Investment, , relied on. Province of Madras vs Boddu Paidanna and Sons, [1942] F.C.R. go, distinguished. It would not be correct to contend that the theory of nexus might lead to multiple taxation or obstruct inter State trade. Article 286(2) of the Constitution and the relevant entries in the Legislative List are a complete safeguard to any such contingency. Although as a matter of economic theory, sales tax maybe an indirect tax realisable from the consumer, it need not be legally so and is not so under the Bihar Sales Tax Act, 1947, which imposes the primary liability on the seller. A buyer, moreover, is not bound to pay sales tax over and above the agreed sale price unless he is by contract bound to do so. There can, therefore, be no scope for the argument that the retrospective enforcement of the tax under section 4(1) of the Act could destroy the character of the tax or that it was beyond the legislative competence of the Bihar Legislature. Love vs Norman Wright (Builders) Ltd., L.R. (1944) 1 K.B. 484, referred to. Per Bose, J. Sales tax can be imposed only on the sale. It is, therefore, wrong to look to the goods or the agreement to sell or any other elements that constitute a sale in order to impose the tax. A State can tax a sale of goods that takes place within its boundary. It has no power to tax extra territorially, and since a completed sale can have only one situs no State Legislature can be allowed to break up a sale into its component parts, which are separate and distinct from the sale itself, and by an application of the theory of nexus claim that ,,he sale wholly took place within it. The nexus can only be in respect of the entire sale, wherever it may take place and not of its several parts.

Two persons, B and C, formed a partnership firm on April 20, 1936, and the firm was dissolved on March 31, 1948. I and C along with R formed a second firm on July 30, 1941, and it was dissolved on March 31, 1949. B and C along with five others formed a third firm on December 1, 1941, and it was dissolved on January 1, 1949. All the three firms were carrying on business in yarn and cloth and all of them were registered under section 26 A of the Income tax Act. For the years 1943 44 and 1944 45 tile said firms were treated as separate entities and separate assessment orders were passed in respect of the income of each one of them for the said years. Subsequently, the Income tax Officer served notices under section 34 Of the Act on C on behalf of the firms and after hearing the parties he held that the firms were fictitious and so cancelled their registration under r. 6B of the Income tax Rules and passed fresh orders of assessment against them on the basis that they were unregistered firms. One Y who was a partner in the third firm and C filed four writ petitions under article 226 of the Constitution in the High Court challenging the validity of the orders passed. The High Court dismissed the petitions but granted certificates of fitness to appeal 190 under article 133. The appellants contended that r. 6B was inconsistent with section 23(4) of the Act and was ultra vires, that consequently the cancellation of registration of the firms was without jurisdiction and was void and that the proceedings taken under section 34 Of the Act were invalid as the required notice was not issued against the individual partners who were the assesses. Held, that r. 6B of the Income tax Rules was not inconsis tent with section 23(4) Of the Act and was not ultra vires. Rule 6B dealt with cancellation of registration in cases where the certificate of registration had been granted without there being a genuine firm in existence, while section 23(4) dealt with cancellation of registration on account of failure to comply with the requirements of law, though the registered firm was genuine. Rule 6B was obviously intended to carry out the purpose of the Act and was valid. The fact that no appeal had been provided against an order made under r. 6B was no ground for challenging its validity. It was also not open to the appellants to contend that the orders passed under section 6B were invalid on the ground that the rule did not require the giving of any notice before the can cellation of registration as in the present case notice had actually been given and the appellants had been afforded an opportunity of being heard. Held, further, that in the cases of registered firms, the firms themselves were the assessees and as such the notices issued under section 34 against the firms and served upon C were valid and proper notices, :and it was not necessary to serve notices upon the individual partners of the firms. The notice prescribed by section 34 was not a mere procedural requirement. If no notice was issued or if the notice issued was shown to be invalid then the proceedings taken by the Income tax Officer would be illegal and void. Commissioner of Income tax, Bombay City vs Ramsukh Motilal, and R. K. Das & Co. vs Commissioncy of Income tax, West Bengal, , approved. The contention that the assessments were completely illogical and therefore illegal could not be urged in a petition under article 226 of the Constitution since it did not raise any question of jurisdiction.

Appeal No. 222 of 1960. Appeal from the judgment and order dated December 15, 1959, of the Punjab High Court (Circuit Bench), Delhi, in R. F. Appeal No. 77 D of 1954. G. section Pathak and B. C. Misra, for the appellant. Mukat Behari Lal Bhargava and J. P. Goyal, for respondents Nos. 1 to 7. 1960. December 5. The Judgment of the Court was delivered by GAJENDRAGADKAR, J. The short question of law( which arises for decision in, the present appeal by special leave is whether the appeal preferred against the appellant and respondents 8 and 9 in the High Court of Punjab by respondents 2 to 7 'was competent in law or not. This question arises unDer somewhat unusual circumstances. It appears that an agreement of sale of one third of the one fourth share in the property covered by the document was entered into between Gokal Dhish Bhargava and the appellant Jagat Dhish Bhargava. Gokal Dhish Bhargava sued the appel lant and pro forms respondents 8 and 9 for specific performance of the said agreement of sale in the Court of the Senior Civil Judge, New Delhi (Civil Suit No. 684/128 of 1949/50). This suit was dismissed on 920 March 12, 1954. , Pending decision in the trial court Gokal Dhish Bhargava (fled and his son Jawahar Lal Bhargava, respondent 1 and Chunni Lal Bhargava were brought on the record as legal representatives. After the suit was dismissed and before the appeal in question was preferred in the High Court Chunni Lal Bhargava died; thereupon respondents 2 to 7, as his legal representatives, joined respondent 1 in preferring an appeal against the said decree in the High Court of Punjab. The memo of appeal along with the judgment dismissing the suit and the taxed bill of costs endorsed on the back of the last page of the judgment was filed in the High Court on July 29, 1954. It is the competence of this appeal that was questioned before the High Court and is in dispute before us in the present appeal. The record shows that on March 24,1954, an application was made by respondents 2 to 7 (who will be called the respondents hereafter) for a certified copy of the judgment and decree passed in the said suit for specific performance. A certified copy of the judgment and the bill of costs was supplied to them but the decree had not been drawn up and no copy of the decree was therefore supplied to them. In the result the appeal was filed without the certified copy of the decree and only with the certified copy of the judgment and the bill of costs. On August 2, 1954, the Assistant Registrar of the High Court returned the memo of appeal filed by the respondents to their counsel and pointed out to him that ' since no copy of the decree had been filed the presentation of the appeal was defective and the defect needed to be rectified. Thereafter, on August 16, 1954, the respondents ' counsel refiled the appeal with an endorsement that a memo of costs alone had been prepared by the trial court and no decree had been drawn up, and so the appeal should be held to be properly filed. Apparently this explanation was treated ' as satisfactory by the office of the High Court and the appeal was registered as No. 77 D of 1954. In due course the appeal was placed for preliminary hearing under 0. 41, r. 11 of the Code of Civil 921 Procedure before Dulat, J. who admitted it on August 30, 1954. Notice of the appeal was accordingly served on the appellant and the pro forma respondents. Ultimately when the appeal became ready for hearing it was put up on the Board of the Circuit Bench of the High Court to be heard on December 26, 1958. Meanwhile on December 23., 1958, the appellant served a notice on the respondents ' counsel intimating to him that he proposed to raise a preliminary objection against the competence of the appeal on the ground that the decree under appeal had not been filed as required under 0. 41, r. 1 along with the memo of appeal and the certified copy of the judgment. Next day, that is to say on December 24, 1958, the respondents moved the trial Court for drawing up of the decree, but since the record had in the meantime been sent by the trial Court to the High Court no decree could be drawn up by the trial Court, and so the motion became infructuous. The appeal, however, did not reach hearing on December 26, 1958. On December 29, 1958, the respondents moved the Court that the appeal should be declared to be maintainable as the memo of costs which alone had been prepared by the trial Court read along with the concluding paragraph of the judgment may be held to satisfy the requirements of the decree; in the alternative they prayed that the record of the suit in the trial Court should be sent for to enable them to get a decree prepared with a view to file the same in the High Court along with their appeal. Bishan Narain, J., before whom this application was taken out for orders, directed that it may be heard by the Bench which would hear the appeal. Eventually the appeal came on for hearing before Falshaw and Chopra, JJ. on De ember 8, 1959. At the said hearing the appellant raised a preliminary objection that the appeal was not competent having regard to the mandatory provisions of 0. 41, r. 1, and urged that the appeal should be dismissed as incompetent. This preliminary objection was, however, not upheld by the High Court, and it was held that "the proper course to follow was to allow the respondents a 922 month 's time for the purpose of getting a decree drawn up in the proper form by the lower Court and obtaining a copy thereof ". Accordingly the record which had in the meanwhile been received by the High Court after the appeal was admitted under 0. 41, r. 11 was ordered to be sent back to the lower Court without delay. It is against this order which was passed by the High Court on December 15, 1959, that the present appeal by special leave has been filed. On behalf of the appellant Mr. Pathak contends that the appeal filed before the High Court was plainly and manifestly incompetent, and so the High Court was in error in not dismissing it on that ground. The position of law under 0. 41, r. 1 is absolutely clear. Under the said rule every appeal has to be preferred in the form of a memorandum signed by the appellant or his pleader and presented to the Court or to such officer as it appoints in that behalf, and has to be accompanied by a copy of the decree appealed from, and of the judgment on which it is founded. Rule 1 empowers the appellate Court to dispense with the filing of the judgment but there is no jurisdiction in the appellate Court to dispense with the filing of the decree. Where the decree consists of different distinct and severable directions enforceable against the same or several defendants the Court may permit the filing of such portions of the decree as are the subject matter of the appeal but that is a problem with which we are not concerned in the present case. In law the appeal is not so much against the judgment as against the decree; that is why Article 156 of the Limitation Act prescribes a period of 90 days for such appeals and provides that the period commences to run from the date of the decree under appeal. Therefore there is no doubt that the requirements that the decree should be filed along with the memorandum of appeal is mandatory, and in the absence of the decree the filing of the appeal would be incomplete, defective and incompetent. That, however, cannot finally dispose of the point raised by the appellant before us. In the present case the respondents had applied for a certified copy of 923 the judgment as well as the decree in the trial Court on March 24, 1954, and they were not given a copy of the decree for the simple reason that no decree was drawn up; what they were given was a copy of the judgment and taxed bill of costs endorsed on the back of the last page of the judgment. These documents they filed along with their memo of appeal; but that would not affect the mandatory requirement of 0. 41, r. 1. In considering the effect of this defect in the presentation of the appeal we must bear in mind the rules of procedure in regard to the drawing up of the decree. The position in that behalf is absolutely clear. Section 33 of the Code of Civil Procedure requires that the Court, after the case has been heard, shall pronounce judgment, and on such judgment a decree shall follow. Order 20, r. 3 provides, inter alia, that the judgment shall be dated and signed by the judge in the open Court at the time of pronouncing it, and under r. 4, sub r. (2) a judgment has to contain a concise statement of the case, the points for determination, the decision thereon and the reasons for such decision. Rule 6 of the same Order prescribes the con. tents of the decree. It provides that the decree shall agree with the judgment and shall contain the particulars therein specified. Under r. 7 it is provided that the decree shall bear the date, the day on which the judgment was pronounced, and it directs that when the judge has satisfied himself that the decree has been drawn up in accordance with the judgment he shall sign the decree. It is, therefore, clear that the drawing up of the decree in the present case was the function and the duty of the office, and it was obligatory on the judge to examine the decree when drawn up, and if satisfied that it has been properly drawn up to sign it. Except in places where the dual system prevails the litigant or his lawyer ' does not play any material or important part in the drawing up of the decree. In fact the process of drawing up of the ' decree is beyond the litigant 's control. Therefore, there is no doubt whatever that in failing to draw up a decree in the present suit the office of the trial Court was negligent in the discharge of its duties, and 924 the said negligence was not even noticed by the learned trial judge himself. Unfortunately, when the appeal was presented in the High Court, even the office of the High Court was not as careful in examining the appeal as it should ,,have been, and as we have already indicated the appeal passed through the stage of admission under 0. 41, r. 11 without the defect in the appeal being brought to the notice of the learned judge who admitted it. Thus it is quite clear on the record that the respondents had applied for a certified copy of the judgment and the decree, and when they were given only a certified copy of the judgment and the bill of costs they filed the same along with the memo of appeal in the bona fide belief that the said documents would meet the requirements of 0. 41, r. 1. It is true that before the appeal came on for actual hearing before the High Court the appellant gave notice to the respondents about his intention to raise a preliminary objection that the appeal had not been properly filed; but, as we have already pointed out, the attempt made by the respondents to move the trial Court to draw up the decree proved infructuous and ultimately the High Court thought that in.fairness to the respondents they ought to be allowed time to obtain the certified copy of the decree and file it before it; and so the High Court passed the order under appeal. The appellant contends that this order is manifestly erroneous in law; according to him the only order which could and should have been passed was to dismiss the appeal as incompetent under 0. 41, r.1. The problem thus posed by the appellant for our decision has now become academic because subsequent to the decision of the High Court under appeal the respondents have in fact obtained Po certified copy of the decree on December 23, 1959, and have filed it in the High Court on the same day. This fact immediately raises the question as to whether the appeal which has admittedly been completely and properly filed on December 23, 1959, was in time or not. If it appears that on the date when the decree was thus filed the 925 presentation of the appeal was in time then the objection raised by the appellant against the propriety or the correctness of the High Court 's order under appeal would be purely technical and academic. The answer to the question as to whether the presentation of the appeal on December 23, 1959, is in time or not would depend upon the construction of section 12, sub section (2) of the Limitation Act. We have already noticed that the period prescribed for filing the present appeal is 90 days from the date of the decree. Section 12, sub section (2) provides, inter alia, that in computing the period of limitation "the time requisite for obtaining a copy of the decree shall be excluded". What then is the time which can be legitimately deemed to have been taken for obtaining the copy of the decree in the present case? Where a decree is not drawn up immediately or soon after a judgment is pronounced, two types of cases may arise. A litigant feeling aggrieved by the decision may apply for the certified copy of the judgment and decree before the decree is drawn up, or he may apply for the said decree after it is drawn up. In the former case, where the litigant has done all that he could and has made a proper application for obtaining the necessary copies, the time requisite for obtaining the copies must necessarily include not only the time taken for the actual supply of the certified copy of the decree but also for the drawing up of the decree itself. In other words, the time taken by the office or the Court in drawing up a decree after a litigant has applied for its certified copy on judgment being pronounced, would be treated as a part of the time taken for obtaining the certified copy of the said decree. Mr. Pathak has fairly conceded that on this point there is a consensus of judicial opinion, and in view of the formidable and imposing array of authorities against him he did not raise any contention about the validity of the view take in all those cases. (Vide: Tarabati Koer vs Lala Jagdeo Narain (1); Bani Madhub Mitter vs Mathungini Dassi & Ors. (Full Bench) (2);Gabriel Christian vs (1) (2) Cal 104. 926 Chandra Mohan Missir (Full Bench) (1); Jayashankar Mulshankar Mehta vs Mayabhai Lalbhai Shah (Full Bench) (2); Gokul Prasad vs Kunwar Bahadur & Ors.(3); and Umda vs Rupchand & Ors. (Nagpur Full Bench) (1)). There is, however, a sharp difference of opinion in regard to cases where an application for a certified copy of the decree is made after the said decree is drawn up. In dealing with such cases Courts have differed as to what would be the period requisite for obtaining the certified copy of the decree. The Bombay, Calcutta and Patna High Courts, appear to have held that the period taken in drawing up of the decree would be part of the requisite period, while other High Courts have taken a contrary view. It is significant that though the High Courts have thus differed on this point, in every case an attempt is judicially made to do justice between the parties. With that aspect of the problem, however, we are not concerned in the present appeal. The position, therefore, is that when the certified copy of the decree was filed by the respondents in the High Court on December 23, 1969, the whole of the period between the date of the application for the certified copy and the date when the decree was actually signed would have to be excluded under section 12, sub section Inevitably the presentation of the appeal on December 23, 1959 would be in time. It is true that more than five years have thus elapsed after the pronouncement of the judgment but for this long delay and lapse of time the respondents are not much to blame. The failure of the trial Court to draw up the decree as well as the failure of the relevant department in the High Court to examine the defect in the presentation of the appeal at the initial stage have contributed substantially to the present unfortunate position. In such a case there can be no doubt that the litigant deserves to be protected against the default committed or negligence shown by the Court or its officers in the discharge of their duties. As observed by Cairnes, L. C. in Rodger vs Comptoir (1) Pat. (2) (1951) 54 B.L.R. II. (3) Lucknow 250. (4) 927 d 'Escompte de Paris (1) as early as 1871 "one of the first and highest duties of all Courts is to take care that the act of the Court does no injury to any of the suitors"; that is why we think that in view of the subsequent event which has happened in this case, namely, the filing of the certified copy of the decree in the, High Court, the question raised by the appellant has( become technical and academic. Faced with this position Mr. Pathak attempted to argue that the application made by the respondents on March 24, 1954, was not really an application for a certified copy of the decree; he contendea that it was an application for the certified copy of the judgment and the bill of costs. This argument is wholly untenable. The words used in the application clearly show that it was an application for a certified copy of the judgment as well as the decretal order, and as subsequent events have shown, a certified copy of the decree was ultimately supplied to the respondents in pursuance of this application. Then it was argued that the respondents should have moved the trial Court for the drawing up of a decree as soon as they found that no decree a been drawn up. It may be assumed that the respondents might have adopted this course; but where the dual system does not exist it would be idle to contend that it is a part of the duty of a litigant to remind the Court or its office about its obligation to draw up a decree after the judgment is pronounced in any suit. It may be that decrees when drawn up are shown to the lawyers of the parties; but essentially drawing up of the decree is the function of the Court and its office, and it would be unreasonable to penalise a party for the default of the office by suggesting that it was necessary that the party should have moved the Court for the drawing up of the decree. Therefore, we are not satisfied that tie appellant is justified in attributing to the respondents any default for which the penalty of dismissing their appeal can be legitimately imposed on them. The result is that the appeal preferred by the respondents on December 23, (1) (1871) L.R. 3 P.C. 465, 475. 928 1959, is proper and in time and it can now be dealt with in accordance with law. It is true that in the circumstances over which the respondents had no control the appeal in question has already been admitted under 0. 41, r. 11, and as a result of the decision under appeal it may not have to go through that process again. Dulat, J. who heard the appeal for admission was satisfied that it deserved to be admitted and we do not think it necessary to require that the present appeal should go through the formality of the procedure prescribed by 0. 41, r. 11 once again. This posi tion is no doubt, unusual, but in the circumstances of the case it is impossible to say that the order passed by the High Court is not fair and just. Let us then consider the technical point raised by the appellant challenging the validity or the propriety of the order under appeal. The argument is that 0. 41, r. 1 is mandatory, and as soon as it is shown that an appeal has been filed with a memorandum of appeal accompanied only with a certified copy of the judgment the appeal must be dismissed as being incompetent, the relevant provisions of 0. 41 with regard to the filing of the decree being of a mandatory character. It would be difficult to accede to the proposition thus advanced in a broad and general form. If at the time when the appeal is preferred a decree has already been drawn up by the trial Court and the appellant has not applied for it in time it would be a clear case where the appeal would be incompetent and a penalty of dismissal would be justified. The position would, however, be substantially different if at the time when the appeal is presented before the appellate Court a decree in fact had not been drawn up by the trial Court; in such a case if an application has been made by the appellant for, a certified copy of the decree, then all that can be said against the appeal preferred by him is that the appeal is premature since a decree has not been drawn up, and it is the decree against which an appeal lies. In such a case, if the office of the High Court examines the appeal carefully and discovery the defect the appeal may be returned to the appellant for presentation 929 with the certified copy of the decree after it is obtained. In the case like the present, if the appeal has passed through the stage of admission through oversight of the office, then the only fair and rational course to adopt would be to adjourn the hearing of the appeal with a direction that the appellant should produce the certified copy of the decree as soon as it is supplied to him. In such a case it would be open to the High Court, and we apprehend it would be its duty, to direct the subordinate Court to draw up the decree forthwith without any delay. On the other hand, if a decree has been drawn up and an application for its certified copy has been made by the appellant after the decree was drawn up, the office of the appellate Court should return the appeal to the appellant as defective, and when the decree is filed by him the question of limitation may be examined on the merits. It is obvious that the complications in the present case have arisen as a result of two factors; the failure of the trial Court to draw up the decree as required by the Code, and the failure of the office in the High Court to notice the defect and to take appropriate action at the initial stage before the appeal was placed for admission under 0. 41, r. 11. It would thus be clear that no hard and fast 'rule of general applicability can be laid down for dealing with appeals defectively filed under 0. 41, r. 1. Appropriate orders will have to be passed having regard to the circumstances of each case, but the most important step to take in cases of defective presentation of appeals is that they should be carefully scrutinized at the initial stage soon after they are filed and the appellant required to remedy the defects. Therefore, in our opinion, the appellant is not justified in challenging the propriety or the validity of the order passed by the High Court because in the circumstances to which we have already adverted the said order is obviously fair and just. The High Court realised that it would be very unfair to penalise the party for the mistake committed by the trial Court and its own office, and so it has given time to the respondents to 930 apply for a certified copy of the decree and then proceed with the appeal. In this connection our attention has been drawn to the fact that in the Punjab High Court two conflicting and inconsistent views appear to have been taken in its reported decisions. Dealing with appeals filed with out a certified copy of the decree some decisions have dismissed the appeals as defective, and have given effect to the mandatory words in 0. 41, r. 1, without presumably examining the question as to whether the failure of the trial Court to draw up the decree would have any bearing or relevance on the point or not. (Vide: Gela Ram vs Ganga Ram(1); Municipal Committee, Chiniot vs Bashi Ram (2); Mubarak Ali Shah vs Secretary of State (3); Nur Din vs Secretary of State (4) Hakam Beg vs Rahim Shah (5); Fazal Karim vs Des Raj (6); and Banwari Lal Varma vs Amrit Sagar Gupta (7). On the other hand it has in some cases been held that it would be fair and just that the hearing of the appeal should be adjourned to enable the appellant to obtain a certified copy of the decree and produce it before the appellate Court (Vide: Manoharlal vs Nanak Chand (8); Mt. Jeewani vs Mt. Misri (9); and, Sher Muhammad vs Muhammad Khan (10). It would obviously have been better if this conflict of judicial opinion in the reported decisions of the High Court had been resolved by a Full Bench of the said High Court but that does not appear to have been done so far. However, as we have indicated, the question about the competence of the appeal has to be judged in each case on its own facts and appropriate orders must be passed at the initial stage soon after the appeal is presented in the appellate Court. If any disputed question of limitation arises it may have to go before the Court for judicial decision. In the result the order passed by the High Court is right. Having regard to the fact that the decree (1) A.I.R. (1920) 1 Lah. 223 (3) A.I.R. (1925) Lah. 438. (5) A I.R. (7) A.I.R. (1940) East Punj. (9) A.I.R. (1919) Lah. (2) A.I.R (1922) Lah. (4) A. I.R. (6) (8) A.I.R. (1919) Lah. (10) A.I.R. (1924) Lah. 352. 931 under appeal has already been filed by the respondents before the High Court on December 23, 1959, the High Court should now proceed to hear the appeal on the merits and deal with it in accordance with law. In the circumstances of this case we make no order as to costs. Appeal dismissed.

The respondents filed a suit for specific performance against the appellant which was dismissed on March 12, 1954. On March 24 the respondents made an application for a certified copy of the judgment and decree. The decree was not drawn up and the respondents were supplied a certified copy of the judgment and the memo of costs. The respondents filed an appeal before the High Court without the certified copy of the decree and only with the certified copy of the judgment and the memo of costs. The appeal was admitted under 0. 41, r. 11 Code of Civil Procedure on August 30, 1954. On December 23, 1958, the appellant served a notice on the respondents that he would raise a preliminary objection at the hearing that the appeal was incompetent as a certified copy of the decree was not filed as required by 0. 41, r. 1. On December 24, 1958, the respondents moved the trial Court for drawing up of the decree, but since the record was in the High Court this could not be done. At the hearing of the appeal, the appellant raised the preliminary objection, but the High Court passed an order on December 15, 1959, allowing the respondents one month 's time for getting a decree drawn up and obtaining. a copy and directed the record to be sent to the trial Court. Against this order the appellant preferred an appeal to the Supreme Court contending that the High Court was bound to dismiss the appeal as it was manifestly incompetent under 0. 41, r. 1. Subsequently, on December 23, 1959, the respondents obtained a certified copy of the decree and filed it before the High Court the same day. The appellant contended that the appeal was to be deemed to be filed on this date and was time barred. Held, that in the circumstances of this case the order passed by the High Court was right. ' There was no doubt that 0. 41, r. 1 was mandatory and in the absence of or the decree the filing of the appeal was incomplete, defective and incompetent. The office of the trial Court was negligent in not drawing up a decree and the office of the High Court was also not as careful as it should have been in examining the appeal and these have contributed substantially to the unfortunate position. In such a case, the respondents deserved to be protected. Besides the, 919 question had become academic and technical in view of subse quent events. The certified copy of the decree was filed on December 23, 1959, and even if the appeal was considered to have been filed on that date, it was within time. Under section 12(2) of the Limitation Act the respondents could treat the time taken in the drawing up of the decree after the application for a certified copy thereof had been made as part of the time taken in obtaining the certified copy of the decree. Tarabati Koer vs Lala jagdeo Narain, , Bani Madhub Mitter vs Matungini Desai, Cal. 104 (F.B.), Gabriel Christian vs 'Chandra Mohan Missir, Pat. 284(F.B.), Jayashankar Mulshankar Mehta vs Mayabhai Lalbhai Shah, , Gokul Prasad vs Kunwar Bahadur, Luck. 250 and Umda vs Rupchand, , referred to. Rodger vs Comptoir d 'Escompte de Paris, (1871) L.R. 3 P.C. 465, relied on.

The appellant Bank filed a suit for the recovery of the amount of loan together with interest thereon granted to Respondent No. I who had not only executed a promissory note but also a bond hypothecating the standing crop of his lands situated at Khandu and Surjipada in Rajasthan. Respondents 2 and 3 being guarantors for the repayment of the loan were also proceeded against. The Trial Court overruled the preliminary objection raised by the Respondents as to the maintainability of the Suit, in view of sections 207 and 256 of the Rajasthan Tenancy Act, 1955. But the High Court, while allowing the Civil Revision Application set aside the judgment of the Trial Court and dismissed the suit. Hence the appeal by special leave of the Court. Allowing the appeal, the Court. ^ HELD: 1.1 A combined reading of sections 207 and 256 of the Rajasthan Tenancy Act, 1955 would show that the jurisdiction of the civil courts is barred only in respect of suits and applications of the nature specified in the Third Schedule to the Act and in respect of suits or applications based on a cause of action in respect of which any relief could be obtained by means of a suit or application of the nature specified in the Third Schedule. The civil court has no jurisdiction to entertain a suit or proceeding with respect to any matter arising under the Act or the Rules made thereunder, provided that a remedy by way of a suit, application or appeal or otherwise is provided in the Act. the long title of which shows that it was passed in order "to consolidate" and amend the law relating to tenancies of agricultural lands and to provide for certain measures of land reforms and matters connected therewith. [787C D; 788A] 1.2. Entry 35 is described in the Third Schedule as a "General" entry, that is to say, not relatable to any particular section of the Act. The 785 suit filed by the Bank cannot fall under this "General" or "residuary" entry. A loan given by a Bank to an agriculturist, which is in the nature of a commercial transaction, is outside the contemplation of the Act and cannot be said to be in respect of any matter arising under the Act. [787G; 788A B] 1.3. The business of the Bank, in so far as lending transactions are concerned, is not to lend moneys on mortgages but the business is to lend moneys. In this particular case, the Bank lent a certain sum of money to respondent 1 in the usual course of its commercial business and nothing could be further removed from the contemplation of the Act than such a transaction. It is only by way of a collateral security that the Bank obtained a hypothecation bond and a deed of mortgage from respondent 1 and a letter of guarantee from respondents 2 and 3. The assumption that the mortgage has executed in pursuance of section 43 of the Act and, therefore, residuary Entry 35 of the Third Schedule is attracted, is not correct. [788G H; 789A] 2. On the question of jurisdiction, one must always have regard to the substance of the matter and not to the form of the suit. Approaching the matter from that point of view, primarily and basically the suit filed by the Bank is one for recovering the amount which is due to it from the respondents on the basis of the promissory note executed by respondent No. I and the guarantee given by respondents 2 and 3. The reliefs sought for also make it clear that the suit is not one to enforce the mortgage and, even assuming that it is, the mortgage not having been executed under section 43 of the Act, nor being one relatable to that section, the residuary Entry 35 can have no application. If that entry is out of way, there is no other provision in the Act which would apply to the instant suit and therefore, the civil court has jurisdiction to entertain the suit filed by the appellant Bank. [789C E]

In response to a notice from the assessing authority under the Punjab General Sales Tax Act that the appellant had not filed a return in respect of the assessment year 1959 60, the appellant claimed that the firm had ceased to do any work since February. 1961 and that a formal document to that effect was executed in August, 1961. The assessing authority made an order of assessment in March 1962. In a writ petition under Article 226 of the Constitution filed ' by the appellant; the High Court directed the Sales Tax Officer to enquire and report if the appellant firm had proved its dissolution in August 1961 or before the date of assessment order. The Sales Tax Officer reported that it had not, The High Court itself examined the matter and came to the s.me conclusion of that reached by the Sales Tax Officer. It also found that though intimation was required to be given under section 16 of the Act regarding the dissolution of the firm within 30 days of such dissolution no such intimation was given under April, 1962 and dismissed the writ petition. Dismissing the appeal to this Court, HELD: (1) There is no sufficient ground to interfere with the judgment of the High Court. The facts and circum stances referred to by the High Court throw a considerable doubt upon the correctness of the appellant 's statement that it had stood dissolved in August, 1961. [754 D & B] (2) The High Court was dealing with the matter on the writ side. In a writ petition, the scope for interference. with a finding of the departmental authorities is much more restricted and the court can normally interfere only if the finding is based upon extraneous or irrelevant evidence or is otherwise perverse. The same cannot be said of the finding of the sales tax authority embodied in its report sent to the High Court in the present case. [754 C]

Respondent No. 1 in the appeals instituted a suit for partition against his younger brothers and sisters, and the heirs of his deceased brothers. The plaintiff was the eldest among the brothers and sisters. The 1st and 2nd Defendants were his brothers, the 3rd Defendant his sister, the 4th and 5th Defendants, the widow and son respectively of the third brother. Defendant 6 was the widow of the fourth brother, and Defendants 7 to 12 were his children, while Defendant No. 14 was the wife of Defendant No. 1, and Defendants 13, 15, 16 and 17 were their children. The subject matter of the appeals related only to one item of property known as "Naroda Chawl" measuring 7 acres and 2 gunthas of land, where 115 rooms and huts stood con structed, out of which 114 rooms had been let out to ten ants, and one room was retained for the caretaker. According to Defendants No. 6 to 12 this property exclu sively belonged to defendant No. 6 and was not liable to partition. The other defendants however supported the plain tiff 's case that it belonged to the 233 joint family and was liable to partition. Defendants 6 to 12 pleaded that the plaintiff 's father Bapalal orally gifted this property to his daughter in law Defendant No. 6 in March 1946 and made a statement before the Revenue authorities on . the basis of which her name was mutated and she was put in possession thereof, that although she came in peaceful possession, the management which in cluded realisation of rent was in the hands of Defendant No. 1, that as some dispute arose in 1952 she assumed direct charge of the chawl and had remained in possession thereaf ter, and that she had acquired good title therein by adverse possession before the suit was filed in 1960. The City Civil Judge who tried the suit, held that there was a joint Hindu family and a business was carried on for the benefit of the family and the income therefrom was thrown into the common pool and all the properties including the disputed chawl were treated as belonging to the family. As the case of Defendant No. 6 about the gift, the mutation of her name, and her exclusive possession from 1946 till the date of the suit was found correct, it was held that she had acquired title by adverse possession, and the suit was dismissed with respect to the disputed chawl. The plaintiff appealed to the High Court. Some of the defendants also filed appeals in respect of the other items of property. All these appeals were heard and disposed of by a common judgment. The High Court reversed the finding of adverse posses sion in regard to the disputed chawl and granted a decree for partition. It held that Defendant No. 6 remained in exclusive possession of the property only since 1952, the period was thus short of the time required for prescription of title. It further held that since the rents of the chawl from 1952 were collected by her husband and after his death by her son (Defendant No. 7), she was liable to render accounts till the death of her husband, and she along with Defendant No. 7 would be jointly liable for the period thereafter. Separate Appeals were preferred by Defendant Nos. 6 and 7 to this Court. Allowing the Appeals, setting aside the decision of the High Court and restoring that of the Trial Court. 234 HELD: 1. The principle that revenue entry furnishes presumptive evidence of title is inapplicable in the instant case. It cannot be denied that title to Naroda Chawl could not have passed to Defendant No. 6 by virtue of the entry Ext. The value of the chawl even in 1946 was large and no registered instrument of transfer was executed. Besides Ext. 247 describes the plaintiff 's father (Bapalal) and Defendant No. 6 (Chandrakanta) as Kabjedar, that is occu pant. In such circumstances, the presumption which can be raised in favour of Defendant No. 6 from this entry is with respect of her possession and possession only. [238F G] Gangabai and others vs Fakirgowda Somaypagowda Desai and others, AIR 1930 Privy Council 93; and Desai Navinkant Kesarlal vs Prabhat Kabhai, 9 Gujarat Law Reporter 694, referred to. The account books have to be rejected as not reli able. It is apparent from the evidence that nobody takes the responsibility of supporting the correctness of the entries therein. Many of the documents produced by Defendant No. 1 were accepted, but the account books which were section Nos. 123 75 to 123 97 of Ext. 123 were in express terms not admitted. The plaintiff filed his objection Ext. Defendant No. 6 also filed her objection Ext. The books were admitted in evidence and marked as exhibits on the statement of the plaintiff which he made in cross exami nation. The plaintiff by saying that he had written as per the instructions of Defendant No. 1 made it clear that he Could not vouchsafe for its reliability. Defendant No. 1 could not summon courage to support them either personally or through any witness. No reason has been suggested as to why he did not produce other important documents in his possession which could have supported the account books and the joint case of the parties resisting the appellant 's claim. [243B E] 3. Defendant No. 1 cannot be treated to be in joint possession as he was actually collecting the rents from the tenants. it is well settled that the possession of the agent is the possession of the principal and in view of the fidu ciary relationship, Defendant No. 1 cannot be permitted to claim his own possession. [247D E] David Lyeii vs John Lawson Kennedy, [1889] XIV H.L.(E) 437; Williams vs Pott, L.R. XII Equity Cases 149 and Secre tary of State for India vs Krishnamoni Gupta, 29 Indian Appeals 104, referred to. It is the intention to claim exclusive title which makes 235 possession adverse and this animus possidendi must be evi denced and effectuated by the manner of occupancy which again depends upon the nature of the property. The manner of possession depends upon the kind of possession which the particular property is susceptible. That possession to the extent to which it is capable of demonstration must be hostile and exclusive and will cover only to the extent of the owner 's possession. [246E F] (b). The title to the chawl as owner, subject to the tenancy was an interest in immovable property so as to be covered by Article 144 of the Indian Limitation Act, 1908, which specifically mentioned, ". or any interest therein". [246E] In the instant case, the parties have been fighting for the rent from the chawl so long as it continued in posses sion of the tenants. Before the gift of 1946 the Defendant No. 1 was collecting the rent and he continued to do so even thereafter till 1952. The appellant has, however, estab lished her case that the Defendant No. 1 acted as her agent after 1946 and when he repudiated this agency in 1952 he was effectively removed from the management of the chawl. Since 1946 the tenants attorned to the Defendant No. 6 and paid rent to her under printed receipts announcing her ownership, but of course through her agent the Defendant No. 1. The fact that the tenants have been in actual physical posses sion of the chawl is, in the circumstances, of no assistance to the respondents. What is material is that they paid the rent to the Defendant No. 6. Defendant No. 6 was in adverse possession from the period 1946 to 1952 through her agent Defendant No. 1 and thereafter through her husband and son Defendant No. 7 till 1960 when the suit was filed, the total period being more than 12 years. [246G H; 248G] Uppalapati Veera Venkata Satyanarayanaraju and another vs Josyula Hanumayamma and another, and Hari Prasad Agarwalla and another vs Abdul Haw and others, A.I.R. 1951 Patna 160, referred to.

The question involved in this appeal was whether under the customary law of the Punjab a sister was a preferential heir in respect of her brother 's self acquired property, to a collateral. The respondent, the sister, relied on a custom, which she termed a special custom, and on that basis claimed her brother 's property, and the appellant, a collateral of the 8th degree of her brother, resisted her claim relying solely on a general custom stated in paragraph 24 Of the Rattigan 's Digest of the Customary Laws of the Punjab to the effect that sisters were excluded by collaterals in the matter of inheritance to non ancestral property. The Subordinate judge, and the District judge on appeal, held in favour of the appellant but the High Court reversed their decisions holding that, there was no such general custom as recorded by Rattigan and that it was in any event for the appellants to prove that custom and this he had failed to do. The High Court also held that the respondent had succeeded in proving the custom set up by her. It was contended on behalf of the appellant that the High Court was in error in placing the onus of proving the custom on him since the custom was a general custom as stated by Rattigan. Held, that no distinction could be made between a general custom or other customs so far as the need of proof was con cerned and the ordinary rule was that all customs, general or otherwise, had to be proved unless by repeated recognition by the courts a custom had become entitled to judicial notice under section 57(1) of the Evidence Act. Raja Rama Rao vs Raja of Pittapur, (1918) L.R. 45 I.A. 148, relied on. Although there could be no doubt that Rattigan 's Digest was of the highest authority on questions of custom of the Pun jab, it was not possible, regard being had to the formidable array of conflicting decisions of the courts as to its existence, to take judicial notice of the custom mentioned in paragraph 24 of the Digest, without further proof. Case law reviewed. Although the respondent had in the plaint relied on a custom and termed it a special custom, that could not amount to an 782 admission which would obviate the necessity of proof of the general customs or its terms by the appellant. Even supposing that the High Court was not correct in its finding that the respondent had proved the custom entitling her to succeed, as the custom set up by the appellant had not also been established, section 5 Of the , applied and the case had to be decided by the personal law of the parties. The respondent was entitled to base her claim on the personal law although in her plaint she had relied on a custom. The personal law of the parties was the Hindu law and the respondent was entitled to succeed under that law also. Daya Ram vs Sohel Singh, 110 P.R. 1906, Abdul Hussein Khan vs Bibi Sona Dero, (1917) L.R. 45 I.A. 10 and Mst. Fatima Bibi vs Shah Nawaz, Lah. 98, relied on.

The appellant is a resident of Tripura State. He assert ed that he belonged to the Laskar community which was in cluded in State records in the Deshi Tripura community and in the former State of Tripura this community had always been treated as Scheduled Tribes, and the members of the community freely enjoyed all the benefits available to members of the Scheduled Tribes until 1976 when the State Government decided to treat members of this community as not belonging to the Scheduled Tribes and issued instructions to the state authorities to implement the Government decision. Being aggrieved the appellant filed a writ petition before the High Court in a representative capacity praying for appropriate directions directing the State Government to continue to treat the appellant and members of Laskar commu nity as belonging to Scheduled Tribes and extend all the benefits available to Scheduled Tribes to this community. In support of his claim the appellant relied upon the two circulars of the erstwhile State of Tripura dated December 1930 and February 1941 as also the census report of the ex state of Tripura, besides the authorities of this Court. The respondent took the plea that Laskar community was never included in the Scheduled Tribes Order and as such there was no question of excluding it from the List. After considering the rival contentions of the parties coupled with the his torical background bearing on the subject, the statement made by the Advocate General that the Memos will be given prospective operation, the High Court dismissed the Writ Petition. Hence this appeal by Special Leave. This appeal initially came up before a two judges Bench for final hear ing when on a statement made by the Counsel for the Union of India that a representation made by the appellant and mem bers of his community for inclusion their caste Laskar, in the Presidential order under Article 342 is being looked into and is being placed before the Parliamentary Committee for review of the position, the Court disposed of the appeal in terms of the assurance 577 given on behalf of the Union. It was specifically stated in the Court 's order that in case the community is not included in the Presidential Order, it would be open to the appellant to take such action as may be available to him in law. Nothing having happened at governmental level, with the consent of the parties, the order disposing of the appeal was recalled and the appeal has thus now come up for hear ing. Dismissing the appeal, this Court, HELD: Reservation has become important in view of the increasing competition in society and that probably had led to the anxiety of the appellant and the people in his commu nity to claim reservation. [586G] In Tripura the Scheduled Tribes within the meaning of the definition given in Article 366 of the Constitution have been 'Jamatia, Noatia, Riang and Tripura/Tripuri/Tippera ' apart from 15 other tribes. It is the case of the appellant that Laskars are a part of the tribe named as 'Tripura, Tripuri and Tippera ' covered by Entry 18. [581D] This Court should not assume jurisdiction and enter into an enquiry to determine whether the three terms indicated in the Presidential Order include Deshi Tripura which covers the Laskar community; but it is appropriate to commend to the authorities concerned that as and when the question is reviewed it should be examined whether the claim of the appellant representing the Laskar community to be included in the scheduled tribes is genuine and should, therefore, be entertained. [586F G] Even if historically this tribe was covered by the general description of Tripura, that by itself may not justify its inclusion in the Order as a Scheduled Tribe. That is an additional feature which has weighed with us in taking our decision not to interfere in the matter. [587C] B. Basavalingappa vs D. Munichinnappa, ; Bhaiyalal vs Harikishan Singh and Ors., ; ; Parsram and Anr. vs Shivchand and Ors. , ; ; Kishorilal Hans vs Raja Ram Singh and Ors., ; ; Dina vs Narayan Singh, and Bhaiya Ram Munda vs Anirudh Patarand Ors., ; , referred to.

The respondent, who was the landlord under whom the appellant was a tenant, obtained a decree for eviction and damages against the appellant. The respondent filed an execution application on July 19, 1960. In answer to it the appellant flied objections by initiating proceedings under O. 21, r. 2(2) C.P.C. on September 3, 1960. In that application, the appellant alleged that there was a compromise between the parties on July 25, 1957 that in pursuance of the compromise he made various payments and that the last of the payments was made on June 16, 1960, and prayed for recording an adjustment of the decree. The trial court, however, held that as the compromise was entered into on July 25, 1957 the period of limitation for filing the application would start from that date, and since the application was filed beyond 90 days from that date, it was barred by limitation. The trial court dismissed the application on that sole ground, without investigating into the truth of the compromise or the payments. On appeal, the appellate court accepted the contention of the appellant that if he was able to establish that be bad made the last payment on June 16, 1960 the period of limitation of three months for filing an application under O. 21, r. 2 would begin to run only from that date and that his application would be in time. The appellate court therefore set aside the order of the trial court and remanded the proceedings for investigation into facts, namely, whether the compromise and the payments alleged to have been made by the appellant on the basis of the compromise and particularly the payment said to have been made on June 16, 1960, were true. After remand, the trial court accepted the plea of the appellant regarding the truth of the compromise as well as the payments said to have been made by him, including the payment of June 16, 1960, held that the application filed was within time, and ordered 'full adjustment and satisfaction of the decree. On appeal, the findings of the trial court were confirmed and the anneal was dismissed, in second appeal, the High Court accepted the findings on the questions of compromise and payments but held that as the appellant had not claimed to have made the payments in compliance with O. 21, r. 1, C.P.C., as amended and in force in Allahabad, it was not open to the appellant to ask for recording adjustment of the decree, and dismissed the application of the appellant filed under O. 21, r. 2. Allowing the appeal to this Court, HELD: In view of the decision of the appellate court when remanding the matter, it was not open to the respondent to raise the objection ,either of limitation or that the payments had not been made as per O. 21, T. 1, C.P.C. The parties and the courts had proceeded an the basis that 837 the entire question related to a controversy in respect of execution, discharge or satisfaction of the decree. Under section 47(2) C.P.C., the Court has power to treat the said proceeding as a suit. Under O. 41, r. 23, an appellant court has power to remand a proceeding when a suit has been disposed of on a preliminary point; and under O. 43, r. 1 (u) C.P.C. an appeal lies against an order remanding the case where an appeal would lie against the decree of the appellate court. The respondent should have filed an appeal against the order of the remand, and the consequence of his omission to file such an appeal is that under section 105(2), C.P.C., the decision of the appellate court, while remanding the matter, regarding the date from which the period of limitation is to commence, namely June 16, 1960, if payment on that date was established by the appellant, was final and binding on the parties. The High Court when dealing with the matter should have given due effect to the decision given in the order of remand and should have held that the respondent was precluded from raising either the plea of limitation or that it was not open to the appellant to rely upon the payments not made in accordance with O. 21, r. 1, C.P.C., as in force in Allahabad. The High Court had not differed on the concurrent findings recorded on facts in favour of the appellant and therefore, interference with the decision of the two subordinate courts was erroneous in law. [843 F G. 844 C H; 845 A E]

In these two appeals the same questions of law arise and the facts in C.A. No. 166 of 1962 are similar to those in C.A. 167 of 1962 which are stated below. The appellant in C.A. No. 167 of 1962 is the owner of certain lands situated in the city of Kanpur. The land is occupied by a Mill and godowns and no part of the land is waste land or arable land. In 1932 the U. P. Government sanctioned by a notification a Scheme (Scheme No. XX) of the improvement Trust, Kanpur. This Trust has been replaced by the Development Board, Kanpur, by reason of the Kanpur Urban Area Development Act, 1945. 426 In 1955 the Housing Department of the Government of U.P, sponsored a scheme for building industrial tenements. Part of the scheme concerned the locality in which the land in dispute is situated. In 1956 a notification was issued under section 4 of the Land Acquisition Act, 1894, by the Governor of U.P. to the effect that the plots in dispute were required for the construction of tenements tinder the subsidized industrial.housing scheme of the U.P. Government as well as for general improvement and street scheme No. XX of the Board. This was followed by a notification under section 6 of the Land Acquisition Act stating that the case being one of urgency the Governor was pleased under sub sections (1) and (I A) of section 17 of that Act to direct that the Collector of Kanpur, though no award under section II had been given, might on the expiration of the notice mentioned vs 9(1) take possession of land mentioned in the schedule. Subsequently a notice under section 9 was issued which stated that possession of the land will be taken within 15 days. The appellant thereupon filed a writ petition under article 226 of the Constitution in the High Court. Two main points were raised in the petition. Firstly, it was contended that as the acquisition was for the purpose of Scheme No. XX of the Board action had to be taken in accordance with section 114 of the Kanpur Act and the schedule thereto and as no action had been so taken the proceedings for acquisition were bad. In the second place, it was urged that it was not open to the Governor to issue the notification under section 6 of the Land Acquisition Act without first taking action under section 5A thereof. The High Court rejected both these contentions and in the result dismissed the writ petition. The present appeal was filed with a certificate issued by the High Court. In the appeal before this Court the same questions which were agitated before the High Court were raised. Held it is only when the Board proceeds to acquire land by virtue of its powers under section 71 that section 114 comes into play and the proceedings for acquisition have to take place under the Land Acquisition Act as modified by section 114 read with the schedule. But where the acquisition is, as in the present case, by the Government under the Land Acquisition Act, for public purposes though that purpose may be the purpose of the Board, the Kanpur Act has no application at all and the Government proceeds to acquire under the provisions of the Land Acquisition Act alone. From the scheme of the Act it is clear that compliance with the provisions of s.5 A is necessary before a notification 427 can be issued under section 6. Even where the Government makes a direction under section 17(1) it is not necessary that it should also make a direction under section 17(4). If the Government makes a direction only under section 17(1) the procedure under section 5 A would stil have to be followed before a notification under section 6 is issued. It is only when the Government also makes a declaration under section 17(4) that it becomes necessary to take action under section 5 A and make a report thereunder. Under the Land Acquisition Act an order under section 17(1) or section 17(4) can only be passed with respect to waste or arable land and it cannot be passed with respect to land which is not waste or arable land on which buildings stand. just as section 17(1) and section 17(4) are independent of each other, section 17(1.A) and section 17(4) are independent of each other and an order under section 17 (I A) would not necessarily mean that an order under section 17(4) must be passed. The right to file objections under section 5 A is a substantial right when a person 's property is being threatened with acquisition and that right cannot be taken away as if by a side wind because section 17(1 A) mentions section 17(1). Section 17(1 A) mentions section 17(1) merely to indicate the circumstances and the conditions under which possession can be taken. It was not open to the State Government to say in the notification under section 4 that proceedings under section 5 A will not take place. This part of the notification under section 4 is beyond the powers of the State Government and in consequence the notification under section 6 also, as it was issued without taking action under section 5 A, must fail.

Appeal No. 222 of 1960. Appeal from the judgment and order dated December 15, 1959, of the Punjab High Court (Circuit Bench), Delhi, in R. F. Appeal No. 77 D of 1954. G. section Pathak and B. C. Misra, for the appellant. Mukat Behari Lal Bhargava and J. P. Goyal, for respondents Nos. 1 to 7. 1960. December 5. The Judgment of the Court was delivered by GAJENDRAGADKAR, J. The short question of law( which arises for decision in, the present appeal by special leave is whether the appeal preferred against the appellant and respondents 8 and 9 in the High Court of Punjab by respondents 2 to 7 'was competent in law or not. This question arises unDer somewhat unusual circumstances. It appears that an agreement of sale of one third of the one fourth share in the property covered by the document was entered into between Gokal Dhish Bhargava and the appellant Jagat Dhish Bhargava. Gokal Dhish Bhargava sued the appel lant and pro forms respondents 8 and 9 for specific performance of the said agreement of sale in the Court of the Senior Civil Judge, New Delhi (Civil Suit No. 684/128 of 1949/50). This suit was dismissed on 920 March 12, 1954. , Pending decision in the trial court Gokal Dhish Bhargava (fled and his son Jawahar Lal Bhargava, respondent 1 and Chunni Lal Bhargava were brought on the record as legal representatives. After the suit was dismissed and before the appeal in question was preferred in the High Court Chunni Lal Bhargava died; thereupon respondents 2 to 7, as his legal representatives, joined respondent 1 in preferring an appeal against the said decree in the High Court of Punjab. The memo of appeal along with the judgment dismissing the suit and the taxed bill of costs endorsed on the back of the last page of the judgment was filed in the High Court on July 29, 1954. It is the competence of this appeal that was questioned before the High Court and is in dispute before us in the present appeal. The record shows that on March 24,1954, an application was made by respondents 2 to 7 (who will be called the respondents hereafter) for a certified copy of the judgment and decree passed in the said suit for specific performance. A certified copy of the judgment and the bill of costs was supplied to them but the decree had not been drawn up and no copy of the decree was therefore supplied to them. In the result the appeal was filed without the certified copy of the decree and only with the certified copy of the judgment and the bill of costs. On August 2, 1954, the Assistant Registrar of the High Court returned the memo of appeal filed by the respondents to their counsel and pointed out to him that ' since no copy of the decree had been filed the presentation of the appeal was defective and the defect needed to be rectified. Thereafter, on August 16, 1954, the respondents ' counsel refiled the appeal with an endorsement that a memo of costs alone had been prepared by the trial court and no decree had been drawn up, and so the appeal should be held to be properly filed. Apparently this explanation was treated ' as satisfactory by the office of the High Court and the appeal was registered as No. 77 D of 1954. In due course the appeal was placed for preliminary hearing under 0. 41, r. 11 of the Code of Civil 921 Procedure before Dulat, J. who admitted it on August 30, 1954. Notice of the appeal was accordingly served on the appellant and the pro forma respondents. Ultimately when the appeal became ready for hearing it was put up on the Board of the Circuit Bench of the High Court to be heard on December 26, 1958. Meanwhile on December 23., 1958, the appellant served a notice on the respondents ' counsel intimating to him that he proposed to raise a preliminary objection against the competence of the appeal on the ground that the decree under appeal had not been filed as required under 0. 41, r. 1 along with the memo of appeal and the certified copy of the judgment. Next day, that is to say on December 24, 1958, the respondents moved the trial Court for drawing up of the decree, but since the record had in the meantime been sent by the trial Court to the High Court no decree could be drawn up by the trial Court, and so the motion became infructuous. The appeal, however, did not reach hearing on December 26, 1958. On December 29, 1958, the respondents moved the Court that the appeal should be declared to be maintainable as the memo of costs which alone had been prepared by the trial Court read along with the concluding paragraph of the judgment may be held to satisfy the requirements of the decree; in the alternative they prayed that the record of the suit in the trial Court should be sent for to enable them to get a decree prepared with a view to file the same in the High Court along with their appeal. Bishan Narain, J., before whom this application was taken out for orders, directed that it may be heard by the Bench which would hear the appeal. Eventually the appeal came on for hearing before Falshaw and Chopra, JJ. on De ember 8, 1959. At the said hearing the appellant raised a preliminary objection that the appeal was not competent having regard to the mandatory provisions of 0. 41, r. 1, and urged that the appeal should be dismissed as incompetent. This preliminary objection was, however, not upheld by the High Court, and it was held that "the proper course to follow was to allow the respondents a 922 month 's time for the purpose of getting a decree drawn up in the proper form by the lower Court and obtaining a copy thereof ". Accordingly the record which had in the meanwhile been received by the High Court after the appeal was admitted under 0. 41, r. 11 was ordered to be sent back to the lower Court without delay. It is against this order which was passed by the High Court on December 15, 1959, that the present appeal by special leave has been filed. On behalf of the appellant Mr. Pathak contends that the appeal filed before the High Court was plainly and manifestly incompetent, and so the High Court was in error in not dismissing it on that ground. The position of law under 0. 41, r. 1 is absolutely clear. Under the said rule every appeal has to be preferred in the form of a memorandum signed by the appellant or his pleader and presented to the Court or to such officer as it appoints in that behalf, and has to be accompanied by a copy of the decree appealed from, and of the judgment on which it is founded. Rule 1 empowers the appellate Court to dispense with the filing of the judgment but there is no jurisdiction in the appellate Court to dispense with the filing of the decree. Where the decree consists of different distinct and severable directions enforceable against the same or several defendants the Court may permit the filing of such portions of the decree as are the subject matter of the appeal but that is a problem with which we are not concerned in the present case. In law the appeal is not so much against the judgment as against the decree; that is why Article 156 of the Limitation Act prescribes a period of 90 days for such appeals and provides that the period commences to run from the date of the decree under appeal. Therefore there is no doubt that the requirements that the decree should be filed along with the memorandum of appeal is mandatory, and in the absence of the decree the filing of the appeal would be incomplete, defective and incompetent. That, however, cannot finally dispose of the point raised by the appellant before us. In the present case the respondents had applied for a certified copy of 923 the judgment as well as the decree in the trial Court on March 24, 1954, and they were not given a copy of the decree for the simple reason that no decree was drawn up; what they were given was a copy of the judgment and taxed bill of costs endorsed on the back of the last page of the judgment. These documents they filed along with their memo of appeal; but that would not affect the mandatory requirement of 0. 41, r. 1. In considering the effect of this defect in the presentation of the appeal we must bear in mind the rules of procedure in regard to the drawing up of the decree. The position in that behalf is absolutely clear. Section 33 of the Code of Civil Procedure requires that the Court, after the case has been heard, shall pronounce judgment, and on such judgment a decree shall follow. Order 20, r. 3 provides, inter alia, that the judgment shall be dated and signed by the judge in the open Court at the time of pronouncing it, and under r. 4, sub r. (2) a judgment has to contain a concise statement of the case, the points for determination, the decision thereon and the reasons for such decision. Rule 6 of the same Order prescribes the con. tents of the decree. It provides that the decree shall agree with the judgment and shall contain the particulars therein specified. Under r. 7 it is provided that the decree shall bear the date, the day on which the judgment was pronounced, and it directs that when the judge has satisfied himself that the decree has been drawn up in accordance with the judgment he shall sign the decree. It is, therefore, clear that the drawing up of the decree in the present case was the function and the duty of the office, and it was obligatory on the judge to examine the decree when drawn up, and if satisfied that it has been properly drawn up to sign it. Except in places where the dual system prevails the litigant or his lawyer ' does not play any material or important part in the drawing up of the decree. In fact the process of drawing up of the ' decree is beyond the litigant 's control. Therefore, there is no doubt whatever that in failing to draw up a decree in the present suit the office of the trial Court was negligent in the discharge of its duties, and 924 the said negligence was not even noticed by the learned trial judge himself. Unfortunately, when the appeal was presented in the High Court, even the office of the High Court was not as careful in examining the appeal as it should ,,have been, and as we have already indicated the appeal passed through the stage of admission under 0. 41, r. 11 without the defect in the appeal being brought to the notice of the learned judge who admitted it. Thus it is quite clear on the record that the respondents had applied for a certified copy of the judgment and the decree, and when they were given only a certified copy of the judgment and the bill of costs they filed the same along with the memo of appeal in the bona fide belief that the said documents would meet the requirements of 0. 41, r. 1. It is true that before the appeal came on for actual hearing before the High Court the appellant gave notice to the respondents about his intention to raise a preliminary objection that the appeal had not been properly filed; but, as we have already pointed out, the attempt made by the respondents to move the trial Court to draw up the decree proved infructuous and ultimately the High Court thought that in.fairness to the respondents they ought to be allowed time to obtain the certified copy of the decree and file it before it; and so the High Court passed the order under appeal. The appellant contends that this order is manifestly erroneous in law; according to him the only order which could and should have been passed was to dismiss the appeal as incompetent under 0. 41, r.1. The problem thus posed by the appellant for our decision has now become academic because subsequent to the decision of the High Court under appeal the respondents have in fact obtained Po certified copy of the decree on December 23, 1959, and have filed it in the High Court on the same day. This fact immediately raises the question as to whether the appeal which has admittedly been completely and properly filed on December 23, 1959, was in time or not. If it appears that on the date when the decree was thus filed the 925 presentation of the appeal was in time then the objection raised by the appellant against the propriety or the correctness of the High Court 's order under appeal would be purely technical and academic. The answer to the question as to whether the presentation of the appeal on December 23, 1959, is in time or not would depend upon the construction of section 12, sub section (2) of the Limitation Act. We have already noticed that the period prescribed for filing the present appeal is 90 days from the date of the decree. Section 12, sub section (2) provides, inter alia, that in computing the period of limitation "the time requisite for obtaining a copy of the decree shall be excluded". What then is the time which can be legitimately deemed to have been taken for obtaining the copy of the decree in the present case? Where a decree is not drawn up immediately or soon after a judgment is pronounced, two types of cases may arise. A litigant feeling aggrieved by the decision may apply for the certified copy of the judgment and decree before the decree is drawn up, or he may apply for the said decree after it is drawn up. In the former case, where the litigant has done all that he could and has made a proper application for obtaining the necessary copies, the time requisite for obtaining the copies must necessarily include not only the time taken for the actual supply of the certified copy of the decree but also for the drawing up of the decree itself. In other words, the time taken by the office or the Court in drawing up a decree after a litigant has applied for its certified copy on judgment being pronounced, would be treated as a part of the time taken for obtaining the certified copy of the said decree. Mr. Pathak has fairly conceded that on this point there is a consensus of judicial opinion, and in view of the formidable and imposing array of authorities against him he did not raise any contention about the validity of the view take in all those cases. (Vide: Tarabati Koer vs Lala Jagdeo Narain (1); Bani Madhub Mitter vs Mathungini Dassi & Ors. (Full Bench) (2);Gabriel Christian vs (1) (2) Cal 104. 926 Chandra Mohan Missir (Full Bench) (1); Jayashankar Mulshankar Mehta vs Mayabhai Lalbhai Shah (Full Bench) (2); Gokul Prasad vs Kunwar Bahadur & Ors.(3); and Umda vs Rupchand & Ors. (Nagpur Full Bench) (1)). There is, however, a sharp difference of opinion in regard to cases where an application for a certified copy of the decree is made after the said decree is drawn up. In dealing with such cases Courts have differed as to what would be the period requisite for obtaining the certified copy of the decree. The Bombay, Calcutta and Patna High Courts, appear to have held that the period taken in drawing up of the decree would be part of the requisite period, while other High Courts have taken a contrary view. It is significant that though the High Courts have thus differed on this point, in every case an attempt is judicially made to do justice between the parties. With that aspect of the problem, however, we are not concerned in the present appeal. The position, therefore, is that when the certified copy of the decree was filed by the respondents in the High Court on December 23, 1969, the whole of the period between the date of the application for the certified copy and the date when the decree was actually signed would have to be excluded under section 12, sub section Inevitably the presentation of the appeal on December 23, 1959 would be in time. It is true that more than five years have thus elapsed after the pronouncement of the judgment but for this long delay and lapse of time the respondents are not much to blame. The failure of the trial Court to draw up the decree as well as the failure of the relevant department in the High Court to examine the defect in the presentation of the appeal at the initial stage have contributed substantially to the present unfortunate position. In such a case there can be no doubt that the litigant deserves to be protected against the default committed or negligence shown by the Court or its officers in the discharge of their duties. As observed by Cairnes, L. C. in Rodger vs Comptoir (1) Pat. (2) (1951) 54 B.L.R. II. (3) Lucknow 250. (4) 927 d 'Escompte de Paris (1) as early as 1871 "one of the first and highest duties of all Courts is to take care that the act of the Court does no injury to any of the suitors"; that is why we think that in view of the subsequent event which has happened in this case, namely, the filing of the certified copy of the decree in the, High Court, the question raised by the appellant has( become technical and academic. Faced with this position Mr. Pathak attempted to argue that the application made by the respondents on March 24, 1954, was not really an application for a certified copy of the decree; he contendea that it was an application for the certified copy of the judgment and the bill of costs. This argument is wholly untenable. The words used in the application clearly show that it was an application for a certified copy of the judgment as well as the decretal order, and as subsequent events have shown, a certified copy of the decree was ultimately supplied to the respondents in pursuance of this application. Then it was argued that the respondents should have moved the trial Court for the drawing up of a decree as soon as they found that no decree a been drawn up. It may be assumed that the respondents might have adopted this course; but where the dual system does not exist it would be idle to contend that it is a part of the duty of a litigant to remind the Court or its office about its obligation to draw up a decree after the judgment is pronounced in any suit. It may be that decrees when drawn up are shown to the lawyers of the parties; but essentially drawing up of the decree is the function of the Court and its office, and it would be unreasonable to penalise a party for the default of the office by suggesting that it was necessary that the party should have moved the Court for the drawing up of the decree. Therefore, we are not satisfied that tie appellant is justified in attributing to the respondents any default for which the penalty of dismissing their appeal can be legitimately imposed on them. The result is that the appeal preferred by the respondents on December 23, (1) (1871) L.R. 3 P.C. 465, 475. 928 1959, is proper and in time and it can now be dealt with in accordance with law. It is true that in the circumstances over which the respondents had no control the appeal in question has already been admitted under 0. 41, r. 11, and as a result of the decision under appeal it may not have to go through that process again. Dulat, J. who heard the appeal for admission was satisfied that it deserved to be admitted and we do not think it necessary to require that the present appeal should go through the formality of the procedure prescribed by 0. 41, r. 11 once again. This posi tion is no doubt, unusual, but in the circumstances of the case it is impossible to say that the order passed by the High Court is not fair and just. Let us then consider the technical point raised by the appellant challenging the validity or the propriety of the order under appeal. The argument is that 0. 41, r. 1 is mandatory, and as soon as it is shown that an appeal has been filed with a memorandum of appeal accompanied only with a certified copy of the judgment the appeal must be dismissed as being incompetent, the relevant provisions of 0. 41 with regard to the filing of the decree being of a mandatory character. It would be difficult to accede to the proposition thus advanced in a broad and general form. If at the time when the appeal is preferred a decree has already been drawn up by the trial Court and the appellant has not applied for it in time it would be a clear case where the appeal would be incompetent and a penalty of dismissal would be justified. The position would, however, be substantially different if at the time when the appeal is presented before the appellate Court a decree in fact had not been drawn up by the trial Court; in such a case if an application has been made by the appellant for, a certified copy of the decree, then all that can be said against the appeal preferred by him is that the appeal is premature since a decree has not been drawn up, and it is the decree against which an appeal lies. In such a case, if the office of the High Court examines the appeal carefully and discovery the defect the appeal may be returned to the appellant for presentation 929 with the certified copy of the decree after it is obtained. In the case like the present, if the appeal has passed through the stage of admission through oversight of the office, then the only fair and rational course to adopt would be to adjourn the hearing of the appeal with a direction that the appellant should produce the certified copy of the decree as soon as it is supplied to him. In such a case it would be open to the High Court, and we apprehend it would be its duty, to direct the subordinate Court to draw up the decree forthwith without any delay. On the other hand, if a decree has been drawn up and an application for its certified copy has been made by the appellant after the decree was drawn up, the office of the appellate Court should return the appeal to the appellant as defective, and when the decree is filed by him the question of limitation may be examined on the merits. It is obvious that the complications in the present case have arisen as a result of two factors; the failure of the trial Court to draw up the decree as required by the Code, and the failure of the office in the High Court to notice the defect and to take appropriate action at the initial stage before the appeal was placed for admission under 0. 41, r. 11. It would thus be clear that no hard and fast 'rule of general applicability can be laid down for dealing with appeals defectively filed under 0. 41, r. 1. Appropriate orders will have to be passed having regard to the circumstances of each case, but the most important step to take in cases of defective presentation of appeals is that they should be carefully scrutinized at the initial stage soon after they are filed and the appellant required to remedy the defects. Therefore, in our opinion, the appellant is not justified in challenging the propriety or the validity of the order passed by the High Court because in the circumstances to which we have already adverted the said order is obviously fair and just. The High Court realised that it would be very unfair to penalise the party for the mistake committed by the trial Court and its own office, and so it has given time to the respondents to 930 apply for a certified copy of the decree and then proceed with the appeal. In this connection our attention has been drawn to the fact that in the Punjab High Court two conflicting and inconsistent views appear to have been taken in its reported decisions. Dealing with appeals filed with out a certified copy of the decree some decisions have dismissed the appeals as defective, and have given effect to the mandatory words in 0. 41, r. 1, without presumably examining the question as to whether the failure of the trial Court to draw up the decree would have any bearing or relevance on the point or not. (Vide: Gela Ram vs Ganga Ram(1); Municipal Committee, Chiniot vs Bashi Ram (2); Mubarak Ali Shah vs Secretary of State (3); Nur Din vs Secretary of State (4) Hakam Beg vs Rahim Shah (5); Fazal Karim vs Des Raj (6); and Banwari Lal Varma vs Amrit Sagar Gupta (7). On the other hand it has in some cases been held that it would be fair and just that the hearing of the appeal should be adjourned to enable the appellant to obtain a certified copy of the decree and produce it before the appellate Court (Vide: Manoharlal vs Nanak Chand (8); Mt. Jeewani vs Mt. Misri (9); and, Sher Muhammad vs Muhammad Khan (10). It would obviously have been better if this conflict of judicial opinion in the reported decisions of the High Court had been resolved by a Full Bench of the said High Court but that does not appear to have been done so far. However, as we have indicated, the question about the competence of the appeal has to be judged in each case on its own facts and appropriate orders must be passed at the initial stage soon after the appeal is presented in the appellate Court. If any disputed question of limitation arises it may have to go before the Court for judicial decision. In the result the order passed by the High Court is right. Having regard to the fact that the decree (1) A.I.R. (1920) 1 Lah. 223 (3) A.I.R. (1925) Lah. 438. (5) A I.R. (7) A.I.R. (1940) East Punj. (9) A.I.R. (1919) Lah. (2) A.I.R (1922) Lah. (4) A. I.R. (6) (8) A.I.R. (1919) Lah. (10) A.I.R. (1924) Lah. 352. 931 under appeal has already been filed by the respondents before the High Court on December 23, 1959, the High Court should now proceed to hear the appeal on the merits and deal with it in accordance with law. In the circumstances of this case we make no order as to costs. Appeal dismissed.

The respondents filed a suit for specific performance against the appellant which was dismissed on March 12, 1954. On March 24 the respondents made an application for a certified copy of the judgment and decree. The decree was not drawn up and the respondents were supplied a certified copy of the judgment and the memo of costs. The respondents filed an appeal before the High Court without the certified copy of the decree and only with the certified copy of the judgment and the memo of costs. The appeal was admitted under 0. 41, r. 11 Code of Civil Procedure on August 30, 1954. On December 23, 1958, the appellant served a notice on the respondents that he would raise a preliminary objection at the hearing that the appeal was incompetent as a certified copy of the decree was not filed as required by 0. 41, r. 1. On December 24, 1958, the respondents moved the trial Court for drawing up of the decree, but since the record was in the High Court this could not be done. At the hearing of the appeal, the appellant raised the preliminary objection, but the High Court passed an order on December 15, 1959, allowing the respondents one month 's time for getting a decree drawn up and obtaining. a copy and directed the record to be sent to the trial Court. Against this order the appellant preferred an appeal to the Supreme Court contending that the High Court was bound to dismiss the appeal as it was manifestly incompetent under 0. 41, r. 1. Subsequently, on December 23, 1959, the respondents obtained a certified copy of the decree and filed it before the High Court the same day. The appellant contended that the appeal was to be deemed to be filed on this date and was time barred. Held, that in the circumstances of this case the order passed by the High Court was right. ' There was no doubt that 0. 41, r. 1 was mandatory and in the absence of or the decree the filing of the appeal was incomplete, defective and incompetent. The office of the trial Court was negligent in not drawing up a decree and the office of the High Court was also not as careful as it should have been in examining the appeal and these have contributed substantially to the unfortunate position. In such a case, the respondents deserved to be protected. Besides the, 919 question had become academic and technical in view of subse quent events. The certified copy of the decree was filed on December 23, 1959, and even if the appeal was considered to have been filed on that date, it was within time. Under section 12(2) of the Limitation Act the respondents could treat the time taken in the drawing up of the decree after the application for a certified copy thereof had been made as part of the time taken in obtaining the certified copy of the decree. Tarabati Koer vs Lala jagdeo Narain, , Bani Madhub Mitter vs Matungini Desai, Cal. 104 (F.B.), Gabriel Christian vs 'Chandra Mohan Missir, Pat. 284(F.B.), Jayashankar Mulshankar Mehta vs Mayabhai Lalbhai Shah, , Gokul Prasad vs Kunwar Bahadur, Luck. 250 and Umda vs Rupchand, , referred to. Rodger vs Comptoir d 'Escompte de Paris, (1871) L.R. 3 P.C. 465, relied on.

By an order dated August 20, 1943, the Appellate Tribunal directed that certain deductions claimed by the assessee should be allowed. The matter came back to the Income tax Officer and he made an order on September 26, 1945, but did not issue any fresh notice of demand. The assessee appealed to the Appellate Assistant Commissioner complaining that in his order of September 26, the Income tax Officer had wrongly included a sum of Rs. 13,000 60 464 as unassessed foreign income of earlier years. The Appellate Assistant Commissioner held that the order of September 26 was not appealable. The assessee, therefore, made a miscellaneous application to the Appellate Tribunal, which held that the Incometax Officer acted wrongly in including the sum of Rs. 13,000 at that stage and directed the Income tax Officer to revise his computation accordingly. The Commissioner of Income tax, being of opinion that the Appellate Tribunal had no jurisdiction to entertain or make such order on a miscellaneous application applied for a reference to the High Court under section 66 (1) of the Income tax Act. The Tribunal referred certain questions and the High Court directed the Tribunal to refer certain other questions also but when the references came on for bearing the High Court held that the references were incompetent. The Commissioner of Incometax appealed to the Supreme Court with the leave of the High Court : Held, (i) that in carrying out the directions of the Tribunal and in passing the order of September 26, 1945, the Income tax Officer cannot be regarded as having acted under section 23 or section 27 of the Act and no appeal lay from his order under section 30 (1). The order made by the Appellate Assistant Commissioner was not therefore an order under a. 31 (3) and no further appeal lay to the Appellate Tribunal under section 33 (1) so as to enable the Tribunal to make an order under section 33 (4) and us there was no order under a. 33 (4), no question of law can be said to arise out of an order under section 33 (4) and there can be no valid reference under section 66 (1) or section 66 (2); (ii) even assuming that the order of the Income tax Officer dated September 26, 1945, was an order under a. 23 or section 27 and as such appealable, the order made by the Appellate Assistant Commissioner declining to entertain the appeal was not an order under any of the sub sections of a. 31 and no appeal lay therefrom to the Appellate Tribunal under section 33 (1) and there could be no order of the Appellate Tribunal under section 34 (1). The order of the Appellate Tribunal correcting the order of the Income tax Officer and directing that the sum of Rs. 13,541 should not be included cannot be regarded in any event as an order under section 33 (4) so as to attract the operation of section 66 (1) or (2).

The appellant brought a suit for possession of land against respondent Birdhi Lal, under Ss. 180 and 183 of the Rajasthan Tenancy Act, 1955. The Assistant Collector, Baran, dismissed the suit, but the Revenue Appellate Authority allowed his appeal and held that Birdhi Lal was a trespasser. A further appeal by Birdhi Lal was dismissed by the Board of Revenue, Rajasthan. Thereafter, his application made under article 226 was allowed by the High Court. The High Court held Birdhi Lal to be a tenant within the meaning of section 5(43), and not a trespasser as conceived by section 5(44). On appeal by special leave, the appellants contended before this Court that the High Court was not justified in exercising appellate jurisdiction and interfering with the concurrent opinions of the Revenue authorities. It was further contended that even if Birdhi Lal was held to be a tenant. he was liable to be ejected, as the original suit had been framed alternatively under section 180 of the Act. Dismissing the appeal, the court ^ HELD: (1) The material on record does not establish that Birdhi Lal took or retained possession of the land without authority. The essential conditions for holding Birdhi Lal to be a trespasser under section 5(44) were manifestly not satisfied. The High Court was right in rectifying the error of law apparent on the face of the record and quashing the judgments of the Appellate Revenue Authority and the Board of Revenue. [589F H & 590A] (2) The alternative case under section 180 required necessary averments and proof of facts which were absent in the case. The plea therefore, cannot be entertained. [590 C D]

On 23rd August, 1970, when the respondent was travelling by car, alleged to be belonging to his brother, from Ambala to Batala, the Customs officer intercepted him near the Beas river and forcibly taken along with the driver, Gurunam Singh to the Customs House at Amritsar. The respondent along with the driver was searched and the customs authorities took into possession Rs.33,500 in Indian currency, 10 gold sovereigns and the car in which he travelled. The Customs authorities, thereupon initiated departmental proceedings under section 110(II) of the and extended the period of issuing of the show cause notice under section 124 of the . These proceedings were quashed by an order of the Learned Single Judge of the High Court of Punjab on 24th April, 1372 following an earlier decision of that Court. After the said judgment, the respondent approached the customs authorities for the return of the money and the car on 11.5.1972. The gold sovereigns were not demanded because ac cording to the respondent these did not belong to him. He had been directed to come on the following day to get back the currency notes and the car. On the next day, however the Income Tax officer served the warrant of authorisation dated 10th May, 1972 issued under section 132 of the Income Tax Act, read with Rule 112(II) of the Rules on the respondent as well as on the customs department with the result the cash was taken possession of by the Income Tax authorities. Thereafter 295 the respondent filed another writ petition under Article 226 and 227 of A the Constitution. The customs authorities also filed an appeal against the decision of the Single Judge dated 24th April, 1972. The writ petition and the appeal were heard together by a Division Bench of the Punjab High Court. Dismissing the appeal and allowing the writ petition the High Court held that where the amount was seized by the customs authorities and the seizure was held illegal by the Court customs authorities were bound to return the money to the person entitled to it under the relevant provisions of section 110 of the ; that the Income Tax authorities could not seize such an amount from the customs authorities under section 132 of the Income Tax Act and authorisation of search and seizure was illegal if issued in the name of the person who did not have possession of the Article in respect of which it was issued. Hence this appeal by the revenue by special leave. Dismissing the appeal, the Court, ^ HELD: 1.1 on a construction of section 132 of Income Tax Act, 1961 and the context, in which the words "search", "possession", and "seizure" have been used in the said section and the rules indicate that there cannot be any order in respect of goods or moneys or papers which are in the custody of another department under legal authority where the location of the property was known to the Government one government department could not search another department and seize them. [301E F] 1.2 Sub Section (3) of section 132 of the Act uses the expression "who is in immediate possession or control thereof". "Possession" is a word of ambiguous meaning and its legal senses do not always coincide with the popular sense. Possession again may not always be synonymous with manual detention or physical retention of the goods or moneys. When the physical custody of the moneys and goods were with the customs authorities, and that too by a legal sanction and authority to have that custody, it cannot be said that possession as used in section 132 of the Act was still with the respondent Tarsem Kumar. [30 1F H] 1.3 Reading the expressions "retention" and "custody" in some of the sub sections of section 132 in the context these have been used, it cannot be said, that where an authority or a person has retention and custody with the legal sanction behind it, it was not the intention of the legislature to say that he was not in possession as contemplated in section 132 of the Income Tax Act, 1961. [302A B] 296 The Commissioner of Income Tax vs Ramesh Chander & Ors. , PunJab; Tarsem Kumar & Anr. vs The Commissioner of Income Tax, Haryana, Himachal Pradesh & Delhi & ors. , ; Laxmipat Chororia vs K.K. Ganguli Motilal and ors. vs Preventive Intelligence officer, Central Excise and Customs, Agra & Ors., Allahabad, distinguished and partly overruled. Noor Mohd. Rahimatulla Gillani vs The Commissioner of Income tax Vidrabha and Marathwada, Nagpurand Anr., [1976] Taxation Law Reports, 688, Bombay; Pannalal vs Income Tax officer, Ward. Chhindwara and ors. , 93 ITR p. 480 Madhya Pradesh; Gulab and Company and Anr. vs Superintendent of Central Excise (Preventive) Trichy, and ors. , Madras; Assainar and Anr. vs Income tax officer, Calicut and ors. , Kerala, overruled. 1.4 It is true that in the instant case, the title was not transferred to the Customs authorities by seizure under the . But in the context, in which the expressions "possession" and "seizure" have been used, it cannot be considered to mean that the possession was where the legal title was, physical possession was with the Customs authorities, title was with the respondent herein. In this context, the physical possession having regard to the language used is relevant and material. Physical possession was with the Customs authorities when the seizure authorisation was passed. Therefore, where the exact location of the property was known and there was no need to seize the money, the Income tax department could direct handing over the money to the Income tax authorities or take steps for such direction through appropriate authorities and not by resort to section 132 of the Income Tax Act. This is so because if the location was certain then there was nothing to search or look for. [304G H; 305A B]

The assessee (respondent) owner of an estate known as "Tekari Rai" executed an indenture of trust dated January 20, 1941 whereby the "Tekari Rai" and certain Zamindari properties owned by her were conveyed to certain named trustees to be held in trust, subject to conditions specified therein. This deed was created with a view to liquidate the debts of the Tekari Raj. The beneficiaries under the deed were the settlor, her husband and her five sons. This original deed was modified by a deed of rectification dated December 22, 1941. It was provided in the original cl. 43 of the deed of trust dated January 20, 1941, that the settlor may at any time during her life re voke or vary either wholly or partly the trust or any provi sions of the deed but not before the payment and discharge of certain debts and liabilities. Clause 43 of the original deed was subsequently modified by the 45th clause which was added by the deed of amendment dated January 12, 1942. By cl. 45 of the deed of amendment the right of revocation was not exercisable till the Thica leases in favour of the Maharajadhiraj of Darbhanga and Capt. Maharaj Kumar Gopal Saran Narain Singh remained good and effective. It was the common ground that the lease in favour of the Maharajadhiraj of Darbhanga was to enure till 1965 and the lease in favour of Capt. Maharaj Kumar Gopal Saran Narain Singh till 1954. In assessing the assessee to income tax for the year 1947 48, the Income tax Officer included in her total income the income of the trust. The matter went up to the High Court and the High Court set aside the assessment order passed by the Income tax Officer. The High Court held that a,, the trust was not revocable for a period of six years, the income received by the beneficiaries (other than the assessee) was not liable to be taxed as the assessee 's income till the power to revoke arose in her favour. The appellant obtained special leave against the order passed by the High Court. Hence the appeal. The principal question for consideration before this Court was whether the income received by the beneficiaries other than the assessee could be included in the total income of the assessee under section 16(l)(c) of the Act. Held:(i) In terms the third proviso to section 16 (l)(c) of the Income tax Act excludes from the operation of the principal clause that part of the income alone which arises to any person under a, deed of settlement: it does not remove from its protection the entire deed of trust, if part of the income is not covered by the conditions prescribed or if the settlor has in a part of the income interest direct or indirect. The third proviso does not operate to exclude the income which the settlor receives as a beneficiary from liability to tax. 921 (ii)The third proviso to section 16 (l)(c) of the Act does ope rate in respect of settlements, dispositions, or transfers which are by the first proviso revocable for the purpose of that clause. (iii) Two conditions are necessary for the application of the 3rd proviso to section 16 (l)(c) of the Income tax Act: (i) that the trust should not be revocable for a period exceeding 6 years or during the life time of the beneficiary and (ii) the settlor or disponer should have no direct or indirect benefit from the income given to the beneficiary. The effect of the two conditions is that, that part of the income which arises to any person by virtue of the settlement which is not revocable for a period of six years or which is not revocable during the life time of the beneficiary will not be included in the settlor 's income, provided that from the income of such person the settlor derives no benefit direct or indirect. On the construction of the deed of trust it was held that the deed was not revocable within six years provided by section 16 (1)(c) of the Act. Ramji Keshavji vs Commissioner of Income tax, Bombay, , relied on. (iv)On the facts of this case it was held that by virtue of the third proviso to section 16 (l) (c) of the Act the income re ceived by the beneficiaries under the deed of trust other than the assessee could not until the power of revocation arose to the assessee, be deemed to be the income of the assessee for the purpose of assessment to income tax.

In the course of consolidation proceedings under the U.P. Consolidation of Holdings Act, 1953, questions arose amongst the members of a family regarding the title to certain properties. Respondent No. 1 filed objections to the original entries in respect of lands in Khata No. 72 and 73 on the basis that he was the son of Chhota, one Of the sons of Teja, the common ancestor. Similarly, respondents Nos. 2 and 3 filed objections claiming shares in the lands in Khata No. 73 on the ground that the said holding was jointly acquired but was recorded in the name of Nanha in a repre sentative character. The appellant contested the claims of respondents Nos. 1, 2 and 3. The objections were considered by the Consolidation Officer, who held that respondent No. 1 was the son of Heera alias Chhota, brother of Nanha, and granted him his share in certain plots of the Khata No. 73. The appellant as well as respondents Nos. 2 and 3 fried appeals against the said order of the Consolidation Officer. The Assistant Settlement Officer (Consolidation) allowed the appeal of the appellant and directed that lands in Khata No. 73 will be continued in the name of the appellant alone. The respondents went in revision against the order of the Assistant Settlement Officer. The Deputy Director of Consolidation allowed the revision of respondent No. 1 in full in respect of share in Khata No. 72. As regards plots in Khata No. 73 the Deputy Director held that the name of Nanha was entered only in a representative capacity. The appellant filed a writ petition in the High Court to challenge the decision of the Deputy Director of Consolida tion which was dismissed in limine. 185 The appellant, thereafter, 'filed the civil suit for a declaration that the order of the Deputy Director of Consol idation was without jurisdiction. Contesting the suit, respondent No. 1 raised a preliminary objection that the suit was barred by section 49 of the Act. The Munsiff decid ed the preliminary objection in favour of respondent No. 1. The Additional District and Sessions Judge in appeal, af firmed the order of the Munsiff. The second appeal filed by the appellant was dismissed by the High Court in limine. Before this Court, it was contended on behalf of the appellant that the bar of section 49 of the Act was not applicable to the suit of the appellant because the orders passed by the consolidation authorities were without juris diction inasmuch as the consolidation authorities could not decide questions as to title to the lands as well as the question relating to the parentage of respondent No. 1 which the civil courts alone could decide. Dismissing the appeal, this Court, HELD: (1) The language used in section 49 of the U.P. Consolidation of Holdings Act, 1953 is wide and comprehen sive. Declaration and adjudication of rights of tenure holders in respect of land lying in the area covered by the notification under section 4(2) of the Act and adjudication of any other right arising out of consolidation proceedings and in regard to which a proceeding could or ought to have been taken under the Act, would cover adjudication of ques tions as to title in respect of the said lands. Accordingly, the jurisdiction of the civil or revenue courts to entertain any suit or proceeding with respect to rights in such land or with respect to any other matter for which a proceeding could or ought to have been taken under the Act has been taken away. [189D E; C] Suba Singh vs Mahendra Singh and Others, ; Gorakh Nath Dube vs Hari Narain Singh, , referred to. (2) In the instant case, respondent No. 1 was claiming an interest in the land lying in the area covered by the notification issued under section 4(2) on the basis that he was the son of Chhota, brother of Nanha, and that the lands were recorded in the name of Nanha in a representative capacity on behalf of himself and his other brothers. This claim which fell within the ambit of section 5(2) had to be adjudicated by the consolidation authorities under the Act, and the jurisdiction of the Civil Court to entertain the suit in respect of the said 186 matter was expressly barred by section 49 of the Act and the suit of the appellant was rightly dismissed on that ground. [194C D]

The appellant agreed on July 4, 1956 to purchase certain lands from the respondents for Rs. 12,000. A memorandum reciting that Rs. 2,000 were paid as advance by the appellant to the respondents was executed by both parties. Three days later the respondents informed the plaintiff by a letter that only a sum of Rs. 350 was paid by the appellant and not Rs. 2,000 as 'recited in the memorandum and since the balance of Rs. 1,650 which was promised to be paid within three days was not paid, the agreement stood cancelled. The appellant thereafter immediately instituted a suit for a decree for specific performance of the agreement and deposited in court a sum of Rs. 10,000 on account of the balance purchase price due from him. In their written statement the respondents claimed that Rs. 1,650 out of Rs. 2,000 not having been so paid, the agreement was cancelled; and that in any event the agreement having been altered in material particulars after its. execution by the addition of the words; "clear the debts and execute the sale deed free from encumbrances", the suit was not maintainable. The Trial Court upheld the: appellant 's claim and decreed the suit. The High Court in appeal, reversed the decree. On appeal to this Court, HELD : Allowing the appeal: (i) On the evidence and in view of the express recital in the agreement that a sum of Rs. 2,000 was paid by the appellant and received by the respondents, the respondents" story that only Rs. 350 was in fact paid was untrue and had been put up as an excuse for resigning from the agreement. (ii) Even assuming that the words in question were introduced in the memorandum after its execution since the respondents were liable to clear any encumbrances subsisting on the land before executing the sale deed, cannot be regarded as a material alteration for, it did not alter the rights or liabilities of the parties or the legal effect of the instrument [463 A] Nathu Lal and Ors. vs Mussamat Gomti Kuar and Others, L.R. 67 I.A. 318; referred to.

The Income tax officer, Dacca, acting under the Bengal Agricultural Income tax Act, 1944, sent by registered post a notice to the Manager of an Estate belonging to the Tripu ra State but situated in Bengal, calling upon the latter to furnish a return of the agricultural income derived from the Estate during the previous year. The notice was received by the Manager in the Tripura State. The State, by its then Ruler, instituted a suit in June, 1946, against the Province of Bengal and the Income tax Officer, in the court of the Subordinate Judge of Dacca for a declaration that the said Act in so far as it purported to impose a liability to pay agricultural income tax on the plaintiff was ultra vires and void, and for a perpetual injunction to restrain the defend ants from taking any steps to assess the plaintiff. The suit was subsequently transferred to the Court of the Subor dinate Judge of Alipore. The partition of India under the Indian Independence Act took place on the 158h August 1947, and the 2 Province of East Bengal in which the Estate was situated, was substituted as a defendant in the place of the Province of Bengal on an application made by it, and in its written statement it contended that the court of Alipore which was situated in West Bengal had no jurisdiction to proceed with the suit. The High Court of Calcutta, reversing the order of the Subordinate Judge of Alipore held that the provisions of the Indian Independence (Legal Proceedings) Order, 1947, and the Indian Independence (Rights, Property and Liabili ties)Order, 1947, did not apply to the case and, as the matter was accordingly governed by the rules of internation al law, the court of Alipore had no jurisdiction to proceed with the suit: Held per KANIA C.J., PATANJALI SASTRI, MUKHERJEA and CHANDRASEKHARA AIYAR JJ. (FAZL ALI J. concurrinG) The suit was not one with respect to any property transferred to East Bengal by the Indian Independence (Rights, Property and Liabilities) Order, 1947, nor was it a suit in respect of any "rights" transferred by the said Order, inasmuch as the Province of East Bengal obtained the right to levy income tax not by means of any transfer under the said Order, but by virtue of sovereign rights which were preserved by section 18 (3) of the Indian Independence Act, 1947, and article 12 (2) of the said Order had no application to the case. Held per KANIA C.J., PATANJALI SASTRI, MUKHERJEA AND CHANDRASEKHARA AIYAR J.J. (FAZL ALI J, dissenting.) (i) Since the object of the Indian Independence (Rights, Property and Liabilities) Order, 1947, was to provide for the initial distribution of rights, properties and liabili ties as between the two Dominions and their Provinces, a wide and liberal construction, as far as the language used would admit, should be placed upon the Order, so as to leave no gap or lacuna in relation to the matters sought to be provided for. The words "liability in respect of an action able wrong" should not therefore be understood in the re stricted sense of liability for damages for completed acts, but so as to cover the liability to be restrained by injunc tion from completing what on the allegations in the plaint are illegal or unauthorised acts which have been commenced. As the Province of Bengal was, on the: allegations in the plaint, liable to be restrained from proceeding with an illegal assessment, that liability was, accordingly, a liability in respect of "an actionable wrong other than breach of contract" with in the meaning of article 10 (2) (a) of the above said Order; and, as the cause of action arose wholly in Dacca within the Province of East Bengal, that liability passed to the province of East Bengal under article 10 (2) (a), the latter must be deemed to be substituted as a party to the suit and the suit must continue in the court of the Subordinate Judge of Alipore, under Art.4 of the Indian Independence (Legal Proceedings) Order, 1947. (ii) Assuming that the cause of action did not wholly arise 3 in Decca, article 10 (9.) (c) would apply and the Province of East Bengal would still be liable, though jointly with the Province of West Bengal. (iii) As the suit was not one "to set aside or modify any assessment made under the Act", section 65 of the Bengal Agricultural Income tax Act, 1944, had no application and the suit was therefore one in respect of an "actionable" wrong within the moaning of article 10 (2) (a). Per FAZL ALI J. The words "liability in respect of an actionable wrong other than breach of contract" in article 10 of the Indian Independence (Rights, Property and Liabili ties) order 1947, refer to liability capable of being ascer tained in terms of money such as liability for damages for tort and not liability in any abstract or academic sense. Even if a meaning, as wide ' as they can bear in a legal context, is given to the words "actionable wrong" and "liability" two elements are necessary to constitute an actionable wrong, namely, (i) an act or omission amounting to an infringement of a legal right of a person or breach of duty towards him, and (ii) damage or harm resulting there from. The mere issuing of a notice under section 4 of the Bengal Agricultural Income tax Act, 1944, by the Income tax Officer is not an actionable wrong because no right known to law is infringed thereby and no action for damages can be main tained in respect of such an act, even assuming that the Income tax Officer had exceeded his powers or acted under an invalid provision of law. No "liability for an action able wrong" was thus involved in the suit and no liability in respect of such a wrong could therefore be said to have been transferred to the Province of East Bengal within the meaning of article 10 (2.) of the said Order so as to entitle the plaintiff to continue the suit against the Province of East Bengal under article 10 (2). For the purpose of understanding the full scope of section 65 of the Bengal Agricultural Income tax Act, 1944 it is necessary also to read the latter part which provides that no suit or other proceeding shall lie against any officer of the Crown for anything in good faith done or intended to be done under the Act. " The latter part of the section clearly excludes the jurisdiction of the courts to prevent the Income tax Officer from proceeding with an assessment which has been started and the section must on a fair construction be held to bar all suits in connection with such assessment whether against the State or an Income tax Officer of the State. If, therefore, no suit or action lies, there cab be no liability for an actionable wrong. [The nature of actionable wrongs and torts discussed.] Judgment of the Calcutta High Court reversed.

Appeals Nos. 37 & 38 of 1957. Appeals from the judgment and order dated August 30, 1955, of the former Bombay High Court in Appeals Nos. 55 and 56 of 1955, arising out of the judgment and order dated June 23, 1955, of the said High Court in Misc. Application No. 80 of 1955. C. K. Daphtary, Solicitor General of India, B. Ganapathy Iyer and R. H. Dhebar, for the appellant (in C. A. No. 37 of 57) and respondent No. 6 (in C. A. No. 38/57). section D. Vimadalal and I. N. Shroff, for the appellant (in C. A. No. 38/57) and respondent No. 6 (in C. A. No. 37/57.) Rajni Patel, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for respondents Nos.1 and 3 to 5 (in both the appeals). section B. Naik and K. R. Chaudhuri, for respondent No. 2 (in both the appeals). August 18. The Judgment of the Court was delivered by GAJENDRAGADKAR J. These two appeals arise from an industrial dispute between the Firestone Tyre and Rubber Co. of India Ltd., (hereafter called the company) and its workmen (hereafter called the respondents), and they raise a short and interesting question about the construction of section 12(5) of the 14 of 1947 (hereafter called the Act). It appears that the respondents addressed four demands to the company; they were in respect of gratuity, holidays, classification of certain employees and for the payment of an unconditional bonus for the financial year ended October 31, 1953. The respondents ' union also addressed the Assistant Commissioner of Labour, Bombay, forwarding to him a 229 copy of the said demands, and intimating to him that since the company had not recognised the respondents ' union there was no hope of any direct negotiations between the union and the company. The Assistant Commissioner of Labour, who is also the conciliation officer, was therefore requested to commence the conciliation proceedings at an early date. Soon thereafter the company declared a bonus equivalent to 1/4 of the basic earnings for the year 195253. The respondents then informed the company that they were entitled to a much higher bonus having regard to the profits made by the company during the relevant year and that they had decided to accept the bonus offered by the company without prejudice to the demand already submitted by them in that behalf. After holding a preliminary discussion with the parties the conciliation officer examined the four demands made by the respondents and admitted into conciliation only two of them ; they were in respect of the classification of certain employees and the bonus for the year 1952 53; the two remaining demands were not admitted in conciliation. The conciliation proceedings initiated by the conciliator, however, proved infructuous with the result that on July 5, 1954, the conciliator made his failure report under section 12(4) of the Act. In his report the conciliator has set out the arguments urged by both the parties before him in respect of both the items of dispute. In regard to the respondents ' claim for bonus the conciliator made certain suggestions to the company but the company did not accept them, and so it became clear that there was no possibility of reaching a settlement on that issue. Incidentally the conciliator observed that it appeared to him that there was considerable substance in the case made out by the respondents for payment of additional bonus. The conciliator also dealt with the respondents ' demand for classification and expressed his opinion that having regard to the type and nature of the work which was done by the workmen in question it seemed clear that the said work was mainly of a clerical nature and the demand that the said workmen should be 230 taken on the monthly paid roll appeared to be in consonance with the practice prevailing in other comparable concerns. The management, however, told the conciliator that the said employees had received very liberal increments and had reached the maximum of their scales and so the management saw no reason to accede to the demand for classification. On receipt of this report the Government of Bombay (now the Government of Maharashtra) considered the matter and came to the conclusion that the dispute in question should not be referred to an industrial tribunal for its adjudication. Accordingly, as required by section 12(5) on December 11, 1954, the Government communicated to the respondents the said decision and stated that it does not propose to refer the said dispute to the tribunal under section 12(5) " for the reason that the workmen resorted to go slow during the year 195253 ". It is this decision of the Government refusing to refer the dispute for industrial adjudication that has given rise to the present proceedings. On February 18, 1955, the respondents filed in the Bombay High Court a petition under article 226 of the Constitution praying for the issue of a writ of mandamus or a writ in the nature of mandamus or other writ, direction or order against the State of Maharashtra (hereafter called the appellant) calling upon it to refer the said dispute for industrial adjudication under section 10(1) and section 12(5) of the Act. To this application the company was also impleaded as an opponent. This petition was heard by Tendolkar J. He held that section 12(5) in substance imposed an obligation on the appellant to refer the dispute provided it was satisfied that a case for reference had been made, and he came to the conclusion that the reason given by the appellant for refusing to make a reference was so extraneous that the respondents were entitled to a writ of mandamus against the appellant. Accordingly he directed that a mandamus shall issue against the appellant to reconsider the question of making or refusing to make a reference under section 12(5) ignoring the fact that there was a slow down and taking into account only such reasons as are germane to the 231 question of determining whether a reference should or should not be made. Against this decision the appellant as well as the company preferred appeals. Chagla, C. J., and Desai, J., who constituted the Court of Appeal, allowed the two appeals to be consolidated, heard them together and came to the conclusion that the view( taken by Tendolkar J. was right and that the writ of mandamus had been properly issued against the appellant. The appellant and the company then applied for and obtained a certificate from the High Court and with that certificate they have come to this Court by their two appeals Nos. 37 and 38 of 1957. These appeals have been ordered to be consolidated and have been heard together, and both of them raise the question about the construction of section 12(5) of the Act. Before dealing with the said question it would be convenient to state one more relevant fact. It is common ground that during a part of the relevant year the respondents had adopted go slow tactics. According to the company the period of go slow attitude was seven months whereas according to the respondents it was about five months. It is admitted that under cl.23(c) of the standing orders of the company willful slowing down in performance of work, or abatement, or instigation thereof, amounts to misconduct, and it is not denied that as a result of the go slow tactics adopted by the respondents disciplinary action was taken against 58 workmen employed by the company. The respon dents ' case is that despite the go slow strategy adopted by them for some months during the relevant year the total production for the said period compares very favorably with the production for previous years and that the profit made by the company during the relevant year fully justifies their claim for additional bonus. The appellant has taken the view that because the respondents adopted go slow strategy during the relevant year the industrial dispute raised by them in regard to bonus as well as classification was not to be referred for adjudication under section 12(5). It is in the light of these facts that we have to consider whether 232 the validity of the order passed by the appellant refusing to refer the dispute for adjudication under section 12(5) can be sustained. Let us first examine the scheme of the relevant provisions of the Act. Chapter III which consists of sections 10 and 10A deals with reference of dispute to Boards, Courts or Tribunals. Section 10(1) provides that where the appropriate Government is of opinion that any industrial dispute exists or is apprehended, it may at any time by order in writing refer the dispute to one or the other authority specified in cls.(a) to (d). This section is of basic importance in the scheme of the Act. It shows that the main object of the Act is to provide for cheap and expeditious machinery for the decision of all industrial disputes by referring them to adjudication, and thus avoid industrial conflict resulting from frequent lock outs and strikes. It is with that object that reference is con templated not only in regard to existing industrial disputes but also in respect of disputes which may be apprehended. This section confers wide and even absolute discretion on the Government either to refer or to refuse to refer an industrial dispute as therein provided. Naturally this wide discretion has to be exercised by the Government bona fide and on a consideration of relevant and material facts. The second proviso to section 10(1) deals with disputes relating to a public utility service, and it provides that where a notice under section 22 has been given in respect of such a dispute the appropriate Government shall, unless it considers that the notice has been frivolously or vexatiously given or that it would be inexpedient so to do, make a reference under this sub section notwithstanding that any other proceedings under this Act in respect of the dispute may have commenced. It is thus clear that in regard to cases falling under this proviso an obligation is imposed on the Government to refer the dispute unless of course it is satisfied that the notice is frivolous or vexatious or that considerations of expediency required that a reference should not be made. This proviso also makes it clear that reference can be made even if other proceedings under the Act 233 have already commenced in respect of the same dispute. Thus, so far as discretion of the Government to exercise its power of referring an industrial dispute is concerned it is very wide under section 10(1) but is limited under the second proviso to section 10(1). Section 10(2) deals with a case where the Government has to refer an industrial dispute and has no discretion in the matter. Where the parties to an industrial dispute apply in the prescribed manner either jointly or separately for a reference of the dispute between them the Government has to refer the said dispute if it is satisfied that the persons applying represent the majority of each party. Thus, in dealing with this class of cases the only point on which the Government has to be satisfied is that the persons applying represent the majority of each party ; once that test is satisfied the Government has no option but to make a reference as required by the parties. Similarly section 10A deals with cases where the employer and his workmen agree to refer the dispute to arbitration at any time before the dispute has been referred under section 10, and it provides that they may so refer it to such person or persons as may be specified in the arbitration agreement; and section 10A(3) requires that on receiving such an arbitration agreement the Government shall, within fourteen days, publish the same in the official Gazette. Section 10A(4) prescribes that the arbitrator or arbitrators shall investigate the dispute and submit the arbitration award to the appropriate Government; and section 10A(5) provides that such arbitrations are outside the Arbitration Act. Thus cases of voluntary reference of disputes to arbitration are outside the scope of any discretion in the Government. That in brief is the position of the discretionary power of the Government to refer industrial disputes to the appropriate authorities under the Act. The appropriate authorities under the Act are the conciliator, the Board, Court of Enquiry, Labour Court ') Tribunal and National Tribunal. Section 11(3) confers on the Board, Court of Enquiry, Labour Court, Tribunal and National Tribunal all, the powers 30 234 as are vested in a civil court when trying a suit in respect of the matters specified by cls.(a) to (d). A conciliation officer, however, stands on a different footing. Under section 11(4) he is given the power to call for and inspect any relevant document and has been given the same powers as are vested in civil courts in respect of Compelling the production of documents. Section 12 deals with the duties of conciliation officers. Under section 12(1) the conciliation officer may hold conciliation proceedings in the prescribed manner where an industrial dispute exists or is apprehended. In regard to an industrial dispute relating to a public utility service, where notice under section 22 has been given, the conciliation officer shall hold conciliation proceedings in respect of it. The effect of section 12(1) is that, whereas in regard to an industrial dispute not relating to a public utility service the conciliation officer is given the discretion either to hold conciliation proceedings or not, in regard to a dispute in respect of a public utility service, where notice has been given, he has no discretion but must hold conciliation proceedings in regard to it. Section 12(2) requires the conciliation officer to investigate the dispute without delay with the object of bringing about a settlement, and during the course of his investigation he may examine all matters affecting the merits and the right settlement of the dispute and do all such things as he thinks fit for the purpose of inducing the parties to come to a fair and amicable settlement. The duty and function of the conciliation officer is as his very name indicates, to mediate between the parties and make an effort at conciliation so as to persuade them to settle their disputes amicably between themselves. If the conciliation officer succeeds in his mediation section 12(3) requires him to make a report of such settlement together with the memorandum of the settlement signed by the parties to the dispute. Section 18(3) provides that a settlement arrived at in the course of conciliation proceedings shall be binding on the parties specified therein. It would thus be seen that if the attempts made by the conciliation officer to induce the parties to come to a settlement succeeds and a settlement is signed by them 235 it has in substance the same binding character as an award under section 18(3). Sometimes efforts at conciliation do not succeed either because one of the parties to the dispute refuses to co operate or they do not agree as to the terms of settlement. In such cases the conciliation officer has to send his report to the appropriate Government under section 12(4). This report must set forth the steps taken by the officer for ascertaining the facts and circumstances relating to the dispute and for bringing about a settlement thereof together with a full statement of such facts and circumstances and the reasons on account of which in his opinion a settlement could not be arrived at. The object of requiring the conciliation officer to make such a full and detailed report is to apprise the Government of all the relevant facts including the reasons for the failure of the conciliation officer so that the Government may be in possession of the relevant material on which it can decide what course to adopt under section 12(5). In construing section 12(5), therefore, it is necessary to bear in mind the background of the steps which the conciliation officer has taken under section 12(1) to (4). The conciliation officer has held conciliation proceedings, has investigated the matter, attempted to mediate, failed in his effort to bring about a settlement between the parties, and has made a full and detailed report in regard to his enquiry and his conclusions as to the reasons on account of which a settlement could not be arrived at. Section 12(5) with which we are concerned in the present appeals provides that if, on a consideration of the report referred to in subsection (4), the appropriate Government is satisfied that there is a case for reference to a Board, Labour Court, Tribunal or National Tribunal, it may make such reference. Where the appropriate Government does not make such a reference it shall record and communicate to the parties concerned its reasons therefore. This section requires the appropriate Government to consider the report and decide whether a case for reference has been made out. If the Government is satisfied that a case for reference has been made out it may make such 236 reference. If it is satisfied that a case for reference has not been made out it may not make such a reference; but in such a case it shall record and communicate to the parties concerned its reasons for not making the reference which in the context means its reasons for not being satisfied that there is a case for reference. The High Court has held that the word " may in the first part of section 12(5) must be construed to mean shall " having regard to the fact that the power conferred on the Government by the first part is coupled with a duty imposed upon it by the second part. The appellant and the company both contend that this view is erroneous. According to them the requirement that reasons shall be recorded and communicated to the parties for not making a reference does not convert " may " into " shall " and that the discretion vesting in the Government either to make a reference or not to make it is as wide as it is under section 10(1) of the Act. Indeed their contention is that, even after receiving the report, if the Government decides to make a reference it must act under section 10(1) for that is the only section which confers power on the appropriate Government to make a reference. It is true that section 12(5) provides that the appropriate Government may make such reference and in that sense it may be permissible to say that a power to make reference is conferred on the appropriate Government by section 12(5). The High Court was apparently inclined to take the view that in cases falling under section 12(5) reference can be made only under section 12(5) independently of section 10(1). In our opinion that is not the effect of the provisions of section 12(5). If it is held that in cases falling under section 12(5) reference can and should be made only under section 12(5) it would lead to very anomalous consequences. Section 10(3) empowers the appropriate Government by an order to prohibit the continuance of any strike or lock out in connection with an industrial dispute which may be in existence on the date of the reference, but this power is confined only to cases where industrial disputes are referred under section 10(1). It would thus be clear that if a reference is made only under section 12(5) independently of 237 s.10(1) the appropriate Government may have no power to prohibit the continuance of a strike in connection with a dispute referred by it to the tribunal for adjudication ; and that obviously could not be the intention of the Legislature. It is significant that sections 23 and 24 prohibit the commencement of strikes and lock outs during the pendency of proceedings there ' in specified, and so even in the case of a reference made under section 12(5) it would not be open to the employer to declare a lock out or for the workmen to go on strike after such a reference is made ; but if a strike has commenced or a lock out has been declared before such a reference is made, there would be no power in the appropriate Government to prohibit the continuance of such a strike or such a lock out. Section 24(2) makes it clear that the continuance of a lock out or strike is deemed to be illegal only if an order prohibiting it is passed under section 10(3). Thus the power to maintain industrial peace during adjudication proceedings which is so essential and which in fact can be said to be the basis of adjudication proceedings is exercisable only if a reference is made under section 10(1). What is true about this power is equally true about the power conferred on the appropriate Government by section 10(4), (5), (6) and (7). In other words, the material provisions contained in sub sections (3) to (7) of section 10(1) which are an integral Dart of the scheme of reference prescribed by Chapter III of the Act clearly indicate that even if the appropriate Government may be acting under section 12(5) the reference must ultimately be made under section 10(1). Incidentally it is not without significance that even in the petition made by the respondents in the present proceedings they have asked for a writ of mandamus calling upon the appellant to make a reference under sections 10(1) and 12(5). Besides, even as a matter of construction, when section 12(5) provides that the appropriate Government may make such reference it does not mean that this provision is intended to confer a power to make reference as such. That power has already been conferred by section 10(1); indeed section 12(5) occurs in a Chapter dealing with the procedure, powers and duties of the 238 authorities under the Act; and it would be legitimate to hold that section 12(5) which undoubtedly confers power on the appropriate Government to act in the manner specified by it, the power to make a reference which it will exercise if it comes to the conclusion that a case for reference has been made must be found in section 10(1). In other words, when section 12(5) says that the Government may make such reference it really means it may make such reference under section 10 (1). Therefore it would not be reasonable to hold that section 12(5) by itself and independently of section 10(1) confers power on the appropriate Government to make a reference. The next point to consider is whether, while the appropriate Government acts under section 12(5), it is bound to base its decision only and solely on a consideration of the report made by the conciliation officer under section 12(4). The tenor of the High Court 's judgment may seem to suggest that the only material on which the conclusion of the appropriate Government under section 12(5) should be based is the said report. There is no doubt that having regard to the back ground furnished by the earlier provisions of section 12 the appropriate Government would naturally consider the report very carefully and treat it as furnishing the relevant material which would enable it to decide whether a case for reference has been made or not; but the words of section 12(5) do not suggest that the report is the only material on which Government must base its conclusion. It would be open to the Government to consider other relevant facts which may come to its knowledge or which may be brought to its notice, and it is in the light of all these relevant facts that it has to come to its decision whether a reference should be made or not. The problem which the Government has to consider while acting under section 12(5)(a) is whether there is a case for reference. This expression means that Government must first consider whether a prima facie case for reference has been made on the merits. If the Government comes to the conclusion that a prima facie case for reference has been made then it would be open to the Government also to con sider whether there are any other relevant or material 239 facts which would justify its refusal to make a reference. The question as to whether a case for reference has been made out can be answered in the light of all the relevant circumstances which would have a bearing on the merits of the case as well as on the incidental question as to whether a reference should nevertheless be made or not. A discretion to consider all relevant facts which is conferred on the Government by section 10(1) could be exercised by the Government even in dealing with cases under section 12(5) provid ed of course the said discretion is exercised bona fide, its final decision is based on a consideration of relevant facts and circumstances, and the second part of section 12(5) is complied with. We have already noticed that section 12 deals with the conciliation proceedings in regard to all industrial dis putes, whether they relate to a public utility service or not. Section 12(1) imposes an obligation on the con ciliation officer to hold conciliation proceedings in regard to an industrial dispute in respect of public utility service provided a notice under section 22 has been given. If in such a dispute the efforts at conciliation fail and a failure report is submitted under section 12(4) Government may have to act under section 12(5) and decide whether there is a case for reference. Now, in dealing with such a question relating to a public utility service considerations prescribed by the second proviso to section 10(1) may be relevant, and Government may be justified in refusing to make a reference if it is satisfied that the notice given is frivolous or vexatious or that reference would be inexpedient. Just as discretion conferred on the Government under section 10(1) can be exercised by it in dealing with industrial disputes in regard to non public utility services even when Government is acting under section 12(5), so too the provisions of the second proviso can be pressed into service by the Government when it deals with an industrial dispute in regard to a public utility service under section 12(5). It would, therefore, follow that on receiving the failure report from the conciliation officer Government would consider the report and other relevant material 240 and decide whether there is & case for reference. If it is satisfied that there is such & case for reference it may make a reference. If it does not make a reference it shall record and communicate to the parties concerned its reasons therefore. The question which arises at this stage is whether the word " may " used in the context means " shall ", or whether it means nothing more than " may " which indicates that the discretion is in the Government either to refer or not to refer. It is urged for the respondent that where power is conferred on an authority and it is coupled with the performance of & duty the words conferring power though directory must be construed as mandatory. As Mr. Justice Coleridge has observed in Beg. vs Tithe Commissioners (1)." The words undoubtedly are only empowering; but it has been so often decided as to have become an axiom, that, in public statutes, words only directory, permissory or enabling may have & compulsory force where the thing to be done is for the public benefit or in advancement of public justice ". The argument is that section 12(5) makes it obligatory on the Government to record and communicate its reasons for not making the reference and this obligation shows that the power to make reference is intended to be exercised for the benefit of the party which raises an industrial dispute and wants it to be referred to the authority for decision. It may be that the Legislature intended that this requirement would avoid casual or capricious decisions in the matter because the recording and communication of reasons postulates that the reasons in question must stand public examination and scrutiny and would therefore be of such a character as would show that the question was carefully and properly considered by the Government; but that is not the only object in making this provision. The other object is to indicate that an obligation or duty is cast upon the Government, and since the power conferred by the first part is coupled with the duty prescribed by the second part " may " in the context must mean " shall ". There is considerable force in (1) ; , 474 : ; , 185.241 this argument. Indeed it has been accepted by the High Court and it has been held that if the Government is satisfied that there is a case for reference it is bound to make the reference. On the other hand, if the power to make reference is ultimately to be found in section 10(1) it would not be easy to read the relevant portion of section 12(5) as imposing an obligation on the Government to make a reference. Section 12(5) when read with section 10(1) would mean, according to the appellant, that, even after considering the question, the Government may refuse to make a reference in a proper case provided of course it records and communicates its reasons for its final decision. In this connection the appellant strongly relies on the relevant provisions of section 13. This section deals with the duties of Boards and is similar to section 12 which deals with conciliation officers. A dispute can be referred to a Board in the first instance under section 10(1) or under section 12(5) itself. Like the conciliation officer the Board also endeavours to bring about a settlement of the dispute. Its powers are wider than those of a conciliator but its function is substantially the same; and so if the efforts made by the Board to settle the dispute fail it has to make a report under section 13(3). Section 13(4) provides that if on receipt of the report made by the Board in respect of a dispute relating to a public utility service the appropriate Government does not make a reference to a Labour Court, Tribunal or National Tribunal under section 10, it shall record and communicate to the parties concerned its reasons therefore. The provisions of section 13 considered as a whole clearly indicate that the power to make a reference in regard to disputes referred to the Board are undoubtedly to be found in section 10(1). Indeed in regard to disputes relating to non public utility services there is no express provision made authorising the Government to make a reference, and even section 13(4) deals with a case where no reference is made in regard to a dispute relating to a public utility service which means that if a reference is intended to be made it would be under the second proviso to section 10(1). Incidentally this fortifies the conclusion that whenever 31 242 reference is made the power to make it is to be found under section 10(1). Now, in regard to cases falling under section 13(4) since the reference has to be made under section 10 there can be no doubt that the considerations relevant under the second proviso to section 10(1) would be relevant and Government may well justify their refusal to make a reference on one or the other of the grounds specified in the said proviso. Besides, in regard to disputes other than those falling under section 13(4) if a reference has to be made, it would clearly be under section 10(1). This position is implicit in the scheme of section 13. The result, therefore, would be that in regard to a dispute like the present it would be open to Government to refer the said dispute under section 12(5) to a Board,, and if the Board fails to bring about a settlement between the parties Government would be entitled either to refer or to refuse to refer the said dispute for industrial adjudication under section 10(1). There can be no doubt that if a reference has to be made in regard to a dispute referred to a Board under section 13 section 10(1) would apply, and there would be no question of importing any compulsion or obligation on the Government to make a reference. Now, if that be the true position under the relevant provisions of section 13 it would be difficult to accept the argument that a prior stage when Government is acting under section 12(5) it is obligatory on it to make a reference as contended by the respondent. The controversy between the parties as to the construction of section 12(5), is, however, only of academic importance. On the respondents ' argument, even if it is obligatory on Government to make a reference provided it is satisfied that there is a case for reference, in deciding whether or not a case for reference is made Government would be entitled to consider all relevant facts, and if on a consideration of all the relevant facts it is not satisfied that there is a case for reference it may well refuse to make a reference and record and communicate its reasons therefore. According to the appellant and the company also though the discretion is with Government its refusal to make a reference can be justified only if it records and communicates its reasons therefore and it appears that the 243 said reasons are not wholly extraneous or irrelevant. In other words, though there may be a difference of emphasis in the two methods of approach adopted by the parties in interpreting section 12(5) ultimately both of them are agreed that if in refusing to make a reference Government is influenced by reasons which are wholly extraneous or irrelevant or which are not germane then its decision may be open to challenge in a court of law. It would thus appear that even the appellant and the Company do not dispute that if a consideration of all the relevant and germane factors leads the Government to the conclusion that there is a case for reference the Government must refer though they emphasise that the scope and extent of relevant consideration is very wide; in substance the plea of the respondents that " may " must mean " shall " in section 12(5) leads to the same result. Therefore both the methods of approach ultimately lead to the same crucial enquiry : are the reasons recorded and communicated by the Government under section 12(5) germane and relevant or not ? It is common ground that a writ of mandamus would lie against the Government if the order passed by it under section 10(1) is for instance contrary to the provisions of section 10(1)(a) to (d) in the matter of selecting the appropriate authority ; it is also common ground that in refusing to make a reference under section 12(5) if Government does not record and communicate to the parties concerned its reasons therefore a writ of mandamus would lie. Similarly it is not disputed that if a party can show that the refusal to refer a dispute is not bona fide or is based on a consideration of wholly irrelevant facts and circumstances a writ of mandamus would lie. The order passed by the Government under section 12(5) may be an administrative order and the reasons recorded by it may not be justiciable in the sense that their propriety, adequacy or satisfactory character may not be open to judicial scrutiny ; in that sense it would be correct to say that the court hearing a petition for mandamus is not sitting in appeal over the decision of the Government : nevertheless if the court is satisfied that the reasons given 244 by the Government for refusing to make a reference are extraneous and not germane then the court can issue, and would be justified in issuing, a writ of mandamus even in respect of such an administrative order. After an elaborate argument on the construction of section 12(5) was addressed to us it became clear that on this part of the case there was no serious dispute between the parties. That is why we think the controversy as to the construction of section 12(5) is of no more than academic importance. That takes us to the real point of dispute between the parties, and that is whether the reason given by the appellant in the present case for refusing to make a reference is germane or not. The High Court has held that it is wholly extraneous and it has issued a writ of mandamus against the appellant. We have already seen that the only reason given by the appellant is that the workmen resorted to go slow during the year 1952 53. It would appear prima facie from the communication addressed by the appellant to the respondents that this was the only reason which weighed with the Government in declining to refer the dispute under section 12(5). It has been strenuously urged before us by the appellant and the company that it is competent for the Government to consider whether it would be expedient to refer a dispute of this kind for adjudication. The argument is that the object of the Act is not only to make provision for investigation and settlement of industrial disputes but also to secure industrial peace so that it may lead to more production and help national economy. Co operation between capital and labour as well as sympathetic understanding on the part of capital and discipline on the part of labour are essential for achieving the main object of the Act; and so it would not be right to assume that the Act requires that every dispute must necessarily be referred to industrial adjudication. It may be open to Government to take into account the facts that the respondents showed lack of discipline in adopting go slow tactics, and since their conduct during a substantial part of the relevant year offended against the standing orders that was a fact which 245 was relevant in Considering whether the present dispute should be referred to industrial adjudication or not. On the other hand, the High Court has held that the reason given by the Government is wholly extraneous and its refusal to refer the dispute is plainly punitive in character and as such is based on considerations which are not at all germane to section 12(5). This Court has always expressed its disapproval of breaches of law either by the employer or by the employees, and has emphasised that while the employees may be entitled to agitate for their legitimate claims it would be wholly wrong on their part to take recourse to any action which is prohibited by the standing orders or statutes or which shows wilful lack of discipline or a concerted spirit of non co operation with the employer. Even so the question still remains whether the bare and bald reason given in the order passed by the appellant can be sustained as being germane or relevant to the issue between the parties. Though considerations of expediency cannot be excluded when Government considers whether or not it should exercise its power to make a reference it would not be open to the Government to introduce and rely upon wholly irrelevant or extraneous considerations under the guise of expediency. It may for instance be open to the Government in considering the question of expediency to enquire whether the dispute raises a claim which is very stale, or which is opposed to the provisions of the Act, or is inconsistent with any agreement between the parties, and if the Govern ment comes to the conclusion that the dispute suffers from infirmities of this character, it may refuse to make the reference. But even in dealing with the question as to whether it would be expedient or not to make the reference Government must not act in a punitive spirit but must consider the question fairly and reasonably and take into account only relevant facts and circumstances. In exercising its power under section 10(1) it would not be legitimate for the Government for instance to say that it does not like the appearance, behaviour or manner of the secretary of the union, or even that it disapproves of the political 246 affiliation of the union, which has sponsored the dispute. Such considerations would be wholly extraneous and must be carefully excluded in exercising the wide discretion vested in the Government. In the present case it is significant that the company has voluntarily paid three months bonus for the relevant year not withstanding the fact that the workmen had adopted go slow tactics during the year, and the report of the conciliator would show prima facie that he thought that the respondents ' claim was not at all frivolous. The reasons communicated by the Government do not show that the Government was influenced by any other consideration in refusing to make the reference. It is further difficult to appreciate how the misconduct of the respondents on which the decision of the Government is based can have any relevance at all in the claim for the classification of the specified employees which was One of the items in dispute. If the work done by these employees prima facie justified the claim and if as the conciliator 's report shows the claim was in Consonance with the practice prevailing in other comparable concerns the misconduct, of the respondents cannot be used as a relevant circumstance in refusing to refer the dispute about classification to industrial adjudication. It was a claim which would have benefited the employees in future and the order passed by the appellant deprives them of that benefit in future. Any considerations of discipline cannot, in our opinion, be legitimately allowed to impose such a punishment on the employees. Similarly even in regard to the claim for bonus, if the respondents are able to show that the profits earned by the company during the relevant year compared to the profits earned during the preceding years justified their demand for additional bonus it would plainly be a punitive action to refuse to refer such a dispute solely on the ground of their misconduct. In this connection it may be relevant to remember that for the said misconduct the company did take disciplinary action as it thought fit and necessary, and yet it paid the respondents bonus to which it thought they were entitled. Besides, in considering the question 247 as to whether a dispute in regard to bonus should be referred for adjudication or not it is necessary to bear in mind the well established principles of industrial adjudication which govern claims for bonus. A claim for bonus is based on the consideration that by their contribution to the profits of the employer the employees are entitled to claim a share in the said profits, and so any punitive action taken by the Government by refusing to refer for adjudication an industrial dispute for bonus would, in our opinion, be wholly inconsistent with the object of the Act. If the Government had given some relevant reasons which were based on, or were the consequence of, the misconduct to which reference is made it might have been another matter. Under these circumstances we are unable to bold that the High Court was in error in coming to the conclusion that the impugned decision of the Government is wholly punitive in character and must in the circumstances be treated as based on a consideration which is not germane and is extraneous. It is clear that the Act has been passed in order to make provision for the investigation and settlement of industrial disputes, and if it appears that in cases falling under section 12(5) the investigation and settlement of any industrial dispute is prevented by the appropriate Government by refusing to make a reference on grounds which are wholly irrelevant and extraneous a case for the issue of a writ of mandamus is clearly established. In the result we confirm the order passed by the High Court though not exactly for the same reasons. The appeals accordingly fail and are dismissed with costs, one set of hearing fees. Appeals dismissed.

Section 2(5) of the , properly construed, does not by itself confer the power on the appropriate Government to make a reference. That power is really contained in section 10(i) of the Act. In deciding whether it should or should not make a reference under section 12(5) of the Act the appropriate Government need not base its decision solely on the report of the conciliation officer, but is free to take into consideration all other relevant facts and circumstances under section 10(1), and where it refused to make a reference it must record and com municate its reasons therefore to the parties concerned. Such reasons, however, must be germane, and not extraneous or irrelevant, to the dispute. But in exercising such wide powers as are conferred by section 10(1), the appropriate Government must act fairly and reasonably and not in a punitive spirit, and although considerations of expediency may not be wholly excluded, it must not be swayed by any extraneous considerations. Consequently, in a case where the issues in dispute related to a claim of classification for specified employees and additional bonus and the sole ground on which the Government refused to refer the dispute for adjudication under section 12(5) was that the employees had adopted go slow tactics during the relevant year, although the company had nevertheless voluntarily paid three months ' bonus for that year and the report of the conciliation officer was in favour of the employees, Held, that the Government acted on irrelevant considerations and its decision being wholly punitive in character a clear case for the issue of a writ of mandamus was made out. Held, further, that since the work done by the employees prima facie justified the claim for classification and it was in consonance with the practice prevailing in other comparable concerns, the misconduct of the respondents could be no ground for refusing reference as the claim was in regard to the future benefit to the employees. 228 The claim of bonus being also prima facie justified by the profits earned during the relevant year in accordance with well settled principles of industrial adjudication, the order of refusal was in the nature of a punitive action that was wholly inconsistent with the object of the Act.

This appeal raised a short question as to the interpretation of sub section (4)(a) of section 4 of the Bombay Rents, Hotel and Lodging House Rates (Control) Act, 1947 ("the Bombay Rent Act"). The appellants were the sub tenants of the respondent No. 1 Firm in respect of the premises called Gala No. 4 in a godown. Respondent No. 1 Firm were the tenants of the said godown, having taken a lease of the building from the Bombay Port Trust. The appellants were in occupation of the said Gala under written agreements executed from time to time for one year each. The last such agreement expired on 19th October, 1971. The respondent No. 1 Firm served a notice on the appellants on 13th January, 1972 to hand over possession of the said gala on the ground that the period of lease had expired. By notice dated February 3, 1972, the respondent No. 1 Firm terminated the tenancy of appellants and then filed a suit in the City Civil Court against the appellants to recover possession of the premises in dispute inter alia on the ground that the period of lease had expired. The appellants took up the contention that they were not liable to be evicted as they were entitled to protection under the provisions of the Bombay Rent Act. The City Civil Court decreed the suit. On appeal by the appellants, the High Court (Single Judge,) holding that the notice of termination of tenancy dated 3rd February, 1972, was a valid notice and the provisions of the Bombay Rent Act did not apply to the premises in question, upheld the decree of eviction passed by the City Civil Court. Letters Patent appeal against this judgment was dismissed by a Division Bench of the High Court. The appellants then moved this Court for relief by special leave. Dismissing the appeal, the Court, 907 ^ HELD: The only submission made by the appellants before the Court was that the said premises, viz, Gala No. 4, were entitled to the protection of the provisions of the Bombay Rent Act and the respondent No. 1 Firm was not entitled to a decree for eviction as no grounds for eviction under the Act had been made out. [910G] The question raised was whether the protection of the sub section (4)(a) of section 4 of the Bombay Rent Act was available to the sub lessee in a building leased by the lessee from the Government or a local authority or put up by a lessee of the land belonging to the Government or a local authority but not under any building lease or pursuant to any obligation imposed on the lessee to put up a building. In this case, the entire building in which the premises in question, namely, Gala No. 4 were situated, belonged to the Bombay Port Trust. It was nowhere contended at any stage by the appellants that the building in which the said premises were situated was put up by the respondent No. 1 Firm. The Court was, therefore, not directly concerned with the position of a sub lessee in a building put up by a lessee of the land taken from the Government or a local authority without being under any obligation to do so. [913D F] A plain reading of sub section (1) of section 4 of the Bombay Rent Act makes it clear that the provisions of the Bombay Rent Act are not applicable to premises belonging to the Government or a local authority. Sub section (4)(a) only takes out from the scope of the exemption conferred by section 4(1) "a building erected on any land held by any person from the Government or a local authority under an agreement, lease, licence or other grant, although having regard to the provisions of such agreement, lease, licence or grant the building so erected may belong or continue to belong to the Government or the local authority, as the case may be". If this provision were to be as including any building put up or erected on land held by any person from the Government or a local authority, the result would be that such protection would be available even against the Government or a local authority and the provision of sub section (1) of section 4 may be rendered largely nugatory. The provisions of sub section (4)(a) were never intended to take away the immunity conferred upon the premises belonging to the Government or a local authority, and if the provisions of section 4(4)(a) were to be construed as urged by the appellants, this immunity would be rendered practically nugatory. A plain reading of the provisions of sub section (4)(a) in the context clearly shows that there is no intention therein to take a building put up by the Government or a local authority from the scope of the exemption conferred by sub section (1) of section 908 4. The language of sub section (4)(a) and sub section (1) of section 4 of the Bombay Rent Act, read together, suggests that it was only in respect of a building put up by the lessee on the Government land or the land belonging to a local authority under a building agreement that the sub lessees were taken out of the exemption contained in sub section (1) of section 4 and allowed the benefit of the provisions of the Bombay Rent Act. It was significant that the exemption granted under the earlier part of sub section (1) of section 4 is in respect of the premises and not in respect of the relationship. In order to confer the protection of the provisions of the Bombay Rent Act on the sub lessees occupying the premises in any building erected on the government land or the land belonging to a local authority irrespective of the question who has put up the building as against the lessees of the land but without affecting the immunity conferred on the government or local authorities as contemplated by sub section (1) of section 4 of the Bombay Rent Act, the Court would have to practically rewrite the provisions of section 4, and it was not open to the Court to do that. The argument of the appellants, therefore, could not be accepted. The learned Judge of the High Court was right in coming to the conclusion that the premises in question were not entitled to the benefit of the provisions of the Bombay Rent Act. [914A H;915A] The decision of this Court in Kanji Manji vs The Trustees of the Port of Bombay, [1962] Suppl. 3 S.C.R. 461 cited by the appellants was of no assistance to the case before the Court, and the decision of this Court in Maneklal and Sons vs Trustees of Port of Bombay and Others, cited by the appellants, far from supporting the submission of the appellants, militated against it. [916D] There was no merit in the appeal and it must fail. Taking the facts and circumstances of the case into consideration, the Court directed that the appellants would not be evicted from the premises in question until December 31, 1988. [916E] The Court observed that if the intention of the legislature was that the protection should be given to the sub lessee against the lessee in a building taken on lease by the lessee from the government or a local authority, it was for the legislature concerned to make appropriate amendments in the Bombay Rent Act and it was not open for the Court to re write the provisions of sub section (4)(a) of section 4 of the Bombay Rent Act on the ground of any such intention as suggested by Dr. Chitale counsel for the appellants. [916F] 909 Bhatia Co operative Housing Society Ltd. vs D.C. Patel, ; Kanji Manji vs The Trustees of the Port of Bombay, [1962] Suppl. 3 S.C.R. 461; Maneklal and Sons vs Trustees of Port of Bombay and Others, and Ram Bhagwandas vs Municipal Corporation of the City of Bombay, , referred to.

The respondents assessees were engaged in the manufacture of mild steel rods, bars or rounds. They claimed that as the articles manufactured by them fell under item 1 of the list set out in the Fifth Schedule, they were entitled to a higher rate of development rebate specified in section 33(1) (b) (B) (i) (a) and to relief under section 80 1 of the Income Tax Act, 1961. The Income Tax Officer rejected the claim of the assessees, whereas the Appellate As sistant Commissioner, the Tribunal and High Court accepted their claim. Hence the Revenue filed appeals before this Court. The contentions of the appellant Revenue were that iron and steel ceased to be a metal when it came out of the furnace in the primary steel mills in the form of ingots. In the next stage the ingots became semi finished products in the shape of billets, blooms and slabs. It was said to be the stage where the raw materi als were converted into. In different form or shape; that the expression "iron and steel (metal)" meant the iron and steel as it emerged in the form of billets, blooms and slabs from the steel mill and that all subse quent products whether in the form of rails, rods (including wire rods), bars, angles, channels, tees, sees, pipes, tubes, sheets, strips, plates and coils would constitute articles made of iron and steel, and that rolling mills making bars and rods were not covered by item 1 of the Fifth Schedule. 188 On the other hand, the respondents asses sees contended that in the steel industry the manufacture of ingots, billets, blooms, etc. represented only an intermediate stage at which the iron and steel metal became semi finished steel. When the semi finished steel was converted into plates, bars or rods, they became finished steel. The bars, rods and rounds, which were continued to be iron and steel in a finished form, were used to manu facture the products of iron and steel by various processes, such as, rolling, cutting, shearing, forging, hammering, etc. and that the products of iron and steel were different from that of iron and steel (metal). Dismissing the appeals filed by the Revenue, this court, HELD: 1. In interpreting the provisions in S.33(1)(b)(B)(i)(a), S.80 I of the Income Tax Act, 1961, the Court would do well to keep in mind the background in which concessions to certain basic industries were introduced in the Income Tax Act. The historical background reflects the intention of the legislature to grant progressively certain exemptions, re liefs and concessions for certain types of industries, which were considered important for national development. The industry in iron and steel and other metals figured in all the lists. [199 C, 200 B] 2. The incentive concession or relief granted under the provisions has to be con strued in a broad and comprehensive manner so as to cover all manufacturing activities legitimately pertaining to the specified core industry with no limitation save what may be called for by the wording of a particular entry. So far as items 1 and 2 are concerned, the wording points to a distinction between the metal which is used as the base and other articles manufactured therefrom. Pig iron and iron scrap are fed into furnaces to produce ingots, billets and blooms. But both are iron and steel in different forms, the latter being referred to as "semi finished steel". Like wise, the bars, rods, rounds, wire rods and the like constitute the second stage in which one gets only "finished" forms of iron and steel. Having regard to the nature and weight of the metal, it has to be "finished" to assume these forms before manufacturers of iron and steel articles can take over and proceed to manufacture articles from them by drawing wires or converting them into rails or shaping them into tees, zees, pipes, tubes and the like. [200 C E] 3. Whether the article produced is the raw material 01, an article made of iron and steel has to be decided on the basis of the 189 nature of the article and not the kind of mill which turns it out. It is significant that these items do not draw distinction between basic steel mills, integrated steel mills and the various other types of mills that are used in the industry. [200 G] 4. The departmental instructions that machinery and plant in "rolling mills" will not be eligible for the higher development rebate would not seem to be justified if it intends to draw a distinction between the same machinery and plant when used in rolling mills and when used in other mills in the industry. If machinery and plant installed in steel mills where the process includes not merely the production of ingots, billets and the like but also the production of bars and rods are eligible for the higher development rebate, it is difficult to see why the same, plant and machinery, when installed in rolling mills which proceed, from the stage of ingots or billets, to manufacture bars and rods should not be eligible for the higher rate of devel opment rebate. [200 G 201 B] 5. In considering the issue, the court should not be carried away be classifications of stages of manufacture that may be relevant for other purposes. What the court should examine is not the nature of the mill which yields the article but the nature of the article or thing that is manufactured and ask the question whether such articles or things can be considered as raw material for manufac ture of other articles made of the metal or is it itself an article made of the metal. [201 B C] 6. The goods in the present case fail in the former category. The mild steel rods, bars or rounds which are manufactured by the asses sees are only finished forms of the metal and not articles made of iron and steel. They only constitute raw material for putting up arti cles of iron and steel such as grills or windows by applying to them processes, such as cutting or turning. The rod or the wire rods are likewise not products of iron and steel but only certain finished or refined forms of the metal itself. [201 C D] 7. Forging and castings are not covered by item 1 being articles made of iron and steel but that since the legislature definite ly intended to give relief even in respect of such articles, item 11 and also item 21 were introduced. Even if MS steel rods, bars and rounds cannot be taken as iron and steel (metal), they would fail under the category of "forgings and castings" referred to in item 11. [201 G H] 190 8. The conclusion drawn by the High Court that the assessee was entitled to the higher development rebate, though, it produced arti cles only from iron scrap, does not call for any interference. [202 C, D] C.I. T. vs Mittal Steel Re tolling and Allied Industries (P) Ltd., ; CI. West India Steel Co. Ltd., (Kerala); Addl. Commissioner of Income Tax vs Trichy Steel Rolling Mills Ltd., ; C.I.T.v. Krishna Copper Steel Roll ing Mills, & Har yana); CI.T.v. Ludhiana Steel Rolling Mills, & Haryana) and Singh Engineering Works Pvt. Ltd. vs CI.T., , approved. Indian Steel and Wire Products Lid vs Commissioner of Income tax, and Commissioner of Income Tax vs Kay Charan Pvt. Ltd., ; over ruled. State of Madhya Bharat vs Hira Lal, (1966) 17 STC 313 (S.C.) Devi Dass Gopal Krishnan vs State of Punjab, (1967) 20 STC 430 (SC); Hindustan A1uminium Corporation Ltd. vs State of (U.P., (1981) 48 STC 411 (S.C.) State of Tamil Nadu vs Pyarelal Malhotra, (1976) 37 STC 319 (SC); C.I.T.v. Rashtriya Metal Industries Co. Ltd., ; Indian A1uminium Co. Ltd vs C.I.T, Cal. and Cal; Jeewanlal vs CI.T., ; C.I.T vs Fitwell Caps P. Ltd., ; Hindustan Wire Products vs CI.T 1 ; Indian Steel and Wire Products Lid vs C.I.T. ; C.I.T.v. Tensile Steel Lid, and CI. Ludhiana Steel Rolling Mills, & H) referred to. Speci 'fication and Glossary By Expert Products Sectional Committee of Bureau of India Standards, New Encyclopedia Brittanica Macropaedia, 15th Edn. Vol.21; Websters, Third New International Dictionary; Encyclopaedia of Chemical Technology By Kirk Othmer, 3rd. Vol.21;// Book on Small Scale Steel Making By R.D.Walker, The Budget Speech of the Finance Minister, (1968) 48 ITR [Statutes] 34; (1965) 55 ITR [Statutes] 57 and 122 referred to.

An industrial dispute with regard to the raising of the age of retirement of the clerical staff employed in the Refinery Division of the respondent oil Company at Bombay from 55 to 60 years was referred to the Industrial Tribunal. The workmen contended that there was a trend in the Bombay region to fix the age of retirement of clerical employees at 60 years and in the comparable concerns as well as in the Marketing Division of the Company itself the age of the clerical employees was above 55 years. The Company contended that the wage scales of their clerical employees were far better than those of similar categories of employees in comparable concerns and that the company took a generous view in the settlement dated 31 10 1973 and arrived at a package deal and revised the benefits of the employees taking into consideration the agreement of the employees to continue the age of retirement of the clerical employees of the Refinery Division at 55 years. Neither party led any oral evidence but filed their respective comparative statements. The Tribunal found as a fact that the wage scales of the Company were not much better than the wage scales of other comparable concerns. The Tribunal also noticed that the age of retirement of the clerical staff of the Company in its Marketing Division both at Bombay and other places was fixed at 58 years. But the Tribunal found that the Company 's contention regarding the settlement being a package deal in regard even to the age of retirement after taking other benefits into consideration was not without substance and observed that it was, however, not sufficient to reject the workmen 's demand in toto and that it had to be taken into account while considering the extent to which the age of retirement should be raised. Having regard to the circumstances of the case and in the interest of industrial harmony, the Tribunal raised the age of retirement to 58 years only. In appeal to this Court the workmen relied on the 'trend ' in the Bombay region while the Company relied on the position in other oil Companies. 252 Allowing the appeal and fixing the age of retirement at 60 years, by majority. HELD (Per Desai and Chinnappa Reddy, JJ.) In fixing the age of superannuation, the most important factor that has to be taken into consideration is the trend in a particular area. From the various decisions rendered by this Court and by the Tribunals, it is obvious that in the early sixties the trend in the Bombay region was to raise the age of superannuation to 60 years. Industrial and labour conditions do not remain stagnant despite the passage of time. Industrial labour relations need revision from time to time to fit and suit changing conditions. That there was an upward trend to raise the age of retirement to 60 in the early sixties may not necessarily mean that the same trend has continued till today. [259 H; 260 D E; 260 G H] Guest, Keen, Willians Private Ltd. vs P. J. Sterling & Ors. ; ; Dunlop Rubber Company Limited vs Workmen & Ors. ; ; Imperial Chemical Industries (India) Pvt. Ltd. vs Workmen ; ; British Paints (India) Ltd. vs Its workmen [1961] 2 S.C.R. 523; G.M. Talang vs Shaw Wallace & Co. ; Burmah Shell Oil Storage & Distributing Company of India Ltd. vs Their Workmen [1970] I LLJ 363, referred to. In the instant case, the Company did not plead that there was any reversal of the trend nor did the Company urge that there was any such reversal of the trend. On the other hand, it may very well be said that there has been much progress in the last two decades in the matter of better living conditions and availability of medical and health facilities and, therefore, a further raise of the age of retirement may be considered necessary and justified. [260 H; 261 A] In the instant case while raising the retirement age of the clerical staff of the Refinery Division to 58 years instead of 60 years since the retirement age of the clerical staff of the Marketing Division of the Company had been fixed at 58 years, the Tribunal fell into a serious error in failing to notice the relevant and outstanding fact that the clerical staff of the Marketing Division have a pension scheme while the clerical staff of the Refinery Division have no such scheme. The general terminal benefits on attaining the age of superannuation are pension, gratuity and provident fund. It is not in dispute that while the clerical staff of the Marketing Division have all the three benefits, the clerical staff of the Refinery Division are not entitled to any pension. This must necessarily have an impact on the raising of their retirement age. On the material available the Court thinks that the retirement age in the case of clerical staff of the Refinery Division should be fixed at 60 years. [262 E H] In applying the region cum industry formula the emphasis to be placed on region or industry depends upon varying factors. Where there are no comparable industries in the region, the regional aspect of the region cum industry formula must be given precedence. G] Greaves Cotton and Co. Ltd. vs Their Workmen 1964 (I) L.L.J. 342; Workmen of Hindustan Motors vs Hindustan Motors 1962 (II) L.L.J. 352; 253 French Motor Car Company vs Their Workmen 1962 (II) L.L.J. 744; Workmen of Orient Paper Mills Ltd. vs Orient Paper Mills Ltd. 1969 (II) L.L.J. 398 referred to: It is observed that nowadays, because of better conditions of living and availability of medical and health facilities, the average span of life has increased and a person between 55 and 60 years of age is alert, active, hale and healthy may be said to be at the prime of his life. That is also the time when he has to meet several financial commitments and demands. To retire him at that age may mean virtually throwing him to the wolves. Can the nation afford to throw away the knowledge and experience of these people by retiring them when they are still capable of turning out some years of good work and have on its hand several families unable to fully support themselves ? On the other hand, can the nation afford to have an army of unemployed youngmen necessarily leading bitter and frustrated lives by allowing them to fritter away their energies in unhealthy pursuits to which they may be tempted ? But then arises the broader question, is the retirement of men of experience at an age when they are still useful to the community the proper solution to the problem of unemployment among the young ? Is not the solution the creation of greater employment opportunities, by increasing production and its modes ? All these questions are difficult to answer and require deep investigation, research and study. [261 D H] (Per Varadarajan, J. Though the trend in a particular area is the most important factor to be taken into account for fixing the age of retirement of employees, it is only one of the several factors like the nature of work assigned to the employees, the wage structure of the employees, the retirement benefits and other amenities available to the employees, the nature of climate where the employees work and the age of superannuation fixed in comparable industries in the region. Moreover, the trend must undoubtedly be in comparable industries. [272 D E; F] Guest Keen Williams Private Ltd. vs Sterling and Ors. 1959 (II) L.L.J. 405; Burmah Shell (Delhi region) (1971) (I) L.L.J. 363 referred to. In the present case, the employees have not placed any material on those factors before the Tribunal apart from relying upon the trend in the Bombay region. They have also not placed any material on record to show that there is any trend in the Refinery Division of any other oil company in the Bombay region to fix the age of retirement of clerical employees at 60 years. They have relied upon the trend generally and not in any comparable industry. There is no evidence to show that there is any other Refinery in the Bombay region than that of the Company. From the comparative statements filed by the Company, it appears that the trend in the Refinery Division of the Company throughout the country is to fix the age of retirement of the clerical employees at 58 years. There is nothing in the award of the Tribunal to show that the employees contended before it that the "trend in the Bombay region" heavily relied upon by them, could be general in nature and not in comparable industries in the region. [272 F; G; 273 B C] 254 Unfortunately, very limited material is available on record for arriving at a decision in this case. The comparative statements filed by the Company show that the pay scales of junior grade clerical employees in the Refinery Division of the respondent company are better than those in another oil company. The pay scales of junior grade clerical employees and senior grade clerical employees of the company in the Refinery Division at Bombay compare favourably with pay scales of junior grade clerical employees and senior grade clerical employees in the Marketing Division of the Company at Bombay Therefore, in considering the absence of a pension scheme for the clerical employees of the Company in the Refinery Division one has to take note of the fact that the pay scales of those employees are more advantageous and compare favourably with the pay scales of clerical employees of the company in the Marketing Division at Bombay. There is no material on record to show the quantum of disadvantage to which the employees in question are subjected by the absence of a pension scheme compared with the section of clerical employees of the Company 's Marketing Division at Bombay who have the benefit of a pension scheme in addition to gratuity and provident fund benefits to which alone the employees concerned in this appeal are entitled as retirement benefits. In those circumstances, there is no satisfactory reason for interfering with the Tribunal 's award raising the age of retirement of the clerical employees of the Company 's Refinery Division at Bombay from 55 years to 58 years. [270 A; 271 A; E F; 272 B C; 273 H; 274 A B]

A firm doing business in Bombay entrusted goods worth Rs. 35,500 the Railway for delivery in Delhi. The goods were consigned to "self" and the firm endorsed the railway receipts to a Bank against an advance of Rs. 20,000 made by the Bank to the firm. The firm also executed a promissory note in favour of the Bank for that amount. When the goods reached the destination, the Bank refused to take delivery, on the ground that they were not the goods consigned by the firm. The Bank, thereafter filed a suit for the recovery of the value of the goods. The trial court dismissed the suit. On appeal by the Bank, the High Court allowed the appeal and decreed the claim for Rs. 20,000 on the ground that as pledgee of the goods, the Bank suffered loss only to the extent of the loss of its security. Both the Bank and the Railway appealed to this Court, and it was contended on behalf of the Railway that the endorsement of the railway receipt in favour of the Bank, did not constitute a pledge of the goods covered by the receipt and that the Bank had no right to sue for compensation. HELD: (Per Subba Rao, Raghubar Dayal and Bachawat, J J): The firm by endorsing the railway receipts in favour of the Bank, for consideration. pledged the goods covered by the said receipts, to the Bank, and the Bank being the pledgee could maintain the suit for the recovery of the full value of consignment amounting to Rs. 35,500. [264 H; 265 D E] On a reasonable construction of section 178 of the Contract Act, 1872, sections 4 and 137 of the , and sections 30 and 53 of the Indian , an owner of goods, can make a valid pledge of them by transferring the railway receipt representing the said goods. To the general rule expressed by the Maxim nemo dat quod non habet (no one can convey a better title than what he had), to facilitate mercantile transactions. the Indian Law has grafted some exceptions, in favour of bonafide pledgees by transfer of documents of title from persons. whether owners of goods who do not possess the full bundle of rights of ownership at the time the pledges are made, or their mercantile agents. To confer a right to effect a valid pledge by transfer of document of title relating to goods on persons with defects in their title to the goods. and on mercantile agents, and to deny it to the full owners thereof, is to introduce an incongruity into the Act. On the other hand, the real intention of the legislature will be carried out if the said right is conceded to the Full owner of goods and extended by construction to persons with defects in their title to the goods or to mercantile agents. A pledge being a bailment of goods under section 172 of the Contract Act, the pledgee, as a bailee. will have the same remedies as the owner of the goods would have against a third person for deprivation of the said goods or injury to them under section 180 of the Act. [264 A C, H] 255 Ramdas Vithaldas Durbar vs section Amarchand and Co., (1916) L.R. 43 I.A. 164 and The Official Assignee of Madras vs The Mercantile Bank of India, Ltd. (1934) L.R. 61 I.A. 416, referred to. Per Mudholkar and Ramaswami JJ. (dissenting): There was no valid pledge of the consignments of goods represented by the railway receipt in favour of the Bank and the Bank was not entitled to sue the Railway for compensation for the loss of goods, relying upon the endorsements of the railway receipts in its favour. [272 G H] After the passing of the , the legal position with regard to the pledge of railway receipts, is exactly the same in Indian Law as it is in English Law, and consequently, the owner of the goods cannot pledge the goods represented by a railway receipt, by endorsing the railway receipt, unless the railway Authorities were notified of the transfer, and they agreed to hold the goods as bailee of the pledgee. Under the amended law a valid pledge can no longer be made by ever.v person "in possession" of goods. It can only be made by a mercantile agent as provided in section 178 of the Contract Act (after amendment in 2930) or by a person who has obtained possession of goods under a contract voidable under section 19 or section 19A of the Contract Act, as provided by section 178 0 the Act. or by a seller or buyer in possession of goods, after sale. as provided in section 30 of the Indian . [271 F G; 272 C D] Further, though a railway receipt and all other documents enumerated in section 2(4) of the are assimilated to bills of lading for the purpose of the right to stoppage in transit and a pledge under section 178 of the Contract Act, its legal position is the same as in English law, so that, no rights are created, merely by reason of the endorsement of a railway receipt by the consignee between the endorses and the railway company which had issued the receipt to the consignee the only remedy of the endorsee being against the endorser. The negotiation of the receipt may pass the property m the goods, but it does not transfer the contract contained in the receipt or the statutory contract under section 74E of the Indian Railways Act. Negotiability is a creature of a statute or mercantile usage, not of Judicial decisions apart from either. So, in the absence of any usage of trade or any statutory provision to that effect, a railway receipt cannot be accorded the benefits which flow from negotiability under the Negotiable Instruments Act, so as to entitle the endorsee, as the holder for the time being of the document of title, to sue the carrier the railway authority in his own name. If the claim of the Bank was as an ordinary assignee of the contract of carriage, then it had to prove the assignment. In the absence of proof of such assignment, or of the existence of any practice of merchants treating a railway receipt as a symbol of goods making a pledge of the receipt a pledge of goods, and in view of cl. (3) of the notice printed at the back of the receipt that an endorsement made on the face of the receipt by the consignee was only meant to indicate the person to whom the consignee wished delivery of goods to be made if he himself did not attend to take delivery, the Bank had no right to sue the Railway. [273 E G; 274 D G] Since the language of section 178 of the Contract Act is clear and explicit, if any hardship and inconvenience is felt because such a practice of treating the receipt as a symbol of goods were not recognised. it is for Parliament to take appropriate steps to amend the law and it is not for courts to legislate under the guise of interpretation. [275 G] 256

The petitioner was serving as an officiating Teleprinter Supervisor at Jaipur when the employees of the Posts and Telegraphs Department went on strike from the midnight of July 11, 1960, throughout India and there was a similar strike at Jaipur. The petitioner 's case was that he was on duty that day from 12 noon to 8 p.m. and after his duty was over, he did not go home but went to the dormitory where he fell asleep as he was tired. On hearing some noise he woke up at 11 30 p.m. and wanted to go home but was arrested by the police under the Essential Services Maintenance Ordinance, No. 1 of 1960. The criminal charge was however withdrawn. On July 21, 1960, a chargesheet was served on the petitioner in the following terms: "That Shri Radhey Shyam Sharma I C/S Telegraphist, CTO Jaipur committed gross misconduct in that on the midnight of the 11th July, 1960, he took part in a demonstration in furtherance of the strike of the P. & T. Employees in violation of the orders dated 8 7 1960 issued by the Government of India under the 'Essential Services Maintenance Ordinance, 1960 (1 of 1960) ' prohibiting strikes in any Postal, telegraph or telephone service". The enquiry officer found him guilty of the charge and ordered that his pay should be reduced in the time scale by three stage,% for a period of two years and on restoration the period of reduction was not to operate to postpone his future increments. 0n appeal, the Director General considered the whole matter on merits and rejected the appeal. In this Court it was urged that the punishment imposed upon the petitioner was violative of his fundamental rights under articles 19(1)(a) and (b), reliance being placed on two cases of this court in Kameshwar Prasad vs State of Bihar and O. K. Ghosh vs E. X. Joseph; that sections 3, 4 and 5 of the Ordinance were ultra vires, as they contravened article 19(1.)(a) and (b) and that in any case there was no evidence on which it could ' be found that the charge against him had been proved. Held: The provisions of the Ordinance in sections 3, 4 and 5 did not violate the fundamental rights enshrined in article 19(1)(a) and (b). A perusal of article 19(1) shows that there is no fundamental right to strike, and all that the ordinance provided was with respect to any illegal strike as provided in the Ordinance. There was no provision in the Ordinance which in any way restricted those fundamental rights. It was not in dispute that Parliament had the competence to make a law in the terms of the Ordinance and therefore the President had also the power to promulgate, such an Ordinance. 404 The competence of the legislature therefore being not in dispute it cannot be held that the Ordinance violated the fundamental rights guaranteed under article 19(1)(a) and (b). All India Bank Employees Association vs National Industrial Tribunal, ; , referred to. The two cases relied on by the petitioner have no relevance in connection with the charge in the present case. The punishment given to the petitioner cannot therefore be set aside on the ground that the charge was in violation of the fundamental rights guaranteed under article 19(1)(a) and (b). Kameshwar Prasad vs State of Bihar, [1962] Supp. 3 S.C.R. 369 and O. K. Ghosh vs E. X. Joseph, [1963] Supp. 1 S.C.R. 789, held inapplicable. If on the undisputed facts the authorities came to the con clusion that the petitioner acted in furtherance of the strike 'Which was to commence half an hour later and was thus guilty of gross misconduct, it could not be said that there was no evidence on which the authorities concerned could find the charge framed against the petititoner proved.

The appellant company dismissed some workmen after a domestic enquiry holding them guilty on a charge of 'go slow ' action. The respondents raised an industrial dispute. The Industrial Tribunal found that the dismissal of the respondents could not be sustained as there was no specific mention of 'go slow ' in the charge. Further it found that there was denial of natural justice at the enquiry as the workmen were not allowed to be represented by a person of their choice. The Tribunal set aside the dismissal of the respondents and ordered their reinstatement. The company appealed to the Supreme Court by special leave. HELD : (i) The charge specified cls. 10(vii) and (xvi) of the Operators Standing Orders. These clauses deal with insubordination and, inter alia, with 'go slow '. The workmen had been expressly warned by notice that they were "going slow" and in their reply to the charge they denied that they were going slow. The Tribunal was thus wrong in holding that the workmen were not charged with 'go slow ' action and could not be found guilty of that charge. [143 B C, G H] (ii) 'Mere was no denial of natural justice because the workmen asked to be represented by a member of a union which was not recognised The Standing Orders clearly provided that only a representative of a union which is registered under the Trade Union Act and recognised by the company can assist. 'Mere was no right to representation as such unless the company by its Standing Order recognised such a right. [144 F G, H] Kalindi & Ors. vs Tata Locomotives & Engineering Co. Ltd.[1960]3 S.C.R. 407 and Brook Bond India (P) Ltd. vs Subba Raman , relied on.

The appellant in both the appeals carried on the busi ness of a carrier and transported goods on hire. It had its principal office at Bombay and branch offices at various other places. The respondent in the first appeal a dealer in cardamom entrusted a consignment of cardamom to the appellant at its branch office at Bodinayakanur in Tamilnadu to be delivered at Delhi. After the goods had been transported by the appel lant and kept in a godown at Delhi the same got destroyed and damaged in a fire as a result whereof the consignee refused to take delivery. The respondent instituted a suit in the sub court within whose territorial jurisdiction the branch office of the appellant was situated for damages alleging that the fire was due to the negligence and care lessness on the part of the staff of the appellant. Respondent No. 4 in the second appeal entrusted certain packets of pesticides insured with the second respondent Insurance Company to the appellant at its branch office at Madras for being carried to Delhi. The respondent alleged that the goods were delivered at New Delhi in a damaged condition resulting in loss and a suit was instituted for recovery of the loss in the City Civil Court at Madras. In both the aforesaid civil suits the appellant pleaded in defence that in the contract entered into between them, the parties had agreed that jurisdiction to decide any dispute between them would be only with the courts at Bom bay, and consequently the courts in Madras ' where the two suits had been instituted had no jurisdiction. This plea was repelled by the Trial Court in each of the suits. The aforesaid orders were challenged by the appellant in the High 392 Court under Section 115 C.P.C. and having failed, the appel lant appealed to this Court. In the appeal, it was contended on behalf of the appel lant that since the courts at two places namely Madras and Bombay had jurisdiction in the matter, the jurisdiction of the courts in Madras was ousted by the clause in the con tract whereunder the parties had agreed that jurisdiction to decide any dispute under the contract would be only in the courts at Bombay. On the question: whether in view of the relevant clause in the contract between the parties the courts at Bombay alone had jurisdiction and the jurisdiction of the courts at Madras where the two suits were instituted was barred. Dismissing the appeals, this Court, HELD: 1. The courts at Bombay in these two cases did not at all have jurisdiction and consequently the agreement between the parties conferring exclusive jurisdiction on courts at Bombay is of no avail. [401D] 2. Clauses (a) and (b) of Section 20 refer to a court within the local limits of whose jurisdiction the defendant "carries on business". Clause (c) on the other hand refers to a court within the local limits of whose jurisdiction the cause of action wholly or in part arises. [397H 398A] 3. Section 20 of the Code before its amendment by the Code of Civil Procedure (Amendment) Act, 1976 had two Expla nations being Explanation I and II. By the Amendment Act Explanation I was omitted and Explanation II was renumbered as the present Explanation. [398G] 4. The Explanation is in two parts, one before the word "or" occurring between the wOrds "office in India" and the words "in respect of" and the other thereafter. The Explana tion applies to a defendant which is a corporation which term, would include even a company such as the appellant in the instant case. The first part of the Explanation applies only to such a corporation which has its sole or principal office at a particular place. In that event the courts within whose jurisdiction the sole or principal office of the defendant is situate will also have jurisdiction inas much as even if the defendant may not be actually carrying on business at that place, it will "be deemed to carry on business" at that place because of the fiction created by the Explanation. [398C F] 393 5. The latter part of the Explanation takes care of a case where the defendant does not have a sole office but has a principal office at one place and has also a subordinate office at another place. The words "at such place" occurring at the end of the Explanation and the word "or" referred to above which is disjunctive clearly suggest that if the case fails within the latter part of the Explanation it is not the court within whose jurisdiction the principal office of the defendant is situate but the court within whose juris diction it has a subordinate office which alone shall have jurisdiction "in respect of any cause of action arising at any place where it has also a subordinate office". [398E F] 6. The Explanation is really an explanation to clause (a). It is in the nature of a clarification on the scope of clause (a) viz. as to where the corporation can be said to carry on business. This, it is clarified, will be the place where the principal office is situated (whether or not any business actually is carried on there) or the place where a business is carried on giving rise to a cause of action (even though the principal office of the corporation is not located there) so long as there is a subordinate office of the corporation situated at such place. The linking together of the place where the cause of action arises with the place where a subordinate office is located clearly shows that the intention of the legislature was that, in the case of a corporation, for the purposes of clause (a), the location of the subordinate office, within the local limits of which a cause of action arises, is to be the relevant place for the filing of a suit and not the principal place of business. [399G 400B] 7. If the intention was that the location of the sole or principal office as well as the location of the subordinate office (within the limits of which a cause of action arises) are to be deemed to be places where the corporation is deemed to be carrying or business, the disjunctive "or" will not he there. Instead, the second part of the explanation would have read "and, in respect of any cause of action arising at any place where it has a subordinate office, also at such place ' '. [400C] 8. The clear intendment of the Explanation, however, is that, where the corporation has a subordinate office in the place where the cause of action arises, it cannot be heard to say that it cannot be sued there because it does not carry on business at that place. It would be a great hard ship if, in spite of the corporation having a subordinate office at the place where the cause of action arises (with which in all probability the plaintiff has had dealings), such plaintiff is to be compelled to travel to the place where the corporation has its principal place. That place should be convenient to the plaintiff; and since the corpo ration 394 has an office at such place, it will also be under no disad vantage. Thus the Explanation provides an alternative locus for the corporation 's place of business, not an additional one. [400F G] 9. In the instant two cases since clause (c) is not attract ed to confer jurisdiction on courts at Bombay and the appel lant has admittedly its subordinate offices at the respec tive places where the goods in these two cases were deliv ered to it for purposes of transport, the courts at Bombay had no jurisdiction at all to entertain the suits filed by the respondents and the parties could not confer jurisdic tion on the courts at Bombay by an agreement. Accordingly, no exception can be taken to the findings in this behalf recorded by the trial court and the High Court. [401C D] Hakam Singh vs M/s. Gammon (India) Ltd., [1971] 3 SCR page 314, referred to.

Appeal No. 200 of 1960. Appeal from the Judgment and Order dated the 19th March, 1959, of the Mysore High Court, Bangalore, in Writ Petition No. 263 of 1957. K.Srinivasan and R. Gopalakrishnan, for the appellant. A. N. Kirpal and D. Gupta, for the respondent. December 5. The Judgment of the Court was delivered by SHAH, J. This appeal with certificate of fitness granted by the High Court of Judicature of Mysore is from an order rejecting the petition of the appellant for a writ to quash a notice of reassessment under section 34 of the Indian Income Tax Act. The appellants are a Hindu Undivided Family carrying on business in groundnuts and other commodities at Goribidnur, Kolar District, in the territory which formed part of the former State of Mysore. The Mysore Income Tax Act was repealed and the Indian ' Income Tax Act was brought into force in the Part B State of Mysore as from April 1, 1950. The appellants had adopted as their year of; account July 1 to June 30 of the succeeding year and they were assessed under the Mysore Income Tax Act on that footing for the year of assessment 1949 50 corresponding to the year of account July 1, 1948,to June 30, 1949. After the Indian Income Tax Act was applied to the State of Mysore on December 26, 1950, notice under section 22(2) of the Indian Income Tax Act was served upon the appellants requiring them to submit their 913 return of income for the assessment year 1950 51. On September 8, 1952, the appellants submitted their return stating that for the year ending June 30, 1949, corresponding to the assessment year 1949 50, they were assessed under the Mysore Income Tax Act, that their income for the year ending June 30, 1950, was assessable under the Indian Income Tax Act in the assessment year 1951 52 and that they had no assessable income for the assessment year 1950 51. The Income Tax Officer passed on that return an order "no proceeding" and closed the assessment. For the assessment year 1951 52, the appellants submitted their return of income. In the books of account produced by the appellants an opening cash credit balance of Rs. 1,87,000 odd on July 1, 1949, was disclosed. The Income Tax Officer called upon the appellants to produce their books of account of previous years, but the books were not produced on the plea that the same were lost. In assessing the income of the appellants for the year of account 1949 50, the Income Tax Officer held that Rs. 1,37,000 out of the opening balance in the books of account dated July 1, 1949, represented income from an undisclosed source. In appeal, the Appellate Assistant Commissioner observed that the appellants not having exercised their option under section 2(ii) of the Indian Income Tax Act, and in the absence "of any system of accounting adopted" by them, the only course open to the Income Tax Officer was to take the financial year ending March 31, 1950, as the previous year for the income from an undisclosed source, and directed the Income Tax Officer to consider this credit in the assessment for the year 1950 51 after giving opportunity to the appellants to explain the nature and source thereof. Before the appeal was disposed of by the Appellate Assistant Commissioner, the appellants had submitted a fresh return for the assessment year 195051 purporting to do so under section 22(3) of the Indian Income Tax Act. Pursuant to the direction of the Appellate Assistant Commissioner, the Income Tax Officer issued a notice of reassessment under section 34 of the Income Tax Act and served it on October 15, 1957, 914 calling upon the appellants to submit a fresh return. The appellants thereupon submitted a petition under article 226 of the Constitution to the High Court of Mysore praying for an order declaring that the notice under section 34 was without jurisdiction and for quashing the notice and proceeding consequent thereon. This petition was dismissed by the High Court, but the High Court, on the application of the appellants, certified that the appeal was a fit one for appeal to this court. Section 34(1) of the Indian Income Tax Act at the relevant time in so far as it is material provided: "(1) If (a). the Income Tax Officer has reason to believe that by reason of the omission or failure on the part of the 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 incometax have escaped assessment for that year, or (b). notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income Tax Officer has in consequence of information in his possession reason to believe that income, profits or gains chargeable to income tax have escaped assessment for any year, he may in cases falling under el. (a) at any time within eight years and in cases falling cl. (b) within four years of the end of that year, serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub section (2) of section 22 and may proceed to assess or reassess such income, profits or gains; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub section. " In the course of the assessment proceedings for 1951 52, the appellants produced their books of account containing an entry dated July 1, 1949, showing an opening cash balance of Rs. 1,87,000 odd which was not satisfactorily explained. Though called upon, they did not produce their books of account for the earlier year. The appellants had failed to disclose in their return for the assessment year 1950 51 any 915 income. In the circumstances, the Income Tax Officer had reason to believe that by reason of failure on the part of the appellants to disclose fully and truly all ' material facts necessary for assessment for that year, income chargeable to tax had escaped assessment. The Income Tax Officer had therefore jurisdiction to issue the notice for reassessment. The submission that the previous return submitted on September 8, 1952, "had not been disposed of" and until the assessment pursuant to that return was made, no notice under section 34(1) for reassessment could be issued, has in our judgment no substance. The Income Tax Officer had disposed of the assessment proceeding accepting the submission made by the appellants that they had no income for the assessment year 1950 51. Under section 23(1) of the Indian Income Tax Act, it is open to the Income Tax Officer, if he is satisfied that the return made by an assessee under section 22 is correct, to assess the income and to determine the sum payable by the assessee on the basis of the return without requiring the presence of the assessee or production by him of any evidence. The appellants had in their return dated September 8, 1952, submitted that they had no assessable income for the year in question and on this return, the Income Tax Officer had passed the order "no, proceeding". Such an order in the circumstances of the case meant that the Income Tax Officer accepted the return and assessed the income as "nil". If thereafter, the Income Tax Officer had reason to believe that the appellants had failed to disclose fully and truly all material facts necessary for assessment for that year, it was open to him to issue a notice for reassessment. Under section 22, sub section (3), an assessee may submit a revised return if after he has furnished the return under sub section (2) he discovers any omission or wrong statement therein. But such a revised return can only be filed "at any time before the assessment is made" and not thereafter. The return dated February 26, 1957, was submitted after the assessment was made pursuant to the earlier return and it could not be entertained. Nor could the lodging of such a return 916 debar the Income Tax Officer from commencing a proceeding for reassessment of the appellant under section 34(1) of the Indian Income Tax Act. There is also no substance in the contention that for the assessment year 1950 51 the assessee could be assessed under the Mysore Income Tax Act and not under the Indian Income Tax Act. By the Finance Act XXV of 1950 section 13, cl. (1), it was provided in so far as it is material that: "If immediately before the 1st day of April, 1950, there is in force in any Part B State. any law relating to income tax or super tax or tax on profits of business, that law shall cease to have effect except for the purposes of the levy, assessment and collection of income tax and super tax in respect of any period not included in the previous year for the purposes of assessment under the Indian Income Tax Act, 1922 (XI of 1922), for the year ending on the 31st day of March, 1951, or for any subsequent year. " By virtue of section 13(1), the Mysore Income Tax Act ceased to be in operation as from April 1, 1950, except for the purposes of levy, assessment and collection of income tax and super tax in respect of any period which was not included in the previous year for the purposes of assessment under the Indian Income Tax Act for the assessment year 1950 51. The appellants had been assessed for the period July 1, 1948, to June 30, 1949, under the Mysore Income Tax Act. It is manifest that for any account year which was the previous year in relation to the assessment year 195051, the appellants were liable to be assessed under the Indian Income Tax Act and not under the repealed Act. The year of account July 1, 1949, to June 30, 1950, was not a period prior to such previous year and therefore liability to pay tax in respect of that period could be assessed not under the Mysore Income Tax Act, but under the Indian Income Tax Act. It was urged that this interpretation of section 13 may, when the account year of an assessee does not coincide with the financial year lead to double taxation of the income for the account year ending between April 1, 1949, 917 and March 31, 1950. But in order to avoid the contingency envisaged by the appellants, the Central Government has, in exercise of its power under section 60A of the Indian Income Tax Act, issued the Part B States (Taxation Concessions) Order, 1950, which by cl. 5(1) provides amongst other things, that the income, profits and gains of any previous year ending after the 31st day of March, 1949, which is a previous year for the State assessment year 1949 50 shall be assessed under the Act (Indian Income Tax Act, 1922) for the year ending on the 31st March, 1951, if and only if such income, profits and gains have not, before the appointed day, been assessed under the State law. If, in respect of the previous year for the purposes of the assessment year ending 31st March, 1951, the appellants had been assessed by any State Government under a law relating to income tax in force in the State, the Indian Income Tax authorities would be in competent to assess income for that year; but in default of such assessment income of the appellants for that year was assessable under the Indian Income Tax Act. The notice under section 34 was also not issued after the expiry of the period prescribed in that behalf. The notice was issued by the Income Tax Officer because he had reason to believe that by reason of failure on the part of the appellants to disclose fully and truly all material facts necessary for the assessment for the the year 1950 51, income had escaped assessment. Such a notice fell manifestly within section 34(1)(a) and could be issued within eight years, from the end of the year of assessment. The impugned notice under section 34 for reassessment of the income of the appellants for the year 1950 51 was, in our judgment, properly issued and the High Court was right in dismissing the petition for a writ to quash the notice. The appeal fails and is dismissed with costs.

The appellants, a Hindu undivided family, carrying on business in the former State of Mysore, were assessed under the Mysore Income tax Act for the year of assessment 1949 50 corresponding to the year of account July 1, 1948, to June 30, 1949. The Indian Income tax Act came into force in that area in April 1, 1950, and on December 26, 1950, notice under section 22(2) of that Act was served upon the appellants to submit their return for the assessment year 1950 51. On September 8, 1952, the appellants submitted their return stating that they had no assessable income for that year. The Income Tax Officer passed on that return an order, "no proceeding", and closed the assessment. When the appellants submitted their return for the next assessment year, their books of account disclosed an opening cash credit balance of Rs. 1,87,000 and odd on July 1. 1949. They failed to produce the books of account of the previous years, and the Income tax Officer held that Rs. 1,37,000 out of the said opening balance represented income from an undisclosed source. The appellants submitted a fresh return for the assessment year 1950 51 purporting to do so under section 22(3) of the Indian Incometax Act. Pursuant to the direction of the Appellate Assistant Commissioner, the Income Tax Officer on October 15, 1957, served on the appellants a notice under section 34 of the Act and thereupon the appellants moved the High Court under article 226 for an order quashing the said notice and the proceeding as without jurisdiction. The High Court dismissed the petition. Held, that it was not correct to say that the issue of the notice for reassessment was without jurisdiction as the assessment was yet pending. Under section 23(1) of the Indian Income tax Act, it is open to the Income tax Officer, if he is satisfied as to correctness of the return filed by the assessee, to assess the income and determine the sum payable on the basis of the return without requiring the assessee either to be present or to Produce evidence. The order 'no proceeding recorded on the. return must, therefore, mean that the Income Tax Officer bad accepted the previous return and assessed the income as nil. A revised return under section 22(3) filed by the assessee may be 912 entertained only before the order of assessment and not thereafter. Lodging of such a return after the assessment is no bar to reassessment under section 34(1) of the Act. It could not be said, having regard to the provisions of section 13(1) of the Finance Act (XXV of 1950) and cl. 5(1) of Part. B States (Taxation Concessions) Order 1950, issued by the Central Government under section 60A of the Indian Income tax Act, that for the assessment year 1950 51 the appellants were assessable under the Mysore Income tax Act and not under the Indian Income tax Act.

The religious Mutts, of which the appellants were Mathadhipatis, were situated in the District of South Kanara which formerly was in the State of Madras. Section 76(1) of the Madras Hindu Religious and Charitable Endowments Act, 1951, the law applicable to the Mutts, provides that in respect of services rendered by the Government and their officers and for defraying the expenses incurred on account of such services, every religious institution shall, from the income derived by it, pay to the Commissioner annually such contribution not exceeding 5% of its income as may be prescribed. Consequent upon the reorganisation of States in 1956 the District of South Kanara was transferred to the State of Mysore. By reason of the provisions of the States Reorganisation Act the Madras Act of 1951 continued to apply to the Mutts in the district even after their transfer to the State of Mysore. The Government of Mysore issued a notification authorising the Commissioner for Settlement and Charitable Endowments for Mysore to exercise the functions of the Commissioner under the Madras Act. In April, 1964 when the Commissioner of Hindu Religious and Charitable Endowments, Mysore issued a notice to the appellants demanding payment of certain contributions for the years 1957 to 1960 the appellants denied their liability to pay the amounts on the ground that (1) the Commissioner had no power to demand payment of contributions for the period subsequent to November, 1956 (when the District was transferred from the former State of Madras to the State of Mysore); (2) that the demands were excessive and bore no relationship with the services rendered by the department and (3) that the expenditure incurred on the maintenance of staff and officers of the Commissioner 's office could not wholly or in part be recovered from the appellants by way of contributions under s.76(1) of the Madras Act of 1951. All the contentions were rejected by the Commissioner. The appellants thereupon filed writ petitions in the High Court impugning the Commissioner 's orders. The High Court dismissed the writ petitions. 369 On appeal to this Court it was contended on behalf of the appellants that (1) the notification issued by the Mysore Government authorising the Commissioner to exercise the functions of the Commissioner under the Madras Act was invalid because the Commissioner being a Corporation Sole the only authority competent to issue a notification in this behalf under section 109(1) of the was the Central Government; (2) that the demands made by the Commissioner for payment of fees were illegal because considering the services rendered to them they were excessive; (3) that the application of the Madras Act to one district only offends against the guarantee of equality contained in article 14 because the Mutts were required to pay fees which similar institutions situated in other areas of the State were not required to pay and (4) that though the initial application of the Madras Act of 1951 to the District was not violative, its continued application offends against the guarantee of equality. Dismissing the appeals, ^ HELD : 1. The provisions of s.109(1) of the do not support the argument that the Commissioner being a Corporation Sole the only authority competent to issue the notification under section 122 was the Central Government. Though the body corporate has to function within the scope of and in accordance with the directions issued by the Central Government from time to time, its power to function under the parent Act is not conditional on the issuance of directions by the Central Government. If directions are issued by the Central Government they have to be complied with by it. If on the other hand no directions are issued the powers and functions of the authority remain unimpaired and can nevertheless be exercised as contemplated by the Act which creates the body corporate. [375C D] 2.(a) Information on matters like the date of constitution of the Religious Endowment Fund, annual salary budget of the Commissioner 's establishment at different places and the total number of institutions to which services were rendered sought by the appellants would be within the knowledge of the respondents and could have been supplied. For the purposes of finding whether there was a correlationship between the services rendered to the fee payers and the fees charged it is necessary to know the cost incurred for organising and rendering the services. But matters involving consideration of such correlationship are not required to be proved by mathematical formula. What has to be seen is whether there is a fair correspondence between the fee charged and the cost of services rendered to the fee payers as a class. A vivisection of the amounts spent by the Commissioner 's establishment would have been speculative. It cannot be said that substantial prejudice had been caused to the appellants by reason of the non supply of the information sought by them. [376 F H] (b) It is well established that a tax is levied as a part of a common burden while a fee is for a special benefit or privilege. Public interest is at the basis of all impositions; but in a fee it is some special benefit which the individual receives which is the basis of imposition. A fee being a levy in consideration of rendering service to a particular type, correlation between the expenditure and the levy must exist but a levy will not be regarded as a tax merely because of the absence of uniformity in its incidence or because of compulsion 370 in the collection thereof or because some of the contributories did not obtain the same degree of service as others may. [377F H] In the instant case there were some institutions whose annual income was over Rs. 200 and a large number whose annual income was less than Rs. 200. The smaller institutions require and receive services from the department as much as the bigger class and the amounts collected by way of fees were just enough to balance the bulk of the expenditure incurred for financing the conduct of affairs of the department which is charged with the duty and obligation of rendering services to the institutions directly and to the public which patronises or visits them indirectly. [378G H] The Commissioner, Hindu Religious Endowment, Madras vs Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt. ; , H. H. Sudhundra Thirtha Swamiar vs Commissioner for Hindu Religious & Charitable Endowments, Mysore. [1963] Suppl. 2 SCR. 302, Kewal Krishan Puri and Anr. etc. vs State of Punjab and ors. ; , Hingir Rampur Coal Co. Ltd. & Ors. vs State of Orissa and Ors. ; , Indian Mica and Micanite Industries Ltd. vs State of Bihar & ors. , Secretary, Government of Madras, Home Department and Anr. vs Zenith Lamp & Electrical Ltd. ; referred to. (c) In the absence of any acceptable evidence showing that the department had built up large accumulations or reserves out of the fees collected from the various institutions and considering that services were required to be rendered to a large class of institutions consisting of major and minor institutions it cannot be said that there was no approximation or correspondence between the fees levied on the appellants and the services rendered to the class to which they belonged. [379C D] 3. The Madras Act of 1951 in its application to the district of South Kanara (now in the State of Karnataka) does not infringe article 14 of the Constitution. By a long line of decisions this Court has laid down that dissimilar treatment does not necessarily offend against the guarantee of equality contained in article 14 so long as there is a valid basis for classification and the classification bears a nexus with the object of the impugned provisions. In matters arising out of reorganisation of States, continued application of laws of a State to territories which were within that State but which became a part of another State, is not discriminatory since classification rests on geographical considerations founded on historical reasons. Bhaiyalal Shukla vs State of Madhya Pradesh [1962] Supp. 2 SCR 257, Pandit Banarsi Das Bhanot vs State of M.P. ; , Anant Prasad Lakshminivas Ganeriwal vs State of Andhra Pradesh and other [1963] Suppl. 1 SCR 844, The State of Madhya Pradesh vs Bhopal Sugar Industries Ltd. ; , Vishwesha Thirtha Swamiar & Ors. vs State of Mysore & Anr. ; referred to. State of Rajasthan vs Rao Manohar Singhji ; and Jia Lal vs The Delhi Administration distinguished. Section 119 of the was intended to serve a temporary purpose. But Acts, Rules and Regulations whose constitutional validity is upheld and can be upheld only on the ground that no violation per se of article 14 is involved in the application of different laws 371 to different components of a State, if the area to which unequal laws are applied has become a part of the State as a result of the States Reorganisation, cannot continue to apply to such area indefinitely. An indefinite extension and application of unequal laws for all time to come would militate against their true character as temporary measures taken in order to serve a temporary purpose. The decision to withdraw application of unequal laws to equals cannot be delayed unreasonably because the relevance of historical reasons which justify the application of unequal laws is bound to wear out with the passage of time. But it cannot, however, be said that the continued application of the Act to the District became violative of article 14 as immediately as during the period under consideration, which was just five or six years after the passing of the . Nor has the continued application of that Act until now is shown to be violative of article 14. [387E G] Narottam Kishore Dev Varma and Ors. vs Union of India and Anr. ; referred to. Shinghal J. (concurring in the final decision). In the absence of necessary pleadings by the appellants it was not necessary to consider whether the continued application of the Madras Act to the district was violative of article 14 of the Constitution. It cannot also be said that inequality is writ large on the face of the impugned statute in its application to the district and that it is perilously near the periphery of unconstitutionality merely because of the lapse of 23 years. [395A] 2. Pleadings or a statement of material facts are of vital importance because absence of all the necessary facts in a petition for the redress of a grievance denies an opportunity for the opposite party to formulate its case. The parties would not know the points at issue and therefore the controversy would be confined to any point or points. If a petition filed under article 226 or article 32 alleging infringement of article 14 is singularly deficient in furnishing particulars justifying the allegation, but makes out only a mere plea of differential treatment, that, by itself, would not be sufficient to enable the Court to examine the validity of the petitioner 's claim. [389G H; 392H] In the instant case the sole ground on which the appellants rested their plea of discrimination was the continued application of the provisions of the Act to the district eight or nine years after the reorganisation of States and that failure to "unify" the legislation on the subject of Hindu Religious and Charitable Endowments was wholly discriminatory. That is quite untenable in view of the decision in Bhopal Sugar Industries case. The other plea of mixing of Mutts with temples is not quite intelligible. It had not even been referred by the counsel during the arguments. The grounds which had been taken were, therefore, untenable. [394A C] 3. It is impossible to lay down any definite time limit within which the State has to make the necessary adjustment for the purpose of effectuating the equality clause of the Constitution. While differential treatment could not be permitted to assume permanency without a rational basis to support it as years go by a mere plea of differential treatment is by itself not sufficient to attract the application of article 14. State of Madhya Pradesh vs Bhopal Sugar Industries Ltd. ; followed.

Respondent 1, a conductor of the Mysore Government Road Transport Department was dismissed. for misconduct on 25 1 1961. The legality of the said dismissal order was questioned in the High Court under article 226 with a further prayer to declare that he had continued in service since the date of his suspension and commencement of disciplinary proceedings. The High Court allowed the writ petition on 11 9 1964 and quashed the dismissal order with an observa tion viz. "It is further ordered that this is without preju dice to the holding of fresh enquiry if they consider the same necessary". On 1 8 1961. the Road Transport Corpora tion was constituted and the Government Road Transport Department was abolished. Such of the employees who had exercised their option as per the notice dated 23 6 1961, were taken over by the appellant corporation. The re spondent No. 1 was not given the option as he was dismissed by that date. On a complaint under the. Contempt of Courts Act against respondent 2 and the appellant, that there was disobedience to the order of the High Court dated 12 9 1964, the respondent 1 was paid ,,he salary by the State Govern ment for the period 25 1 1961 to 31 7 1971. Since he was not paid back salary and allowances and also the salary due from 1 8 1961, the respondent filed a writ petition No. 1579/66 which was again allowed. On a concession made by the counsel for the State Government that the State Govern ment was willing to make available to the petitioner an option to become an employee of the appellant corporation, the High Court held: "Notice shall be in the same form in which it was served on other employees and with a month 's time to exercise his option. If he exercises his option to become an employee of the corporation the petitioner will have all. the benefits. such as continuity in service, seniority, the benefit of the old conditions of service applicable in Mysore Government Road Transport Department. The petitioner will also be entitled to the salary for the period ' between August 1, 1961 and the date of his appoint ment as an employee of the corporation". On appeal by special leave by the corporation, the Court, HELD: (1) The order of the High Court dated 11 9 1964 could not possibly amount to a declaration that the first respondent had continued in the service of either the Mysore Government or had become the servant of the appellant corpo ration, a separate legal entity which came into existence by means of a Notification under section 3 of the Road Transport Corporation Act, 1950. As a separate legal entity the corpo ration could not be said to have stepped automatically into the shoes of the Mysore Road Transport Department, there being no provision of the Act or Rules made thereunder to that effect. [927 A D] (2) The declaratory relief asked for not having been granted, that relief would be deemed to have been refused. Failure to go in appeal against that decision operates as a bar for claiming such a relief in the subsequent writ petition. [931 B] (3) The effect of the High Courts ' order setting aside the dismissal was that the stigma of dismissal was removed from the record of the first respondent. The winding of the department on the facts of the case, operates as the discharge of the respondent. The respondent cannot be deemed to be the corporation 's employee inasmuch as he has not exercised any option nor did be ask for a notice of option in the original writ petition filed by him. [931 D E] 926 Mysore State Road Transport Corporation vs A. Krishna Rao & Anr., C.A. No. 1720 of 1967 S.C. decided on 6 8 1969, followed. (4) Neither the Act nor the two notifications under section 34(1) of the Act contain any provision. which could entitle an employee of the Mysore Government Road Transport Depart ment to get a notice automatically. The notifications could apply only to those persons who, on 1 8 1961 had already exercised an option to serve under the corporation in pursu ance of notice issued to them. It makes no provision for persons to whom for any considerable reason, no notice has been issued. [928 D F] (5) When the first respondent applied in the High Court for another writ or direction under article 226 in 1966, the High Court over stepped the limits of mere interpretation or application of the law and indulged in what is nothing short of legislation by directing the State Government to serve a notice calling upon the first respondent to exercise his option on the question whether he wanted to become an employee of the Mysore State Road Transport Corporation in the same way in which other employees of the Transport Department had been asked to exercise their option. [929 C E] (6) The State Government owed no duty to the first respondent to pay him after transport department was wound up in the absence of any contract 10 show what duty the Government could have to employ the first respondent after its transport department was wound up or to direct the corporation to do so. [929 G H] (7) In order to compel the corporation to do anything only a general direction u/s 34 of the Act could be given by the Government. There neither could be a special direction with regard to a particular case nor was any special direction given by the Government for any such case. The High Court could not take upon itself the power to fill any gap in the provision of the. Act, even if there be one, and compel the Government to perform a function which the Gov ernment was not under any kind of obligation to discharge. The High Court could not give a specific direction to make a provision to meet what it thought was required in a particular or individual case if such a case fell outside the provisions made by the Act and the rules. There is no justification at for such assumption of powers by the High Court. [929 H, 930 A B]

The respondent imported 2,000 drums of mineral oil and the appellant confiscated 50 drums and imposed a personal penalty. The appeal of the respondent was dismissed by the Central Board of Revenue. The respondent filed a petition under article 226 of the Constitution in the Calcutta High Court. A Full Bench of the High Court held that the High Court had no jurisdiction to issue a writ against the Central Board of Revenue in view of the decision in the case of Saka Venkata Subbha Rao. However, as the Central Board of Revenue had merely dismissed the appeal against the 564 order of the appellant, the High Court further held that it had jurisdiction to pass an order against the appellant. The appellant came to this Court after obtaining a certificate. Held that the appellant had merged into that of the Central Board of Revenue and hence no order could be issued against the appellant. It is only the order of the appellate authority which is operative after the appeal is disposed of. It is immaterial whether the appellate order reverses the original order, modifies it or confirms it. The appellate order of confirmation is as efficacious as an operative order as an appellate order of reversal or modification. As the appellate authority in this case was beyond the territorial jurisdiction of the High Court, it was not open to the High Court to issue a writ to the original authority which was within its jurisdiction. Election Commission, India vs Saka Vankata Subba Rao, , A. Thangal Kunju Mudatiar vs M. Venkitachalam Poiti, ; , Commissioner of Income tax vs M/s. Amritlal Bhogilal & Co. [1959] section C. R. 713 and Madan Gopal Rungta vs Secretary to the Government of Orissa, (1962) (Supp.) 3 S.C.R. followed. Barkatali vs Custodian General of Evacuee Property, A. 1. R. , overruled. Joginder Singh Waryam Singh vs Director, Rural Rehabilitation, Pepsu, Patiala, A. 1. R. 1955 Pepsu 91, Burhanpur National Textile Workers Union vs Labour Appellate Tribunal of India at Bombay, A. I. R. , and Azmat Ullah vs Custodian, Evacuee Property, A.I.R. 1955 All 435, approved. State of U. P. vs Mohammed Nooh, ; , distinguished.

By an election petition two electors of the constituency, the appellants, challenged the election of the first respondent to, the Mysore Legislative Assembly in 1967 from the Jamkhandi constituency. It was alleged inter alia that the first 'respondent had ceased to be a person ordinarily resident within the constituency during the period relevant to the 1967 General Elections, and the validity of the entry of his name on the Electoral Roll was questioned; it was claimed that he was not therefore qualified to stand for election from the constituency. The petition also contained allegations of corrupt practices including misuse by certain Police Officers of their position to prevent voters from voting freely, and malpractices by the Presiding Officer at the time of polling, etc. After framing an issue on the question and taking the view that the Court had jurisdiction to determine the validity of the inclusion of the first respondent 's name as an elector on the Electoral Roll, the trial judge held on a consideration of the evidence, that the petitioners had failed to prove he first respondent was not an elector and was not qualified to stand for election from the constituency. The High Court also rejected the allegations of corrupt practices and dismissed the petition On appeal to this Court, HELD : (i) Under section 30 of the Representation of the People Act, 1950, no civil court shall have jurisdiction to entertain or adjudicate upon any question whether any person is or is not entitled for registration in an Electoral Roll for a constituency. There are elaborate rides which have be en promulgated for preparation and revision of the Electoral Rolls, namely, Electors ' Rules 1960. The conditions about being ordinarily resident in a constituency for the purpose of registration are meant for that purpose alone and have nothing to do with the disqualifications for registration which are prescribed by section 16 of the Act of 1950, which alone are relevant to the definition of an "elector" as given in section 2(1)(e) of the Act of 1951. The entire scheme of the Act of 1950 and the amplitude of its provisions show that the entries made in an Electoral Roll of a constituency can only be challenged in accordance with the machinery provided by it and not in any other manner or before any other forum unless some question of violation of the provisions of the Constitution is involved. The present case did not also involve any violation or infringement of Article 173 or any other provision of the Constitution. [,615 H] The question whether respondent No. 1 was ordinarily resident in Jamkhandi constituency during the material period and was entitled to 612 be registered in the Electoral Roll could not therefore be the subject matter of enquiry except in accordance with the provisions of the Act of 1950. Under section 100(1) (d) an election can be declared void only if the result of the election, in so far as it concerns a returned candidate, has been materially affected by any non compliance with the provisions of the Constitution or of the Act of 1951 or of any rules or orders made thereunder. Nothing could be clearer than the ambit of this provision. It does not entitle the court in an election petition to set aside any election on the ground of non compliance with the provisions of the Act of 1950 or of any rules made hereunder with the exception of section 16. [617 E] Durga Shankar Mehta vs Thakur Raghurai Singh & Others, [1955] 1 S.C.R. 267; K. Sriramulu vs K. Deviah ; Roop Lal Mehta vs Dhan Singh and Others ; referred to. On the evidence, no reasons were shown for this court to differ from the findings of the Trial Judge on the allegations of corrupt practices. Meghraj Patodis vs R. K. Birla & Others, Civil Appeal No. 1094/69 dated 10 9 1970; referred to.

The appellant was registered as a dealer under the various Sales Tax Acts in force in Bombay from time to time i.e. Bombay Acts 5 of 1946, 3 of 1953 and 51 of 1959. In the course of its assessments to sales tax for the periods from 1st April, 1948 to 31st March, 1950, and from 1st April 1950 to 31st March, 1951, the appellant claimed exemption from tax, inter alia, in respect of certain despatches of goods from its head office in Bombay to its branches in other States. The Sales Tax Officer rejected these claims but, in appeal, the Assistant Collector accepted the claim in respect of the despatches to various branches though he rejected all other claims for exemption. He also directed a refund of the excess 'tax collected from the appellants. While revision petitions filed by the appellant against these orders were pending, a notice was issued to him on January 7, 1963 by the Deputy Commissioner of Sales Tax in Form XXIV under section 31 of the Bombay Sales Tax Act, 1953, intimating the appellant that he proposed to revise suo motu the orders passed by the Assistant Collector in so far as he had allowed deduction in respect of the entire goods despatched to the appellants ' branches outside Maharashtra because, in so doing, he had overlooked certain provisions of law which were specified in the notice. Tile appellant filed a petition under article 226 of the Institution seeking to quash the notice dated 7th January, 1963 but his petition was dismissed by the High Court. In the appeal to this Court it was contended on behalf of the appellant, inter alia (i) that in exercise of the revisional powers, the Deputy Commissioner, whether acting under the Sales Tax Act of 1946, or of 1953, or of 1959, could only proceed to take action on the basis of the material already present on the record and was not entitled to act on conjecture or to institute any enquiry so as to include additional material nor to judge the correctness of the order sought to be revised; (ii) that the notice in question was issued on 7th January, 1963, when the Act of 1959 had already come into force and the Act of 1953 had been repealed; so that any revisional jurisdiction could only be exercised by the Deputy Commissioner under the Act of 1959 and not under the Act of 1953 , as the power under section 57 of the Act of 1959 could only be exercised within five years from the date of the order sought to be revised; the notice issued by the Deputy Commissioner was time barred; and (iii) that the proceedings to be instituted were barred by time, because limitation of a reasonable time; within which the revisional Powers are to be exercised must be implied in the statute itself. 493 HELD : The proceedings initiated by the Deputy Commissioner of Sales Tax against the appellant were not incompetent and the High Court was right in refusing the writ sought by the appellant. (i) Whenever a power is conferred on an authority to revise an order, it is entitled to examine the correctness, legality and propriety of the order and to pass such suitable orders as it may think fit in the circumstances of the particular case. The proceedings for revision, if started suo motu, must not be based on a mere conjecture and there should be some ground for invoking the revisional powers. Once these powers are invoked, the actual interference must be based on sufficient grounds and, if it is considered necessary that some additional enquiry should be made to arrive at a proper and just decision, there can be no bar to the revising authority holding or directing a further enquiry and thereafter admitting additional material. [496 A C] The State of Kerala vs K. M. Cheria Ahdulla and Company, ; , explained and followed. State of Andhra Pradesh vs T. G. Lakshmnaiah Setty & Sons, 12 S.T.C. 663; disapproves. In the present case,. the notice issued by the Deputy Commissioner, on the face of it, disclosed the reasons which led him to take proceedings for exercising his revisional powers suo motu, and it could not be said on those facts that he was acting merely on conjecture. There was no reason to think that, when proceeding with his inquiry, he would not keep within the limitations indicated by this Court in K. M. Cheria Abdullas case. (ii) The effect of section 77(1) (a) of the Act of 1959 is to continue in force the Act of 1953 as well as: the Act of 1946 to the extent to which they were in force when the Act of 1959 came into force for the purposes of levy, assessment, reassessment and collection of sales tax. Fur thermore, by virtue of section 7(e) of the Bombay General Clauses Act, 1904, which was made applicable to the repeal of the Act of 1953 by section 77(3) of the 1959 Act, any legal proceeding in respect of levy, imposition or recovery of tax is to continue and any fresh investigation, legal proceeding or remedy could be instituted as if there had been no repeal by the Act of 1959. Consequently, the repeal of the Act of 1953 did not in any way affect the power of the Deputy Commissioner to institute proceedings for revision suo motu against the appellate order of the Assistant Collector which had been Passed in exercise of his power under the Act of 1946. [499 C 500 B] Although the Deputy Commissioner, in seeking to exercise revisional powers should have proceeded under section 22 of the Act of 1946 and not under section 31 of the 1953 Act, this fact was immaterial as the provisions of the two Sections were similar. [500 D E] (iii) Section 22 of the Act of 1946 and section 31 of the Act of 1953 do not lay down any period of limitation for the exercise of the power of revision by a Deputy Commissioner suo motu and no such limitation could be read in the two Acts. [500 G] The State of Orissa vs Debaki Debi and Others, 15 S.T.C. 153. Commissioner of Income tax, Bombay City 1 vs Narsee Nagsee & Co., , Manordas Kalidas vs V. V. Tatke, 11 S.T.C, 87. Disesar House vs State of Bombay, 9 S.T.C. 654, distinguished. 494 Maharaj Kumar Kamal Singh vs C.I.T., Bihar and Orissa, , referred to.

The constituent members of the appellant Association, who carried on business in iron and steel articles were assessed to sales tax for the years 1953 54 and 1954 55 under a notification dated October 24, 1953, issued by the State of Madhya Bharat under section 5(2) of the Madhya Bharat Sales Tax Act, Samvat 2007, (Act No. 30 of 1950). The appellant moved the High Court under article 226 of the Constitution challenging the validity of the assessment on the ground that the said articles were covered by the declaration made by Parliament by section 2 of the Essential Goods (Declaration and Regulation of Tax on Sale or Purchase) Act, 1952, that iron and steel were essential commodities within the meaning of article 286(3) of the Constitution which was operative from August 9, 1952. The High Court found against the appellant. Held, that even assuming that the words "iron and steel" in Entry 14 of the Schedule to the Act were comprehensive enough to include articles made of iron and steel, that would not necessarily render the notification invalid under article 286(3) of the Constitution. Article 286(3), as it stood before the Constitution (Sixth Amendment) Act, 1956, could be successfully invoked only if three conditions were satisfied, (1) that the impugned legisla. tion was one by the Legislature of a State, constituted under the Constitution, (2) that it was subsequent to the declaration made by the Parliament as to the essential character of the commodity and (3) that it could be, but was not, reserved for the President 's consideration and assent. It was obvious, therefore, that a subsequent Parliamentary 925 declaration could not affect the validity of an enactment retrospectively. Sardar Soma Singh vs The State of Pepsu and Union of India, ; and Firm of A. 'Gowrishankar vs Sales Tax Officer, Secunderabad, A. I. R. , referred to. Although the Art, tinder which the impugned notification was made, satisfied the first condition, it did not satisfy the second or the third and, consequently, its validity could not be questioned under article 286(3) of the Constitution. Held, further, that it was apparent from section 3 of the Essential Goods (Declaration and Regulation of Tax on Sale or Purchase) Act, 1952, that if a law had been passed prior to the commencement of the Act authorising the imposition of a tax its validity could not be challenged on the ground that the said commodity was subsequently declared by the Act to be essential for the life of the community. The impugned notification and the State Act under which it was made were, therefore, outside the purview of section 3 of the Act.

The respondent was assessed to sales tax in the State of Kerala for the year 1962 63 in March, 1964. In December, 1965 the Sales Tax Officer issued notice under R. 33 of the Travancore Cochin General Sales Tax Rules, 1950 in force at that time for reopening the original assessment on the ground that certain turnover had escaped assessment. According to the relevant portion of the said rule the assessing authority "may at any time within three years next succeeding that to which the tax relates determine to the best of his judgment the turnover which has escaped assessment and assess the tax payable on such turnover after issuing a notice to the dealer and after making such enquiry as he considers necessary". The respondent 's objection to the notice having failed it filed a writ petition in the High Court. The learned Single Judge who heard the writ petition felt that it was due to the orders of the court that the Sales tax authorities had been prevented from completing the assessment within the time allowed by Rule 33. While disposing of the writ petition he observed that the Sales Tax Authorities would be at liberty to complete the proceedings initiated by the notice within a further period of 59 days. The respondent preferred an appeal to the division bench which set aside the direction granting 59 days extension for completing the assessment. The Revenue appealed. On behalf of the appellant it was contended that on a true construction of Rule 33 it should be held that the proceedings under that rule: have to commence within three years next succeeding that to which the tax relates and that it is not necessary that the entire proceeding.s relating to the escaped assessment should be completed within that period. On behalf of the respondent it was urged that the word 'determine ' in Rule 33 meant that the final determination of the turnover which had escaped assessment and the assessment of the tax have to be done within three years. Allowing the appeal. HELD: In view of the previous decisions of this Court in which provisions similar to Rule 33, namely, sub clauses (2), (4) and (5) of section 11 of the PUnjab General Sales Tax Act, 1948 came up for consideration, the principle is firmly established that assessment proceedings under the Sales Tax Act must be taken to be pending from the time the proceedings are initiated until they are terminated by a final order of assessment. In these cases the initiation o.f proceedings within the prescribed period was considered sufficient. The fact that the word used in Rule 33 is 'determine ' whereas in sections 11(4) and (5) of the Punjab Act the words 'proceed to assess ' are used, cannot, in the context of sales tax legislation lead to a different result. r862 H 863 C] The words which follow the word 'determine ' in Rule 33 must be accorded their due signification. The words 'assess the tax payable ' cannot be ignored and it is clearly meant that the assessment has to be made within the period prescribed. 'Assessment" is a comprehensive word and can 860 denote the entirety of proceedings which are taken with regard to it. It cannot and does not mean a final order of assessment alone unless there is something in the context of a particular provision which compels such a meaning being attributed to it. Rule 33 must not be so interpreted that it may be defeated by taking certain collateral proceedings and obtaining a stay order as was done in the present case or by unduly delaying assessment proceedings beyond a period of three years. It must be interpreted like the analogous provisions considered in earlier cases. This must particularly be so when there is no provision in the Rule in question analogous to. sub section (3) of section 34 of the Income tax Act, 1922 by which the Income Tax authorities were debarred from completing the assessment beyond the period prescribed. [863 D G] The State of Punjab vs Tara Chand Lajpat Rai, 19 S.T.C. 493 and The State of Punjab vs Murlidhar Mahabir Prashad, 21 S.T.C. 29 applied. Ghanshyam Das vs Regional Assistant Commissioner of Sales Tax, Nagpur, ; , referred to.

Appeal No. 200 of 1960. Appeal from the Judgment and Order dated the 19th March, 1959, of the Mysore High Court, Bangalore, in Writ Petition No. 263 of 1957. K.Srinivasan and R. Gopalakrishnan, for the appellant. A. N. Kirpal and D. Gupta, for the respondent. December 5. The Judgment of the Court was delivered by SHAH, J. This appeal with certificate of fitness granted by the High Court of Judicature of Mysore is from an order rejecting the petition of the appellant for a writ to quash a notice of reassessment under section 34 of the Indian Income Tax Act. The appellants are a Hindu Undivided Family carrying on business in groundnuts and other commodities at Goribidnur, Kolar District, in the territory which formed part of the former State of Mysore. The Mysore Income Tax Act was repealed and the Indian ' Income Tax Act was brought into force in the Part B State of Mysore as from April 1, 1950. The appellants had adopted as their year of; account July 1 to June 30 of the succeeding year and they were assessed under the Mysore Income Tax Act on that footing for the year of assessment 1949 50 corresponding to the year of account July 1, 1948,to June 30, 1949. After the Indian Income Tax Act was applied to the State of Mysore on December 26, 1950, notice under section 22(2) of the Indian Income Tax Act was served upon the appellants requiring them to submit their 913 return of income for the assessment year 1950 51. On September 8, 1952, the appellants submitted their return stating that for the year ending June 30, 1949, corresponding to the assessment year 1949 50, they were assessed under the Mysore Income Tax Act, that their income for the year ending June 30, 1950, was assessable under the Indian Income Tax Act in the assessment year 1951 52 and that they had no assessable income for the assessment year 1950 51. The Income Tax Officer passed on that return an order "no proceeding" and closed the assessment. For the assessment year 1951 52, the appellants submitted their return of income. In the books of account produced by the appellants an opening cash credit balance of Rs. 1,87,000 odd on July 1, 1949, was disclosed. The Income Tax Officer called upon the appellants to produce their books of account of previous years, but the books were not produced on the plea that the same were lost. In assessing the income of the appellants for the year of account 1949 50, the Income Tax Officer held that Rs. 1,37,000 out of the opening balance in the books of account dated July 1, 1949, represented income from an undisclosed source. In appeal, the Appellate Assistant Commissioner observed that the appellants not having exercised their option under section 2(ii) of the Indian Income Tax Act, and in the absence "of any system of accounting adopted" by them, the only course open to the Income Tax Officer was to take the financial year ending March 31, 1950, as the previous year for the income from an undisclosed source, and directed the Income Tax Officer to consider this credit in the assessment for the year 1950 51 after giving opportunity to the appellants to explain the nature and source thereof. Before the appeal was disposed of by the Appellate Assistant Commissioner, the appellants had submitted a fresh return for the assessment year 195051 purporting to do so under section 22(3) of the Indian Income Tax Act. Pursuant to the direction of the Appellate Assistant Commissioner, the Income Tax Officer issued a notice of reassessment under section 34 of the Income Tax Act and served it on October 15, 1957, 914 calling upon the appellants to submit a fresh return. The appellants thereupon submitted a petition under article 226 of the Constitution to the High Court of Mysore praying for an order declaring that the notice under section 34 was without jurisdiction and for quashing the notice and proceeding consequent thereon. This petition was dismissed by the High Court, but the High Court, on the application of the appellants, certified that the appeal was a fit one for appeal to this court. Section 34(1) of the Indian Income Tax Act at the relevant time in so far as it is material provided: "(1) If (a). the Income Tax Officer has reason to believe that by reason of the omission or failure on the part of the 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 incometax have escaped assessment for that year, or (b). notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income Tax Officer has in consequence of information in his possession reason to believe that income, profits or gains chargeable to income tax have escaped assessment for any year, he may in cases falling under el. (a) at any time within eight years and in cases falling cl. (b) within four years of the end of that year, serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub section (2) of section 22 and may proceed to assess or reassess such income, profits or gains; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub section. " In the course of the assessment proceedings for 1951 52, the appellants produced their books of account containing an entry dated July 1, 1949, showing an opening cash balance of Rs. 1,87,000 odd which was not satisfactorily explained. Though called upon, they did not produce their books of account for the earlier year. The appellants had failed to disclose in their return for the assessment year 1950 51 any 915 income. In the circumstances, the Income Tax Officer had reason to believe that by reason of failure on the part of the appellants to disclose fully and truly all ' material facts necessary for assessment for that year, income chargeable to tax had escaped assessment. The Income Tax Officer had therefore jurisdiction to issue the notice for reassessment. The submission that the previous return submitted on September 8, 1952, "had not been disposed of" and until the assessment pursuant to that return was made, no notice under section 34(1) for reassessment could be issued, has in our judgment no substance. The Income Tax Officer had disposed of the assessment proceeding accepting the submission made by the appellants that they had no income for the assessment year 1950 51. Under section 23(1) of the Indian Income Tax Act, it is open to the Income Tax Officer, if he is satisfied that the return made by an assessee under section 22 is correct, to assess the income and to determine the sum payable by the assessee on the basis of the return without requiring the presence of the assessee or production by him of any evidence. The appellants had in their return dated September 8, 1952, submitted that they had no assessable income for the year in question and on this return, the Income Tax Officer had passed the order "no, proceeding". Such an order in the circumstances of the case meant that the Income Tax Officer accepted the return and assessed the income as "nil". If thereafter, the Income Tax Officer had reason to believe that the appellants had failed to disclose fully and truly all material facts necessary for assessment for that year, it was open to him to issue a notice for reassessment. Under section 22, sub section (3), an assessee may submit a revised return if after he has furnished the return under sub section (2) he discovers any omission or wrong statement therein. But such a revised return can only be filed "at any time before the assessment is made" and not thereafter. The return dated February 26, 1957, was submitted after the assessment was made pursuant to the earlier return and it could not be entertained. Nor could the lodging of such a return 916 debar the Income Tax Officer from commencing a proceeding for reassessment of the appellant under section 34(1) of the Indian Income Tax Act. There is also no substance in the contention that for the assessment year 1950 51 the assessee could be assessed under the Mysore Income Tax Act and not under the Indian Income Tax Act. By the Finance Act XXV of 1950 section 13, cl. (1), it was provided in so far as it is material that: "If immediately before the 1st day of April, 1950, there is in force in any Part B State. any law relating to income tax or super tax or tax on profits of business, that law shall cease to have effect except for the purposes of the levy, assessment and collection of income tax and super tax in respect of any period not included in the previous year for the purposes of assessment under the Indian Income Tax Act, 1922 (XI of 1922), for the year ending on the 31st day of March, 1951, or for any subsequent year. " By virtue of section 13(1), the Mysore Income Tax Act ceased to be in operation as from April 1, 1950, except for the purposes of levy, assessment and collection of income tax and super tax in respect of any period which was not included in the previous year for the purposes of assessment under the Indian Income Tax Act for the assessment year 1950 51. The appellants had been assessed for the period July 1, 1948, to June 30, 1949, under the Mysore Income Tax Act. It is manifest that for any account year which was the previous year in relation to the assessment year 195051, the appellants were liable to be assessed under the Indian Income Tax Act and not under the repealed Act. The year of account July 1, 1949, to June 30, 1950, was not a period prior to such previous year and therefore liability to pay tax in respect of that period could be assessed not under the Mysore Income Tax Act, but under the Indian Income Tax Act. It was urged that this interpretation of section 13 may, when the account year of an assessee does not coincide with the financial year lead to double taxation of the income for the account year ending between April 1, 1949, 917 and March 31, 1950. But in order to avoid the contingency envisaged by the appellants, the Central Government has, in exercise of its power under section 60A of the Indian Income Tax Act, issued the Part B States (Taxation Concessions) Order, 1950, which by cl. 5(1) provides amongst other things, that the income, profits and gains of any previous year ending after the 31st day of March, 1949, which is a previous year for the State assessment year 1949 50 shall be assessed under the Act (Indian Income Tax Act, 1922) for the year ending on the 31st March, 1951, if and only if such income, profits and gains have not, before the appointed day, been assessed under the State law. If, in respect of the previous year for the purposes of the assessment year ending 31st March, 1951, the appellants had been assessed by any State Government under a law relating to income tax in force in the State, the Indian Income Tax authorities would be in competent to assess income for that year; but in default of such assessment income of the appellants for that year was assessable under the Indian Income Tax Act. The notice under section 34 was also not issued after the expiry of the period prescribed in that behalf. The notice was issued by the Income Tax Officer because he had reason to believe that by reason of failure on the part of the appellants to disclose fully and truly all material facts necessary for the assessment for the the year 1950 51, income had escaped assessment. Such a notice fell manifestly within section 34(1)(a) and could be issued within eight years, from the end of the year of assessment. The impugned notice under section 34 for reassessment of the income of the appellants for the year 1950 51 was, in our judgment, properly issued and the High Court was right in dismissing the petition for a writ to quash the notice. The appeal fails and is dismissed with costs.

The appellants, a Hindu undivided family, carrying on business in the former State of Mysore, were assessed under the Mysore Income tax Act for the year of assessment 1949 50 corresponding to the year of account July 1, 1948, to June 30, 1949. The Indian Income tax Act came into force in that area in April 1, 1950, and on December 26, 1950, notice under section 22(2) of that Act was served upon the appellants to submit their return for the assessment year 1950 51. On September 8, 1952, the appellants submitted their return stating that they had no assessable income for that year. The Income Tax Officer passed on that return an order, "no proceeding", and closed the assessment. When the appellants submitted their return for the next assessment year, their books of account disclosed an opening cash credit balance of Rs. 1,87,000 and odd on July 1. 1949. They failed to produce the books of account of the previous years, and the Income tax Officer held that Rs. 1,37,000 out of the said opening balance represented income from an undisclosed source. The appellants submitted a fresh return for the assessment year 1950 51 purporting to do so under section 22(3) of the Indian Incometax Act. Pursuant to the direction of the Appellate Assistant Commissioner, the Income Tax Officer on October 15, 1957, served on the appellants a notice under section 34 of the Act and thereupon the appellants moved the High Court under article 226 for an order quashing the said notice and the proceeding as without jurisdiction. The High Court dismissed the petition. Held, that it was not correct to say that the issue of the notice for reassessment was without jurisdiction as the assessment was yet pending. Under section 23(1) of the Indian Income tax Act, it is open to the Income tax Officer, if he is satisfied as to correctness of the return filed by the assessee, to assess the income and determine the sum payable on the basis of the return without requiring the assessee either to be present or to Produce evidence. The order 'no proceeding recorded on the. return must, therefore, mean that the Income Tax Officer bad accepted the previous return and assessed the income as nil. A revised return under section 22(3) filed by the assessee may be 912 entertained only before the order of assessment and not thereafter. Lodging of such a return after the assessment is no bar to reassessment under section 34(1) of the Act. It could not be said, having regard to the provisions of section 13(1) of the Finance Act (XXV of 1950) and cl. 5(1) of Part. B States (Taxation Concessions) Order 1950, issued by the Central Government under section 60A of the Indian Income tax Act, that for the assessment year 1950 51 the appellants were assessable under the Mysore Income tax Act and not under the Indian Income tax Act.

The appellant (since deceased) was being assessed as the Karta of the Hindu Undivided Family consisting of himself, his mother, his wife and three sons until the assessment years 1948 49. For the assessment year 1949 50 and subse quent years upto 1961 62 he filed a return in his individual capacity claiming that there had been a total partition of the family and that he was assessable in respect of the income from the properties of the family that fell to his share on partition; in the alternative he claimed partial partition. Both of his claims having been negatived, the entire income was assessed in the hands of the Hindu Undi vided Family and the returns filed by the appellant in his individual capacity were finalised on the footing that there was no income assessable in his individual capacity. The Hindu Undivided Family went up in appeals and ultimately the Tribunal accepted the claim of partial partition in respect of some of the properties. The conclusion of the Tribunal was affirmed by the High Court, with the result that the income from some of the erstwhile family properties stood excluded from the assessment of the Hindu Undivided Family and became liable to be included in the hands of the appel lant. The original assessments made on the appellant as an individual for the assessment upto 1961 62 had been complet ed under the Income tax Act, 1922 and in these assessments no income from the erstwhile joint family properties had been included as the Income Tax Officer was of the view, as in 1949 50, that it was assessable in the hands of the family. There were no proceedings initiated or pending under Section 34 of the 1922 Act in respect of these assessment years as on 1.4.1962, when the 1922 Act was repealed by the 1962 Act. The Income Tax Officer therefore, served a notice for reassessment on the appellant, invoking the provisions of Section 297(2)(d)(ii) of the Act. The appellant resisted the reassessment proceedings on the ground that notice was barred by limitation while the department contended that the reassessment proceedings in this case were saved by the provisions of Section 150(1) of the 1961 Act. The High Court accepted the contention of the department. 10 Dismissing the assessee 's appeal, this Court, HELD: The provisions of Section 150(1) have been spe cially made applicable and operative in respect of a notice under section 148 issued in pursuance of Section 297(2)(d)(ii). The application of the provisions of Section 297(2)(d)(ii) gives rise to two sets of situations to one of which the language of Section 150(1) would squarely apply. Section 150(1) will operate to lift the time bar in cases where the reassessment is initiated under section 148 to give effect to an order passed under the 1961 Act. Section 297(2) is a provision enacted with a view to provide for continuity of proceedings in the context of repeal of one Act by a fresh one broadly containing analogous provisions and the transitory provisions should as far as possible, be construed so as to affect such continuity and not so as to create a lacuna. It will therefore be appropriate to so read the words of section 297(2)(d)(ii) as to permit the applica bility of section 150 (or section 153) with the necessary modifications. [18 G, 19A B, D E] The last words of Section 297(2)(d)(ii) should be read to mean that where the proceedings initiated under Section 148, subject to the relaxations and limitation of Sections 149 and 150, all the provisions of the Act shall apply accordingly: that is to say, in the same manner as they would apply in case of proceedings normally initiated under these provisions. Since reassessment proceedings so initiat ed to give effect to orders on appeal, revision or reference will not be subject to a time limit, the proceedings like wise initiated under Section 297(2)(d)(ii) read with Section 149 will also not be subject to any limitations save to the extent mentioned in Section 150(2). [19 E F] Income Tax Officer vs Eastern Coal Co. Ltd., ; Commissioner of Income Tax ' vs Kamalapat Moti lal, ; Ambaji Traders vs Income Tax Officer, ; Commissioner of Income Tax vs T.P. Asrani, ; Jain vs Mahendra, ; Govinddas vs Income Tax Officer, ; Seth Gujannal Modi vs Commissioner of Income Tax, ; Third Income Tax Officer vs Damodar Bhat, ; Jain Bros. vs Union of India, ; , referred to.

The assessee firm carried on business at Bangalore in the State of Mysore, which at the relevant time was a Part B State. It was appointed as the sole selling agent for certain areas in Ceylon in respect of tiles and ridges manufactured by the principal at Feroke in British India. According to the agreement between the parties all prices quoted by the manufacturer were to be F.O.B. Beypore Port situated in taxable territory. Chartering and loading of vessels was done by one of the employees stationed at Calicut. The bills of lading were obtained by the assessee 's representative at Beypore and sent to Bangalore when the hundis together with the invoices and shipping documents were handed over by the assessee to a bank at Bangalore. Pursuant to the letter of credit opened ' by the purchaser in Ceylon, payments were made by the aforesaid bank to the assessee. In income tax proceedings for the assessment years 1951 52, 1952 53, and 1953 54 the assessee claimed that since its registered office was in Bangalore and as the agency agreement with the purchaser at Colombo was entered into in Bangalore the entire come should be treated as income accruing or 'arising in Part B State and concession regarding rates and allowances as provided in Part States (Taxation Concessions) Order, 1950 should be allowed to it. The income tax authorities and the Tribunal decided against the assessee. The High Court however held that since the profits were received in Part State at Bangalore, it could not be said that the entire profit accrued or arose within the meaning of el. (a) of sub section (1) of section 4 of the Income tax Act, 1922 in the taxable territories other than Part B State. According to the High Court the profits arose at Bangalore, Feroke, and Ceylon, of which only Feroke was in the taxable territories, and therefore, the assessee was entitled to the concession under the order in respect of the profits that could be apportioned under section 42(3) of the Act to the business operations conducted in Bangalore and Ceylon. The Revenue appealed to this Court contending that hardly any activity took place of such a nature as could be said to give rise to accrual of profits at Bangalore. HELD: The conclusion which the High Court arrived at must be upheld. The making of contracts pursuant to which all the subsequent activity in respect of the execution of those. contracts took place resulting in profits to the assessee was an integral part of the entire selling operations. The contracts in the present case having been entered into at Bangalore it could not be said that no part of the business activity which produced the profits took place there. [53 H] 56

The husband of the respondent died in October 1944. For the assessment year 1945 46, his estate was assessed to income tax on a total income of Rs. 22,160. In January 1946, the respondent encashed 584 high denomination notes of the value of Rs. 5,84,000. There were proceedings for re assessment of the total income of the assessee, wherein it was stated before the Income tax Officer, on behalf of the respondent, that during the previous 30 years, her husband was giving gifts to the respondent and was also setting apart money exclusively for her and their children and, that the fund so accumulated amounting to Rs. 5,84,000 remained in a cupboard and was found after his death, and therefore, the amount was not liable to tax as the income of her husband in the previous year. The Income tax Officer disbelieved her explanation and brought the amount of Rs. 5,84,000 to tax as tre income of the respondents ' husband from an undisclosed source in the year of account 1944 45. The order was con firmed by the Appellate Assistant Commissioner who also referred to the respondent 's declaration under the High Denomination Bank Notes (Demonetisation) Ordinance that the amount was made over by the de,ceased, some time before his death, to her for her benefit and that of her 8 minor sons. The Appellate Tribunal also upheld the order of the Income tax Officer. The respondent then filed an application under section 66 (1) to state a case to the High Court. In that application she asserted that 494 out of the 584 notes were received from a Bank in Calcutta in realisation of a cheque drawn for Rs. 4,94,000 in September 1945 by her eldest son. The Tribunal rejected the application. The High Court, under section 66(2) directed the Tribunal to state a case on the question6n: Whether the Tribunal erred in law by basing its decision on a part of the evidence ignoring the 'statement made as regards the withdrawal of Rs. 4,94,000 by 494 pieces of Rs. 1,000 notes from the bank. The Tribunal, while submitting the statement of case, pointed out that the statement in the petition under section 66(1) was materially different from that made before the Income tax Officer and that the Tribunal was not invited to consider, at the hearing of the appeal, the truth of that statement. The High Court, thereafter, heard the reference and decided in favour of the assessee, holding that: (1) the Tribunal ignored a part of the declaration made by the respondent that 494 high denomination notes were received from the bank in Calcutta in September 1945; (2) no opportunity was given by the Tribunal to the respondent to clear up the discrepancies in her statements made at the time of the disclosure of the high denomination notes and before the Income tax Officer; and (3) it was not open to the Court hearing a reference under section 66(2) to hold, contrary to the decision recorded at the time when the Tribunal was directed to state the case on a question, that the question did not arise out of the order of the Tribunal. 467 In appeal to this Court, HELD : (1) In the question which was directed to be referred it was assumed that the Tribunal had before it the statement about the receipt of 494 currency notes from the bank at Calcutta. But that evidence was not before the Tribunal. No such statement was made either before the Income tax Officer, or before the Appellate Assistant Commissioner or in the appeal before the Tribunal. The statement was made for the first time in the petition under section 66(1). Even in the application it was not suggested that the finding of the Tribunal was vitiated because some relevant evidence was ignored. The order of the Tribunal was not therefore open to the objection that the appeal before it was decided on a partial review of the evidence. [471 B, D F] (2) The plea of want of opportunity was not raised before the Tribunal, and therefore, the validity of the conclusion of the Tribunal on the evidence could not be assailed before the High Court on the ground that the departmental authorities had violated the basic rules of natural justice, without raising that question before the Tribunal. [472 H] (3) The High Court was in error in holding that at the hearing of a reference pursuant to an order calling upon the Tribunal to state a case, the High Court must proceed to answer the question without considering whether it arises out of the order of the Tribunal or whether it is a question of law, or whether it is academic, unnecessary or irrelevant especially when by an erroneous order the High Court directed the Tribunal to state a case on a question which did not arise out of the order of the Tribunal. [472 D E] Observations contra in Chainrup Sampatram vs Commissioner of Income tax, West Bengal, overruled. (4) When the Tribunal was not invited to state a case on a question of law alleged to arise out of its order, the High Court could not direct the Tribunal to state it on that question. [471 G H] Commissioner of Income tax vs Scindia Steam Navigation Co. Ltd., followed. (5) The irregularities in the judgment of the High Court could not be cured by reframing the question referred to the High Court and calling for a supplementary statement from the Tribunal The power to reframe a question may be exercised only to clarify some obscurity in the question referred or to pinpoint the real issue between the tax payer and the department or for similar other reasons. It cannot be exercised for reopening an enquiry on questions of fact, which was closed by the order of the Tribunal. Similarly, a supplementary statement could be ordered only on a question arising out of the order of the Tribunal if the court is satisfied that the original statement is not sufficient to enable it to determine the question raised thereby, and, when directed the supplementary statement may be only on such material and evidence as may already 1 on record, but not included in the statement initially made. [473 B D] Keshav Mills Ltd. vs Commissioner of Income tax, Bombay North, Ahmedabad, and Narain Swadeshi Weaving Mills Y. Commissioner of Excess Profits Tax, , referred to. (6) The Tribunal was not in error in failing to raise and state a case on the question whether the amount of Rs. 5,84,000 was taxable in the accounting year 1944 45. That question was considered by the Incometax Officer and by the Appellate Assistant Commissioner and the explana 468 tion of the respondent was rejected by them, and no argument was raised before the tribunal that the amount, though taxable, was not the income of the year of account 1944 45. Further, when the High Court did not direct the Tribunal to state a case on the question, it must be deemed to have, rejected the application to refer that question, and the order of rejection having become final, this Court cannot set it aside without an appeal by the respondent. [474 B, E, H; 475 A]

The assesses Company used to purchase sugarcane from the sugarcane growers to prepare sugar in its factory, in which a very large percentage of shares was owned by the Government of Mysore. As a part of its business operation it entered into written agreements with the sugarcane growers and advanced them seedlings, fertilizers, and also cash. The cane growers entered into these agreements known as "oppige" by which they agreed to sell sugarcane exclusively to the assessee company at current market rates and to have the 977 advances adjusted towards the price. An account of each "Oppigedar" was opened by the company. These agreements were entered into for each crop. In the year 1948 49 due to drought, the assessee company could not work its mills and the "oppigedar" could not grow or deliver the sugarcane and thus the advances made in the year remainded unrecovered. The Mysore Government realising the hardship appointed a committee to investigate the matter and make a report. The Committee recommended that the assessee company should ex gratia forgo some of its dues, and in the year of account ending June 30, 1952, the company waived its rights in respect of Rs. 2,87,422/ . The Company claimed this as a deduction under section 10 (2) (xi) and section 10 (2) (xv) 'but the Income Tax Officer declined to make the deduction and the appeal before the Appellate Assistant Commissioner also failed. The Tribunal was also of the opinion that these advances were made to ensure to steady supply of quality surgarcane and the loss, if any, must be taken to represent a capital loss and not a trading loss but the tribunal referred the. question thereby arising for the decision of the High Court. The High Court relying upon a decision of this Court in Badridas Daga vs Commissioner of Income tax held, that the expenditure was not in the nature of a capital expenditure, but was a revenue expenditure and that this amount was deductible in computing. the profits of the business for the year in question under section 10 (1) of the Income tax Act. The central point for decision in the present case, was whether the money which was given up, represented a loss of capital or must be treated as a revenue, expenditure. Held, that section 10 (2) does not deal exhaustively with the deductions which must be made to arrive at the true profits and gains. It mentions certain deductions in cls. (i) to (xiv) and if an expenditure comes within any of the emunerated classes of allowance the case has to be considered under the appropriate class. Clause (xv) is a general clause which allows an expenditure to be deducted, if laid out or expended wholly and exclusively for the purpose of such business, which is not in the nature of capital expenditure or personal expenses of the assessee. But the general scheme of the section is that profits or gains must be calculated after deducting outgoings reasonably attributable as business expenditure but not so as to deduct any part of a capital expenditure. To find out whether an. expenditure is on the capital account or on revenue, one must consider the expenditure in 978 relation to the business. The questions to consider in this connection are for what was the money laid out ? Was it to acquire an asset of an enduring nature for the benefit of the business, or was it an outgoing in the doing of business ? If money be lost in the first circumstance it, is a loss of capital, but it lost in the second circumstance, it is a revenue loss. In the first, it bears the character of an investment, but in the second, it bears the character of current expenses. English Crown Spelter Co. Ltd. vs Baker, , Charles Marsden & Sons Ltd. vs The Commissioners of Inland Revenue, and Raid 's Brewery Co. Ltd. vs Nale, , applied. Badridas Daga vs Commissioner of Income tax (1959) section C. R. 690 and Commissioner of Income tax vs Chitnavis, (1932) L. R : 59 I. A. 290, referred to. Held, in this case, there was hardly any element of investment which contemplate more than payment of advance price. The resulting loss to the assessee company was just as much a loss on the revenue side as would have been, if it had paid for the ready crop which was not delivered,

The then Satguru of the appellant Creed was assessed for the assessment years 1937 38, 1938 39 for the first time. He was a retired Govt. servant. His pension as well as the income from the institution were assessed together. On appeal, the Assistant Commissioner of Income tax confirmed the assessments made by the Income tax Officer. The Income tax Commissioner under reference made under section 66(2) of the Income tax Act, 1922 held that the offerings made to the assessee Satguru were offerings as held in trust and same were exempted under section 4(3)(1) of the Act. When an application under Section 35 of the Act was made for ratification, whether the offerings received by the assessee consisted of interest income, property income, and income derived from sale of books and photographs etc. to be excluded, the Commissioner directed deletion thereof. For the year 1939 40, though the Income tax Officer did not allow exemption u/s.4(3)(1) of the Act, the Appellate Assistant Commissioner allowed exemption. Till 1963 64 the appellant was not taxed and its refund applications were accepted by the respondent Revenue. For the assessment years 1964 65, 1965 66, 1966 67, 1967 68, 1968 69, 1969 70, the assessee appellant was as sessed, treating it to be an association of persons, and held that the donations and contributions received volun tarily had limited religious use. When the appellant assesses appealed, the appellate authority upheld the assessments. 313 Against the orders of the Appellate authority the asses see appealed before the Income tax Tribunal. The Tribunal allowing the appeals of the assessee, held that the assessee was entitled to the exemption claimed under Section 11 of the Income tax Act, 1961. On the question, referred to the High Court by the Tribunal, "Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that the income derived by the Radha Swami Satsang, a religious institution, was entitled to exemption under Sections 11 and 12 of the Income Tax Act, 1961?", the High Court answered the question in favour of the Revenuerespondent, holding that the trust deed was revocable and the conditions for exemption under Sections 11 and 12 of the Act were not satisfied. Allowing the appeals of the assessee, this Court, HELD: 1.01. Assessments are quasi judicial. Each assess ment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have al lowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. [320H, 321 A B] 1.02. No formal document is necessary to create a trust. The conditions which have to be satisfied to entitled one for exemption are: (a) the property from which the income is derived should be held under trust or legal obli gation, (b) the property should be so held for charitable or religious purposes which enure for the benefit of the pub lic. [317 E G] 1.03. The property was given to the Satguru for the common purpose of furthering the objects of the Sat Guru. The property was therefore subject to a legal liability of being used for the religious or charitable purpose of the Satsang. [319 E, F] 1.04. The Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under Sections 11 and 12 of the Income Tax Act, 1961. [321 D] Patel Chhotahhai and Ors. Janan Chandra Bask and Ors., AIR 314 1935 Privy Council 97; Acharya Jagdish Waranand Avadhuta & Ors. vs Commissioner of Police, Calcutta & Ant., , The Secretary of State for India in Council vs Radha Swami Sat Sang, ; All India Spinners 'Associ ation vs Commissioner of Income Tax, Bombay, ; TM.M. Sankaralinga Nadar & Bros. & Ors. vs Commissioner of Income tax, Madras, ; Hoystead & Ors. vs Commis sioner of Taxation, and Parashuram Pottery Works Co. Ltd. vs Income tax Officer, Circle 1, Ward A Rajkot, at p.10, referred to.

The first respondent was the founder and Managing Director of a company, the second respondent in the appeal, which was incorporated in the State of Mysore and conducted a Prize Competition called the R. M. D. C. Cross words through a weekly newspaper printed and published at Bangalore. This paper had a wide circulation in the State of Bombay, where the respondents set up collection depots to receive entry forms and fees, appointed local collectors and invited the people by advertisements in the paper to participate in the competitions. On November 20, 1952, the Bombay Legislature passed the Bombay Lotteries and Prize Competitions Control and Tax (Amendment) Act of 1952, and widened the scope of the definition of 'prize competition ' contained in section 2(1) (d) of the Bombay Lotteries and Prize Competition Control and Tax Act of 1948, so as to include prize competitions carried on through newspapers printed and published outside the State and inserted a new section, section 12A, levying a tax on the promoters of such competitions for sums collected from the State. Thereupon, on December 18, 1952, the respondents moved the High Court of Bombay under article 226 of the Constitution and contended that the Act as amended and the Rules framed thereunder in so far as they applied to such prize competitions were ultra vires the State Legislature and violated their fundamental rights under article 19(1) (g) and freedom of inter State trade under article 301 of the Constitution. The Single Judge who heard the matter in the first instance as also the court of appeal found in favour of the respondents, though on somewhat different grounds, and the State of Bombay preferred the appeal. The principal question canvassed in this Court related to the validity. or otherwise of the impugned Act. It was contended on behalf of the appellant that the impugned Act was a law relating to betting and gambling and as such was covered 875 by Entries 34 and 62 of List II in the Seventh Schedule to the Constitution, whereas the contention of the respondents was that the Act was with respect to trade and commerce and came under Entries 26 and 60 of that List. Held, that in testing the validity of an Act it was necessary, in the first place, to decide whether it was with respect to a topic assigned to the legislature and, secondly, where it was so and the legislature was a State Legislature and the Act purported to operate beyond the State, whether there was sufficient territorial nexus to validate such operation and, lastly, whether the powers of the legislature were in any other way fettered by the Constitution. So judged, the impugned Act was a perfectly valid legislation and its constitutionality was beyond question. Regard being had to the purpose and scope of the Act read as a whole there could be no doubt that all the categories of prize competitions included in the definition contained in section 2(1) (d) of the Act were of a gambling nature. The qualifying ' clause appearing at the end of cl. (1) must apply to each of the five kinds enumerated therein, and the word 'or ' appearing after the word I promoters ' and before the word 'for ' in the clause must be read as 'and '. Similarly, cl. (ii), properly construed, could not include any prize competitions other than those of a gambling nature. Elderton vs Totalisator Co. Ltd., , held inapplicable. The impugned Act was, therefore, a legislation with respect to betting and gambling and fell under Entry 34 of List II of the Seventh Schedule to the Constitution and was within the competence of the State Legislature. Taxes on gambling are a well recognised group of indirect taxes and section 12A of the Act in seeking to tax the gross collections in the hands of the promoters, and not their profits, was only following an easy and convenient way of getting at the gambler 's money in their hands and this made no difference in the character of the tax, essentially one on betting and gambling and not on any trade, and, consequently, the section fell within Entry 62 and not Entry 6o of List II of the Seventh Schedule to the Constitution. A prize competition that did not to a substantial degree depend upon the exercise of skill for its solution would be of a gambling nature and a scrutiny of the prize competitions offered by the respondents clearly showed that there was an element of chance to start with, and, consequently, they must be of a gambling nature and fell within the mischief of the Act. The doctrine of territorial nexus was a well established doctrine and could apply only when (1) the territorial connection between the persons sought to be taxed and the legislating State was real and not illusory and (2) the liability sought to be imposed was pertinent to that connection. The existence of sufficient 876 territorial nexus in a particular case was essentially a question of fact. There could hardly be any doubt in the instant case that the impugned Act satisfied all these tests and, consequently, it was unassailable on the ground of extra territoriality. Gambling activities were in their very nature and essence extra commercium although they might appear in the trappings of trade. They were considered to be a sinful and pernicious vice by the ancient seers and law givers of India and have been deprecated by the laws of England, Scotland, United States of America and Australia. The Constitution makers of India, out to create a welfare State, could never have intended to raise betting and gambling to the status of trade, business, commerce or intercourse. The petitioners, therefore, had no fundamental right under article 19(1) (g) or freedom under article 301 Of the Constitution in respect of their prize competitions that could be violated and the validity of the impugned Act, in pith and substance an Act relating to gambling, did not fall to be tested by articles 19(6) and 304 Of the Constitution. judicial decisions on article 1, section 8, sub section (3) Of the Constitution of the United States and section 92 of the Australian Constitution should be used with caution and circumspection in construing articles 19(1) (g) and 301 of the Indian Constitution. State of Travancore Cochin vs The Bombay Co. Ltd. ; and P. P. Kutti Keya vs The State of Madras, A.I.R. (1954) Mad. 621, referred to. The King vs Connare, ; , The King vs Martin; , , Commonwealth of Australia vs Bank of New South Wales, L.R. (195o) A.C. 235, Mansell vs Beck, Australian Law journal Vol. 3o, NO. , Champion vs Ames, ; , Hipolite Egg Co. vs United States, ; , Hoke vs United States, ; , United States vs Kahriger, ; and Lewis vs United States, 99 L.Ed.475, discussed.

In respect of his assessment to wealth tax for the assessment years 1957 58, 1958 59 and 1959 60, the appellant filed returns in the status of a Hindu Undivided Family. His family at the material time consisted of himself, his wife and two minor daughters. The appellant claimed to be assessed in the status of a Hindu Undivided Family inasmuch as the wealth returned consisted of ancestral property received or deemed to have been received by him on partition with his father and brothers. The Wealth Tax Officer did not accept the contention of. the appellant and assessed him as an individual. The Appellate Assistant Commissioner confirmed this view. However the Appellate Tribunal held that the appellant should be assessed in the status of Hindu Undivided Family but the High Court, upon a reference, disagreed with the view of the Appellate Tribunal and held that as the appellant family did not have any other male coparcener, all the assets forming the 'subject matter of the returns filed by the appellant belonged to him as an individual and not to a Hindu Undivided Family. On appeal to this Court, HELD:Allowing the appeal: The status of the appellant was rightly determined as that of a Hindu ,Undivided Family by the Appellate Tribunal. The expression "Hindu Undivided Family" in the Wealth Tax Act is used in the sense in which a Hindu joint family is understood in the personal law of Hindus. Under the Hindu system of law a joint family may consist of a single male member and his wife and daughters and there is nothing in the scheme of the Wealth Tax Act to suggest that a Hindu Undivided Family as an assessable unit must consist of at least two male members. [886 C] Under section 3 of the Wealth Tax Act not a Hindu coparcenary but a Hindu Undivided Family is one of the assessable legal entities. A Hindu joint family consists of all persons lineally descended from a common ancestor, and includes their wives and unmarried daughters. A Hindu coparcenary is a much narrower body than the Hindu joint family; it in cludes only those persons who acquire by birth an interest in the joint or coparcenary property, these being the sons, grand sons and great grand sons of the holder of the joint property for the time being. [885 F H] Kalyanji Vithaldas vs Commissioner of Income Tax, 5 I.T.R. 90, Commissioner of Income Tax vs Gomedalli Lakshminarayan considered. 88 3 Commissioner of Income Tax vs A. P. Swamy Gomedalli, , Attorney General of Ceylon vs A.R. Arunachallam Chettiar , Gowali Buddanna 's [1960] 6 I.T.R. 203 referred to. T.S. Srinivasan vs Commissioner of Income Tax 60, I.T.R. 36 distinguished.

Appeal No. 328 of 1960. Appeal from the order dated March 4, 1958, of the Punjab High Court, Chandigarh, in Civil Reference No. 29 of 1952. A. V. Viswanatha Sastri, R. Ganapathy Iyer and G. Gopalakrishnan, for the appellant. Hardyal Hardy and D. Gupta, for the respondent. December 6. The Judgment of the Court was delivered by SHAH, J. The Income Tax Appellate Tribunal, Delhi Bench, stated under section 66(1) of the Indian Income Tax Act the following question for decision of the High Court of Judicature at Chandigarh: "Whether the assessee 's receipts from consumers for laying service lines, (that is, not distributing mains) were trading receipts and whether the profit element therein, viz., service connection receipts minus service connection cost was taxable income in the assessee 's hands?" The High Court answered the question as follows: ". the company 's receipts from the consumers for laying the service lines are trading receipts and 958 the profit element therein being the difference bet ween the service connection receipts and the service connection costs is taxable income in the hands of the company." With certificate granted under section 66A(2) of the Income Tax Act, this appeal is preferred by the Hoshiarpur Electric Supply Company hereinafter referred to as the assessee. The assessee is a licensee of an electricity undertaking. In the year of account, April 1, 1947March 31, 1948, the assessee received Rs. 12,530 for new service connections granted to its customers. Out of this amount, Rs. 5,929 were spent for laying the service lines, and Rs. 1,338 were spent for laying certain mains. The Income Tax Officer treated the entire amount of Rs. 12,530 as trading receipt. In appeal to the Appellate Assistant Commissioner, the cost incurred for laying service lines and mains was excluded and the balance was treated as taxable income. In appeal, the Appellate Tribunal agreed with the Appellate Assistant Commissioner and held that the service connection receipts were trading receipts and that the "profit element" therein was taxable income in the hands of the assessee. In a reference under section 66(1) of the Income Tax Act, the High Court substantially agreed with the view of the Tribunal. The assessee has installed machinery for producing electrical energy and has also laid mains and distributing lines for supplying it to its customers. The assessee makes no charge to the consumers for laying service lines not exceeding 100 ft. in length from its distributing main to the point of connection on the consumer 's property in accordance with cl. 6(1)(b) of the Schedule to the . But where the length of a service line to be installed exceeds 100 ft., the cost is charged at certain rates by the assessee. The charge consists usually of cost of wiring copper as well as galvanised iron, service and other brackets, insulators, meter wiring, poles and appropriate labour and supervision charges. In the year of account, the assessee gave 229 new connections 959 and received Rs. 12,530 out of which Rs. 5,929 have been regarded as taxable income. In the forms of account prescribed under the Indian Electricity Rules framed under section 37 read with section 11 of the , the assessee credited service connection receipts to the revenue account and debited the Inc, corresponding cost of laying service lines to the capital account. But the classification of the receipts in the form of accounts is not of any importance in considering whether the receipt is taxable as revenue. The assessee contended that the service lines when installed became the property of the assessee, because they were in the nature of an extension of the assessee 's distributing mains. On behalf of the Revenue, it was urged relying upon the judgment of the High Court that the service lines which are paid for by the consumers do not become the property of the assessee. We do not think that it is open to us in an appeal from an order under section 66 of the Indian Income Tax Act to enter upon this question. The Tribunal did not record a finding on the question whether the assessee was the owner of the service lines. Undoubtedly, contributions were made by the consumers towards the cost of the service lines installed by the assessee which exceeded 100 ft. in length. Normally, a person who pays for installation of property may be presumed to be the owner thereof; but such a presumption cannot necessarily be made in respect of a service line, which so long as it is used for supplying electrical energy remains an integral part of the distri buting mains of an electrical undertaking. The High Court was exercising advisory jurisdiction, and the question as to who was the owner of the service lines after they were installed could be adjudicated upon only by the Tribunal. It was for the Tribunal to record its conclusion on that question, but the Tribunal has recorded none. In our judgment, the High Court was in error in assuming to itself jurisdiction substantially appellate in character and in proceeding to decide the question as to ownership of the service lines which is a mixed question of law and fact, on which the Tribunal has given no finding. 960 The assessee contended that the amount paid by the consumers for new connections is capital receipt and not liable to tax, because the amount is paid by the consumers towards expenditure to be incurred by the assessee in laying new service lines an asset of a lasting character. This question falls to be determined in the light of the nature of the receipt irrespective of who remained owner of the materials of the service lines installed for granting electrical connections to new customers. The assessee only spends a part of the amount received by it from the consumers. It is not clear from the statement of the case whether amongst the 229 new connections given, there were any which were of a length less than 100 ft. Payments received by the assessee must of course be for service lines installed of length more than 100 ft., but it is not clear on the, record whether the expenditure of Rs. 5,929 incurred by the assessee is only in respect of service lines which exceeded 100 ft. in length or it is expenditure incurred in respect of all service lines. It is however not disputed that a part of the amount received from the consumers remains with the assessee after meeting the expenses incidental to the construction of the service lines. But an electric service line requires constant inspection and occasional repairs and replacement and expenses in this behalf have to be undertaken by the assessee. The amount contributed by the consumer for obtaining a new connection would of necessity cover all those services. The amount contributed by the consumer is in direct recoupment of the expenditure for bringing into existence an asset of a lasting character enabling the assessee to conduct its business of supplying electrical energy. By the installation of the service lines, a capital asset is brought into existence. The contribution made by the consumers is substantially as consideration for a joint adventure; the service line when installed becomes an appanage of the mains of the assessee, and by the provisions of the Electricity Act, the assessee is obliged to maintain it in proper repairs for ensuring efficient supply of energy. The assumption made by the 961 Department that the excess remaining in the hands of the assessee, after defraying the immediate cost of installation of a service line must be regarded as a trading profit of the company is not correct. The assessee is undoubtedly carrying on the business of distributing electrical energy to the consumers. Installation of service lines is not an isolated or casual act; it is an incident of the business of the assessee. But if the amount contributed by the consumers for installation of what is essentially reimbursement of capital expenditure, the excess remaining after expending the cost of installation out of the amount contributed is not converted into a trading receipt. This excess which is called by the Tribunal "profit element" was not received in the form of profit of the business; it was part of a capital receipt in the hands of the assessee, and it was not converted into a trading profit because the assessee was engaged in the business of distribution of electrical energy, with which the receipt was connected. In Commissioner of Income tax vs Poona Electric Supply Co. Ltd. (1), it was held by a Division Bench of the Bombay High Court that the amount received from the Government of Bombay by the Poona Electric Company in reimbursement of expenses incurred for constructing new supply lines for supplying energy to new areas not previously served, was a capital receipt and not a trade receipt. The question of the taxability of the "profit element" in the contribution received from the Government was not expressly determined; but the court in that case held that the entire amount received by the Poona Electric Company from the Government as contribution was a capital receipt. In Monghyr Electric Supply Co. Ltd. vs Commissioner of Income tax, Bihar and Orissa (2), it was held that the amount paid by consumers of electricity for meeting the cost of service connections was a capital receipt in the hands of the electricity undertaking and not revenue receipt and the difference between the amount received on account of service connection charges and (1) (2) 962 the amount immediately not expended was not taxable as revenue. The receipts though related to the business of the assessee as distributors of electricity were not inciden t nor in the course of the carrying on of the assessee 's business; they were receipts for bringing into existence capital of lasting value. Contributions were not made merely for services rendered and to be rendered, but for installation of capital equipment under an agreement for a joint venture. The total receipts being capital receipts, the fact that in the installation of capital, only a certain amount was immediately expended, the balance remaining in hand, could not be regarded as profit in the nature of a trading receipt. On that view of the case, in our judgment, the High Court was in error in holding that the excess of the, receipts over the amount expended for installation of service lines by the assessee was a trading receipt. The appeal is allowed and the question submitted to the High Court is answered in the negative. The assessee is entitled to its costs in this court as well as in the High Court. Appeal allowed.

The assessee, an electricity supply undertaking, received certain sum of money for new service connections granted to its customers. Part of this amount was spent for laying mains and service lines. The Income tax Officer treated the entire amount as trading receipt. In appeal the Appellate Assistant Commissioners excluded the cost of laying service lines and the mains and treated the balance as taxable income. The Appellate Tribunal agreed with the Appellate Assistant Commissioner and held that the service connection receipts were trading receipts and the "profit element" therein was taxable income in the hands (1)[1929] A.C. 386; 957 of the assessee. In a reference under section 66(1) of the Income tax Act, the High Court substantially agreed with the view of the Tribunal. On appeal by the assessee, Held, that the High Court erred in holding that the excess of the receipts over the amount spent by the assessee for installation of service lines was a trading receipt. The receipts though related to the business of the assessee as distributors of electricity were not incidental to nor in the course of the carrying on of the assessee 's business. They were receipts for bringing into existence capital of lasting value. The total receipts being capital receipts the balance remaining after a part thereof was expended for laying service lines and mains, could not be regarded as 'profit ' in the nature of a trading receipt. Commissioner of Income tax vs Poona Electric Supply Co. Ltd., and Monghyr Electric Supply Co. Ltd. vs Commissioner of Income tax, Bihar and Orissa, , discussed and applied.

The assessee, resident in British India, had some money in deposit with a concern in Bhavnagar, outside British India. On April 7, 1947, he transferred part of it to a concern in Bombay. He was assessed to tax on this amount under section 4(i)(b)(iii) of the Income tax Act. The assessee contended that to attract the application of section 4(i)(b)(iii) the receipt in the taxable territory must be the first receipt of income. Held, that the assessee was liable to tax on this amount. Per Gajendragadkar and Wanchoo, JJ. Where a person, resident in the taxable territories, has already received, outside the taxable territories, any income etc. accruing or arising to him outside the taxable territories before the previous year brings that income into or receives that income in the taxable territories he would be chargeable to income tax thereon. Though for the purposes of cl. (a) of section 4 the receipt must be the first receipt of income in the taxable territories, for the purposes of cl. (b)(iii) the receiving in the taxable territories need not be the first receipt. Keshav Mills Ltd. vs Commissioner of Income tax ; , referred to. Per Sarkar, J. The income could not be said to have been "received" in the taxable territory within the meaning of cl. (b)(iii) as income could be received only once. But it is clear that the assessee " brought into " Bombay that income. It was immaterial in what shape he received the income in Bhavnagar and in what shape he brought it in Bombay. Keshav Mills Ltd. vs Commissioner of Income tax ; , Board of Revenue vs Ripon Press Mad. 706 and Sundar Das vs Collector of Gujrat (1922) I.L.R. , applied. Gresham Life Assurance Society Ltd. vs Bishop [1902] A.C. 287 and Tennant vs Smith ; , referred to.

The Appellant Bank which was registered under the Co operative Societies 'Act, 1922, received, in the relevant account years, by way of interest on deposits with the Imperial Bank of India certain sums of money. The Income tax Officer assessed the aforesaid sums under section 12 of the Indian Income tax Act 1922, as income from other sources, but the appellant claimed that the deposits were made not with the idea of making investments but for the purpose of carrying on its business as a bank and that as the interest received on the deposits was profit attributable to its business activities it was not subject to incometax because of the Notification issued by the Central Government under section 6o of the Act. Under the Notification profits of any Co operative Society are exempt from the tax payable under the Act but not income derived from "other sources" referred to in section 12 of the Act. Held, that the interest from deposits received by the Appel lant Bank in the present case arose out of a transaction entered into for the purpose of carrying on its banking business and fell within the income exempted under the Notification. The Punjab Co operative Bank Ltd. vs The Commissioner of Income tax, Punjab, , relied on.

The respondent who carried on business was prosecuted under section 13 of the Hoarding and Profiteering Ordinance of 1943 on a charge of selling goods at an unreasonable price. He was finally acquitted and claimed in his assessment for a subsequent year that the sum of Rs. 10,895 which he had spent in defending himself against the charge should be deducted from his income under section 10(2)(xv) of the Income tax Act as "expenditure laid out or expended wholly and exclusively for purposes of the business". The Appellate Tribunal held that in the absence of any evidence that personal liberty was likely to be jeopardised there was only a chance of his being fined, that the object of saving himself from fine was so inextricably mixed with the main purpose of the defence which was solely for the purpose of maintaining the respondent 's name as a good businessman and also to save his stock from being undersold, that it could be ignored, and that, therefore, the claim was allowable under section 10(2)(xv). On a reference the High Court held that the finding of the Tribunal was one of fact and was binding on it. On further appeal: Held (i) that the finding of the Tribunal was not one of fact and was not decisive of the reference; (ii) the finding of the Tribunal was vitiated by its refusal to consider the possibility of the prosecution ending in a sentence of imprisonment and throwing on the Income tax authorities the burden to prove that the prosecution might result in his imprisonment; and the finding was not therefore binding on the Court; (iii) in any event, the expenses could not be said to be " expenditure laid out or expended wholly and exclusively for the purposes of the business" within section 10(2)(xv) of the Act. Legal expenses incurred in civil litigation &rising out of matters incidental to the carrying on of a business stand on a different footing as in such a case no question could arise as to the primary or secondary purpose for which the expenses could be said to have been incurred. The deductibility of such expenses under section lO (2) (xv) must depend on the nature and purpose of the legal proceeding and not 715 on the final outcome of it and a distinction cannot therefore be drawn between expenses of a successful and unsuccessful defence for purposes of section 10 (2) (xv). J. B. Advani vs Commissioner of Income tax ([1950] referred to. Commissioner of Income tax vs Maharajadhiraj of Darbhanga ([1942] L. R. 69 I.A. 15) distinguished.

The assessee company, which derived its income from the manufacture and sale of sugar and confectionery, was as sessed for the years 1958 59 by the Income Tax Officer under the Income Tax Act, 1922 by making additions of Rs.48,500 for cane cost, Rs.67,500 for shortage in cane, and Rs.21,700 for salary of outstation staff. The assessee did not chal lenge the said assessment order. Later in the year 1963 the Income Tax Officer issued notice under section 274 read with section 271 of the Income Tax Act, 1961 in respect of the assessment year 1958 59 for imposing penalty. Before the Inspecting Assistant Commissioner the assessee admitted that these amounts, which were not included in the return by the compa ny, represented income. On finding that there was deliberate understatement of income he imposed a penalty of Rs.70,000. On appeal the Tribunal held that the mere fact that the amounts were agreed to be taken into account by the assessee did not ipsofacto indicate any criminality in its action to conceal any portion of the income, and that the assessee could very well have argued against the additions of the two sums, namely, Rs.67,500 and Rs.21,700. As regards the sum of Rs.48,500 it found that the assessee had agreed to similar addition in the earlier years and so the penalty was war ranted in similar amount for this year and taking into consideration that the sum involved was Rs.48,500, it con sidered that a smaller penalty of Rs.5,000 was imposable. The High Court took the view that the onus of proving concealment was on the Revenue because proceedings for penalty were penal in character, and held that so far as the sum of Rs.48,500 was concerned it was not proved that there was any deliberate concealment, that the Tribunal had not set aside the finding of the Assistant Inspecting Com 693 missioner that the assessee surrendered the amount of Rs.67,500 when it was faced with facts which clearly estab lished concealment, that the assessee in fact had surren dered the amount only after the Income Tax Officer had conclusive evidence in his possession that the amount repre sented its income, that acceptance by the assessee was material to give proper weight to judge the criminality of the action which in its opinion was not given, and that the Tribunal omitted to take into account the fact that the assessee had admitted that the amount of Rs.21,700 repre sented its income. In the appeal by special leave on the question as to how far the High Court in a reference could interfere with a finding of fact and transform the same into a question of law on the ground that there has been non consideration of all relevant facts. Allowing the appeal, HELD: 1.1 In an income tax reference a finding on a question of pure fact could be reviewed by the High Court only on the ground that there was no evidence to support it or that it was perverse. If the High Court found that there was no such evidence, those circumstances would give rise to question of law and could be agitated in a reference. [700G 701A, 702H 703A] 1.2 When a conclusion has been reached on an apprecia tion of a number of facts established by the evidence, whether that is sound or not must be determined not by considering the weight to be attached to each single fact in isolation, but by assessing the cumulative effect of all the facts in their setting as a whole. Where an ultimate finding on an issue is an inference to be drawn from the facts found, on the application of any principles of law, there would be a mixed question of law and fact, and the inference from the facts found in such a case would be a question of law. But where the final determination of the issue equally with the finding or ascertainment of the basic facts did not involve the application of any principle of law, an infer ence from the facts could not be regarded as one of law. The proposition that an inference from. facts is one of law is, therefore, correct in its application to mixed questions of law and fact, but not to pure questions of fact. In the case of pure questions of fact an inference from the facts is as much a question of fact as the evidence of the facts. [701A D] In the instant case, it is not said that the Tribunal had acted on material which was irrelevant to the enquiry or considered material 694 which was partly relevant and partly irrelevant or based its decision partly on conjectures, surmises and suspicions. It took into account all the relevant facts in a proper light in rendering a finding of fact. Therefore, no question of law arises. [703BC, 701DE] Sree Meenakshi Mills Limited vs Commissioner of Income tax, Madras, ; Omar Salay Mohamed Sait vs Com missioner of Income tax, Madras, ; Udhavdas Kewalram vs Commissioner of Income tax Bombay City 1, and Remeshwar Prasad Bagla vs Commissioner of Income tax, U.P., , referred to. 2.1 The High Court was wrong in saying that proper weight had not been given to all the evidence and admissions made by the assessee. The Tribunal had taken into considera tion the fact that the assessee had admitted the additions as its income when faced with non disclosure in assessment proceedings. The time when the assessee admitted the addi tions was also considered. But to admit that there has been excess claim or disallowance is not the same thing as delib erate concealment or furnishing inaccurate particulars. There may he hundred and one reasons for such admissions, i.e., when the assessee realises the true position it does not dispute certain disallowances but that does not absolve the Revenue to prove the mens rea of quasi criminal offence. [703BC, 702AB, 701A, 702BC] 2.2 It is for the Income tax authority to prove that a particular receipt is taxable. If however, the receipt is accepted and certain amount is accepted as taxable, it could be added. But in the instant case, it was not accepted by the assessee that it had deliberately furnished inaccurate particulars or concealed any income. [702EF] 3. The High Court observed that the time of admission was not noted by the Tribunal and this fact had not been properly appreciated by the Tribunal. That is not correct. The Tribunal had made additions during the assessment pro ceedings. In any event that would be appreciation of evi dence in a certain way, unless in such misappreciation which amounted to non appreciation no question of law would arise. Nonappreciation may give rise to the question of law but not mere misappreciation even if there he any from certain angle. Change of perspective in viewing a thing does not transform a question of fact into a question of law. [703CD] The High Court in preferring one view to another view of factual 695 appreciation in the instant case, has therefore, trans gressed the limits of its. jurisdiction under the Income Tax Reference in answering the question of law. [703F]

The assessee is a private limited company and was the Managing Agent of two other companies. All the shares held by the assessee company as its investments were the shares of those two companies. The Income tax authorities held that the assessee company was an 'investment company ' within the scope of section 23A of the Act and ordered the company to pay super tax as provided under section 23A(1). The High Court in reference held in favour of the assessee. Dismissing the appeals, HELD : (1) In the facts and circumstances of the present case, the assessee company cannot be said to be an 'investment company ' coming within the scope of section 23A of the Act. The meaning of the expression "in the case of a company whose business consists wholly or mainly in the dealing in or holding of investments" both in the main section 23A and in the Explanation concerns itself with a company whose business consists "wholly or mainly in the dealing in or holding of investments". The word "mainly" must necessarily take its colour from the word "wholly" preceding that word. , In other words the company which comes within the scope of those provisions must be a company whose primary business is in the dealing in or holding of investments and only in such cases, section 23A applies. And the expression 'business of holding of investments ' in the said section refers to a real, substantial and systematic or organised course of activity of investment carried on by an assesses for a set purpose such as earning profits. [730 H, 731 D] All the shares held by the assessee company as its investments were the shares of the two companies of which it was the Managing Agent. These investments were made for a collateral purpose viz., to have a firm grip over its Managing Agency business. The investments made by the assessee company in the shares of the managed companies are essentially linked with its Managing Agencies and not with the dealing of that company in shares of other companies. The company 's total income from dividend income of the shares of the managed companies and the Managing Agency commission together is much more than the income earned by the company from its share dealings. Further the assets of the company used in its share dealings are not more that its other assets. Therefore, it cannot be said that the assessee company 's business consisted wholly or mainly in the dealing in investments. [7.33 F] Bengal Assam Investors Ltd. vs C.I.T., West Bengal, and Narain Swadesh. Weaving Mills vs Commissioner of Excess Profits Tax, , referred to.

The then Satguru of the appellant Creed was assessed for the assessment years 1937 38, 1938 39 for the first time. He was a retired Govt. servant. His pension as well as the income from the institution were assessed together. On appeal, the Assistant Commissioner of Income tax confirmed the assessments made by the Income tax Officer. The Income tax Commissioner under reference made under section 66(2) of the Income tax Act, 1922 held that the offerings made to the assessee Satguru were offerings as held in trust and same were exempted under section 4(3)(1) of the Act. When an application under Section 35 of the Act was made for ratification, whether the offerings received by the assessee consisted of interest income, property income, and income derived from sale of books and photographs etc. to be excluded, the Commissioner directed deletion thereof. For the year 1939 40, though the Income tax Officer did not allow exemption u/s.4(3)(1) of the Act, the Appellate Assistant Commissioner allowed exemption. Till 1963 64 the appellant was not taxed and its refund applications were accepted by the respondent Revenue. For the assessment years 1964 65, 1965 66, 1966 67, 1967 68, 1968 69, 1969 70, the assessee appellant was as sessed, treating it to be an association of persons, and held that the donations and contributions received volun tarily had limited religious use. When the appellant assesses appealed, the appellate authority upheld the assessments. 313 Against the orders of the Appellate authority the asses see appealed before the Income tax Tribunal. The Tribunal allowing the appeals of the assessee, held that the assessee was entitled to the exemption claimed under Section 11 of the Income tax Act, 1961. On the question, referred to the High Court by the Tribunal, "Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that the income derived by the Radha Swami Satsang, a religious institution, was entitled to exemption under Sections 11 and 12 of the Income Tax Act, 1961?", the High Court answered the question in favour of the Revenuerespondent, holding that the trust deed was revocable and the conditions for exemption under Sections 11 and 12 of the Act were not satisfied. Allowing the appeals of the assessee, this Court, HELD: 1.01. Assessments are quasi judicial. Each assess ment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have al lowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. [320H, 321 A B] 1.02. No formal document is necessary to create a trust. The conditions which have to be satisfied to entitled one for exemption are: (a) the property from which the income is derived should be held under trust or legal obli gation, (b) the property should be so held for charitable or religious purposes which enure for the benefit of the pub lic. [317 E G] 1.03. The property was given to the Satguru for the common purpose of furthering the objects of the Sat Guru. The property was therefore subject to a legal liability of being used for the religious or charitable purpose of the Satsang. [319 E, F] 1.04. The Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under Sections 11 and 12 of the Income Tax Act, 1961. [321 D] Patel Chhotahhai and Ors. Janan Chandra Bask and Ors., AIR 314 1935 Privy Council 97; Acharya Jagdish Waranand Avadhuta & Ors. vs Commissioner of Police, Calcutta & Ant., , The Secretary of State for India in Council vs Radha Swami Sat Sang, ; All India Spinners 'Associ ation vs Commissioner of Income Tax, Bombay, ; TM.M. Sankaralinga Nadar & Bros. & Ors. vs Commissioner of Income tax, Madras, ; Hoystead & Ors. vs Commis sioner of Taxation, and Parashuram Pottery Works Co. Ltd. vs Income tax Officer, Circle 1, Ward A Rajkot, at p.10, referred to.

On the ground that 50% of the transactions recorded in a rough note book detected and seized by the Inspecting officer from the Head office of the firm were not entered in the regular books of accounts maintained by the assessee, the Sales Tax officer made an addition of 10% to the admitted turnover and completed the assessment. In an appeal, the Appellate Assistant Commissioner, reduced the addition to 5% of the admitted turnover. The respondents preferred a second appeal before the Appellate Tribunal. But the Department neither filed an appeal against the order of the Appellate Assistant Commissioner nor raised any cross objections in the assessee 's appeal After issuing a show cause notice to the assessee, the Tribunal, under section 39(4) of the Kerala General Sales Tax Act 1963, directed the addition of a certain amount to the taxable turnover. In its Tax Revision Petition, the respondent contended before the High Court that the order of the Tribunal was wrong in that it had no jurisdiction or power to enhance the assessment in the absence of an appeal or cross objections by the Department. Setting aside the impugned order of the Tribunal the High Court remanded the case for hearing the appeal afresh. In appeal to this Court, the appellant (Department) contended that on a true construction of section 39(4) of the Act, the Appellate Tribunal should be regarded as possessing the power to enhance the assessment even in the absence of any appeal or cross objections by the Department against the Appellate Assistant Commissioner 's order. Dismissing the appeal ^ Held: (1) The Tribunal has no jurisdiction or power to enhance the assessment in the absense of an appeal or. cross objections by the Department. [543 E] (2) To accept the construction placed by the counsel for the appellant on sub section (4)(a)(i) would be really rendering sub section (2 of section 39 otiose, for if in an appeal preferred by the assesses against, the Appellate Assistant Commissioner 's order, the tribunal would have the power to enhance the assessment, a provision for cross objections by the Department was really unnecessary. [1543 D] 539 (3) The elementary principle found in the Code of Civil Procedure that the respondent who has neither preferred his own appeal nor filed cross objections in the appeal preferred by the appellant must be deemed to be satisfied with the decision of the lower authority and that he will not be entitled to seek relief against a rival party in an appeal preferred by the latter, is equally applicable to revenue proceedings.[543 G] Motor Union Insurance Co. Ltd. vs Commissioner of Income Tax Bombay and New India Life Assurance Co. vs Commissioner of Income Tax, Excess Profits Tax, Bombay City. approved. Commissioner of Sales Tax, orissa vs Chunnilal Parmeshwar Lal (1961) 12 STC 677 distinguished.

Appeal No. 37 of 1955. Appeal from the judgment and order dated December 7, 1954, of the Jammu and Kashmir High Court in Criminal Misc. No. 76 of 2011. Vir Sen Sawhney, for the appellant. C. K. Daphtary, Solicitor General of India, B. R. L. Iyengar, R. H. Dhebar and T. M. Sen, for the respondents. Sardar Bahadur, for the intervener. December 5. The Judgment of Sinha, C. J., Kapur, Gajendragadkar, Wanchoo and Shah, JJ., was delivered by Sinha, C. J. Subba Rao, J. and Das Gupta, J. delivered separate judgments. SINHA, C. J. This appeal on a certificate of fitness granted by the High Court of Judicature, Jammu and Kashmir, is directed against the judgment and order dated December 7, 1954, in an application under article 32(2A) of the Constitution for issue of. a writ, directions or. order against the Union of India, through the Secretary, Ministry of Defence,, New Delhi, a,% the first respondent and the State of Jammu and Kashmir through the Chief Secretary,, Jammu and Kashmir State, as the second respondent. The petition is based on the following allegations. The petitioner will be referred to as the appellant in the course of this judgment. He was aged 45 years 832 262 days on August 12, 1954. He was holding a regular commission in the Jammu and Kashmir State Forces, which were amalgamated with the Defence Forces of the Union with effect from September 1, 1949. The appellant holding the substantive rank of Lieut. Col. in the amalgamated forces had the right to continue in service until he attained the age of 53 years, which event will happen on November 20, 1961. The Government of India issued a letter dated July 31, 1954, retiring the appellant from the service with effect from August 12, 1954, This decision of the Government of India is not based on any allegations or charge of inefficiency, indiscipline or any other irregularity on the part of the appellant. The aforesaid decision of the Government of India prematurely retiring the appellant is impugned as illegal, unwarranted and discriminatory and as having been made in contravention of article 16(1) of the Constitution. The petition was opposed on behalf of the respondents aforesaid on a number of preliminary grounds of which it is only necessary to mention the first, namely, that the authority against whom the writ is sought, that is to say, respondent No. 1, being outside the territorial limits of the jurisdiction of the Jammu and Kashmir High Court, the same was not maintainable. This preliminary objection was heard by a Division Bench, (Janki Nath Wazir, C. J. and M. A. Shahmiri, J.) Jammu and Kashmir High Court. By its judgment. dated December 7, 1954, the High Court upheld the preliminary objection. The High Court, relying upon the decisions of this Court in Election Commission, India vs Saka Venkata Subba Rao (1) and K. section Rashid and Son vs The Income tax Investigation Commission etc. (2), held that it had no jurisdiction to issue a writ against the first respondent and, therefore, dismissed the petition, but the High Court granted the necessary certificate under article 132 of the Constitution; hence this appeal. The matter was first heard by a Bench of five judges. in the course of hearing it became clear to us that the appellant not only sought to distinguish (1) ; (2) ; 833 the two decisions aforesaid of this Court, but questioned the correctness of those decisions. Hence this larger Bench was constituted in order to examine the correctness of the decisions aforesaid of this Court on the strength of which the High Court had refused to entertain the appellant 's petition, on merits. It has been argued on behalf of the appellant, in the first instance, that the previous decisions of this Court were distinguishable on the ground that they did not, in terms, consider the question whether the Government of India wag amenable to the jurisdiction of the High Court under article 226 or of the Jammu and ' Kashmir High Court under article 32(2A) of the Constitution. that those provisions, on a true construction, would not stand in the way of the appellant, inasmuch as the Government of India has no location and its authority is present throughout the Union territory; that the correct test is whether or not the cause of action arose within the territorial limits of the High Court 's jurisdiction; that the High Court was in error in holding that the term "authority" included a Government. In answer to these contentions on behalf of the appellant, the learned Solicitor General contended that, on a proper construction of the relevant provisions of the Constitution, it is clear that Sastri C. J. 's observations relating to "authority" in the case of Election Commission, India vs Saka Venkata Subba Rao (1) applied with equal force to Government, inincluding the Union Government. The Government of India functions through its officers and, therefore, the location contemplated means the place at which the orders impugned are ordinarily passed. The considerations in a suit with reference to the cause of action for the suit do not stand on the same footing in a writ matter, because the writ has to reach the particular officers of the Government concerned. The expression "in appropriate cases" means that there may be cases where though the Union Government as such is not located within the territorial limits of a High Court yet a writ may be issued against it by the High (1) ; 834 Courts because an officer of the Union Government is functioning within such limits and it is his order which is the subject matter of the controversy. Therefore, it is not in every case that a High Court can issue a writ against the Union. A writ of mandamus, for example, is directed against a particular named person or authority. Similarly, a writ of certiorari is directed against a particular record. Therefore, the writ must issue to someone within the territorial limits of the High Court 's jurisdiction. The question that we have to determine in this case is of far reaching importance and is not a matter of first impression. The question was first raised in this Court in 1952 and was determined by a Constitution Bench in the case of Election Commission, India vs Saka Venkata Subba Rao (1). In that case a writ was applied for in the Madras High Court for restraining the Election Commission from, enquiring into the alleged disqualification of the respondent. A single Judge of the High Court of Judicature of Madras issued a writ of prohibition restraining the Election Commission, a statutory authority constituted by the President of India, with its office permanently located at New Delhi, when the matter was heard by the learned single Judge of the High Court. In the High Court the Election Commission demurred to the jurisdiction of the Court to issue any writ against it on the ground that the Commission was not within the territory in relation to which the High Court exercised jurisdiction, apart from other objections. The learned Judge of the High Court overruled the preliminary objection and decided the case on merits, and issued a writ prohibiting the Commission from ' proceeding with the enquiry. The learned Judge granted the certificate under article 132 that the case involved a substantial question of law as to the interpretation of the Constitution. The Election Commission accordingly came up in appeal to this Court and challenged the jurisdiction of the Madras High Court to issue the writ it had purported to do. This Court overruled the contention on behalf of the respondent which was (1) ; 835 based on the decision of the Privy Council in the Parlakimedi case (1) that the jurisdiction of the High Court to issue a writ is analogous to the jurisdiction of a court to grant a decree or order against persons outside the limits of its local jurisdiction, provided that the cause of action arose within those limits. This Court overruled that contention in these words: "The rule that cause of action attracts jurisdiction in suits is based on statutory enactment and cannot apply to writs issuable under article 226 which makes no reference to any cause of action or where it arises but insists on the presence of the person or authority 'within the territories ' in relation to which the High Court exercises jurisdiction". The Constitution Bench in that case considered that the language of article 226 of the Constitution was "reasoriably plain" and that the exercise of the power conferred by that Article was subject to a two fold limitation, namely, (1) that the power is to be exercised "throughout the territories in relation to which it exercises jurisdiction" and (2) that the person or authority to whom the High Court is empowered to issue the writs must be "within those territories". In other words, the writ of the Court could not run beyond the territories subject to its jurisdiction and that the person or authority affected by the writ must be amenable to the Court 's jurisdiction, either by residence or location within those territories. The second case of this Court, which dealt with this question is K. section Rashid and Son vs The Income Tax Investigation Commission (2). That was a case on appeal from the judgment and order dated August 10, 1950, of the High Court of Judicature, Punjab, at Simla, in a number of miscellaneous matters, in which the High Court had been moved under articles 226 and 227 of the Constitution praying for quashing proceedings started against the appellants under the Taxation on Income (Investigation Commission.) Act (XXX of 1947). It was prayed in the High Court that a writ of prohibition might issue against the Income Tax (1) (1943) L.R. 70 I.A. 129. (2) ; 836 Investigation Commission directing it not to proceed with the investigation of cases referred to it under the provisions of the Act. The writ petitions in the High Court were opposed on behalf of the Commission on a number of grounds, one of them being that the Pun. jab High Court had no jurisdiction to issue the writs prayed for under article 226 of the Constitution, simply because the Commission was located in Delhi. Reliance was placed on behalf of the Commission on the decision of the Privy Council in the Parliament case (1) that the substance of the matter was that the assessees against whom the investigation had been started belonged to U. P. and all the assessment pro ceedings, including reference to the High Court, would lie in Uttar Pradesh. The High Court gave effect to this contention and dismissed the application primarily on the ground that the High Court had no jurisdiction to issue the writ to the Commission. The assessees came up in appeal to this Court, and this Court substantially adopted the reasons given by it in its previous judgment in the case of Election Commission, India vs Saka Venkata Subba Rao (2). It is to be noted that when the High Court of Punjab decided the case, the decision of this Court referred to above had not been given. Relying upon its previous decision, this Court held that the Punjab High Court was in error in holding that it had no jurisdiction to deal with the matter under article 226 of the Constitution. The appeal was dismissed by this Court on other grounds, not material to this case. Learned counsel for the appellant has contended that the two decisions of this Court referred to above are distinguishable from the facts of the present case, inasmuch as in those cases the Election Commission and the Income tax Investigation 'Commission were statutory bodies, which had their location in Delhi, and, therefore, this Court held that the Punjab High Court was the High Court within whose jurisdiction those bodies functioned and had their location and were, therefore, amenable to its jurisdiction. He further contended that the Union Government functioned throughout the territory of India and could (1) (1943) L.R. 70 I.A. 129. (2) ; 837 not be said to be located only in Delhi simply because the capital for the time being was in Delhi. In this connection, strong reliance was placed on the decision of the Full Bench of the Allahabad High Court in Maqbulunnissa vs Union of India (1). That case does lend a great deal of support to this contention on behalf of the appellant. It was held by the High Court in that case that the words "any Government" in article 226(1) of the Constitution clearly indi cated that the Allahabad High Court had jurisdiction to entertain the petition under article 226, not only against the State of Uttar Pradesh, but also against the Union Government for the issue of a writ in the nature of mandamus, directing the Government to forbear from giving effect to the order asking the petitioner to leave India. The ratio of the decision was that, even though the capital of the Government of India is in Delhi, its executive power extends throughout the territory of India and that the real test to determine the jurisdiction would be the residence of the petitioners and the effect of the impugned order upon them. After holding that the High Court had the jurisdiction to entertain the petition, the Court dismissed it on other grounds, not material to this case. The Allahabad High Court distinguished the decision of a Division Bench of the Calcutta High Court dated January 17, 1951, in the case of The Lloyds Bank Limited vs The Lloyds Bank Indian Staff Association (Calcutta Branches) (2) which was unreported till then. In that case, Harries, C. J., speaking for the Court, had held that though article 226 of the Constitution had gone beyond the English practice by providing that writs in the nature of prerogative writs could issue even against a Government, that Government most be located within the territorial limits of the Court which was moved to exercise its power under that Article. He further observed that the Government of India could not be said to be located in the State of West Bengal and, therefore, writs under article 226 could not issue against that Government by the High Court of Calcutta. That (1) I.L. R. (1953) 2 All. 289. (2) I.L.R. 838 decision of the Calcutta High Court was distinguished by the Allahabad High Court on the ground that "the effects of the orders of the Union Government were not operative within the jurisdiction of the Court". It may be added that that decision came up in appeal to this Court in Civil Appeal No. 42 of 1952 but the appeal was dismissed by this Court by its judgment dated April 20, 1952, on other grounds. It will be noticed that when the Allahabad decision, so strongly relied upon by the appellant, was given, the two decisions referred to above of this Court were not there. The Allahabad High Court may not have given that judgment if the two decisions of this Court had then been in existence. The two main questions which arise, therefore, are: (i) whether the Government of India as such can be said to have a location in a particular place, viz., New Delhi, irrespective of the fact that its authority extends over all the States and its officers function throughout India, and (ii) whether there is any scope for introducing the concept of cause of action as the basis of exercise of jurisdiction under article 226. Before, however, we deal with these two main questions, we would like to clear the ground with respect to two subsidiary matters which have been urged on behalf of the appellant. The first argument is that the word "authority" used in article 226 cannot and does not include Government. We are not impressed by this argument. In interpreting the word "authority" we must have regard to the clause immediately following it. article 226 provides for "the issue to any person or authority including in appropriate cases any Government" within those territories. It is clear that the clause "including in appropriate cases any Government" goes with the preceding word "authority", and on a plain and reasonable construction it means that the word " authority" in the context may include any Government in an appropriate case. The suggestion that the said clause is intended to confer discretion on the High Courts in the matter of issuing a writ or direction on any Government seems to us clearly unsustainable. 839 To connect this clause with the issuance of a writ or order and to suggest that in dealing with cases against Government the High Court has to decide whether the case is appropriate for the issue of the order is plainly not justified by the rules of grammar. We have no hesitation in holding that the said clause goes with the word "authority" and that its effect is that the authority against whom jurisdiction is conferred on the High Court to issue a writ or appropriate order may in certain cases include a Government. Appro priate cases in the context means cases in which orders passed by a Government or their subordinates are challenged, and the clause therefore means that where such orders are challenged the High Court may issue a writ against the Government. The position, therefore, is that under article 226 power is conferred on the High Court to issue to any person or authority or in a. given case to any Government, writs or orders there specified for enforcement of any of the rights conferred by Part III and for any other purpose. Having thus dealt with the two subsidiary points raised before us, we may now proceed to consider the two main contentions which arise for our decision in the present appeal. This brings us to the first question, namely, whether the Government of India as such can be said to be located at one place, namely, New Delhi. The main argument in this connection is that the Government of India is all pervasive and is functioning throughout the territory of India 'and therefore every High Court has power to issue a writ against it, as it must be presumed to be located within the territorial jurisdiction of all State High Courts. This argument in our opinion confuses the concept of location of 'a Government with the concept of its functioning ' A Government may be functioning all over a State or all over India; but it certainly is not located all over the State or all over India. It is true that the Constitution has not provided that the seat of the Government, of India will be at New Delhi. That, however, does not mean ' that the Government of India as such has no seat where it is located. It is common knowledge that the seat of the 840 Government of India is in New Delhi 'and the Government as such is located in New Delhi. The absence of a provision in the Constitution can make no difference to this fact. What we have to see, therefore, is whether the words of article 226 mean that the person or authority to whom a writ is to be issued has to be resident in or located within the territories of the High Court issuing the writ? The relevant words of article 226 are these "Every High Court shall have power to issue to any person or authority within those territories. ". So far as a natural person is concerned, there can be no doubt that he can be within those territories only if he resides therein either permanently or temporarily. So far as an authority is concerned, there can be no doubt that if its office is located therein it must be within the territory. But do these words mean with respect to an authority that even though its office is not located within those territories it will be within those territories because its order may affect persons living in those territories? Now it is clear that the jurisdiction conferred on the High Court by article 226 does not depend upon the residence or location of the person applying to it for relief; it depends only on the person or authority against whom a writ is sought being within those territories. It seems to us therefore that it is not permissible to read in article 226 the residence or location of the person affected by the order passed in order to determine the jurisdiction of the High Court. That jurisdiction depends on the person or authority passing the order being within those territories and the residence: or location of the person affected can have no relevance on the question of the High Court 's jurisdiction. Thus if a person residing or located in Bombay, for example, is aggrieved by an order passed by an authority located, say, in Calcutta, the forum in which he has to seek relief is not the Bombay High Court though the order may affect him in Bombay but the Calcutta High Court where the authority passing the order is located. It would, therefore, in our opinion be wrong to introduce in article 226 the concept of the place where the order 841 passed has effect in order to determine the jurisdiction of the High Court which can give relief under article 226. The introduction of such a concept may give a rise to confusion and conflict of jurisdictions. Take , for example, the case of an order passed by an authority in Calcutta, which affects six brothers living, say , in Bombay, Madras, Allahabad, Jabalpur, Jodhpur and Chandigarh. The order passed by the authority in Calcutta has thus affected persons in six States. Can it be said that article 226 contemplates that all the six High Courts have jurisdiction in the matter of giving relief under it? The answer must obviously be 'No ', if one is to avoid confusion and conflict of jurisdiction. As we read the relevant words of article 226 (quoted above) there can be no doubt that the jurisdiction conferred by that Article on a High Court is with respect to the location or residence of the person or authority passing the order and there can be no question of introducing the concept of the place where the order is to have effect in order to determine which High Court can give relief under it. It is true that this Court will give such meaning to the words used in the Constitution as would help towards its working smoothly. If we were to introduce in article 226 the concept of the place where the order is to have effect we would not be advancing the purposes for which article 226 has been enacted. On the other hand, we would be producing conflict of jurisdiction between various High Courts as already shown by the illustration given above. Therefore, the effect of an order by whomsoever it is passed can have no relevance in determining the jurisdiction of the High Court which can take action under article 226. Now, functioning of a Government is really nothing other than giving effect to the orders passed by it. Therefore it would not be right to introduce in article 226 the concept of the functioning of Government when determining the meaning of the words "any person or authority within those territories". By introducting the concept of functioning in these words we shall be creating the same conflict which would arise if the concept of the place where the order is to have effect is introduced in 842 article 226. There can, therefore, be no escape from the conclusion that these words in article 226 refer not to the place where the Government may be functioning but only to the place where the person or authority is either resident or is located. So far therefore as a natural person is concerned, he is within those territories if he resides there permanently or temporarily. So far. as an authority (other than a Government) is concerned, it is within the territories if its office is located there. So far as a Government is concerned it is within the territories only if its seat is within those territories. The seat of a Government is sometimes mentioned in the Constitutions of various countries but many a time the seat is not so mentioned. But whether the seat of a Government is mentioned in the Constitution or not, there is undoubtedly a seat from which the Government as 'such functions as a fact. What article 226 requires is residence or location as a fact and if therefore there is a seat from which the Government functions as a fact even though that seat is not mentioned in the Constitution the High Court within whose territories that seat is located will be the High Court having jurisdiction under AA. 226 so far as the orders of the Government as such are concerned. Therefore, the view taken in Election Commission, India vs Saka Venkata Subba Rao (1) and K.S. Rashid and Son vs The Income tax Investigation Commission (2) that there is two fold limitation on the power of the High Court to issue writs etc. under article 226, namely, (i) the power is to be exercised 'throughout the territories in relation to which it exercises jurisdiction ', that is to say, the writs issued by the Court cannot run beyond the territories subject to its jurisdiction, and (ii) the person or authority to whom the High Court is empowered to issue such writs must be "within those territories" which clearly implies that they must be amenable to its jurisdiction either by residence or location within those territories, is the correct one. This brings us to the second point, namely, whether (1) ; (2) ; 843 it is possible to introduce the concept of cause of action in article 226 so that the High Court in whose jurisdiction the cause of action arose would be the proper one to pass an order thereunder. Reliance in this connection has been placed on the judgment of the Privy Council in Ryots of Garabandho vs Zamindar of Parlakimedi (1). In that case the Privy Council held that even though the impugned order was passed by the Board of Revenue which was located in Madras, the High Court would have no jurisdiction to issue a writ quashing that order, as it had no jurisdiction to issue a writ beyond the limits of the city of Madras except in certain cases, and that particular matter was not within the exceptions. This decision of the Privy Council does appa rently introduce an element of the place where the cause of action arose in considering the jurisdiction of the High Court, to issue a writ. The basis of the at decision, however, was the peculiar history of the issue of writs by the three Presidency High Courts as successors of the Supreme Courts, though on the literal construction of cl. 8 of the Charter of 1800 conferring jurisdiction on, the Supreme Court of Madras, there could be little doubt that the Supreme Court would have the same jurisdiction as the Justices of the Court of King 's Bench Division in England for the territories which then were or thereafter might be subject to or depend upon the Government of Madras. It will therefore not be correct to put too much stress on the decision in that case. The question whether the concept of cause of action could be introduced in article 226 was also considered in Saka Venkata Subba Rao 's case ( 2 ) and was repelled in these words: "The rule that cause of action attracts jurisdiction in suits is based on statutory enactment and cannot apply to writs issuable under article 226 which makes no reference to any cause of action or where it arises but insists on the presence of the person or authority within the territories ' in relation to which the High Court exercises jurisdiction. " Article 226 as it stands does not refer anywhere to (1) (1943) L.R. 70 I.A. 129. (2) ; 844 the accrual of cause of action and to the jurisdiction of the High Court depending on the place where the cause of action accrues being within its territorial jurisdiction. Proceedings under article 226 are not suits; they provide for extraordinary remedies by a special procedure and give powers of correction to the High Court over persons and authorities and these special powers have to be exercised within the limits set for them. These two limitations have already been indicated by us above and one of them is that the person or authority concerned must be within the territories over which the High Court exercises juris diction. Is it possible then to overlook this constitu tional limitation and say that the High Court can issue a writ against a person or authority even though it may not be within its territories simply because the cause of action has arisen within those territories? It seems to us that it would be going in the face of the express provision in article 226 and doing away with an express limitation contained therein if the concept of cause of action were to be introduced in it. Nor do we think that it is right to say that because article 300 specifically provides for suits by and against the Government of India, the proceedings under article 226 are also covered by article 300. It seems to us that article 300 which is on the same line as section L76 of the Government of India Act, 1935, dealt with suits as such and proceedings analogous to or consequent upon suits and has no reference to the extraordinary remedies provided by article 226 of the Constitution. The concept of cause of action cannot in our opinion be introduced in article 226, for by doing so we shall be doing away with the express provision contained therein which requires that the person or authority to whom the writ is to be issued should be resident in or located within the territories over which the High Court has jurisdiction. It is true that this may result in some inconvenience to persons residing far away from Now Delhi who are aggrieved by some order of the Government of India as such, and that may be a reason for making a suit. able constitutional amendment in article 226. But the argument of inconvenience, in our opinion,. cannot 845 affect the plain language of article 226, nor can the concept of the place of cause of action be introduced into it for that would do away with the two limitations on the powers of the High Court contained in it. We have given our earnest consideration to the language of article 226 and the two decisions of this Court referred to above. We are of opinion that unless there are clear and compelling reasons, which cannot be denied, we should not depart from the interpretation given in these two cases and indeed from any interpretation given in an earlier judgment of this Court, unless there is a fair amount of unanimity that the earlier decisions are manifestly wrong. This Court should not, except when it is demonstrated beyond all reasonable doubt that its previous ruling, given after due deliberation and full hearing, was erroneous, go back upon its previous ruling, particularly on a constitutional issue. In this case our reconsideration of the matter has confirmed the view that there is no place for the introduction of the concept of the place where the impugned order has effect or of the concept of functioning of a Government, apart from the location of its office concerned with the case, or even of the concept of the place where the cause of action arises in article 226 and that the language of that Article is plain enough to lead to the conclusion at which the two cases of this Court referred to above arrived. 'If any inconvenience is felt on account of this interpretation of article 226 the remedy seems to be a constitutional amendment. There is no scope for avoiding the inconvenience by an interpretation which we cannot reasonably, on the language of the Article, adopt and which the language of the Article does not bear. In this view of the matter the appeal fails and is hereby dismissed with costs. SUBBARAO, J. I have had the advantage of perusing the judgment prepared by my Lord the Chief Justice. I regret my inability to agree. I would not have ventured to differ from his weighty opinion but for the fact that the acceptance of the contention of 107 846 the respondents would practically deprive the majority of citizens of our country of the benefit of cheap, expeditious and effective remedy given to them under article 226 of the Constitution against illegal acts of the Union Government. If the relevant provisions are clear and unambiguous, the said contention must prevail however deleterious the effect may be to public interest. But if the words of the Article are capable of two or more interpretations, one that will carry out the intention of the Constituent Assembly and the other that would defeat it, the former interpretation must necessarily be accepted. We must also bear in mind that the provisions of the Constitution are not " mathematical formulae which have their essence in mere form". It being an organic statute, its provisions must be construed broadly and not in a pedantic way, but without doing violence to the language used. The facts have been fully stated in the judgment of my Lord the Chief Justice and it would be redundant to restate them. It would be enough if I formulate the point of law raised and express my opinion thereon. The question is whether the appellant, who is a citizen of India and is residing in the State of Kashmir, can enforce his fundamental right under Art 32(2A) of the Constitution by filing an appropriate writ petition in the High Court of Jammu & Kashmir, if his right is infringed by an order of the Union Government. The Constitution of India has been made applicable to the State of Jammu & Kashmir by the Constitution (Application to Jammu & Kashmir) Order, 1954 (Order No. 48 dated May 14, 1954) with certain exceptions and modifications. By the said Order, cl. (3) of article 32 of the Constitution was deleted, and a new clause (2A) was inserted after cl. The question falls to be decided on a true construction of the said el. (2A) which reads: "Without prejudice to the powers conferred by clauses (1) and (2), the High Court shall have power throughout the territories in rotation to which it exercises jurisdiction to issue to any person or authority, including in appropriate cases any Government within these territories, directions or orders or writs, 847 including writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari, or any of them, for the enforcement of any of the rights conferred by this Part. " The operative part of this clause is in pari materia with article 226 of the Constitution with the difference that the words "for any other purpose" found in the latter Article are omitted in the former. Though the power of the High Court of Jammu & Kashmir is limited to that extent, in other respects it is as extensive as that of the other High Courts under article 226. The object of the amendment is self evident; it was enacted to enable the said High Court to protect the fundamental rights of the citizens of India in that part of the country. The learned Solicitor General broadly contends that this Court has construed the analogous provisons of article 226 of the Constitution and held that the writs under that Article do not run beyond the territories in relation to which a High Court exercises jurisdiction and that a High Court cannot issue a writ thereunder unless the person or authority against whom the writ is sought is physically resident or located within the territorial jurisdiction of that High Court; and that, therefore, on the same parity of reasoning, the High Court of Jammu & Kashmir cannot issue a writ to run beyond the territories of that State against the Union Government functioning through its officers in New Delhi. Learned counsel for the appellant contends, on the other hand, that neither article 32(2A) nor article 226 bears any such limited construction and that on a liberal and true construction of the said constitutional provisions it must be held that 'the High Court can issue a writ against any Government, including the Union Government, exercising the functions within the territories of a State, if it infringes the right of a person in that State. Before I attempt to construe the provisions of el. (2A) of article 32, I think it would be convenient to trace briefly the history of article 226, for it throws a flood of light on the legislative intention expressed in 848 article 32(2A). In pre independence India the High Courts, other than the High Courts in the presidency towns of Bombay, Calcutta and Madras, had no power to issue prerogative writs; even in the case of the said presidency High Courts the power to issue writs was very much circumscribed; their jurisdiction to issue the said writs was confined only to the limits of their original jurisdiction and the Governments were excluded from its scope. But the framers of our Constitution with the background of centuries of servility, with the awareness of the important role played by the High Court of England in protecting the rights of its citizens when they were infringed by executive action, with the knowledge of the effective and impartial part played by the High Courts in pre independence India within the narrow limits of their jurisdiction to protect the rights of the citizens of our country, with a vision to prevent autocracy raising its ugly head in the future, declared the fundamental rights in Part III of the Constitution, conferred powers on the High Courts to issue to any person or authority, including in appropriate cases any Government, directions, orders or writs for the enforcement of the fundamental rights or for any other purpose. In short, any person of India can approach an appropriate High Court to protect his rights against any person, authority or any Government if his fundamental right or any other right is infringed by the said person, authority or Government. If the contention of the respondents be accepted, whenever the Union Government infringes the right of a person in any remote part of the country. , he must come all the way to New Delhi to enforce his right by filing a writ petition in the Circuit Bench of the Punjab High Court. If a common man residing in Kanyakumari, the southern most part of India, his illegally detained in prison, or deprived of his property otherwise than by law, by an order of the Union Government, it would be a travesty of fundamental rights to expect him to come to New Delhi to seek the protection of the High Court of Punjab. This construction of the provisions of article 226 would attribute to the framers 849 of the Constitution an intention to confer the right on a person and to withhold from him for all practical purposes the remedy to enforce his right against the Union Government. Obviously it could not have been the intention of the Constituent Assembly to bring about such an anomalous result in respect of what they conceived to be a cherished right conferred upon the citizens of this country. In that event, the right conferred turns out to be an empty one and the object of the framers of the Constitution is literally defeated. The scope of article 226 vis a vis the reach of the High Courts ' power has been considered in two decisions of this Court, namely, Election Commission, India vs Saka Venkata Rao (1) and K. section Rashid and Son vs The Income tax Investigation Commission (2). As this Bench of seven Judges is constituted to enable this Court to approach the problem with a fresh mind unhampered by precedents, I propose to scrutinize the provisions of article 32(2A) free from the curbs imposed by the earlier decisions. The core of the Article is discernible in the following clause and phrases: "throughout the territories in relation to which it exercises its jurisdiction", "any Government", "within those territories", "directions or orders or writs, including writs in the nature of habeas corpus, etc. " The wore "throughout the territories, etc." delimit the territorial jurisdiction of the High Courts in the matter of issuing directions or writs. A High Court exercises jurisdiction throughout the State in which it is located. Its writs run only through. out the State and not beyond its territorial limits. The main object of the powers to keep the authorities or tribunals within their bounds and to prevent them from infringing the fundamental or other rights of citizens. At the instance of an aggrieved person it can issue one or other of the writs or orders or directions against the offending authority in respect of an act done or omitted tot be done by it. It is implicit in the, limitation that the impugned act must affect a person or property amenable to its territorial jurisdiction. (1) ; (2) ; 850 This question, in a different context, has been considered by the Judicial Committee of the Privy Council in Ryots of Garabandho vs Zemindar of Parlaki medi (1). There the Board of Revenue situated in the State of Madras under section 172 of the Madras Estates Land Act, 1908, enhanced the rents payable by the ryots in three villages, including Parlakimedi village, in the district of Ganjam in the Northern Circars. The question was whether the Madras High Court had power to issue a writ to quash the order of the Board. of Revenue, as the parties to that litigation were not subject to the original jurisdiction of the Madras High Court. The Judicial Committee held that the Madras High Court had no jurisdiction to issue a writ of certiorari to run beyond the territorial limits of that High Court. When it was contended that, as the Revenue Board was in Madras, the High Court had jurisdiction to quash its order, the Judicial Committee repelled that contention with the follow ing remarks at p. 164: "The Board of Revenue has always had its offices in the Presidency Town, and in the present case the Collective Board, which made the order complained of, issued this order in the town. On the other hand, the parties are not subject to the original jurisdiction of the High Court, and the estate of Parlakimedi ties in the north of the province. . . Their Lordships think that the question of jurisdiction must be regarded as one of substance, and that it would not have been within the competence of the Supreme Court to claim jurisdiction over such a matter as the present by issuing certiorari to the Board of Revenue on the strength of its location in the town. Such a view would give jurisdiction to the Supreme Court, in the matter of settlement of rents for ryoti holdings in Ganjam between parties not otherwise subject to its jurisdiction, which it would not have had over the Revenue Officer who dealt with the matter at first instance." This decision in clear terms lays emphasis on the substance of the matter and holds that mere physical (1) (1943) L.R. 70 I.A. 129. 851 presence of an authority within the jurisdiction of a High Court does not enable that Court to issue writs against the said authority in respect of an order made in a dispute between persons residing outside the territorial jurisdiction of the said High Court. Therefore, a High Court 's jurisdiction to issue an appropriate writ depends on the co existence of two conditions, namely, (i) the cause of action has accrued within the territories in relation to which it has jurisdiction, and (ii) the said authority is "within" the said territories. This interpretation may give rise to a criticism; it may be asked, which High Court could give the relief if the cause of action accrues within the territorial jurisdiction of one High Court and the authority concerned is located within that of another High Court? There may. be statutory authorities with all India jurisdiction, but for convenience located in a particular State. In exercise of the powers conferred under statutes, they may make orders affecting the rights of parties residing in different States. I am prima facie of the view that the said authorities, in so far as their orders operate in a particular territory, will be "within" those territories and the High Court, which exercises its jurisdiction throughout that territory, can issue a suitable writ against the said authorities. This interpretation avoids the anomaly of one High Court issuing a writ against an authority located "within" its territorial jurisdiction in respect of a cause of action accruing in another State or territory over which it has no jurisdiction. But this question does not arise in this case, for we re mainly concerned with the Union Government. Article 226 of the Constitution is expressed in wide and most comprehensive terms. There is no difficulty about. the words "person or authority", but the phrase "including any Government" gives rise to a conflict of opinion. If the framers of the Constitution intended to extend simply the power of the High Court to issue writs only against the Government of the State, they could have stated "or the Government of the State", instead they designedly used the words "any Government" which at first sight appear rather involved but on a deeper scrutiny reveal that the words 852 "any Government" cannot mean only the Government of the State. The word "any" clearly presupposes the existence of more than one Government functioning in a State. Under the Constitution two Governments function in each State. Under article 1, India shall be a Union of States and the territory of India shall comprise, inter alia, the territories of the States. Part 11 provides for one class of citizens, that is, citizens of India. In whatever State a person with the requisite qualifications of a citizen may reside, he is a citizen of India and not of that particular State. All the three departments of the Union as well as the State function in the State; both Parliament and the Legislature of the State make laws which govern the State in respect of matters allotted to them respectively. Both the Union and the State executive powers extend to the. State, and the former is exercised in regard to matters with respect to which Parliament has power to make laws and the latter in regard to matters with respect to which the Legislature of the State has power to make laws: see articles 73 and 162. The Judiciary consists of an hierarchy of courts and all the courts from the lowest to the Supreme Court exercise jurisdiction in respect of a cause of action arising in that State. The demarcation between the Union Government and the State Government is, therefore, not territorial but only : subjectwise and both the Governments function within the State. With this background it is easy to perceive that "any Government" must include the Union Government, for two State Governments cannot administer the same State, though for convenience or as a temporary arrangement, the offices of one State may be located in another State. Then it is asked why the Article confers power to issue writs against any Government only in appropriate cases. There are two answers to this question. Till the Constitution was framed there was no power in a High Court to issue a writ even against the Provincial Government. The Constitution conferred for the first time a power on the High Court to issue a writ not only against the State Government but also the Union Government. As the 853 Union Government has sway over not only the State in question but beyond it, it became necessary to administer a caution that a writ can only be issued in appropriate cases. The High Court 's jurisdiction is limited in the matter of issuing writs against the Union Government, for it cannot issue writs against it in respect of a cause of action beyond its territorial jurisdiction. There may also be a case where the secretariat of one of the State Governments is located in another State temporarily. In such a case also the High Court of the latter State cannot issue writs against that State Government as it is not appropriate to issue such writs, for the cause of action accrues ' within the former State. I have, therefore, no doubt that the words "any Government" must necessarily take in the Union Government. Much of the argument turns upon the words "within those territories". It is said that the Union Government is not within the territories of the State, for its headquarters are in Delhi. The Article does not use the word "headquarters", "resident" or "location". The dictionary meaning of the word "within" is "inside of, not out of or beyond". The connotation of the words takes colour from the context in which they are used. A person may be said to be within a territory if he resides therein. He may also be within a territory if he temporarily enters the said territory or is in the course of passing through the territory. Any authority may be in a territory if its office is located therein. It may also be said to be within a territory if it exercises its powers therein and if it can make orders to bind persons for properties therein. So too a Government may be within a State if it has a legal situs in that State. It may also be said to be within a State if it administers the State, though for convenience some of its executive authorities are residing outside the territory. We must give such meaning to these words as would help the working of the Constitution rather than retard it. To put it differently, can it be said that the Union Government 108 854 is within a particular State? Union Government in the present context means the executive branch of the Government. Where is it located? To answer this question it is necessary to consider what is "Union Government". The Constitution in Part V under the heading. "The Union" deals with separate subjects, namely, the executive, the Parliament and the Union judiciary. Under article 53, the executive power of the Union shall be vested in the President and shall be exercised by him either directly or through officers subordinate to him in accordance with the Constitution. Article 74 provides for a council of Ministers with the Prime Minister at the head to aid and advise the President in the exercise of his functions. By article 77, all executive action of the Government of India shall be expressed to be taken in the name of the President; and el. (3) thereof authorizes the President to make rules for the more convenient transaction of the business of the Government of India, and for the allocation among Ministers of the said business. Article 73 says that subject to the provisions of the Constitution, the executive power of the Union shall extend to the matters with respect to which Parliament has power to make laws and to the exercise of such rights, authority and jurisdiction as are exercisable by the Government of India by virtue of any; treaty or agreement. The Constitution nowhere fixes the seat of the Union Government or even that of the President. Shortly stated, the Union Government is the President acting on the advise of the Ministers directly or through officers subordinate to him in accordance with the Constitution and the jurisdiction of the said Government extends, so far as is relevant to the present purpose, to matters in respect of which Parliament has power to make laws. The question that immediately arises is, what is the situs of such a Government? There is no statutory situs. For convenience of administration, the officers of such Government may stay at one place,, or they may be distributed in different places; the President may. reside in one place, the Prime Minister in another, the 855 Ministers in a third place and the officers through whom the President exercises his powers in a place different from the rest. What happens when the Secretariat remains in New Delhi and the President resides for some months in a year in, say,, Hyderabad? Contrary wise, what would be the position if the President stays in New Delhi and the entire or part of the Secretariat or some of the Ministers stay in Hyderabad? It is, therefore, not possible to apply 'the test of residence or location in the absence of any statutory situs. The Union Government has no fixed legal abode; it is present throughout the territories over which it exercises jurisdiction and in respect whereof it can make effective and binding orders in the field allotted to it by the Constitution. The constitutional situs of the Union Government is the entire territories of the Union and it is "within" the territories of India and,, therefore, within the territories of every State. Let us look at the problem from another standpoint. Under article 300 of the Constitution, the Government of India may sue or be sued by the name of the Union of India. The word "sued" is used in a general sense and cannot be narrowly construed in the Constitution as to comprehend only action by way of filing a suit in a civil court. According to Webster, it means to seek justice or right by legal process. Generally speaking, it includes any action taken in a court. The practice followed in the various High Courts and the Supreme Court is also consistent with the wide meaning attributed to it, for writs are filed against the Government of India only in the name of the Union of India. Union of India is a juristic person and it is impossible to predicate its residence in a particular place in the Union. Its presence Synchronizes with the limits of the Union territories. That is the reason why that Order XXVII, rule 3, Code of Civil Procedure, says that in suits by or against the Government instead of inserting in the plaint the name and description and place of residence of the plaintiff or defendant, it shall be sufficient to insert the appropriate name as provided in section 79 Section 79 of the 856 Civil Procedure Code is in terms analogous to article 300 of the Constitution, and under that section, "In a suit by or against the Government, the authority to be named as plaintiff or defendant, as the case may be, shall be (a). in the case of a suit by or against the Central Government, the Union of India, and (b). in the case of a suit by or against a State Government, the State." As the Union of India has no statutory situs, Order XXVII, rule 3, Code of Civil Procedure, exempts its place of residence being given in the plaint or the written statement, as the case may be. The suit by or against the Union Government shall be filed in a court which has jurisdiction to entertain such a suit, having regard to the provisions of sections 15 to 20 of the said Code. On the same analogy, it may be held that the Union of India has no legal situs in a particular place and a writ petition can be filed against it in a place within the jurisdiction of the High Court wherein the cause of action accrues. It is said that the limits of the power to issue a writ are implicit in the nature of a particular writ. What is the nature of the principal writs, namely, habeas corpus, mandamus, prohibition, quo warranto and certiorari? The writ of habeas corpus "is a prerogative process for securing the liberty of the subject by affording an effective means of immediate release from unlawful or unjustifiable detention whether in prison or in private custody". The writ of mandamus "is, in form, a command directed to any person, corporation or inferior tribunal, requiring him or them to do some particular thing therein specified which appertains to his or their office and is in the nature of a public duty." An order of prohibition is an order directed to an inferior tribunal forbidding it to; continue with the proceedings pending therein. An information in the nature of a quo warranto lies against a person who claimed or usurped an office, franchise, or liberty, to inquire by what authority he supported his claim. A certiorari is directed to an authority "requiring the record of the proceedings in some cause or matter to 857 be transmitted into the High Court to be dealt with there. " (See Halsbury 's Laws of England, Vol. II, 3rd edition). It was asked how could the liberty of a subject be secured, the command be issued, the proceedings of an inquiry be prohibited, the credentials of a person to hold office be questioned, the records of a proceeding be directed to be transmitted to the High Court, if the authority concerned wag located, or the person directed resided, outside. the territorial jurisdiction of the High Court? It was also asked how, if the said authority, or person, disobeyed the order of the High Court, it could be enforced against the said authority or person. On the parity of the same reasoning the argument proceeded that, as the officers acting for the Government of India reside in Delhi, a writ which would become brutum fulmen could not be issued by the High Court. The questions so posed are based on a misapprehension of the relevant provisions of the Constitution. They also mix up the nature of the writs with the procedure in dealing with the writs or enforcing the orders made therein. As I have already indicated, the Article confers a power on the High Court to issue writs against the Union Government. If the said Government is "within the State", is it an answer to it that an officer of the Government dealing with a particular paper or papers is residing outside the territorial jurisdiction of the High Court? If the Union Government is bound by the order of the High Court, the question of service of notice on a particular officer acting for the Government or to enforce an order against him is a matter pertaining to the realm of procedure and appropriate rules calf be framed by the High Court or the requisite law made by the Parliament. If the Union Government disobeys the order it would certainly be liable for contempt of court under the . Even if the con temner happens to be an officer of the said Government residing outside the territorial limits of the High Court, the High Court has ample power to reach him under section 5 of the said Act. 858 The analogy drawn from English law is rather misleading. England is comparatively a small country and it has only one Government functioning throughout the State. The problem that has arisen now could not have arisen in England, for the jurisdiction of the Queen 's Bench Division of the High Court extends throughout England. In England the manner of the exercise of the jurisdiction was also regulated by a procedure brimming with technicalities, but later on simplified by statute. The framers of our Constitution therefore designedly used the words "in the nature of" indicating that they were not incorporating in the Constitution the entire procedure followed in England, for the procedure will have to be evolved having regard to the federal structure of our Government. How can the procedural law of England in the matter of writs be bodily lifted and implanted in India? This Court shall have to put a reasonable construction on the words without being unduly weighed down by the historical background of these writs and construe the Article in such a way, if legally permissible, to carry out the intention of the Constitution makers. That apart, Article 226 of the Constitution is not confined to the prerogative writs in vogue in England. The Article enables the appropriate High Court to issue also directions or orders, and there is no reason why the High Court could not, in an appropriate case, give a suitable direction to, or make a proper order on, the Union Government. Such directions or orders are certainly free from the procedural technicalities of the said writs. I shall now notice briefly the decisions cited at the Bar. The first is the decision of this Court in Election Commission, India vs Saka Venkata Rao(1). There the Governor of Madras referred to the Election Commission, which had its offices permanently located in New Delhi, the question whether the respondent was disqualified and could be allowed to sit and vote in the Assembly. The respondent thereupon applied to the High Court of Madras under article 226 of the Constitution for a writ restraining the Election Commission (1) [1953] S.C.R. lI44. 859 from enquiring into his alleged disqualification for membership of the Assembly. This Court held that the power of the High Court to issue writs under article 226 of the Constitution was subject to the two fold limitation: (i) that such writs cannot run beyond the territories subject to its jurisdiction; and (ii) that the person or authority to whom the High, Court is empowered to issue writs must be amenable to the jurisdiction of the High Court either by residence or location within the territories subject to its jurisdiction. On that basis the writ petition was dismissed. At the outset it may be noticed that there is one obvious difference between that case and the present one. In that case the respondent was not the Union of India but an authority which could have and had its location in a place outside the Madras State. The present case satisfies both the conditions: the writ does not run beyond the territorial jurisdiction of the High Court, as the Union Government must be deemed to be "within" the said territories; the second condition is also satisfied, as the Union Government, being within the State, is also amenable to its jurisdiction. The next case relied upon by the learned Solicitor General is a converse one. It is the decision of this Court in K. section Rashid & Son vs The Income tax Investigation Commission (1). In that case the Income tax Investigation Commission located in Delhi was investigating the case of the petitioners under section 5 of the Taxation on Income (Investigation Commission) Act 1947, although the petitioners were assessees belonging to Uttar Pradesh and their original assessments were made by the Income tax authorities of that State. It was contended that the Punjab High Court had no jurisdiction to issue a writ under article 226 of the Constitution to the said Commission. This Court, after restating the two limitations on the power of the High Court to issue a writ, held that the Commission was amenable to the jurisdiction of the Punjab High Court and, therefore, the Punjab High Court had jurisdiction to issue the writ. This decision also (1) ; 860 deals with a case of statutory authority located in Delhi and it has no application to the case of the Union Government. The question whether the principles that apply to the Government of India would equally apply to statutory authorities situate in one State but exercising jurisdiction in another, does not arise for consideration in this case; though, as I have already expressed, I am prima facie of the view that there is no reason why they should not. Now coming to the decision of the High Courts, there is a clear enunciation of the relevant principles in Maqbul Un Nissa vs Union of India(1). The Full Bench of the Allahabad High Court directly decided the point now raised before us. The importance of the decision lies in the fact that the learned Judges approached the problem without being oppressed by the decision of this Court in Saka Venkata Rao 's case (2), which was decided only subsequent to that decision. After considering the relevant Articles of the Constitution ' Sapru, J., speaking for the Full Bench, observed at pp. 293 294 thus: "The analogy between a government and a corporation or a joint stock company which has its domicile in the place where its head office is situate is misleading. To hold that the jurisdiction of this Court does not extend to the Union Government as it has its capital at Delhi and must be deemed to have its domicile at Delhi would be to place the Union Government not only in respect of the rights conceded in Part III but for any other purpose also beyond the jurisdiction of all State High Courts except the Punjab High Court. " The learned Judge proceeded to state at p. 294 "In our opinion, the jurisdiction of this Court to intervene under Article 226 depends not upon where the Headquarters or the Capital of, the Government is situate but upon the fact of the effect of the act done by Government, whether Union or State being within the territorial limits of this Court., Adverting to the words "any Government" in article 226, the learned Judge observed at p. 292 thus: (1) I.L.R. (2) ; 861 "They indicate that the founding fathers knew that more than one government would function within the same territory.)) I entirely agree with the observations of the learned Judge, for they not only correctly construe the provisions of article 226 but also give effect to the intention of the Constitution makers. After the decision of this Court in Saka Yenkata Rao 's case (1) the High Court of Madhya Pradesh considered the question in Surajmal vs State of M. P. (2). There, the Central Government rejected an application for a mining lease and the order rejecting the application was communicated to the applicant who was residing in the State of Madhya Pradesh. It was held by the High Court that the writ asked for could not be issued so as to bind the Central Government because, "(a) the Central Government could not be deemed to be permanently located or normally carrying on its business within the jurisdiction of the High Court; (b) the record of the case which the Central Government decided was not before the High Court and could not be made available from any legal custody within the State; (c) the order of the State Government must be deemed to have merged in that of the Central Government; (d) the order of the State Government could not be touched unless the order of the Central Government could be brought before the High Court and quashed. " We are concerned here with the first and second grounds. The learned Chief Justice, who delivered the judgment on behalf of the Full Bench, applied the principle of the decision of this Court in Saka Venkata Rao 's(1) to the Union Government; and for the reasons already mentioned I am of opinion that the decision Is not applicable to the case of the Union Government. The second reason in effect places the procedure 'on a higher pedestal than the substantive law. It is true that in a writ of certiorari the records would be called for; but, if once it is held that the Union Government is within the State within the meaning of article 226 of the Constitution, I do not think why the High Court in exercise (1) ; (2) A.I.R. 1958 M.P. 103, 862 of its constitutional power cannot direct the Union Government to bring the records wherever its officers might have kept them. This second ground is really corollary to the first, viz., that the Union Government is not within the territorial jurisdiction of the High Court concerned. The Bombay High Court in Radheshyam Makhanlal vs The Union of India (1) also held that a writ cannot issue against the Union Government whose office is located outside the territorial jurisdiction of the High Court. Shah, J., applying the principle of the decision in Saka Venkata Rao 's case (2 ) to the Union Government hold that as the office of the Union Government was not located within the State of Bombay, the Bombay High Court could not issue a writ to the Union Government. But section T. Desai, J.,, was not willing to go so far, and he based his conclusion on a narrower ground, namely, that even if the writ was issued it could not be enforced. I have already pointed out that both the grounds are not tenable. The Union Government is within the State of Bombay in so far as it exercises its powers in that State and the High Court has got a constitutional power to issue writes to the Union Government and, therefore, their enforceability does not depend upon its officers residing in a particular place. The foregoing discussion may be summed up in the following propositions: (1) The power of the High Court under article 226 of the Constitution is of the widest amplitude and it is not confined only to issuing of writs in the nature of habeas corpus, etc., for it can also issue directions or orders against any person or authority, including in appropriate cases any Government. (2) The intention of the framers of the Constitution is clear, and they used in the Article words "any Government" which in their ordinary significance must include the Union Government. (3) The High Court can issue a writ to run throughout the territories in relation to which it exercises jurisdiction. and to the person or authority or Government within the said territories. (4) The Union Government has (1) A.I.R. 1960 Bom. (2) ; 863 no constitutional situs in a particular place, but it exercises its executive powers in respect of matters to which Parliament has power to make laws and the power in this regard is exercisable throughout India; the Union Government must, therefore, be deemed in law to have functional existence throughout India. (5) When by exercise of its powers the Union Government makes an order infringing the legal right or interest of a person residing within the territories in relation to which a particular High Court exercises jurisdiction, that High Court can issue a writ to the Union Government, for in law it must be deemed to be "within" that State also. (6) The High Court by issuing a writ against the Union Government is not travelling beyond its territorial jurisdiction, as the order is issued against the said Government "within" the State. (7) The fact that for the sake of convenience a particular officer of the said Government issuing an order stays outside the territorial limits of the High Court is not of any relevance, for it is the Union Government that will have to produce the record or carry out the order, as the case may be. (8) The orders issued by the High Court can certainly be enforced against the Union Government, as it is amenable to its jurisdiction, and if they are disobeyed it will be liable to contempt. (9) Even if the Officers physically reside outside its territorial jurisdiction, the High Court can always reach them under the , if they choose to disobey the orders validly passed against the Union Government which cannot easily by visualized or ordinarily be expected. (10) The difficulties in communicating the orders pertain to the rules of procedure and adequate and appropriate rules can be male for communicating the same to the Central Government or its officers. For the aforesaid reasons, I hold that article 32(2A) of the Constitution enables the High Court of Jammu & Kashmir to issue the writ to ' the Union Government in respect of the act done by it infringing the fundamental rights of the parties in that State. In the result,, I allow the appeal, set aside the order of the High Court and direct ' it to dispose of the 864 matter in accordance with law. The appellant will have his costs. DAS GUPTA, J. I have had the advantage of reading the judgments prepared by my Lord the Chief Justice and Mr. Justice Subba Rao. I agree with the conclusions reached by the Chief Justice 'that the appeal should be dismissed. As, however, I have reached that conclusion by a slightly different process of reasoning I propose to indicate those reasons briefly. The facts have been fully stated in the judgment of My Lord the Chief Justice and it is not necessary to repeat them. It is sufficient to state that the appellant filed an application to the High Court of Jam mu & Kashmir under Article 32(2A) of the Constitution for the issue of an appropriate writ, order or directions restraining the Union of India and the State of Jammu & Kashmir from enforcing an order conveyed in the Government of India 's letter dated July 31, 1954, whereby the Government of India ordered the premature compulsory retirement of the appellant with effect from August 12, 1954. A preliminary objection was raised on behalf of the respondents that Government of India is not a Government within the territorial limits of the jurisdiction of the Jammu and Kashmir High Court and so the application was not maintainable. The High Court accepted this objection as valid and dismissed the application. The sole question in controversy in appeal is whether the High Court had jurisdiction, on the 'facts and circumstances of this case, to issue a writ to the Government of India under article 32(2A) of the Constitution. Article 32(2A) of the Constitution under which the appellant asked the High Court for relief is in the following words: "Without prejudice to the powers conferred by clauses (1) and (2), the High Court shall have power throughout the territories in relation to which it exercises jurisdiction to issue to any person or authority, including in appropriate cases, any Government within the territories, directions or orders or writs, 865 including writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari, or any of them, for the enforcement of any of the rights conferred by this Part. " Except for the fact that "the High Court" in this Article means only the High Court of the State of Jammu & Kashmir, while article 226 of the Constitution refers to all other High Courts and the further fact that power granted by this Article is for the enforcement only of the rights conferred by Part III of the Constitution while article 226 gives power to the High Courts in the Union for the enforcement not only of the rights conferred by Part III but for any other purpose, the provisions of the two articles are exactly the same. Power is given to the High Court to give relief in certain matters by issuing appropriate writs and orders to (1) any person; (2) any authority other than the Government and (3) any Government. The exercise of this power is subject to the existence of the condition precedent that the person or the Government or the authority other than the Government must be "within the territories in relation to which the High Court exercises jurisdiction". A special limitation in respect of the issue of writs or orders to a Government is introduced by the words "in appropriate cases" before the words "any Government". Leaving for later consideration the effect of the words "in appropriate cases" we have first to examine the question: when is a Government within the territories under the jurisdiction of a particular High Court ? On behalf of the first respondent, the Union of India, it is urged that to be within the terri tories under the jurisdiction of a High Court the Government must be located within those territories. It is pointed out that "any person" ' to be within any specified territories has to be present within those territories; an authority other then Government has also, before it can be said to be within any particular territories, a physical existence within those territories by having its office therein. The same requirement of location within the particular territories, it is argued, should apply to the case of Governments. The 866 argument is no doubt attractive and at first sight even plausible. On closer examination however it becomes evident that this argument oversimplifies the problem by slurring over the fallacious assumption that a, Government has a location in the same way as any person or any authority other than Government. Has the Government any location in a similar sense in the same way as a person has a location at any point of time by being present at a particular place or an authority other than the Government can be said to be located at the place where its office is situated ? There is no doubt that when we think of a Government, whether of the States or of the Union we are thinking of the executive organ of the State. The executive power of the Union is under article 53 vested in the President and is to be exercised by him. The executive power of the States is vested in the Governors of the States and has to be exercised by them. Does it follow however that the Government of India is located at the place where the President resides and similarly the Government of each State is located at the place where the Governor resides ? It has to be noticed that while the Constitution contains specific provisions in article 130 as to where the Supreme Court shall sit, no such provision is made as to where the President of India shall reside or exercise his executive power vested in him. article 231 of the Constitution speaks of a principal seat for the High Court of each State. We search in vain however for any mention of any principal seat "for the President of India or the Governors of the States". The fact that the President of India has a special place of residence, the Rashtrapati Bhawan in Delhi and the Governors of States have also special places of residence at some places in the State known as Rai Bhavan is apt to make us forget that the Constitution does not provide for any place 'of residence for the President or Governors. There is nothing to prevent the President of India from having more than one permanent place of residence within the Union. If this happens and places of residence are provided for the President of India in, say, Bombay, Calcutta and 867 Madras in addition to the residence at Delhi, can it be said that the Government of India is located in Delhi when the President of India resides in Delhi, it goes to Calcutta when he resides in Calcutta, it goes to Bombay when the President resides in Bombay and to Madras when the President goes and resides in Madras? This may seem at first sight a fantastic illustration; but when we remember that in fact in the days of British rule, the Viceroy had a permanent place of residence at Simla for part of the year and another permanent place of residence at Calcutta for part of the year before 1911 and after 1911 one permanent place of residence in Delhi and another in Simla, it is easy to see that what has been said above by way of illustration is by no means improbable. If therefore a Government is to be held to be located at the place where the head of the State the President of India in the case of the Government of India and the Governor in the case of each State resides, it may well become impossible to speak of any particular place as the place where the Government is located throughout the year. This may not affect the question of any State Government being within the territories of the High Court of the State. For whatever place the Governor may have for his residence is bound to be within the territories of the State. The position will however become wholly uncertain and difficult as regards the Government of India being within the territorial jurisdiction of any particular High Court. For part of the year it may be, if the residence of the President be the criterion for ascertaining the location of the Government, that the Government of India will be within the territories of one High Court and for other parts of the year in another High Court. It will be wholly unreasonable therefore to accept the test of residence of the President of India for deciding where the Government of India is located. Finding the test of the President 's residence illusory, one may try to say that the Government of India or of a State is situated at the place *here the offices of the Ministry are situated. Under article 77, the President allocated the business of the. Government of India 868 among the Ministers while under article 166 the Governor of a State allocates the business of the Government of a State except business with respect to which the Governor is required to act in his discretion among the Ministers of the State. If therefore it was correct to say that all the Ministers of the Government of India had to perform their functions in respect of the business allocated to them at one particular place, it might be reasonable to say that the Government of India is located at that place. Similarly if all the Ministers of a State had to perform their functions in respect of the business allocated to them at one particular place the Government of the State might well be said to be located at that place. The Constitution however contains no provision that all the Ministers of a State shall perform their functions at one particular place in the State nor that the Ministers of the Union will perform their functions at one particular place in the State. Situations may arise not only in an emergency, but even in normal times, when some Ministers of the Government may find it necessary and desirable to dispose of the business allocated to them at places different from where the rest of the Ministers are doing so. The rehabilitation of refugees from Pakistan is part of the business of the Government of India and for the proper performance of this business there is a Ministry of Rehabilitation for Refugees. It is well known that the Minister in this Ministry has to perform a great portion of his business at Calcutta 'in West Bengal and stays there for a considerable part of the year. Many of the offices of this Ministry are situated in Calcutta. What is true of this Ministry, may happen as regards other Ministries also. Special circumstances may require that some portion of the business of the Minis. try of Commerce be performed at places like Bombay, Calcutta or Madras in preference to Delhi, and if this happens the Minister to whom the business of Government of India in respect of commerce has been allocated will be transacting his business at these places instead of at Delhi. If public interest requires that the greater portion of the business of the Ministry of 869 Defence should for reasons of security or other reasons be carried on at some place away from Delhi the Defence Minister will have to transact its business at that place. It is clear therefore that while at any particular point of time it may be possible to speak of any Ministry of the Government of India being located at a particular place, the Government of India as a whole may not necessarily be located at that place. In my opinion, it is therefore neither correct nor appropriate to speak of location of any Government. Nor is it possible to find any other satisfactory test for ascertaining the location of the Government of India. In Election Commission vs Saka Venkata Subba Rao (1) this Court held that before a writ under article 226 could issue to an authority, the authority must be located within the territories under the jurisdiction of the High Court. There however the Court was not concerned with the case of any Government, and had no occasion to consider whether a Government could be said to have a location. The decision in that case and in the later case of K. section Rashid and Son vs The Income tax Investigation Commission, etc., (2) does not therefore bind us to hold that a Government has a location in the same way as an authority like an Election Commission or an Income tax Investigation Commission. It appear,% reasonable therefore to hold that all that is required to satisfy the condition of a Government being within the territories under the jurisdiction of a High Court is that the Government must be functioning within those territories. The Government of India functions throughout the territory of India. The conclusion cannot therefore be resisted that the Government of India is within the territories under the jurisdiction of every High Court including the High Court of Jammu and Kashmir. The use of the words "any Government" appears to me to be an additional reason for thinking that the Government of India is within the territories under the jurisdiction of the Jammu & Kashmir High Court. "Any Government" in the context cannot but mean (1)[1953] S.C.R. 1144. (2) ; 870 every Government. If the location test were to be applied the only Government within the territories of the State of Jammu and Kashmir would be the Government of Jammu and Kashmir. It would be meaningless then to give the High Court the power to give relief against "any Government" within its territories. These words "any Government" were used because the Constitution makers intended that the High Court shall have power to give relief against the Government of India also. But, contends the respondent, that will produce an intolerable position which the Constitution makers could not have contemplated. The result of the Government of India being within the territories of every High Court in India will, it is said, be that the Government of India would be subjected to writs and orders of every High Court in India. A person seeking relief against the Government of India will naturally choose the High Court which is most convenient to him and so the Government of India may have to face applications for relief as against the same order affecting a number of persons in all the different High Courts in India. If a position of such inconvenience to the Government of India ' though of great convenience to the persons seeking relief, did in fact result from the words used by the Constitution makers, I for one, would refuse to shrink from the proper interpretation of the words merely to help the Government. I do not however think that that result follows. For, on a proper reading of the words "in appropriate cases", it seems to me that there will be, for every act or omission in respect of which relief can be claimed, only one High Court that can exercise jurisdiction. It has first to be noticed that the limitation introduced by the use of these words "in appropriate cases ' has not been placed in respect of issue of writs to persons and to authorities other than government. It has been suggested that the effect of these words is that in issuing writs against any Government the High Court has not got the same freedom as it has when issuing writs against any person or authority other than 871 Government and that when relief is asked against a Government the High Court has to take special care to see that writs are not issued indiscriminately but only in proper cases. I have no hesitation in rejecting this suggestion. It cannot be seriously contemplated for a moment that the Constitution makers intended to lay down different standards for the courts when the relief is asked for against the Government from when the relief is asked for against other authorities. In every case where relief under article 226 is sought the High Court has the duty to exercise its discretion whether relief should be given or not. It is equally clear that in exercising such discretion the High Court will give relief only in proper cases and not in cases where the relief should not be granted. Why then were these words "in appropriate cases" used at all? It seems to me that the Constitution makers being conscious of the difficulties that would arise if all the High Courts in the country were given jurisdiction to issue writs against the Central Government on the ground that the Central Government was functioning within its territories wanted to give such jurisdiction only to that High Court where the act or omission in respect of which relief was sought had taken ' place. In every case where relief is sought under article 226 it would be possible to ascertain the place where the act complained of was performed or when the relief is sought against an omission, the place where the act ought to have been performed. Once this place is ascertained the High Court which exercises jurisdiction over that place is the only High Court which has jurisdiction to give relief under article 226. That, in my view, is the necessary result of the words "in appropriate cases". On behalf of the appellant it Was contended on the authority of the decision of the Privy Council in Ryots of Garabandho vs Zemindar of Parlakimedi (1) that all that is necessary to give, jurisdiction to a High Court to act under article 226 is that a part of the cause of action has arisen within the ';territories in relation to which it exercises jurisdiction. The question whether the cause of action attracts jurisdiction for relief (1) (1943) L.R. 70 I.A. 129. 872 under article 226 of the Constitution as in the case of suits was considered by this Court in Saka Venkata Subba Rao 's Case (1) and the answer given was in the negative. Referring to the decision of the Privy Council in Parlakimedi 's Case (2) this Court pointed out that the decision did not turn on the construction of a statutory provision similar in scope, purpose or wording to article 226 of the Constitution, and is not of much assistance in the construction of that article. Delivering the judgment of the Court Patanjali Sastri C. J. also observed: "The rule that cause of action attracts jurisdiction in suits is based on statutory enactment and cannot apply to writs issuable under article 226 which makes no reference to any cause of action or where it arises but insists on the presence of the person or authority 'within the territories ' in relation to which the High Court exercises jurisdiction. " This decision is binding on us, and I may respectfully add that I find no reason to doubt its correctness. It is true that in that case the Court had to consider the question of jurisdiction in respect of an authority other than Government. It is difficult to see however why if cause of action could not attract jurisdiction against persons and authorities other than Government it would attract jurisdiction as against a Government. It seems to me clear that the principle of basing jurisdiction on cause of action has not been introduced in the Constitution under article 226 or article 32(2A) of the Constitution. It may seem at first sight that to hold that the High Court within whose jurisdiction the action or omission, complained of took place will have jurisdiction, is in effect to accept the accrual of cause of action as the basis of jurisdiction. This however is not correct. The High Court within. the jurisdiction of which the act or omission takes place, has jurisdiction, not because a part of the: cause of action arose there, but in consequence of the use of the words "in appropriate cases". (1) ; (1) (1943) L.R. 70 I.A. 129. 873 The several cases in the High Court in which the question now before us has been considered have been referred to in the majority judgment and also in the judgment of Mr. Justice Subba Rao and no useful purpose would be served in discussing them over again. For the reasons discussed above I have reached the conclusion that while the Government of India is within the territories of every High Court in India the only High Court which has jurisdiction to issue a writ or order or directions under article 226 or article 32 (2A) against it is the one within the territories under which the act or omission against which relief was sought took place. In the present case the act against which the relief has been sought was clearly performed at Delhi which is within the territories under the jurisdiction of the Punjab High Court and the Jammu and Kashmir High Court cannot therefore exercise its jurisdiction under article 226. In the result, I agree with my Lord the Chief Justice that the appeal should be dismissed with costs. BY COURT. In accordance with the opinion of the majority of the Court, this appeal is dismissed with costs. Appeal dismissed.

The High Court of. Jammu and Kashmir, relying on the decisions of this Court in Election Commission, India vs Saka Venkata Subba Rao; , and K. section Rashid and Son vs The Income Tax Investigation Commission etc. ; , , dismissed an application for a writ made by the appellant against the Union of India and Anr. under article 32(2A), the relevant provisions of which are in the matter of enforcement of fundamental rights the same as in article 226 of the Constitution, on the preliminary objection that the said application was not maintainable against the Union of India as it was outside the territorial jurisdiction of that Court. The appellant 's case was that he was holding the substantive rank of Lieut. Col. in Jammu and Kashmir and had the right to continue in service until he attained the age of 53 on November 20, 1961, but was prematurely retired by a letter issued by the Government of India on July 31, 1954, without any allegation or charge and in contravention of article 16(1) of the Constitution. Held, that there can be no doubt as to the correctness of the decisions relied on by the High Court and the appeal must fail. 829 The jurisdiction of the High Court under article 226 of the Constitution, properly construed, depends not on the residence or location of the person affected by the order but of the person or authority passing the order and the place where the order has effect cannot enter into the determination of such jurisdiction. Since functioning of a Government really means giving effect to its order, such functioning cannot determine the meaning of the words "any person or authority within these territories" occurring in the article. A natural person, therefore, is within those territories if he resides there permanently or temporarily, an authority other than the Government is within those territories if its office is located there and a Government if its seat from which, in fact, it functions is there. It is not correct to say that the word "authority" in article 226 cannot include a Government. That word has to be read along with the clause "including in appropriate cases any Government" immediately following it, which, properly construed, means, that the word may include any Government in an appropriate case. That clause is not connected with the issuance of a writ or order and is not intended to confer discretion on the High Courts in the matter of issuing a writ or direction on any Government, and only means in such cases where the authority against whom the High Court has jurisdiction to issue the writ, happens to be a Government or its subordinates, the High Court may issue a writ against the Government. Election Commission, India vs Saka Venkata Subba Rao, and K. section Rashid and Son vs The Income tax Investigation Commission etc. ; , , approved. Maqbulunnissa vs Union of India, I.L.R. (1953) 2 All. 289, overruled. The Lloyds Bank Limited vs The Lloyds Bank Indian Staff Association (Calcutta Branches), I.L.R. , referred to. Proceedings under article 226 are not suits covered by article 300 of the Constitution. Such proceedings provide for extra ordinary remedies by a special procedure and there is no scope for introducing the concept of cause of action in it in the face of the express limitation imposed by it, that the person or authority concerned must be within the territories over which the High Court exercises jurisdiction. Ryots of Garabandho vs Zamindar of Parlakimedi, (1943) L.R. 70 I.A. 129, held inapplicable. The resulting inconvenience of such an interpretation of article 226 to persons residing far &way from New Delhi, where the Government of India is in fact located, and aggrieved by some order passed by it, may. be a reason for suitably amending the Article but cannot affect its plain language. This Court should not, except when it is demonstrated beyond all reasonable doubt that the previous ruling, given after 105 830 due deliberation and full hearing, was erroneous, go back upon it, particularly on a constitutional issue. Per Subba Rao, J. The object that the framers of our Con stitution had before them in declaring the fundamental rights in Part III of the Constitution and empowering the High Courts by article 226 of the Constitution to enforce them would be largely defeated if a person in a remote part of the country had to come to New Delhi to seek the protection of the Punjab High Court whenever the Union Government infringed his fundamental right. The power of the High Courts under article 226 of the Consti tution is of the widest amplitude and it can issue not merely writs but also directions and orders. The words "any Government" in the Article includes the Union Government which has no constitutional situs in a particular place and exercises its powers throughout India and must, therefore, be deemed in law to have functional existence throughout India and thus within the territories of every State. Consequently, when the Union Government infringes the legal right and interest of a person residing within the territorial jurisdiction of 'a High Court, the High Court has the power under the Article to issue a writ to that Government. If its orders are disobeyed by that Government or any of its officers, even though physically outside its territories, it can proceed in contempt against them under the Contempt. of Courts Act, 1952. Election Commission, India vs Saka Venkata Subba Rao, ; , held inapplicable. K. section Rashid and Son vs Income Tax Investigation Commission, ; and Ryots of Garabandho vs Zamindar of Parlakimedi, L.R. 70 I.A. 129, considered. Maqbul Unnissa vs Union of India, I.L.R. (1953) 2 All. 289, approved. Surajmal vs State of M.P., A.I.R. 958 M.P. 103 and Radhe shyam Makhanlal vs Union.of India, A.I.R. 1960 Bom. 353, held inapplicable. In the instant case, therefore, the High Court had the power to issue the writ to the Union Government under article 32(2A) of the Constitution. Per Das Gupta, J. It is neither correct nor appropriate to speak of location of any Government and there is no satisfactory test for ascertaining the location of the Government of India. Since the Government functions throughout the territory of India, the conclusion must be that it is within the territories under the jurisdiction of every High Court. The words "any Government" in article 226 clearly indicate that the High Court was intended to give relief against that Government as well. Even though the Government, of India is within the territories of every High Court, it will not have to face applications 831 for relief against the same order in all the High Courts in India. The words "in appropriate cases" in that Article, properly construed, indicate that there can be only one High Court thereunder that can exercise jurisdiction under the Article for every act or omission in respect of which relief is claimed. It is possible in every case to ascertain the place where the act or omission took place and that High Court alone, which exercises jurisdiction over that place, can have jurisdiction to grant relief under the Article. It is not correct to say that under article 226 the cause of action determines the jurisdiction. Neither that Article nor article 32(2A) of the Constitution is based on that principle. Election Commission, India vs Saka Venkata Subba Rao, ; , approved.

The second respondent had been an employee of the Central Railway as a daily rated casual labourer on specified daily wages since 1941. He continued to receive his wages at the specified rate until October 1949. In October 1949 he made an application through an official of the Registered Trade Union a person permitted by the authority under sub section (2) of section 15 of the Payment of Wages Act, 1936 claiming his wages due in respect of six months from May to October 1949. The respondent did not allege delay in the 1354 payment of his wages or deduction of his wages in contravention of the provisions of section 5 or section 7 of Act IV of 1936 respectively. The respondent alleged that he had been paid his actual wages as fixed by the railway administration but that after the introduction of the scheme of upgrading of persons employed under the daily wages scheme, others who were junior to him had been placed on the monthly wages scheme whereas his claim to be so placed, had been ignored and that he had not been paid wages on the scale to which he would have been entitled if he had been placed on the monthly wages scheme. Held, per SINHA J. (VIVIAN BosE and VENYATARAMA AYYAR JJ. concurring, JAGANNADHADAS J. dissenting), that the respondent 's complaint fell under the category of potential wages and the authority appointed under the Act had no jurisdiction to decide the question of potential wages. It had the jurisdiction to decide what actually the terms of the contract between the parties were, that is to say, to determine the actual wages. On the case as made on behalf of the respondent, orders of the superior officers were necessary to upgrade him from a daily wageearner to a higher cadre. The authority under the Act has not been empowered under section 15 to make any such direction to the superior officers. Per JAGANNADHADAS J. Undoubtedly a claim to a higher potential wage cannot be brought in under the category of "claim arising out of deduction from the wages or delay in payment of the wages" if that wage depended on the determination by a superior departmental or other authority as to whether or not a particular employee is entitled to the higher wage a determination which involves the exercise of administrative judgment or discretion or certification, and which would, in such a situation, be a condition of the payability of the wage. But where the higher wage does not depend upon such determination but depends on the application of and giving effect to certain rules and orders which, for this purpose, must be deemed to be incorporated in the contract of employment, such a wage is not a prospective wage merely because the paying authority concerned makes default or commits error in working out the application of the rules. The wage under the Act is not necessarily the immediately pre existing wage but the presently payable wage. Whether or not an employee was entitled to wages of a higher category than what he was till then drawing would depend entirely on the scope of the rules with reference to which he is entitled to become one in the higher category and it cannot be assumed a priori that such a claim is a claim to "prospective wages". On the facts of the case as found the dispute as to the wage was one that fell within the jurisdiction of the "authority" concerned.

The right of appeal is a matter of substantive right and not merely a matter of procedure, and this right becomes vested in a party when the proceedings are first initiated in, and before a decision is given by, the inferior Court and such a right cannot be taken away except by express enactment or necessary intendment. Section 22(l.) of the Central Provinces and Berar Sales Tax Act, 1947, provided that no appeal against an order of assessment should be entertained by the prescribed authority unless it was satisfied that such amount of tax as the appellant might admit to be due from him, had been paid. This Act was amended on the 25th November, 1949, and section 22(l) as amended provided that no appeal should ])a admitted by the said authority unless such appeal was accompanied by satisfactory proof of the payment of the tax in respect of which the appeal had been preferred. On the 28th of November, 1947, the appellant submitted a return to the Sales Tax Officer, who, finding that the turnover exceeded 2 lacs, submitted the case to the Assistant Commissioner for disposal and the latter made an assessment on the 8th April, 1950. The appellant preferred an appeal on the 10th May, 1950, without depositing the amount of tax in respect of which he had appealed. The Board of Revenue was of opinion that section 22(l.) as amended applied to the case as the assessment was made, and the appeal was preferred, after the amendment came into force, ' and rejected the appeal. Held, (i) that the appellant had a vested right to appeal when the proceedings were initiated, i.e., in 1947, and his right to appeal was governed by the law as it existed on that date ; (ii) that the amendment of 1950 cannot be regarded as a mere alteration in procedure or an alteration regulating the exercise of the right of appeal, but whittled down the right itself, and it had no retrospective effect as the Amendment Act of 1950 did not expressly or by necessary intendment give it retrospective effect, and the 988 appeal could not therefore be rejected for non payment of the tax in respect of which the appeal was preferred. Colonial Sugar Refining Co. Ltd. vs Irving , Nanabin Aba vs Sheku bin Andu (I.L.R. , Delhi Cloth and General Mills Co. Ltd. vs Income tax Commissioner, Delhi (54 I.A. 421), Kirpa Singh vs Rasaldar Ajaipal Singh (A.I.R. 1928 Lab. 627), Sardar Ali vs Dalimuddin (I.L.R. applied. Badraddin Abdul Rahim vs Sitaram Vinayak Apte (I.L.R. disapproved. In re Vasudeva Samiar (A.I.R. 1929 Mad. 381), Ram Singha vs Sankar Dayal (I.L.R. 50 All. 965), Radhakisan vs Sri Dhar (A.I.R. , Gordhan Das vs Governor General in Council (A.I.R. 1950 Punj. 103) and Nagendra Nath Bose vs Monmohan referred to.

The respondent was appointed a Sub Inspector on probation in the Orissa Police Force. A notice was served on him to show cause why he should not be discharged from service " for gross neglect of duties and unsatisfactory work ". He submitted his explanation and asked for opportunity to cross examine certain witnesses. The Deputy Inspector General of Police considered the explanation unsatisfactory and passed an order discharging the respondent from service " for unsatisfactory work and conduct ". The respondent contended that the order was invalid on two grounds: (i) that he was not given a reasonable opportunity to show cause against the proposed action within the meaning of article 311(2), and (ii) that he was not afforded an opportunity to be heard nor was any evidence taken on the charges. Held, that the order of discharge did not amount to dismis sal and did not attract the protection of article 311(2) of the Constitution and was a valid order. The services of the respondent, ' who was a probationer, were terminated in accordance with the rules and not by way of punishment. He had no right to the post held by him and under the terms of his appointment he was liable to be discharged at any time during the period of his probation. The notice given to the respondent was under Rule 55 B of the Civil Services (Classification, Control and Appeal) Rules which made it obligatory to give such notice before terminating the services of a probationer. The enquiry was merely for ascertaining whether he was fit to be confirmed. Shyam Lal vs The State of U. P., ; and Purshottam Lal Dhingra vs Union of India, ; , referred to. State of Bihar vs Gopi Kishore Prasad, A.I.R. 1960 S.C. 689, distinguished.

The appellant. was tried by the Sessions judge and acquitted of the charge of murder. On appeal the High Court convicted him and sentenced him to imprisonment for life. The appellant applied for and was granted a certificate under Art 134 (1) (c) of the Constitution for appeal to the Supreme Court on the ground that there was unusual delay in delivering the judgment of the High Court and that the judg ment failed to deal with certain questions of fact which were raised at the hearing of the appeal. Held, that the certificate granted by the High Court was not a proper certificate. The mere ground of delay in giving judgment did not fall within the words "fit one for appeal to the Supreme Court" in article 134 (1) (c). The points raised in the appeal before the High Court were questions of fact and the High Court was not justified in passing such questions on to the Supreme Court for further consideration thus converting the Supreme Court into a court of appeal on facts. Haripada Dev vs State of. West Bengal; , and Sidheswar Ganguly vs State of West Bengal, [1958] section C. R. 749, followed. Banaswmi Parshed vs Kashi Krishna Narain, (1900) L. R. 23 1. A I I and Radhakrishna Ayyar vs Swaminathna Ayyar, (1920) L. R. 48 I. A. 31, referred to.

On the allegations that the appellant in the Criminal Appeal along with two other accused were in possession of railway property which they had obtained under forged railway receipts, the Inspector of the Railway Protection Force lodged a complaint against the three accused that they were guilty of offences under section 3(a) of the Railway Property (Unlawful 15 Possession) Act, 1966 and action should be taken against them. In the Complaint it was mentioned that accused 2 and 3 were absconding and annexed to the complaint was (I) a list of prosecution witnesses and (2) a list of documents. The appellant, who was accused I appeared before the Presidency Magistrate who commenced an enquiry and recorded the statements of four witnesses one on March 2, 1973 and of the other three on June 12, 1973. On June 11, 1973 the appellant moved an application before the Magistrate making a grievance that although three witnesses had been examined, no copies of the document were furnished to him. On June 25, 1973 he made a further application requesting for supply of true copies of all the documents in the case to enable him to prepare the defence and that he should be permitted to take photostat copies of the documents. The Magistrate on August 9, 1973 rejected the appellants ' application on the ground that the offence complained of against him was not cognizable and that the provisions of section 251 (a) of the Code of Criminal Procedure were not applicable and consequently, he had no right to obtain copies of the documents concerned. On August 24, 1973 the Magistrate framed a charge under section 3(a) of the Act. The accused pleaded not guilty and again made an application repeating his request for copies of the statements of witnesses recorded by the Inspector R.P.F. This application was also rejected by the Magistrate on September 7, 1973. 176 Feeling aggrieved by the orders passed by the Magistrate on August 9, 1973 and September 7, 1973 the appellant invoked the inherent jurisdiction of the High Court by a petition under section 561A of the Code of Criminal Procedure, 1898 and prayed that the orders be quashed. He challenged the constitutional validity of section 9 of the Act in the petition. The High Court rejected the petition. In the appeal to this Court it was contended on behalf of the appellant (a) relying on Raja Ram Jaiswal vs State of Bihar; , that the expression "Police officer" in section 25 of the Evidence Act must be considered in a wide popular sense, so as to include within its ambit all officers of Government who are in substance invested with the power to investigate certain offences in accordance with the provisions of the Code of Criminal Procedure 1898 irrespective of the fact that they are differently labelled such as Excise officers or Customs officers or members of R.P.F., otherwise the very object of section 25 will be defeated. An Inspector of the R.P.F. making an inquiry under the Railway Property (Unlawful Possession) Act 1966 into an offence under section 3 of that Act, in substance, acts and exercises almost all the powers of a 'Police officer ' making an investigation under the Code of Criminal Procedure and any confessional statement recorded by such Inspector will be hit by section 25 Evidence Act. The case of State of U.P. vs Durga Prasad, ; was not correctly decided and that its ratio needs reconsideration by a larger Bench because it has overlooked the test laid down by the three Judge Bench in Raja Ram Jaiswal 's case. (b) As soon as a person is arrested by an officer of the Force on a suspicion or charge of committing an offence punishable under the 1966 Act, he stands in the character of a "person accused of an offence" and any confessional or incriminating statements recorded by an officer of the Force in the course of an inquiry under section 8(1) of the 1966 Act, cannot be used as evidence in view of the constitutional ban against "compelled testimony" imposed by article 20(3) of the Constitution. On behalf of the respondent it was submitted that: (a) an officer of the R.P.F. while making an inquiry under the 1966 Act cannot be equated with a police officer in charge of a Police Station making an investigation under the Code. The important difference in their powers is, that the R.P.F. Inspector has no power to submit a report or a charge sheet under section 173 of the Code. The decision of this Court in Raja Ram Jaiswal 's case stands on its own peculiar facts and was distinguished in a later decision by a Constitution Bench of this Court in Badku Joti Savant vs State of Mysore, ; The correct test for determining whether or not R.P.F. Officer is a police officer for the purpose of section 25 of the Evidence Act is the one which was consistently applied in State of Punjab vs Barkat Ram ; , & Romesh Chandra Mehta vs West Bengal (b) The conditions necessary for the attraction of the ban in article 20(3) do not exist in the instant case because before the filing of the complaint in the Court, the appellant was not a "person accused of an offence" and that it was nowhere alleged that the confessional or incriminating statements were extorted by the R.P.F. Officer under physical duress, threat, inducement or mental torture. 177 on the questions: (1) whether an officer of the Railway Protection Force making an inquiry under the Railway Property (Unlawful Possession) Act, 1966 in respect of an offence under section 3 of that Act of unlawful possession of the railway property is a police officer for the purpose of section 25 of the Evidence Act and section 162 of the Code of Criminal Procedure 1898 and whether any confession or incriminatory statement recorded by him in the course of an inquiry under section 8 of the Act is inadmissible in evidence, and (2) whether a person arrested by an officer of the Railway Protection Force under section 6 of the Act for the alleged commission of an offence under section 3 of the Act is "person accused of an offence" within the meaning of article 20(3) of the Constitution: ^ HELD: 1. An officer of the R.P.F. conducting an enquiry under section 8(1) of the 1966 Act has not been invested with all the powers of an officer in charge of a police station making an investigation under Chapter XIV of the Code. Particularly, he has no power to initiate prosecution by filing a charge sheet before the Magistrate concerned under section 173 of the Code, which he has been held to be the clinching attribute of an investigating 'police officer '. An officer of the R.P.F. could not therefore be deemed to be a "police officer" within the meaning of section 25 of the Evidence Act, and therefore, any confessional or incriminating statement recorded by him in the course of an inquiry under section 8(1) of the 1966 Act, cannot be excluded from evidence under the said section. [201C E] 2. The term 'police officer ' has not been defined in the Evidence Act The policy behind sections 25 and 26 of Evidence Act is to make a substantive rule of law that confessions whenever and wherever made to the police shall he presumed to have been obtained under the circumstances mentioned in section ' 24 and therefore, inadmissible except so far as is provided in section 27 of that Act. [182F, E] Ariel vs State A.I.R. 1954 S.C. 15, referred to. The primary object of constituting the Railway Protection Force is to secure better "protection and security of the railway property". The restricted power of arrest and search given to the officers or members of the Force is incidental to the efficient discharge of their basic duty to protect and safeguard Railway Property. No general power to investigate all cognizable offence relating to Railway Property, under the Criminal Procedure Code has bee. conferred on any superior officer or member of the Force by the 1957 Act [185F G] 4. The main purpose of passing the 1966 Act was to "invest powers of investigation and prosecution" of offences relating to railway property in the RPF "in the same manner as in the Excise and Customs." Inspite of provision in the Code of Criminal Procedure to the contrary, offences under this Act have been made non cognizable and, as such, cannot be investigated by a police officer under the Code. It follows that the initiation of prosecution for an offence inquired into under this Act can only be on the basis of a complaint by an officer of RPF and not on the report of a police officer under section 173(4) of the Criminal Procedure Code, 1898. [187A, 188B] 5. Section 14 makes clear that the provisions of the Act shall override all other laws. which means that anything in the 1966 Act which is inconsistent 178 with the Code, will prevail and the application of the Code pro tanto will be excluded. The scheme of the 1966 Act, particularly the provisions in sections 5, 8, 9(3), (4) is different from that of the Code. The Code, therefore, cannot proprio vigore apply to an enquiry conducted under section 8(1) of the 1966 Act by an officer of the Force. [189G, 190A] 6. An analysis of clause (3) of article 20 shows three things: Firstly, its protection is available only to a "person accused of any offence". Secondly, the protection is against compulsion "to be a witness". Thirdly, this protection avails "against himself". [202F] 7. Only a person against whom a formal accusation of the commission of an offence has been made can be a person "accused of on offence" within the meaning of article 20(3). Such formal accusation may be specifically made against him in an F.I.R. or a formal complaint or any other formal document or notice served on that person, which ordinarily results in his prosecution in Court. [204F] In the instant case no such formal accusation had been made against the appellant when has statement(s) in question were recorded by the R.P.F. Officer. He did not at that time, stand in the character of a person "accused of an offence" and as such, the protection of Article 20(3) will not be available to him. [203F G] Kathi Raning Rawat vs The State of Saurashtra ; , K. Joseph Augusthi & Ors. vs M. A. Narayanan , Mohamed Destagir vs The State of Madras ; , Bhagwan Das, Crl. 131 132/61 decided on 20 9 63, Bhogilal Shah & Anr vs D. K. Guha & Ors ; , M. P. Sharma vs Satish Chandra ; , Smt. Nandini Satpathy vs P. L Dani & Anr. ; , In re The Special Courts Bill, , Raja Narayanlal Bansilal vs Maneck Phiroz Mistry & Anr. ; , State of Bombay vs Kathi Kalu Oghad & Ors. ; , ref to.

The appellant was a State Judicial Service officer in the grade of Additional District & Sessions Judge. Consequent upon the decision of the State Government to reorganise the Higher Judicial Service it was decided that a number of posts of the cadre of Additional District & Sessions Judges be abolished and the incumbents of those posts be absorbed as District & Sessions Judges. The High Court at one of the High Court meetings held to screen the officers in the cadre of Additional District & Sessions Judges, decided to retire the appellant compulsorily on his at tanning the age of SS years under Rule 56(3)(a) of the Fundamental Rules. It was also decided not to recommend him for promotion to the cadre of District and Sessions Judges. The appellant was served with an order of compulsory retirement dated August 28, 1981. The Division Bench of the High Court dismissed the appellant 's writ petition impugning his compulsory retirement. In the appeal to this Court, it was contended that the High Court had made the recommendation to retire the appellant compulsorily without applying its mind and that the decision was based on collateral considerations and was arbitrary. On behalf of the High Court it was contended that the personal confidential records of the appellant were considered by the Full Court Meeting and the decision to retire the appellant under Fundamental Rule 56(3)(a) was taken after due consideration of the entire record. Allowing the appeal: ^ HELD: 1. It would be an act bordering on perversity to dig out old files to find out some material to make an order against an officer. Dependence on entries about 20 years before the date on which the decision of compulsory retirement was taken cannot placed for retiring a person compulsorily, particularly when such person concerned has been promoted subsequent to such entries. [474H; 475A] D.Ramaswami vs State of Tamil Nadu, [19811 2 S.C.R. 75 referred to. 2. The power to retire a Government servant compulsorily in public interest in terms of a service rule is absolute provided the authority concerned forms 467 an opinion bona fide that it was necessary to pass such an order in public interest. But if such decision was based on collateral grounds or if the decision was arbitrary, it is liable to be interfered with by Courts. [469 B C] Union of India vs Col. J.N. Sinha Anr., [1971] 1 S.C.R. 791; Union of India vs M.E. Reddy & Anr., ; ; Swami Saran Saksena vs State of U.P., ; ; Baldev Raj Chadha Y. Union of India & ors ; ; and Brij Bihari Lal Agarwal vs High Court of Madhya Pradesh & Ors. ; referred to. In the instant case the High Court relied on some adverse remarks relating to 1959 60 or thereabout. It was true that in the early part of the appellant 's career the entries did not appear to be quite satisfactory. Some were and some were not good and some were of a mixed kind. But being reports relating to a remote period, they are not quite relevant or the purpose of determining whether he should by retired compulsorily or not in 1981. The scrutiny should have been confined to the reports for about ten years prior to the date on which action was proposed to be taken. All the reports except for 1972 73 and 1973 74 were good and quite satisfactory. Even in the reports of the said years there was nothing to doubt his integrity. He was punctual in attending to his work. The reports for the years 1976 77 to 1980 81 speak in favour of the appellant and not against him. A perusal of the said reports showed that there was nothing against him. In these circumstances it was impossible to take the view that the appellant was liable to be compulsorily retired. [470 E H] 3. The resolution of the High Court recommending to the Government that the appellant should be compulsorily retired and the impugned order passed under Fundamental Rule 56(3)(a) are quashed. The resolution of the High Court that the appellant was not fit for promotion to the cadre of District and Sessions Judges is also quashed. [474 E]

This appeal is directed against the order of the Gujarat High Court upholding the order dated the 15th November, 1977 passed by the State of Gujarat whereby the amounts of gratu ity and pension payable to the appellant on superannuation were reduced by 50 per cent. The appellant was born on January 15, 1909 and after obtaining a Degree in Bachelor of Engineering (Civil) joined the service in the former State of Junagarh and as such was governed by the Junagadh State Pension and Parwashi Allow ances Rules of 1932 which were duly codified and published in the Junagadh State Account Code, State of Junagadh was integrated into the State of Saurashtra on 20.1.1949 and the services of the appellant were absorbed in the State of Saurashtra. The conditions of service of the absorbed serv ants were duly protected and a proclamation providing a guarantee that the service conditions of absorbed servants could not be varied to their disadvantage was issued on 20.1.49 that being the date of merger of the State. The State of Saurashtra made the Saurashtra Covenanting State Servants (Superannuation Age) Rules, 1955. Rule 3(i) thereof provided that a Government servant shall, unless for special reasons otherwise directed by Government retire from service on his completing 55 years of age. After the merger of the State of Saurashtra with State of Bombay the old Bombay Civil Service Rules, 1959 were made applicable to Saurashtra area and on 1.7.59 the Bombay Civil Service Rules, 1959 were promulgated. As per clause (c)(2)(ii)(1) of Rule 161, Government servants in the Bombay Service of Engineers Class I were to retire on reaching the age of 55 years. 215 The appellant was compulsorily retired by the State on 12.10.1961 with effect from 12.1.1962 when he had completed the age of 53 years. The appellant challenged that order by means of writ before the High Court and having remained unsuccessful he took up the matter before this Court and this Court by its judgment dated 9.4.69 allowed the appeal and declared that the appellant was entitled to remain in service until he attained the age of 55 years and that the impugned order compulsorily retiring him at the age of 53 years was invalid and ineffective. In order to give effect to this Court 's order mentioned above, the Government of Gujarat on 4.8.69 intimated the appellant that he will be deemed to have remained in service uptil 14.1.64, when he attained the age of 55 years. as he had attained that age prior to the decision of this Court. In the meantime the age of superannuation of the employ ees of the State of Gujarat had been raised from 55 years to 58 years. The appellant in order to take benefit of the change moved a writ petition before the High Court of Guja rat but remained unsuccessful. Thereupon he filed a special leave petition before this Court. This Court by its order dated 21.7.1975 declined to interfere. Thus the appellant was not entitled to continue in service beyond 55 years of age. It may be mentioned that prior to his compulsory retire ment there were three departmental inquiries pending against the appellant, on grounds of slackness in supervision. overpayment to contractors and loss to the Government and payment in advance of the receipt of goods. The first in quiry was initiated on 6.2.61. second on 11.4.1963 and the third on 17.8.63. These inquiries remained pending against the appellant till 1971. The appellant filed yet another Special Civil Applica tion No. 504 of 1971 before the High Court praying for issue of a writ of mandamus directing the State to pay to the appellant all his outstanding salary. allowances. including due increments after the efficiency bar from 12.1. 1902 to 14.1. 1964 together with 6% interest. An application for interim relief was also filed but was withdrawn later on the representation perhaps made by the State that the enquiries had become infructuous consequent to appellant 's retirement. In the meanwhile the State of Gujarat issued a show cause notice dated 17.7.1971 to the appellant intimating him that the Government 216 considered his service record and did not find the same thoroughly satisfactory for the reasons mentioned in the said notice and accordingly the Government proposed to make 50% reduction both in the payment of Gratuity and Pension admissible to him. The appellant submitted his reply and these proceedings due to laches on the part of the appellant went on for a considerable time and the Government passed the final order on 15.11.1977 reducing the Pension and Gratuity by 50 per cent. To challenge this Order the appellant again filed Spe cial Civil Application before the High Court for quashing the order reducing his Pension and gratuity. The High Court dismissed the application in limine on 8.3.1978 observing that in the present case the Government recorded reasons why it came to the conclusion that the petitioner 's Service was unsatisfactory and therefore, put a proportionate cut in the Pension. as no case of discrimination was made out. The appellant, preferred Letters Patent Appeal. against the order passed by the Single Judge. His contention before the Division Bench was that he continued to be governed by the Junagadh Rules in spite of the fact that the Bombay Rules were sought to be made applicable to him. His alternative contention was that even if the Bombay Rules were to be made applicable, so far as the question of payment was concerned, inasmuch as they were not less advantageous on compulsory retirement. proportionate pension was payable to the appel lant under the Bombay Rules of 1959. The Division Bench held that under either set of Rules, it was open to the State Government to reduce the amount of pension payable to the petitioner as his service had not been found satisfactory by the State under Junagadh Rules as also under Bombay Civil Service Rules. The High Court accordingly dismissed the Letter Patent Appeal. Hence this appeal. It was contended on behalf of the appellant that the High Court went wrong in upholding the impugned order reduc ing the amounts of pension & gratuity in exercise of its power under Rules 188 and 189 of the Bombay Rules, as it had already been ruled by this Court in its judgment in Civil Appeal No. 409 of 1966, that Bombay Rules could not be made applicable to the appellant. It was urged that the appellant was not governed by Saurashtra Rules either, and it was asserted that either in the show cause notice or in the impugned order. it Is nowhere specifically stated as to under what set of Rules, the impugned order Imposing a cut in the Pension or Gratuity has been passed. A contention was also raised based on clauses 3, 13 & 15 of Rule 241 A of Junagadh Rules stating that they operate in different fields. It was added that no inquiry as contemplated under Rule 189 had been made and admittedly the State had stated before the High Court that 217 the departmental inquiries had become infructuous consequent upon the retirement of the appellant. According to the counsel for the State the appellant having been retired in pursuance of a judicial order passed by this Court, he cannot now be heard that his retirement at the age of 55 years should be construed as compulsory re tirement the superannuation age having been increased to 60 years under Junagadh Rules, that the retirement of the appellant is normal one; he was entitled to pension under Rule 241 of the Junagadh Rules and the State has passed the impugned order after complying with the provisions of Rules or gratuity be not reduced. Dismissing the appeal. this Court, HELD: Rules 188 and 189 have expressly preserved the State Government 's power to reduce or withhold pension by taking proceedings against a Government Servant even after his retirement. [229H; 230A] In the instant case, in accordance with the procedure specified in Note I to Rule 33 of the Bombay Civil Services Conduct, Discipline and Appeal Rules a show cause notice had been issued to the appellant on 17.7.71 calling upon him to show cause within 30 days from the date of the receipt of the notice as to why the proposed reduction should not be made in the Pension and death cum retirement gratuity. The appellant failed to avail that opportunity to disprove the allegations and satisfy his appointing authority that he rendered satisfactory service throughout. It was in those circumstances the appointing authority thought fit to impose reduction on the Pension and gratuity in accordance with Rules 188 and 189 of the Bombay Rules on the ground that the appellant had not rendered satisfactory service. The appel lant is not entitled to take advantage of clause (b)(ii) of the proviso to Rule 189 A since the proceedings had been instituted long before his retirement. Further as per clause (a) of the said proviso the proceedings were already insti tuted long before his retirement. Further as per clause (a) of the said proviso, the proceedings already instituted while the Government servant was in service could be contin ued and concluded even after his retirement. Therefore the order dated 15.11.1977 reducing the pension and gratuity cannot be said to contravene the Bombay Rules. [231A E] A combined reading of clauses 3, 13 and 15 of Rule 241 A of 218 Junagadh Rules shows that clause 3 is an exception to the general scheme laid down in clauses 13 and 15. [228C] Bholanath J. Thakar vs State of Saurashtra, AIR 1954 SC 680; Dalip Singh vs State of Punjab, ; Moti Ram Deka etc. vs General Manager NEF Railways, Maligaon, Pandu etc. ; , ; State of Maharashtra vs M.H. Mazumdar; , and M. Narasimhachar vs State of Mysore, [1960] 1 SCR 981, referred to. State of U.P.v. Brahm Datt Sharma, [1987] 2 SCC 179, fol lowed.

Appeal No. 37 of 1955. Appeal from the judgment and order dated December 7, 1954, of the Jammu and Kashmir High Court in Criminal Misc. No. 76 of 2011. Vir Sen Sawhney, for the appellant. C. K. Daphtary, Solicitor General of India, B. R. L. Iyengar, R. H. Dhebar and T. M. Sen, for the respondents. Sardar Bahadur, for the intervener. December 5. The Judgment of Sinha, C. J., Kapur, Gajendragadkar, Wanchoo and Shah, JJ., was delivered by Sinha, C. J. Subba Rao, J. and Das Gupta, J. delivered separate judgments. SINHA, C. J. This appeal on a certificate of fitness granted by the High Court of Judicature, Jammu and Kashmir, is directed against the judgment and order dated December 7, 1954, in an application under article 32(2A) of the Constitution for issue of. a writ, directions or. order against the Union of India, through the Secretary, Ministry of Defence,, New Delhi, a,% the first respondent and the State of Jammu and Kashmir through the Chief Secretary,, Jammu and Kashmir State, as the second respondent. The petition is based on the following allegations. The petitioner will be referred to as the appellant in the course of this judgment. He was aged 45 years 832 262 days on August 12, 1954. He was holding a regular commission in the Jammu and Kashmir State Forces, which were amalgamated with the Defence Forces of the Union with effect from September 1, 1949. The appellant holding the substantive rank of Lieut. Col. in the amalgamated forces had the right to continue in service until he attained the age of 53 years, which event will happen on November 20, 1961. The Government of India issued a letter dated July 31, 1954, retiring the appellant from the service with effect from August 12, 1954, This decision of the Government of India is not based on any allegations or charge of inefficiency, indiscipline or any other irregularity on the part of the appellant. The aforesaid decision of the Government of India prematurely retiring the appellant is impugned as illegal, unwarranted and discriminatory and as having been made in contravention of article 16(1) of the Constitution. The petition was opposed on behalf of the respondents aforesaid on a number of preliminary grounds of which it is only necessary to mention the first, namely, that the authority against whom the writ is sought, that is to say, respondent No. 1, being outside the territorial limits of the jurisdiction of the Jammu and Kashmir High Court, the same was not maintainable. This preliminary objection was heard by a Division Bench, (Janki Nath Wazir, C. J. and M. A. Shahmiri, J.) Jammu and Kashmir High Court. By its judgment. dated December 7, 1954, the High Court upheld the preliminary objection. The High Court, relying upon the decisions of this Court in Election Commission, India vs Saka Venkata Subba Rao (1) and K. section Rashid and Son vs The Income tax Investigation Commission etc. (2), held that it had no jurisdiction to issue a writ against the first respondent and, therefore, dismissed the petition, but the High Court granted the necessary certificate under article 132 of the Constitution; hence this appeal. The matter was first heard by a Bench of five judges. in the course of hearing it became clear to us that the appellant not only sought to distinguish (1) ; (2) ; 833 the two decisions aforesaid of this Court, but questioned the correctness of those decisions. Hence this larger Bench was constituted in order to examine the correctness of the decisions aforesaid of this Court on the strength of which the High Court had refused to entertain the appellant 's petition, on merits. It has been argued on behalf of the appellant, in the first instance, that the previous decisions of this Court were distinguishable on the ground that they did not, in terms, consider the question whether the Government of India wag amenable to the jurisdiction of the High Court under article 226 or of the Jammu and ' Kashmir High Court under article 32(2A) of the Constitution. that those provisions, on a true construction, would not stand in the way of the appellant, inasmuch as the Government of India has no location and its authority is present throughout the Union territory; that the correct test is whether or not the cause of action arose within the territorial limits of the High Court 's jurisdiction; that the High Court was in error in holding that the term "authority" included a Government. In answer to these contentions on behalf of the appellant, the learned Solicitor General contended that, on a proper construction of the relevant provisions of the Constitution, it is clear that Sastri C. J. 's observations relating to "authority" in the case of Election Commission, India vs Saka Venkata Subba Rao (1) applied with equal force to Government, inincluding the Union Government. The Government of India functions through its officers and, therefore, the location contemplated means the place at which the orders impugned are ordinarily passed. The considerations in a suit with reference to the cause of action for the suit do not stand on the same footing in a writ matter, because the writ has to reach the particular officers of the Government concerned. The expression "in appropriate cases" means that there may be cases where though the Union Government as such is not located within the territorial limits of a High Court yet a writ may be issued against it by the High (1) ; 834 Courts because an officer of the Union Government is functioning within such limits and it is his order which is the subject matter of the controversy. Therefore, it is not in every case that a High Court can issue a writ against the Union. A writ of mandamus, for example, is directed against a particular named person or authority. Similarly, a writ of certiorari is directed against a particular record. Therefore, the writ must issue to someone within the territorial limits of the High Court 's jurisdiction. The question that we have to determine in this case is of far reaching importance and is not a matter of first impression. The question was first raised in this Court in 1952 and was determined by a Constitution Bench in the case of Election Commission, India vs Saka Venkata Subba Rao (1). In that case a writ was applied for in the Madras High Court for restraining the Election Commission from, enquiring into the alleged disqualification of the respondent. A single Judge of the High Court of Judicature of Madras issued a writ of prohibition restraining the Election Commission, a statutory authority constituted by the President of India, with its office permanently located at New Delhi, when the matter was heard by the learned single Judge of the High Court. In the High Court the Election Commission demurred to the jurisdiction of the Court to issue any writ against it on the ground that the Commission was not within the territory in relation to which the High Court exercised jurisdiction, apart from other objections. The learned Judge of the High Court overruled the preliminary objection and decided the case on merits, and issued a writ prohibiting the Commission from ' proceeding with the enquiry. The learned Judge granted the certificate under article 132 that the case involved a substantial question of law as to the interpretation of the Constitution. The Election Commission accordingly came up in appeal to this Court and challenged the jurisdiction of the Madras High Court to issue the writ it had purported to do. This Court overruled the contention on behalf of the respondent which was (1) ; 835 based on the decision of the Privy Council in the Parlakimedi case (1) that the jurisdiction of the High Court to issue a writ is analogous to the jurisdiction of a court to grant a decree or order against persons outside the limits of its local jurisdiction, provided that the cause of action arose within those limits. This Court overruled that contention in these words: "The rule that cause of action attracts jurisdiction in suits is based on statutory enactment and cannot apply to writs issuable under article 226 which makes no reference to any cause of action or where it arises but insists on the presence of the person or authority 'within the territories ' in relation to which the High Court exercises jurisdiction". The Constitution Bench in that case considered that the language of article 226 of the Constitution was "reasoriably plain" and that the exercise of the power conferred by that Article was subject to a two fold limitation, namely, (1) that the power is to be exercised "throughout the territories in relation to which it exercises jurisdiction" and (2) that the person or authority to whom the High Court is empowered to issue the writs must be "within those territories". In other words, the writ of the Court could not run beyond the territories subject to its jurisdiction and that the person or authority affected by the writ must be amenable to the Court 's jurisdiction, either by residence or location within those territories. The second case of this Court, which dealt with this question is K. section Rashid and Son vs The Income Tax Investigation Commission (2). That was a case on appeal from the judgment and order dated August 10, 1950, of the High Court of Judicature, Punjab, at Simla, in a number of miscellaneous matters, in which the High Court had been moved under articles 226 and 227 of the Constitution praying for quashing proceedings started against the appellants under the Taxation on Income (Investigation Commission.) Act (XXX of 1947). It was prayed in the High Court that a writ of prohibition might issue against the Income Tax (1) (1943) L.R. 70 I.A. 129. (2) ; 836 Investigation Commission directing it not to proceed with the investigation of cases referred to it under the provisions of the Act. The writ petitions in the High Court were opposed on behalf of the Commission on a number of grounds, one of them being that the Pun. jab High Court had no jurisdiction to issue the writs prayed for under article 226 of the Constitution, simply because the Commission was located in Delhi. Reliance was placed on behalf of the Commission on the decision of the Privy Council in the Parliament case (1) that the substance of the matter was that the assessees against whom the investigation had been started belonged to U. P. and all the assessment pro ceedings, including reference to the High Court, would lie in Uttar Pradesh. The High Court gave effect to this contention and dismissed the application primarily on the ground that the High Court had no jurisdiction to issue the writ to the Commission. The assessees came up in appeal to this Court, and this Court substantially adopted the reasons given by it in its previous judgment in the case of Election Commission, India vs Saka Venkata Subba Rao (2). It is to be noted that when the High Court of Punjab decided the case, the decision of this Court referred to above had not been given. Relying upon its previous decision, this Court held that the Punjab High Court was in error in holding that it had no jurisdiction to deal with the matter under article 226 of the Constitution. The appeal was dismissed by this Court on other grounds, not material to this case. Learned counsel for the appellant has contended that the two decisions of this Court referred to above are distinguishable from the facts of the present case, inasmuch as in those cases the Election Commission and the Income tax Investigation 'Commission were statutory bodies, which had their location in Delhi, and, therefore, this Court held that the Punjab High Court was the High Court within whose jurisdiction those bodies functioned and had their location and were, therefore, amenable to its jurisdiction. He further contended that the Union Government functioned throughout the territory of India and could (1) (1943) L.R. 70 I.A. 129. (2) ; 837 not be said to be located only in Delhi simply because the capital for the time being was in Delhi. In this connection, strong reliance was placed on the decision of the Full Bench of the Allahabad High Court in Maqbulunnissa vs Union of India (1). That case does lend a great deal of support to this contention on behalf of the appellant. It was held by the High Court in that case that the words "any Government" in article 226(1) of the Constitution clearly indi cated that the Allahabad High Court had jurisdiction to entertain the petition under article 226, not only against the State of Uttar Pradesh, but also against the Union Government for the issue of a writ in the nature of mandamus, directing the Government to forbear from giving effect to the order asking the petitioner to leave India. The ratio of the decision was that, even though the capital of the Government of India is in Delhi, its executive power extends throughout the territory of India and that the real test to determine the jurisdiction would be the residence of the petitioners and the effect of the impugned order upon them. After holding that the High Court had the jurisdiction to entertain the petition, the Court dismissed it on other grounds, not material to this case. The Allahabad High Court distinguished the decision of a Division Bench of the Calcutta High Court dated January 17, 1951, in the case of The Lloyds Bank Limited vs The Lloyds Bank Indian Staff Association (Calcutta Branches) (2) which was unreported till then. In that case, Harries, C. J., speaking for the Court, had held that though article 226 of the Constitution had gone beyond the English practice by providing that writs in the nature of prerogative writs could issue even against a Government, that Government most be located within the territorial limits of the Court which was moved to exercise its power under that Article. He further observed that the Government of India could not be said to be located in the State of West Bengal and, therefore, writs under article 226 could not issue against that Government by the High Court of Calcutta. That (1) I.L. R. (1953) 2 All. 289. (2) I.L.R. 838 decision of the Calcutta High Court was distinguished by the Allahabad High Court on the ground that "the effects of the orders of the Union Government were not operative within the jurisdiction of the Court". It may be added that that decision came up in appeal to this Court in Civil Appeal No. 42 of 1952 but the appeal was dismissed by this Court by its judgment dated April 20, 1952, on other grounds. It will be noticed that when the Allahabad decision, so strongly relied upon by the appellant, was given, the two decisions referred to above of this Court were not there. The Allahabad High Court may not have given that judgment if the two decisions of this Court had then been in existence. The two main questions which arise, therefore, are: (i) whether the Government of India as such can be said to have a location in a particular place, viz., New Delhi, irrespective of the fact that its authority extends over all the States and its officers function throughout India, and (ii) whether there is any scope for introducing the concept of cause of action as the basis of exercise of jurisdiction under article 226. Before, however, we deal with these two main questions, we would like to clear the ground with respect to two subsidiary matters which have been urged on behalf of the appellant. The first argument is that the word "authority" used in article 226 cannot and does not include Government. We are not impressed by this argument. In interpreting the word "authority" we must have regard to the clause immediately following it. article 226 provides for "the issue to any person or authority including in appropriate cases any Government" within those territories. It is clear that the clause "including in appropriate cases any Government" goes with the preceding word "authority", and on a plain and reasonable construction it means that the word " authority" in the context may include any Government in an appropriate case. The suggestion that the said clause is intended to confer discretion on the High Courts in the matter of issuing a writ or direction on any Government seems to us clearly unsustainable. 839 To connect this clause with the issuance of a writ or order and to suggest that in dealing with cases against Government the High Court has to decide whether the case is appropriate for the issue of the order is plainly not justified by the rules of grammar. We have no hesitation in holding that the said clause goes with the word "authority" and that its effect is that the authority against whom jurisdiction is conferred on the High Court to issue a writ or appropriate order may in certain cases include a Government. Appro priate cases in the context means cases in which orders passed by a Government or their subordinates are challenged, and the clause therefore means that where such orders are challenged the High Court may issue a writ against the Government. The position, therefore, is that under article 226 power is conferred on the High Court to issue to any person or authority or in a. given case to any Government, writs or orders there specified for enforcement of any of the rights conferred by Part III and for any other purpose. Having thus dealt with the two subsidiary points raised before us, we may now proceed to consider the two main contentions which arise for our decision in the present appeal. This brings us to the first question, namely, whether the Government of India as such can be said to be located at one place, namely, New Delhi. The main argument in this connection is that the Government of India is all pervasive and is functioning throughout the territory of India 'and therefore every High Court has power to issue a writ against it, as it must be presumed to be located within the territorial jurisdiction of all State High Courts. This argument in our opinion confuses the concept of location of 'a Government with the concept of its functioning ' A Government may be functioning all over a State or all over India; but it certainly is not located all over the State or all over India. It is true that the Constitution has not provided that the seat of the Government, of India will be at New Delhi. That, however, does not mean ' that the Government of India as such has no seat where it is located. It is common knowledge that the seat of the 840 Government of India is in New Delhi 'and the Government as such is located in New Delhi. The absence of a provision in the Constitution can make no difference to this fact. What we have to see, therefore, is whether the words of article 226 mean that the person or authority to whom a writ is to be issued has to be resident in or located within the territories of the High Court issuing the writ? The relevant words of article 226 are these "Every High Court shall have power to issue to any person or authority within those territories. ". So far as a natural person is concerned, there can be no doubt that he can be within those territories only if he resides therein either permanently or temporarily. So far as an authority is concerned, there can be no doubt that if its office is located therein it must be within the territory. But do these words mean with respect to an authority that even though its office is not located within those territories it will be within those territories because its order may affect persons living in those territories? Now it is clear that the jurisdiction conferred on the High Court by article 226 does not depend upon the residence or location of the person applying to it for relief; it depends only on the person or authority against whom a writ is sought being within those territories. It seems to us therefore that it is not permissible to read in article 226 the residence or location of the person affected by the order passed in order to determine the jurisdiction of the High Court. That jurisdiction depends on the person or authority passing the order being within those territories and the residence: or location of the person affected can have no relevance on the question of the High Court 's jurisdiction. Thus if a person residing or located in Bombay, for example, is aggrieved by an order passed by an authority located, say, in Calcutta, the forum in which he has to seek relief is not the Bombay High Court though the order may affect him in Bombay but the Calcutta High Court where the authority passing the order is located. It would, therefore, in our opinion be wrong to introduce in article 226 the concept of the place where the order 841 passed has effect in order to determine the jurisdiction of the High Court which can give relief under article 226. The introduction of such a concept may give a rise to confusion and conflict of jurisdictions. Take , for example, the case of an order passed by an authority in Calcutta, which affects six brothers living, say , in Bombay, Madras, Allahabad, Jabalpur, Jodhpur and Chandigarh. The order passed by the authority in Calcutta has thus affected persons in six States. Can it be said that article 226 contemplates that all the six High Courts have jurisdiction in the matter of giving relief under it? The answer must obviously be 'No ', if one is to avoid confusion and conflict of jurisdiction. As we read the relevant words of article 226 (quoted above) there can be no doubt that the jurisdiction conferred by that Article on a High Court is with respect to the location or residence of the person or authority passing the order and there can be no question of introducing the concept of the place where the order is to have effect in order to determine which High Court can give relief under it. It is true that this Court will give such meaning to the words used in the Constitution as would help towards its working smoothly. If we were to introduce in article 226 the concept of the place where the order is to have effect we would not be advancing the purposes for which article 226 has been enacted. On the other hand, we would be producing conflict of jurisdiction between various High Courts as already shown by the illustration given above. Therefore, the effect of an order by whomsoever it is passed can have no relevance in determining the jurisdiction of the High Court which can take action under article 226. Now, functioning of a Government is really nothing other than giving effect to the orders passed by it. Therefore it would not be right to introduce in article 226 the concept of the functioning of Government when determining the meaning of the words "any person or authority within those territories". By introducting the concept of functioning in these words we shall be creating the same conflict which would arise if the concept of the place where the order is to have effect is introduced in 842 article 226. There can, therefore, be no escape from the conclusion that these words in article 226 refer not to the place where the Government may be functioning but only to the place where the person or authority is either resident or is located. So far therefore as a natural person is concerned, he is within those territories if he resides there permanently or temporarily. So far. as an authority (other than a Government) is concerned, it is within the territories if its office is located there. So far as a Government is concerned it is within the territories only if its seat is within those territories. The seat of a Government is sometimes mentioned in the Constitutions of various countries but many a time the seat is not so mentioned. But whether the seat of a Government is mentioned in the Constitution or not, there is undoubtedly a seat from which the Government as 'such functions as a fact. What article 226 requires is residence or location as a fact and if therefore there is a seat from which the Government functions as a fact even though that seat is not mentioned in the Constitution the High Court within whose territories that seat is located will be the High Court having jurisdiction under AA. 226 so far as the orders of the Government as such are concerned. Therefore, the view taken in Election Commission, India vs Saka Venkata Subba Rao (1) and K.S. Rashid and Son vs The Income tax Investigation Commission (2) that there is two fold limitation on the power of the High Court to issue writs etc. under article 226, namely, (i) the power is to be exercised 'throughout the territories in relation to which it exercises jurisdiction ', that is to say, the writs issued by the Court cannot run beyond the territories subject to its jurisdiction, and (ii) the person or authority to whom the High Court is empowered to issue such writs must be "within those territories" which clearly implies that they must be amenable to its jurisdiction either by residence or location within those territories, is the correct one. This brings us to the second point, namely, whether (1) ; (2) ; 843 it is possible to introduce the concept of cause of action in article 226 so that the High Court in whose jurisdiction the cause of action arose would be the proper one to pass an order thereunder. Reliance in this connection has been placed on the judgment of the Privy Council in Ryots of Garabandho vs Zamindar of Parlakimedi (1). In that case the Privy Council held that even though the impugned order was passed by the Board of Revenue which was located in Madras, the High Court would have no jurisdiction to issue a writ quashing that order, as it had no jurisdiction to issue a writ beyond the limits of the city of Madras except in certain cases, and that particular matter was not within the exceptions. This decision of the Privy Council does appa rently introduce an element of the place where the cause of action arose in considering the jurisdiction of the High Court, to issue a writ. The basis of the at decision, however, was the peculiar history of the issue of writs by the three Presidency High Courts as successors of the Supreme Courts, though on the literal construction of cl. 8 of the Charter of 1800 conferring jurisdiction on, the Supreme Court of Madras, there could be little doubt that the Supreme Court would have the same jurisdiction as the Justices of the Court of King 's Bench Division in England for the territories which then were or thereafter might be subject to or depend upon the Government of Madras. It will therefore not be correct to put too much stress on the decision in that case. The question whether the concept of cause of action could be introduced in article 226 was also considered in Saka Venkata Subba Rao 's case ( 2 ) and was repelled in these words: "The rule that cause of action attracts jurisdiction in suits is based on statutory enactment and cannot apply to writs issuable under article 226 which makes no reference to any cause of action or where it arises but insists on the presence of the person or authority within the territories ' in relation to which the High Court exercises jurisdiction. " Article 226 as it stands does not refer anywhere to (1) (1943) L.R. 70 I.A. 129. (2) ; 844 the accrual of cause of action and to the jurisdiction of the High Court depending on the place where the cause of action accrues being within its territorial jurisdiction. Proceedings under article 226 are not suits; they provide for extraordinary remedies by a special procedure and give powers of correction to the High Court over persons and authorities and these special powers have to be exercised within the limits set for them. These two limitations have already been indicated by us above and one of them is that the person or authority concerned must be within the territories over which the High Court exercises juris diction. Is it possible then to overlook this constitu tional limitation and say that the High Court can issue a writ against a person or authority even though it may not be within its territories simply because the cause of action has arisen within those territories? It seems to us that it would be going in the face of the express provision in article 226 and doing away with an express limitation contained therein if the concept of cause of action were to be introduced in it. Nor do we think that it is right to say that because article 300 specifically provides for suits by and against the Government of India, the proceedings under article 226 are also covered by article 300. It seems to us that article 300 which is on the same line as section L76 of the Government of India Act, 1935, dealt with suits as such and proceedings analogous to or consequent upon suits and has no reference to the extraordinary remedies provided by article 226 of the Constitution. The concept of cause of action cannot in our opinion be introduced in article 226, for by doing so we shall be doing away with the express provision contained therein which requires that the person or authority to whom the writ is to be issued should be resident in or located within the territories over which the High Court has jurisdiction. It is true that this may result in some inconvenience to persons residing far away from Now Delhi who are aggrieved by some order of the Government of India as such, and that may be a reason for making a suit. able constitutional amendment in article 226. But the argument of inconvenience, in our opinion,. cannot 845 affect the plain language of article 226, nor can the concept of the place of cause of action be introduced into it for that would do away with the two limitations on the powers of the High Court contained in it. We have given our earnest consideration to the language of article 226 and the two decisions of this Court referred to above. We are of opinion that unless there are clear and compelling reasons, which cannot be denied, we should not depart from the interpretation given in these two cases and indeed from any interpretation given in an earlier judgment of this Court, unless there is a fair amount of unanimity that the earlier decisions are manifestly wrong. This Court should not, except when it is demonstrated beyond all reasonable doubt that its previous ruling, given after due deliberation and full hearing, was erroneous, go back upon its previous ruling, particularly on a constitutional issue. In this case our reconsideration of the matter has confirmed the view that there is no place for the introduction of the concept of the place where the impugned order has effect or of the concept of functioning of a Government, apart from the location of its office concerned with the case, or even of the concept of the place where the cause of action arises in article 226 and that the language of that Article is plain enough to lead to the conclusion at which the two cases of this Court referred to above arrived. 'If any inconvenience is felt on account of this interpretation of article 226 the remedy seems to be a constitutional amendment. There is no scope for avoiding the inconvenience by an interpretation which we cannot reasonably, on the language of the Article, adopt and which the language of the Article does not bear. In this view of the matter the appeal fails and is hereby dismissed with costs. SUBBARAO, J. I have had the advantage of perusing the judgment prepared by my Lord the Chief Justice. I regret my inability to agree. I would not have ventured to differ from his weighty opinion but for the fact that the acceptance of the contention of 107 846 the respondents would practically deprive the majority of citizens of our country of the benefit of cheap, expeditious and effective remedy given to them under article 226 of the Constitution against illegal acts of the Union Government. If the relevant provisions are clear and unambiguous, the said contention must prevail however deleterious the effect may be to public interest. But if the words of the Article are capable of two or more interpretations, one that will carry out the intention of the Constituent Assembly and the other that would defeat it, the former interpretation must necessarily be accepted. We must also bear in mind that the provisions of the Constitution are not " mathematical formulae which have their essence in mere form". It being an organic statute, its provisions must be construed broadly and not in a pedantic way, but without doing violence to the language used. The facts have been fully stated in the judgment of my Lord the Chief Justice and it would be redundant to restate them. It would be enough if I formulate the point of law raised and express my opinion thereon. The question is whether the appellant, who is a citizen of India and is residing in the State of Kashmir, can enforce his fundamental right under Art 32(2A) of the Constitution by filing an appropriate writ petition in the High Court of Jammu & Kashmir, if his right is infringed by an order of the Union Government. The Constitution of India has been made applicable to the State of Jammu & Kashmir by the Constitution (Application to Jammu & Kashmir) Order, 1954 (Order No. 48 dated May 14, 1954) with certain exceptions and modifications. By the said Order, cl. (3) of article 32 of the Constitution was deleted, and a new clause (2A) was inserted after cl. The question falls to be decided on a true construction of the said el. (2A) which reads: "Without prejudice to the powers conferred by clauses (1) and (2), the High Court shall have power throughout the territories in rotation to which it exercises jurisdiction to issue to any person or authority, including in appropriate cases any Government within these territories, directions or orders or writs, 847 including writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari, or any of them, for the enforcement of any of the rights conferred by this Part. " The operative part of this clause is in pari materia with article 226 of the Constitution with the difference that the words "for any other purpose" found in the latter Article are omitted in the former. Though the power of the High Court of Jammu & Kashmir is limited to that extent, in other respects it is as extensive as that of the other High Courts under article 226. The object of the amendment is self evident; it was enacted to enable the said High Court to protect the fundamental rights of the citizens of India in that part of the country. The learned Solicitor General broadly contends that this Court has construed the analogous provisons of article 226 of the Constitution and held that the writs under that Article do not run beyond the territories in relation to which a High Court exercises jurisdiction and that a High Court cannot issue a writ thereunder unless the person or authority against whom the writ is sought is physically resident or located within the territorial jurisdiction of that High Court; and that, therefore, on the same parity of reasoning, the High Court of Jammu & Kashmir cannot issue a writ to run beyond the territories of that State against the Union Government functioning through its officers in New Delhi. Learned counsel for the appellant contends, on the other hand, that neither article 32(2A) nor article 226 bears any such limited construction and that on a liberal and true construction of the said constitutional provisions it must be held that 'the High Court can issue a writ against any Government, including the Union Government, exercising the functions within the territories of a State, if it infringes the right of a person in that State. Before I attempt to construe the provisions of el. (2A) of article 32, I think it would be convenient to trace briefly the history of article 226, for it throws a flood of light on the legislative intention expressed in 848 article 32(2A). In pre independence India the High Courts, other than the High Courts in the presidency towns of Bombay, Calcutta and Madras, had no power to issue prerogative writs; even in the case of the said presidency High Courts the power to issue writs was very much circumscribed; their jurisdiction to issue the said writs was confined only to the limits of their original jurisdiction and the Governments were excluded from its scope. But the framers of our Constitution with the background of centuries of servility, with the awareness of the important role played by the High Court of England in protecting the rights of its citizens when they were infringed by executive action, with the knowledge of the effective and impartial part played by the High Courts in pre independence India within the narrow limits of their jurisdiction to protect the rights of the citizens of our country, with a vision to prevent autocracy raising its ugly head in the future, declared the fundamental rights in Part III of the Constitution, conferred powers on the High Courts to issue to any person or authority, including in appropriate cases any Government, directions, orders or writs for the enforcement of the fundamental rights or for any other purpose. In short, any person of India can approach an appropriate High Court to protect his rights against any person, authority or any Government if his fundamental right or any other right is infringed by the said person, authority or Government. If the contention of the respondents be accepted, whenever the Union Government infringes the right of a person in any remote part of the country. , he must come all the way to New Delhi to enforce his right by filing a writ petition in the Circuit Bench of the Punjab High Court. If a common man residing in Kanyakumari, the southern most part of India, his illegally detained in prison, or deprived of his property otherwise than by law, by an order of the Union Government, it would be a travesty of fundamental rights to expect him to come to New Delhi to seek the protection of the High Court of Punjab. This construction of the provisions of article 226 would attribute to the framers 849 of the Constitution an intention to confer the right on a person and to withhold from him for all practical purposes the remedy to enforce his right against the Union Government. Obviously it could not have been the intention of the Constituent Assembly to bring about such an anomalous result in respect of what they conceived to be a cherished right conferred upon the citizens of this country. In that event, the right conferred turns out to be an empty one and the object of the framers of the Constitution is literally defeated. The scope of article 226 vis a vis the reach of the High Courts ' power has been considered in two decisions of this Court, namely, Election Commission, India vs Saka Venkata Rao (1) and K. section Rashid and Son vs The Income tax Investigation Commission (2). As this Bench of seven Judges is constituted to enable this Court to approach the problem with a fresh mind unhampered by precedents, I propose to scrutinize the provisions of article 32(2A) free from the curbs imposed by the earlier decisions. The core of the Article is discernible in the following clause and phrases: "throughout the territories in relation to which it exercises its jurisdiction", "any Government", "within those territories", "directions or orders or writs, including writs in the nature of habeas corpus, etc. " The wore "throughout the territories, etc." delimit the territorial jurisdiction of the High Courts in the matter of issuing directions or writs. A High Court exercises jurisdiction throughout the State in which it is located. Its writs run only through. out the State and not beyond its territorial limits. The main object of the powers to keep the authorities or tribunals within their bounds and to prevent them from infringing the fundamental or other rights of citizens. At the instance of an aggrieved person it can issue one or other of the writs or orders or directions against the offending authority in respect of an act done or omitted tot be done by it. It is implicit in the, limitation that the impugned act must affect a person or property amenable to its territorial jurisdiction. (1) ; (2) ; 850 This question, in a different context, has been considered by the Judicial Committee of the Privy Council in Ryots of Garabandho vs Zemindar of Parlaki medi (1). There the Board of Revenue situated in the State of Madras under section 172 of the Madras Estates Land Act, 1908, enhanced the rents payable by the ryots in three villages, including Parlakimedi village, in the district of Ganjam in the Northern Circars. The question was whether the Madras High Court had power to issue a writ to quash the order of the Board. of Revenue, as the parties to that litigation were not subject to the original jurisdiction of the Madras High Court. The Judicial Committee held that the Madras High Court had no jurisdiction to issue a writ of certiorari to run beyond the territorial limits of that High Court. When it was contended that, as the Revenue Board was in Madras, the High Court had jurisdiction to quash its order, the Judicial Committee repelled that contention with the follow ing remarks at p. 164: "The Board of Revenue has always had its offices in the Presidency Town, and in the present case the Collective Board, which made the order complained of, issued this order in the town. On the other hand, the parties are not subject to the original jurisdiction of the High Court, and the estate of Parlakimedi ties in the north of the province. . . Their Lordships think that the question of jurisdiction must be regarded as one of substance, and that it would not have been within the competence of the Supreme Court to claim jurisdiction over such a matter as the present by issuing certiorari to the Board of Revenue on the strength of its location in the town. Such a view would give jurisdiction to the Supreme Court, in the matter of settlement of rents for ryoti holdings in Ganjam between parties not otherwise subject to its jurisdiction, which it would not have had over the Revenue Officer who dealt with the matter at first instance." This decision in clear terms lays emphasis on the substance of the matter and holds that mere physical (1) (1943) L.R. 70 I.A. 129. 851 presence of an authority within the jurisdiction of a High Court does not enable that Court to issue writs against the said authority in respect of an order made in a dispute between persons residing outside the territorial jurisdiction of the said High Court. Therefore, a High Court 's jurisdiction to issue an appropriate writ depends on the co existence of two conditions, namely, (i) the cause of action has accrued within the territories in relation to which it has jurisdiction, and (ii) the said authority is "within" the said territories. This interpretation may give rise to a criticism; it may be asked, which High Court could give the relief if the cause of action accrues within the territorial jurisdiction of one High Court and the authority concerned is located within that of another High Court? There may. be statutory authorities with all India jurisdiction, but for convenience located in a particular State. In exercise of the powers conferred under statutes, they may make orders affecting the rights of parties residing in different States. I am prima facie of the view that the said authorities, in so far as their orders operate in a particular territory, will be "within" those territories and the High Court, which exercises its jurisdiction throughout that territory, can issue a suitable writ against the said authorities. This interpretation avoids the anomaly of one High Court issuing a writ against an authority located "within" its territorial jurisdiction in respect of a cause of action accruing in another State or territory over which it has no jurisdiction. But this question does not arise in this case, for we re mainly concerned with the Union Government. Article 226 of the Constitution is expressed in wide and most comprehensive terms. There is no difficulty about. the words "person or authority", but the phrase "including any Government" gives rise to a conflict of opinion. If the framers of the Constitution intended to extend simply the power of the High Court to issue writs only against the Government of the State, they could have stated "or the Government of the State", instead they designedly used the words "any Government" which at first sight appear rather involved but on a deeper scrutiny reveal that the words 852 "any Government" cannot mean only the Government of the State. The word "any" clearly presupposes the existence of more than one Government functioning in a State. Under the Constitution two Governments function in each State. Under article 1, India shall be a Union of States and the territory of India shall comprise, inter alia, the territories of the States. Part 11 provides for one class of citizens, that is, citizens of India. In whatever State a person with the requisite qualifications of a citizen may reside, he is a citizen of India and not of that particular State. All the three departments of the Union as well as the State function in the State; both Parliament and the Legislature of the State make laws which govern the State in respect of matters allotted to them respectively. Both the Union and the State executive powers extend to the. State, and the former is exercised in regard to matters with respect to which Parliament has power to make laws and the latter in regard to matters with respect to which the Legislature of the State has power to make laws: see articles 73 and 162. The Judiciary consists of an hierarchy of courts and all the courts from the lowest to the Supreme Court exercise jurisdiction in respect of a cause of action arising in that State. The demarcation between the Union Government and the State Government is, therefore, not territorial but only : subjectwise and both the Governments function within the State. With this background it is easy to perceive that "any Government" must include the Union Government, for two State Governments cannot administer the same State, though for convenience or as a temporary arrangement, the offices of one State may be located in another State. Then it is asked why the Article confers power to issue writs against any Government only in appropriate cases. There are two answers to this question. Till the Constitution was framed there was no power in a High Court to issue a writ even against the Provincial Government. The Constitution conferred for the first time a power on the High Court to issue a writ not only against the State Government but also the Union Government. As the 853 Union Government has sway over not only the State in question but beyond it, it became necessary to administer a caution that a writ can only be issued in appropriate cases. The High Court 's jurisdiction is limited in the matter of issuing writs against the Union Government, for it cannot issue writs against it in respect of a cause of action beyond its territorial jurisdiction. There may also be a case where the secretariat of one of the State Governments is located in another State temporarily. In such a case also the High Court of the latter State cannot issue writs against that State Government as it is not appropriate to issue such writs, for the cause of action accrues ' within the former State. I have, therefore, no doubt that the words "any Government" must necessarily take in the Union Government. Much of the argument turns upon the words "within those territories". It is said that the Union Government is not within the territories of the State, for its headquarters are in Delhi. The Article does not use the word "headquarters", "resident" or "location". The dictionary meaning of the word "within" is "inside of, not out of or beyond". The connotation of the words takes colour from the context in which they are used. A person may be said to be within a territory if he resides therein. He may also be within a territory if he temporarily enters the said territory or is in the course of passing through the territory. Any authority may be in a territory if its office is located therein. It may also be said to be within a territory if it exercises its powers therein and if it can make orders to bind persons for properties therein. So too a Government may be within a State if it has a legal situs in that State. It may also be said to be within a State if it administers the State, though for convenience some of its executive authorities are residing outside the territory. We must give such meaning to these words as would help the working of the Constitution rather than retard it. To put it differently, can it be said that the Union Government 108 854 is within a particular State? Union Government in the present context means the executive branch of the Government. Where is it located? To answer this question it is necessary to consider what is "Union Government". The Constitution in Part V under the heading. "The Union" deals with separate subjects, namely, the executive, the Parliament and the Union judiciary. Under article 53, the executive power of the Union shall be vested in the President and shall be exercised by him either directly or through officers subordinate to him in accordance with the Constitution. Article 74 provides for a council of Ministers with the Prime Minister at the head to aid and advise the President in the exercise of his functions. By article 77, all executive action of the Government of India shall be expressed to be taken in the name of the President; and el. (3) thereof authorizes the President to make rules for the more convenient transaction of the business of the Government of India, and for the allocation among Ministers of the said business. Article 73 says that subject to the provisions of the Constitution, the executive power of the Union shall extend to the matters with respect to which Parliament has power to make laws and to the exercise of such rights, authority and jurisdiction as are exercisable by the Government of India by virtue of any; treaty or agreement. The Constitution nowhere fixes the seat of the Union Government or even that of the President. Shortly stated, the Union Government is the President acting on the advise of the Ministers directly or through officers subordinate to him in accordance with the Constitution and the jurisdiction of the said Government extends, so far as is relevant to the present purpose, to matters in respect of which Parliament has power to make laws. The question that immediately arises is, what is the situs of such a Government? There is no statutory situs. For convenience of administration, the officers of such Government may stay at one place,, or they may be distributed in different places; the President may. reside in one place, the Prime Minister in another, the 855 Ministers in a third place and the officers through whom the President exercises his powers in a place different from the rest. What happens when the Secretariat remains in New Delhi and the President resides for some months in a year in, say,, Hyderabad? Contrary wise, what would be the position if the President stays in New Delhi and the entire or part of the Secretariat or some of the Ministers stay in Hyderabad? It is, therefore, not possible to apply 'the test of residence or location in the absence of any statutory situs. The Union Government has no fixed legal abode; it is present throughout the territories over which it exercises jurisdiction and in respect whereof it can make effective and binding orders in the field allotted to it by the Constitution. The constitutional situs of the Union Government is the entire territories of the Union and it is "within" the territories of India and,, therefore, within the territories of every State. Let us look at the problem from another standpoint. Under article 300 of the Constitution, the Government of India may sue or be sued by the name of the Union of India. The word "sued" is used in a general sense and cannot be narrowly construed in the Constitution as to comprehend only action by way of filing a suit in a civil court. According to Webster, it means to seek justice or right by legal process. Generally speaking, it includes any action taken in a court. The practice followed in the various High Courts and the Supreme Court is also consistent with the wide meaning attributed to it, for writs are filed against the Government of India only in the name of the Union of India. Union of India is a juristic person and it is impossible to predicate its residence in a particular place in the Union. Its presence Synchronizes with the limits of the Union territories. That is the reason why that Order XXVII, rule 3, Code of Civil Procedure, says that in suits by or against the Government instead of inserting in the plaint the name and description and place of residence of the plaintiff or defendant, it shall be sufficient to insert the appropriate name as provided in section 79 Section 79 of the 856 Civil Procedure Code is in terms analogous to article 300 of the Constitution, and under that section, "In a suit by or against the Government, the authority to be named as plaintiff or defendant, as the case may be, shall be (a). in the case of a suit by or against the Central Government, the Union of India, and (b). in the case of a suit by or against a State Government, the State." As the Union of India has no statutory situs, Order XXVII, rule 3, Code of Civil Procedure, exempts its place of residence being given in the plaint or the written statement, as the case may be. The suit by or against the Union Government shall be filed in a court which has jurisdiction to entertain such a suit, having regard to the provisions of sections 15 to 20 of the said Code. On the same analogy, it may be held that the Union of India has no legal situs in a particular place and a writ petition can be filed against it in a place within the jurisdiction of the High Court wherein the cause of action accrues. It is said that the limits of the power to issue a writ are implicit in the nature of a particular writ. What is the nature of the principal writs, namely, habeas corpus, mandamus, prohibition, quo warranto and certiorari? The writ of habeas corpus "is a prerogative process for securing the liberty of the subject by affording an effective means of immediate release from unlawful or unjustifiable detention whether in prison or in private custody". The writ of mandamus "is, in form, a command directed to any person, corporation or inferior tribunal, requiring him or them to do some particular thing therein specified which appertains to his or their office and is in the nature of a public duty." An order of prohibition is an order directed to an inferior tribunal forbidding it to; continue with the proceedings pending therein. An information in the nature of a quo warranto lies against a person who claimed or usurped an office, franchise, or liberty, to inquire by what authority he supported his claim. A certiorari is directed to an authority "requiring the record of the proceedings in some cause or matter to 857 be transmitted into the High Court to be dealt with there. " (See Halsbury 's Laws of England, Vol. II, 3rd edition). It was asked how could the liberty of a subject be secured, the command be issued, the proceedings of an inquiry be prohibited, the credentials of a person to hold office be questioned, the records of a proceeding be directed to be transmitted to the High Court, if the authority concerned wag located, or the person directed resided, outside. the territorial jurisdiction of the High Court? It was also asked how, if the said authority, or person, disobeyed the order of the High Court, it could be enforced against the said authority or person. On the parity of the same reasoning the argument proceeded that, as the officers acting for the Government of India reside in Delhi, a writ which would become brutum fulmen could not be issued by the High Court. The questions so posed are based on a misapprehension of the relevant provisions of the Constitution. They also mix up the nature of the writs with the procedure in dealing with the writs or enforcing the orders made therein. As I have already indicated, the Article confers a power on the High Court to issue writs against the Union Government. If the said Government is "within the State", is it an answer to it that an officer of the Government dealing with a particular paper or papers is residing outside the territorial jurisdiction of the High Court? If the Union Government is bound by the order of the High Court, the question of service of notice on a particular officer acting for the Government or to enforce an order against him is a matter pertaining to the realm of procedure and appropriate rules calf be framed by the High Court or the requisite law made by the Parliament. If the Union Government disobeys the order it would certainly be liable for contempt of court under the . Even if the con temner happens to be an officer of the said Government residing outside the territorial limits of the High Court, the High Court has ample power to reach him under section 5 of the said Act. 858 The analogy drawn from English law is rather misleading. England is comparatively a small country and it has only one Government functioning throughout the State. The problem that has arisen now could not have arisen in England, for the jurisdiction of the Queen 's Bench Division of the High Court extends throughout England. In England the manner of the exercise of the jurisdiction was also regulated by a procedure brimming with technicalities, but later on simplified by statute. The framers of our Constitution therefore designedly used the words "in the nature of" indicating that they were not incorporating in the Constitution the entire procedure followed in England, for the procedure will have to be evolved having regard to the federal structure of our Government. How can the procedural law of England in the matter of writs be bodily lifted and implanted in India? This Court shall have to put a reasonable construction on the words without being unduly weighed down by the historical background of these writs and construe the Article in such a way, if legally permissible, to carry out the intention of the Constitution makers. That apart, Article 226 of the Constitution is not confined to the prerogative writs in vogue in England. The Article enables the appropriate High Court to issue also directions or orders, and there is no reason why the High Court could not, in an appropriate case, give a suitable direction to, or make a proper order on, the Union Government. Such directions or orders are certainly free from the procedural technicalities of the said writs. I shall now notice briefly the decisions cited at the Bar. The first is the decision of this Court in Election Commission, India vs Saka Venkata Rao(1). There the Governor of Madras referred to the Election Commission, which had its offices permanently located in New Delhi, the question whether the respondent was disqualified and could be allowed to sit and vote in the Assembly. The respondent thereupon applied to the High Court of Madras under article 226 of the Constitution for a writ restraining the Election Commission (1) [1953] S.C.R. lI44. 859 from enquiring into his alleged disqualification for membership of the Assembly. This Court held that the power of the High Court to issue writs under article 226 of the Constitution was subject to the two fold limitation: (i) that such writs cannot run beyond the territories subject to its jurisdiction; and (ii) that the person or authority to whom the High, Court is empowered to issue writs must be amenable to the jurisdiction of the High Court either by residence or location within the territories subject to its jurisdiction. On that basis the writ petition was dismissed. At the outset it may be noticed that there is one obvious difference between that case and the present one. In that case the respondent was not the Union of India but an authority which could have and had its location in a place outside the Madras State. The present case satisfies both the conditions: the writ does not run beyond the territorial jurisdiction of the High Court, as the Union Government must be deemed to be "within" the said territories; the second condition is also satisfied, as the Union Government, being within the State, is also amenable to its jurisdiction. The next case relied upon by the learned Solicitor General is a converse one. It is the decision of this Court in K. section Rashid & Son vs The Income tax Investigation Commission (1). In that case the Income tax Investigation Commission located in Delhi was investigating the case of the petitioners under section 5 of the Taxation on Income (Investigation Commission) Act 1947, although the petitioners were assessees belonging to Uttar Pradesh and their original assessments were made by the Income tax authorities of that State. It was contended that the Punjab High Court had no jurisdiction to issue a writ under article 226 of the Constitution to the said Commission. This Court, after restating the two limitations on the power of the High Court to issue a writ, held that the Commission was amenable to the jurisdiction of the Punjab High Court and, therefore, the Punjab High Court had jurisdiction to issue the writ. This decision also (1) ; 860 deals with a case of statutory authority located in Delhi and it has no application to the case of the Union Government. The question whether the principles that apply to the Government of India would equally apply to statutory authorities situate in one State but exercising jurisdiction in another, does not arise for consideration in this case; though, as I have already expressed, I am prima facie of the view that there is no reason why they should not. Now coming to the decision of the High Courts, there is a clear enunciation of the relevant principles in Maqbul Un Nissa vs Union of India(1). The Full Bench of the Allahabad High Court directly decided the point now raised before us. The importance of the decision lies in the fact that the learned Judges approached the problem without being oppressed by the decision of this Court in Saka Venkata Rao 's case (2), which was decided only subsequent to that decision. After considering the relevant Articles of the Constitution ' Sapru, J., speaking for the Full Bench, observed at pp. 293 294 thus: "The analogy between a government and a corporation or a joint stock company which has its domicile in the place where its head office is situate is misleading. To hold that the jurisdiction of this Court does not extend to the Union Government as it has its capital at Delhi and must be deemed to have its domicile at Delhi would be to place the Union Government not only in respect of the rights conceded in Part III but for any other purpose also beyond the jurisdiction of all State High Courts except the Punjab High Court. " The learned Judge proceeded to state at p. 294 "In our opinion, the jurisdiction of this Court to intervene under Article 226 depends not upon where the Headquarters or the Capital of, the Government is situate but upon the fact of the effect of the act done by Government, whether Union or State being within the territorial limits of this Court., Adverting to the words "any Government" in article 226, the learned Judge observed at p. 292 thus: (1) I.L.R. (2) ; 861 "They indicate that the founding fathers knew that more than one government would function within the same territory.)) I entirely agree with the observations of the learned Judge, for they not only correctly construe the provisions of article 226 but also give effect to the intention of the Constitution makers. After the decision of this Court in Saka Yenkata Rao 's case (1) the High Court of Madhya Pradesh considered the question in Surajmal vs State of M. P. (2). There, the Central Government rejected an application for a mining lease and the order rejecting the application was communicated to the applicant who was residing in the State of Madhya Pradesh. It was held by the High Court that the writ asked for could not be issued so as to bind the Central Government because, "(a) the Central Government could not be deemed to be permanently located or normally carrying on its business within the jurisdiction of the High Court; (b) the record of the case which the Central Government decided was not before the High Court and could not be made available from any legal custody within the State; (c) the order of the State Government must be deemed to have merged in that of the Central Government; (d) the order of the State Government could not be touched unless the order of the Central Government could be brought before the High Court and quashed. " We are concerned here with the first and second grounds. The learned Chief Justice, who delivered the judgment on behalf of the Full Bench, applied the principle of the decision of this Court in Saka Venkata Rao 's(1) to the Union Government; and for the reasons already mentioned I am of opinion that the decision Is not applicable to the case of the Union Government. The second reason in effect places the procedure 'on a higher pedestal than the substantive law. It is true that in a writ of certiorari the records would be called for; but, if once it is held that the Union Government is within the State within the meaning of article 226 of the Constitution, I do not think why the High Court in exercise (1) ; (2) A.I.R. 1958 M.P. 103, 862 of its constitutional power cannot direct the Union Government to bring the records wherever its officers might have kept them. This second ground is really corollary to the first, viz., that the Union Government is not within the territorial jurisdiction of the High Court concerned. The Bombay High Court in Radheshyam Makhanlal vs The Union of India (1) also held that a writ cannot issue against the Union Government whose office is located outside the territorial jurisdiction of the High Court. Shah, J., applying the principle of the decision in Saka Venkata Rao 's case (2 ) to the Union Government hold that as the office of the Union Government was not located within the State of Bombay, the Bombay High Court could not issue a writ to the Union Government. But section T. Desai, J.,, was not willing to go so far, and he based his conclusion on a narrower ground, namely, that even if the writ was issued it could not be enforced. I have already pointed out that both the grounds are not tenable. The Union Government is within the State of Bombay in so far as it exercises its powers in that State and the High Court has got a constitutional power to issue writes to the Union Government and, therefore, their enforceability does not depend upon its officers residing in a particular place. The foregoing discussion may be summed up in the following propositions: (1) The power of the High Court under article 226 of the Constitution is of the widest amplitude and it is not confined only to issuing of writs in the nature of habeas corpus, etc., for it can also issue directions or orders against any person or authority, including in appropriate cases any Government. (2) The intention of the framers of the Constitution is clear, and they used in the Article words "any Government" which in their ordinary significance must include the Union Government. (3) The High Court can issue a writ to run throughout the territories in relation to which it exercises jurisdiction. and to the person or authority or Government within the said territories. (4) The Union Government has (1) A.I.R. 1960 Bom. (2) ; 863 no constitutional situs in a particular place, but it exercises its executive powers in respect of matters to which Parliament has power to make laws and the power in this regard is exercisable throughout India; the Union Government must, therefore, be deemed in law to have functional existence throughout India. (5) When by exercise of its powers the Union Government makes an order infringing the legal right or interest of a person residing within the territories in relation to which a particular High Court exercises jurisdiction, that High Court can issue a writ to the Union Government, for in law it must be deemed to be "within" that State also. (6) The High Court by issuing a writ against the Union Government is not travelling beyond its territorial jurisdiction, as the order is issued against the said Government "within" the State. (7) The fact that for the sake of convenience a particular officer of the said Government issuing an order stays outside the territorial limits of the High Court is not of any relevance, for it is the Union Government that will have to produce the record or carry out the order, as the case may be. (8) The orders issued by the High Court can certainly be enforced against the Union Government, as it is amenable to its jurisdiction, and if they are disobeyed it will be liable to contempt. (9) Even if the Officers physically reside outside its territorial jurisdiction, the High Court can always reach them under the , if they choose to disobey the orders validly passed against the Union Government which cannot easily by visualized or ordinarily be expected. (10) The difficulties in communicating the orders pertain to the rules of procedure and adequate and appropriate rules can be male for communicating the same to the Central Government or its officers. For the aforesaid reasons, I hold that article 32(2A) of the Constitution enables the High Court of Jammu & Kashmir to issue the writ to ' the Union Government in respect of the act done by it infringing the fundamental rights of the parties in that State. In the result,, I allow the appeal, set aside the order of the High Court and direct ' it to dispose of the 864 matter in accordance with law. The appellant will have his costs. DAS GUPTA, J. I have had the advantage of reading the judgments prepared by my Lord the Chief Justice and Mr. Justice Subba Rao. I agree with the conclusions reached by the Chief Justice 'that the appeal should be dismissed. As, however, I have reached that conclusion by a slightly different process of reasoning I propose to indicate those reasons briefly. The facts have been fully stated in the judgment of My Lord the Chief Justice and it is not necessary to repeat them. It is sufficient to state that the appellant filed an application to the High Court of Jam mu & Kashmir under Article 32(2A) of the Constitution for the issue of an appropriate writ, order or directions restraining the Union of India and the State of Jammu & Kashmir from enforcing an order conveyed in the Government of India 's letter dated July 31, 1954, whereby the Government of India ordered the premature compulsory retirement of the appellant with effect from August 12, 1954. A preliminary objection was raised on behalf of the respondents that Government of India is not a Government within the territorial limits of the jurisdiction of the Jammu and Kashmir High Court and so the application was not maintainable. The High Court accepted this objection as valid and dismissed the application. The sole question in controversy in appeal is whether the High Court had jurisdiction, on the 'facts and circumstances of this case, to issue a writ to the Government of India under article 32(2A) of the Constitution. Article 32(2A) of the Constitution under which the appellant asked the High Court for relief is in the following words: "Without prejudice to the powers conferred by clauses (1) and (2), the High Court shall have power throughout the territories in relation to which it exercises jurisdiction to issue to any person or authority, including in appropriate cases, any Government within the territories, directions or orders or writs, 865 including writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari, or any of them, for the enforcement of any of the rights conferred by this Part. " Except for the fact that "the High Court" in this Article means only the High Court of the State of Jammu & Kashmir, while article 226 of the Constitution refers to all other High Courts and the further fact that power granted by this Article is for the enforcement only of the rights conferred by Part III of the Constitution while article 226 gives power to the High Courts in the Union for the enforcement not only of the rights conferred by Part III but for any other purpose, the provisions of the two articles are exactly the same. Power is given to the High Court to give relief in certain matters by issuing appropriate writs and orders to (1) any person; (2) any authority other than the Government and (3) any Government. The exercise of this power is subject to the existence of the condition precedent that the person or the Government or the authority other than the Government must be "within the territories in relation to which the High Court exercises jurisdiction". A special limitation in respect of the issue of writs or orders to a Government is introduced by the words "in appropriate cases" before the words "any Government". Leaving for later consideration the effect of the words "in appropriate cases" we have first to examine the question: when is a Government within the territories under the jurisdiction of a particular High Court ? On behalf of the first respondent, the Union of India, it is urged that to be within the terri tories under the jurisdiction of a High Court the Government must be located within those territories. It is pointed out that "any person" ' to be within any specified territories has to be present within those territories; an authority other then Government has also, before it can be said to be within any particular territories, a physical existence within those territories by having its office therein. The same requirement of location within the particular territories, it is argued, should apply to the case of Governments. The 866 argument is no doubt attractive and at first sight even plausible. On closer examination however it becomes evident that this argument oversimplifies the problem by slurring over the fallacious assumption that a, Government has a location in the same way as any person or any authority other than Government. Has the Government any location in a similar sense in the same way as a person has a location at any point of time by being present at a particular place or an authority other than the Government can be said to be located at the place where its office is situated ? There is no doubt that when we think of a Government, whether of the States or of the Union we are thinking of the executive organ of the State. The executive power of the Union is under article 53 vested in the President and is to be exercised by him. The executive power of the States is vested in the Governors of the States and has to be exercised by them. Does it follow however that the Government of India is located at the place where the President resides and similarly the Government of each State is located at the place where the Governor resides ? It has to be noticed that while the Constitution contains specific provisions in article 130 as to where the Supreme Court shall sit, no such provision is made as to where the President of India shall reside or exercise his executive power vested in him. article 231 of the Constitution speaks of a principal seat for the High Court of each State. We search in vain however for any mention of any principal seat "for the President of India or the Governors of the States". The fact that the President of India has a special place of residence, the Rashtrapati Bhawan in Delhi and the Governors of States have also special places of residence at some places in the State known as Rai Bhavan is apt to make us forget that the Constitution does not provide for any place 'of residence for the President or Governors. There is nothing to prevent the President of India from having more than one permanent place of residence within the Union. If this happens and places of residence are provided for the President of India in, say, Bombay, Calcutta and 867 Madras in addition to the residence at Delhi, can it be said that the Government of India is located in Delhi when the President of India resides in Delhi, it goes to Calcutta when he resides in Calcutta, it goes to Bombay when the President resides in Bombay and to Madras when the President goes and resides in Madras? This may seem at first sight a fantastic illustration; but when we remember that in fact in the days of British rule, the Viceroy had a permanent place of residence at Simla for part of the year and another permanent place of residence at Calcutta for part of the year before 1911 and after 1911 one permanent place of residence in Delhi and another in Simla, it is easy to see that what has been said above by way of illustration is by no means improbable. If therefore a Government is to be held to be located at the place where the head of the State the President of India in the case of the Government of India and the Governor in the case of each State resides, it may well become impossible to speak of any particular place as the place where the Government is located throughout the year. This may not affect the question of any State Government being within the territories of the High Court of the State. For whatever place the Governor may have for his residence is bound to be within the territories of the State. The position will however become wholly uncertain and difficult as regards the Government of India being within the territorial jurisdiction of any particular High Court. For part of the year it may be, if the residence of the President be the criterion for ascertaining the location of the Government, that the Government of India will be within the territories of one High Court and for other parts of the year in another High Court. It will be wholly unreasonable therefore to accept the test of residence of the President of India for deciding where the Government of India is located. Finding the test of the President 's residence illusory, one may try to say that the Government of India or of a State is situated at the place *here the offices of the Ministry are situated. Under article 77, the President allocated the business of the. Government of India 868 among the Ministers while under article 166 the Governor of a State allocates the business of the Government of a State except business with respect to which the Governor is required to act in his discretion among the Ministers of the State. If therefore it was correct to say that all the Ministers of the Government of India had to perform their functions in respect of the business allocated to them at one particular place, it might be reasonable to say that the Government of India is located at that place. Similarly if all the Ministers of a State had to perform their functions in respect of the business allocated to them at one particular place the Government of the State might well be said to be located at that place. The Constitution however contains no provision that all the Ministers of a State shall perform their functions at one particular place in the State nor that the Ministers of the Union will perform their functions at one particular place in the State. Situations may arise not only in an emergency, but even in normal times, when some Ministers of the Government may find it necessary and desirable to dispose of the business allocated to them at places different from where the rest of the Ministers are doing so. The rehabilitation of refugees from Pakistan is part of the business of the Government of India and for the proper performance of this business there is a Ministry of Rehabilitation for Refugees. It is well known that the Minister in this Ministry has to perform a great portion of his business at Calcutta 'in West Bengal and stays there for a considerable part of the year. Many of the offices of this Ministry are situated in Calcutta. What is true of this Ministry, may happen as regards other Ministries also. Special circumstances may require that some portion of the business of the Minis. try of Commerce be performed at places like Bombay, Calcutta or Madras in preference to Delhi, and if this happens the Minister to whom the business of Government of India in respect of commerce has been allocated will be transacting his business at these places instead of at Delhi. If public interest requires that the greater portion of the business of the Ministry of 869 Defence should for reasons of security or other reasons be carried on at some place away from Delhi the Defence Minister will have to transact its business at that place. It is clear therefore that while at any particular point of time it may be possible to speak of any Ministry of the Government of India being located at a particular place, the Government of India as a whole may not necessarily be located at that place. In my opinion, it is therefore neither correct nor appropriate to speak of location of any Government. Nor is it possible to find any other satisfactory test for ascertaining the location of the Government of India. In Election Commission vs Saka Venkata Subba Rao (1) this Court held that before a writ under article 226 could issue to an authority, the authority must be located within the territories under the jurisdiction of the High Court. There however the Court was not concerned with the case of any Government, and had no occasion to consider whether a Government could be said to have a location. The decision in that case and in the later case of K. section Rashid and Son vs The Income tax Investigation Commission, etc., (2) does not therefore bind us to hold that a Government has a location in the same way as an authority like an Election Commission or an Income tax Investigation Commission. It appear,% reasonable therefore to hold that all that is required to satisfy the condition of a Government being within the territories under the jurisdiction of a High Court is that the Government must be functioning within those territories. The Government of India functions throughout the territory of India. The conclusion cannot therefore be resisted that the Government of India is within the territories under the jurisdiction of every High Court including the High Court of Jammu and Kashmir. The use of the words "any Government" appears to me to be an additional reason for thinking that the Government of India is within the territories under the jurisdiction of the Jammu & Kashmir High Court. "Any Government" in the context cannot but mean (1)[1953] S.C.R. 1144. (2) ; 870 every Government. If the location test were to be applied the only Government within the territories of the State of Jammu and Kashmir would be the Government of Jammu and Kashmir. It would be meaningless then to give the High Court the power to give relief against "any Government" within its territories. These words "any Government" were used because the Constitution makers intended that the High Court shall have power to give relief against the Government of India also. But, contends the respondent, that will produce an intolerable position which the Constitution makers could not have contemplated. The result of the Government of India being within the territories of every High Court in India will, it is said, be that the Government of India would be subjected to writs and orders of every High Court in India. A person seeking relief against the Government of India will naturally choose the High Court which is most convenient to him and so the Government of India may have to face applications for relief as against the same order affecting a number of persons in all the different High Courts in India. If a position of such inconvenience to the Government of India ' though of great convenience to the persons seeking relief, did in fact result from the words used by the Constitution makers, I for one, would refuse to shrink from the proper interpretation of the words merely to help the Government. I do not however think that that result follows. For, on a proper reading of the words "in appropriate cases", it seems to me that there will be, for every act or omission in respect of which relief can be claimed, only one High Court that can exercise jurisdiction. It has first to be noticed that the limitation introduced by the use of these words "in appropriate cases ' has not been placed in respect of issue of writs to persons and to authorities other than government. It has been suggested that the effect of these words is that in issuing writs against any Government the High Court has not got the same freedom as it has when issuing writs against any person or authority other than 871 Government and that when relief is asked against a Government the High Court has to take special care to see that writs are not issued indiscriminately but only in proper cases. I have no hesitation in rejecting this suggestion. It cannot be seriously contemplated for a moment that the Constitution makers intended to lay down different standards for the courts when the relief is asked for against the Government from when the relief is asked for against other authorities. In every case where relief under article 226 is sought the High Court has the duty to exercise its discretion whether relief should be given or not. It is equally clear that in exercising such discretion the High Court will give relief only in proper cases and not in cases where the relief should not be granted. Why then were these words "in appropriate cases" used at all? It seems to me that the Constitution makers being conscious of the difficulties that would arise if all the High Courts in the country were given jurisdiction to issue writs against the Central Government on the ground that the Central Government was functioning within its territories wanted to give such jurisdiction only to that High Court where the act or omission in respect of which relief was sought had taken ' place. In every case where relief is sought under article 226 it would be possible to ascertain the place where the act complained of was performed or when the relief is sought against an omission, the place where the act ought to have been performed. Once this place is ascertained the High Court which exercises jurisdiction over that place is the only High Court which has jurisdiction to give relief under article 226. That, in my view, is the necessary result of the words "in appropriate cases". On behalf of the appellant it Was contended on the authority of the decision of the Privy Council in Ryots of Garabandho vs Zemindar of Parlakimedi (1) that all that is necessary to give, jurisdiction to a High Court to act under article 226 is that a part of the cause of action has arisen within the ';territories in relation to which it exercises jurisdiction. The question whether the cause of action attracts jurisdiction for relief (1) (1943) L.R. 70 I.A. 129. 872 under article 226 of the Constitution as in the case of suits was considered by this Court in Saka Venkata Subba Rao 's Case (1) and the answer given was in the negative. Referring to the decision of the Privy Council in Parlakimedi 's Case (2) this Court pointed out that the decision did not turn on the construction of a statutory provision similar in scope, purpose or wording to article 226 of the Constitution, and is not of much assistance in the construction of that article. Delivering the judgment of the Court Patanjali Sastri C. J. also observed: "The rule that cause of action attracts jurisdiction in suits is based on statutory enactment and cannot apply to writs issuable under article 226 which makes no reference to any cause of action or where it arises but insists on the presence of the person or authority 'within the territories ' in relation to which the High Court exercises jurisdiction. " This decision is binding on us, and I may respectfully add that I find no reason to doubt its correctness. It is true that in that case the Court had to consider the question of jurisdiction in respect of an authority other than Government. It is difficult to see however why if cause of action could not attract jurisdiction against persons and authorities other than Government it would attract jurisdiction as against a Government. It seems to me clear that the principle of basing jurisdiction on cause of action has not been introduced in the Constitution under article 226 or article 32(2A) of the Constitution. It may seem at first sight that to hold that the High Court within whose jurisdiction the action or omission, complained of took place will have jurisdiction, is in effect to accept the accrual of cause of action as the basis of jurisdiction. This however is not correct. The High Court within. the jurisdiction of which the act or omission takes place, has jurisdiction, not because a part of the: cause of action arose there, but in consequence of the use of the words "in appropriate cases". (1) ; (1) (1943) L.R. 70 I.A. 129. 873 The several cases in the High Court in which the question now before us has been considered have been referred to in the majority judgment and also in the judgment of Mr. Justice Subba Rao and no useful purpose would be served in discussing them over again. For the reasons discussed above I have reached the conclusion that while the Government of India is within the territories of every High Court in India the only High Court which has jurisdiction to issue a writ or order or directions under article 226 or article 32 (2A) against it is the one within the territories under which the act or omission against which relief was sought took place. In the present case the act against which the relief has been sought was clearly performed at Delhi which is within the territories under the jurisdiction of the Punjab High Court and the Jammu and Kashmir High Court cannot therefore exercise its jurisdiction under article 226. In the result, I agree with my Lord the Chief Justice that the appeal should be dismissed with costs. BY COURT. In accordance with the opinion of the majority of the Court, this appeal is dismissed with costs. Appeal dismissed.

The High Court of. Jammu and Kashmir, relying on the decisions of this Court in Election Commission, India vs Saka Venkata Subba Rao; , and K. section Rashid and Son vs The Income Tax Investigation Commission etc. ; , , dismissed an application for a writ made by the appellant against the Union of India and Anr. under article 32(2A), the relevant provisions of which are in the matter of enforcement of fundamental rights the same as in article 226 of the Constitution, on the preliminary objection that the said application was not maintainable against the Union of India as it was outside the territorial jurisdiction of that Court. The appellant 's case was that he was holding the substantive rank of Lieut. Col. in Jammu and Kashmir and had the right to continue in service until he attained the age of 53 on November 20, 1961, but was prematurely retired by a letter issued by the Government of India on July 31, 1954, without any allegation or charge and in contravention of article 16(1) of the Constitution. Held, that there can be no doubt as to the correctness of the decisions relied on by the High Court and the appeal must fail. 829 The jurisdiction of the High Court under article 226 of the Constitution, properly construed, depends not on the residence or location of the person affected by the order but of the person or authority passing the order and the place where the order has effect cannot enter into the determination of such jurisdiction. Since functioning of a Government really means giving effect to its order, such functioning cannot determine the meaning of the words "any person or authority within these territories" occurring in the article. A natural person, therefore, is within those territories if he resides there permanently or temporarily, an authority other than the Government is within those territories if its office is located there and a Government if its seat from which, in fact, it functions is there. It is not correct to say that the word "authority" in article 226 cannot include a Government. That word has to be read along with the clause "including in appropriate cases any Government" immediately following it, which, properly construed, means, that the word may include any Government in an appropriate case. That clause is not connected with the issuance of a writ or order and is not intended to confer discretion on the High Courts in the matter of issuing a writ or direction on any Government, and only means in such cases where the authority against whom the High Court has jurisdiction to issue the writ, happens to be a Government or its subordinates, the High Court may issue a writ against the Government. Election Commission, India vs Saka Venkata Subba Rao, and K. section Rashid and Son vs The Income tax Investigation Commission etc. ; , , approved. Maqbulunnissa vs Union of India, I.L.R. (1953) 2 All. 289, overruled. The Lloyds Bank Limited vs The Lloyds Bank Indian Staff Association (Calcutta Branches), I.L.R. , referred to. Proceedings under article 226 are not suits covered by article 300 of the Constitution. Such proceedings provide for extra ordinary remedies by a special procedure and there is no scope for introducing the concept of cause of action in it in the face of the express limitation imposed by it, that the person or authority concerned must be within the territories over which the High Court exercises jurisdiction. Ryots of Garabandho vs Zamindar of Parlakimedi, (1943) L.R. 70 I.A. 129, held inapplicable. The resulting inconvenience of such an interpretation of article 226 to persons residing far &way from New Delhi, where the Government of India is in fact located, and aggrieved by some order passed by it, may. be a reason for suitably amending the Article but cannot affect its plain language. This Court should not, except when it is demonstrated beyond all reasonable doubt that the previous ruling, given after 105 830 due deliberation and full hearing, was erroneous, go back upon it, particularly on a constitutional issue. Per Subba Rao, J. The object that the framers of our Con stitution had before them in declaring the fundamental rights in Part III of the Constitution and empowering the High Courts by article 226 of the Constitution to enforce them would be largely defeated if a person in a remote part of the country had to come to New Delhi to seek the protection of the Punjab High Court whenever the Union Government infringed his fundamental right. The power of the High Courts under article 226 of the Consti tution is of the widest amplitude and it can issue not merely writs but also directions and orders. The words "any Government" in the Article includes the Union Government which has no constitutional situs in a particular place and exercises its powers throughout India and must, therefore, be deemed in law to have functional existence throughout India and thus within the territories of every State. Consequently, when the Union Government infringes the legal right and interest of a person residing within the territorial jurisdiction of 'a High Court, the High Court has the power under the Article to issue a writ to that Government. If its orders are disobeyed by that Government or any of its officers, even though physically outside its territories, it can proceed in contempt against them under the Contempt. of Courts Act, 1952. Election Commission, India vs Saka Venkata Subba Rao, ; , held inapplicable. K. section Rashid and Son vs Income Tax Investigation Commission, ; and Ryots of Garabandho vs Zamindar of Parlakimedi, L.R. 70 I.A. 129, considered. Maqbul Unnissa vs Union of India, I.L.R. (1953) 2 All. 289, approved. Surajmal vs State of M.P., A.I.R. 958 M.P. 103 and Radhe shyam Makhanlal vs Union.of India, A.I.R. 1960 Bom. 353, held inapplicable. In the instant case, therefore, the High Court had the power to issue the writ to the Union Government under article 32(2A) of the Constitution. Per Das Gupta, J. It is neither correct nor appropriate to speak of location of any Government and there is no satisfactory test for ascertaining the location of the Government of India. Since the Government functions throughout the territory of India, the conclusion must be that it is within the territories under the jurisdiction of every High Court. The words "any Government" in article 226 clearly indicate that the High Court was intended to give relief against that Government as well. Even though the Government, of India is within the territories of every High Court, it will not have to face applications 831 for relief against the same order in all the High Courts in India. The words "in appropriate cases" in that Article, properly construed, indicate that there can be only one High Court thereunder that can exercise jurisdiction under the Article for every act or omission in respect of which relief is claimed. It is possible in every case to ascertain the place where the act or omission took place and that High Court alone, which exercises jurisdiction over that place, can have jurisdiction to grant relief under the Article. It is not correct to say that under article 226 the cause of action determines the jurisdiction. Neither that Article nor article 32(2A) of the Constitution is based on that principle. Election Commission, India vs Saka Venkata Subba Rao, ; , approved.

The election of the respondent, who was returned to the Lok Sabha in a bye election in 1981, was challenged by the appellant under section 80 of the Representation of the People Act, 1951, on a number of grounds, including the allegations of corrupt practice of undue influence, hiring and procuring of vehicles for carrying voters and obtaining the assistance of Government servants and incurring expenses at the elec tion in excess of the permissible limit. Upon a preliminary objection raised by the respondent the High Court struck off the pleadings as vague, general, unnecessary, frivolous and vexatious within the meaning of Order VI Rule 16 of the Code of Civil Procedure and rejected the petition under Order VII Rule 11 read with section 87 of the Act on the ground that it did not disclose any cause of action. In the appeal under section 116 A of the Act against the order of the High Court, it was contended for the appellant that the High Court had no jurisdiction to entertain prelim inary objections under Order VI Rule 16 or to reject the election petition under Order VII Rule 11 of the Code before the respondent had filed his written statement to the peti tion, which deprived him of the opportunity of amending the petition by supplying material facts and particulars, that allegations contained in various paragraphs of the petition constituted corrupt practices which disclosed cause of action within the meaning of section 100 of the Act and the High Court committed error in holding that the petition was detective, on the premise that it did not disclose any triable issue, and that the election petition disclosed primary facts regarding corrupt practice and 370 if there was absence of any particulars or details the High Court should have afforded opportunity to the appellant to amend the petition. The respondent was subsequently returned to the Lok Sabha in the general election held in 1984 and the validity of that election has been upheld in Azhar Hussain vs Rajiv Gandhi, ; and Bhagwati Prasad vs Rajiv Gandhi, ; The relief of setting aside the impugned election had thus become infructuous by lapse of time as the subsequent election could not be set aside on the grounds raised in the petition. But since section 98 read with section 99 of the Act mandates investigation of charges of corrupt practice, if any, raised against the returned candi date, and as proof thereof entails incurring of disqualifi cation from contesting subsequent election for a period of six years, the Court heard the appeal at length. On the questions: Whether the High Court had jurisdic tion to strike out pleadings under Order VI Rule 16 of the Code of Civil Procedure and to reject an election petition under Order VII Rule 11 of that Code at the preliminary stage, even though no written statement had been filed by the respondent, whether in the instant case in entertaining the preliminary objections and rejecting the election peti tion the High Court deprived the appellant of an opportunity to amend the petition and to make good the deficiencies by supplying necessary particulars and details of the corrupt practices alleged in the petition, and whether the various paragraphs of the said election petition disclosed any cause of action. Dismissing the appeal, HELD: 1.1 Right to contest election or to question the election by means of an election petition is neither common law nor fundamental right, instead it is a statutory right regulated by the statutory provisions of the Representation of the People Act, 1951, which is a complete and self con tained Code. Outside the statutory provisions, there is no right to dispute an election. The provisions of the Civil Procedure Code are applicable to the extent as permissible by section 87 of the Act. [387H 388B] 1.2. The scheme of the Act shows that an election can be questioned under the statute as provided by section 80 on the grounds as contained in section 100. The pleadings are regulated by section 83, which lays down a mandatory provision in providing that an election petition shall contain a COncise statement of material facts and set forth full particulars of 371 corrupt practices with exactitude. [388C] 1.3 Since allegations of corrupt practice are in the nature of criminal charges, it is necessary that each and every corrupt practice must be clearly and specifically pleaded and it should be complete in itself so that the returned candidate may know the case he has to meet. If the allegations are vague and general and the particulars of corrupt practice are not stated in the pleadings the trial of the election petition cannot proceed for want of cause of action. [388DE] N.P. Ponnuswami vs Returning Officer, ; ; Jagan Nath vs Jaswant Singh, ; and Jyoti Basu vs Debi Ghosal, ; , referred to. 2.1 A combined reading of sections 81, 83, 86 and 87 of the Act makes it apparent that an election petition is liable to be dismissed in limine at the initial stage if it does not disclose any cause of action. Cause of action in questioning the validity of election must relate to the grounds speci fied in section 100 of the Act. If the allegations contained in the petition do not set out grounds of challenge as contem plated by section 100 and if the allegations do not conform to the requirement of sections 81 and 83 the pleadings are liable to be struck off under Order VI Rule 16 of the Code of Civil Procedure. If after striking out defective pleadings the Court finds that no cause of action remains to be tried it would be duty bound to reject the petition under Order VII Rule 11 of the Code. [382H, 386A C] Azhar Hussain vs Rajiv Gandhi, ; ; Bhag watii Prasad vs Rajiv Gandhi, ; ; Udhav Singh vs Madhay Rao Scindia, ; and Charan Lal Sahu to. 2.2 In the instant case, the appellant failed to plead complete details of corrupt practices which could constitute a cause of action as contemplated by section 100 of the Act. He also failed to give the material facts and other details of the alleged corrupt practices. The High Court, therefore, rightly exercised its power in rejecting the election peti tion under Order VII Rule 11 of the Code. [401G, 403G H] 3. I Order VI Rule 16 of the Civil Procedure Code per mits striking out of pleadings which are unnecessary, scan dalous, frivolous, or vexatious or which may tend to preju dice, embarrass or delay a fair trial at any stage of the proceedings. It does not admit of any exception that the respondent must file written statement before the 372 preliminary objections could be entertained. If, therefore, a preliminary objection is raised before commencement of the trial, the court is duty bound to consider the same. It need not wait for the filing of the written statement by the defendant and point out defects. Instead it can proceed to hear the preliminary objection and strike out the pleadings. [387BC, 386D, 383AB, CD] 3.2. The High Court, therefore, had jurisdiction in the instant case to strike out pleadings at the preliminary stage even though no written statement had been filed by the respondent. [382CD] K. Kamaraja Nadar vs Kunju Thevar & Ors., , referred to. Union of India vs Surjit Singh Atwal, ; , distinguished. Vidya Charan Shukla vs G.P. Tiwari & Ors., AIR 1963 MP 356 overruled. 4.1 The Court did not deprive the appellant of the opportunity to amend the petition and to make good the deficiencies by supplying the necessary particulars and details of the corrupt practices alleged in the petition. He was free to file amendment application, but at no stage did he express any desire to make any amendment application nor he made any application to that effect before the High Court. It was open to him to have made that application but he himself did not make any such application. [387DE] 4.2 The High Court was under no legal obligation to direct the appellant to amend pleadings or to suo moto grant time for the same. Moreover, the allegations of corrupt practice as required by Section 83 were not complete and did not furnish any cause of action. [387E] 5.1 The petition was drafted in a highly vague and general manner. Various paragraphs of the petition presented disjointed averments and it is difficult to make out as to what actually the petitioner intended to plead. [401H] 5.2 The allegations contained in paragraphs 1 to 7 contain narration of facts as to when the election took place and the petitioner 's desire to file his nomination paper and the obstruction raised by the authorities and the allegation that the police were shadowing the appellant do not make out any ground under section 100 of the Act. [388H] 5.3 The allegation in para 8 that food was given to the workers of the respondent at some places assuming to be true does not make out a 373 case of corrupt practice or any other ground of challenge under section 100 of the Act. A corrupt practice as contemplated by section 123(6) contemplates incurring or authorising expendi ture beyond the prescribed limit. The impugned allegation does not contain any averment that the respondent incurred or authorised expenditure beyond the prescribed limit. [389B D] 5.4 Paras 9 to 19 merely show that a number of vehicles were plying with party flags of the respondent in the con stituency on different dates which by itself do not consti tute any corrupt practice. The basic ingredients to make out a ground for challenging the election under section 100 of the Act in these paras were totally lacking. They, therefore, disclosed no cause of action. [389E G] 5.5 The allegations in paras 20 and 21 that the mother of the returned candidate, who was the Prime Minister, had toured the constituency alongwith him and in her speeches had appealed to the voters to vote for him do not constitute undue influence or any other corrupt practice. It is always open to a candidate or his supporters to appeal to the electors to vote for a particular candidate for the develop ment and progress of the area. This would be a legitimate appeal, [389H 390A] 5.6 The allegations in paras 22 to 26 of the petition relate to the relationship of the appellant with his agent. These do not make out any ground under section 100 of the Act. [390BC] 5.7 The statement in para 27 that the appellant as we11 as his election agent were being followed by police does not refer to any violation of law or rule or commission of any electoral offence by the returned candidate or his workers with his consent. [390C] 5.8 The allegation in para 28 that on the polling day a lady went to the polling booth alongwith a voter where he affixed stamp on ballot paper and returned with her does not amount to any corrupt practice with consent of the returned candidate unless it could be shown that it materially af fected the result of the election. [390D] 5.9 The allegation in para 29 that on the polling day drinking water and batashas were being distributed to the voters at the polling station does not show that it was being done with the consent of the respondent or that he spent money over it or that the said action influenced the voters or that it materially affected the result of the election. In the absence of such allegations it disclosed no cause of action. [390F] 374 5.10 The allegations in paras 31 to 35 that workers of the respondent helped voters to cast their votes in favour of the respondent, do not amount to any corrupt practice unless there was further allegation that it materially affected the result of the election. [390G] 5.11 The averments made in paras 37 and 38 contain narration of facts which have no bearing on any corrupt practice. [391A] 5.12 The allegations in paras 39 to 49 that neither the appellant nor his election agent had appointed any counting agents but a number of persons had acted as his counting agents in an unauthorised manner and that complaints made by him were not considered by the Returning Officer, even if assumed to be true do not make out any case of commission of corrupt practice. [391B] The High Court, was, therefore, justified in striking out all these paragraphs. 6.1 In order to constitute a corrupt practice as contem plated by sections 77 and 123(6) it is necessary to plead requi site facts showing authorisation or undertaking of reim bursement by the candidate or his election agent. A mere vague and general statement that the candidate and his workers with his consent spent money in election in excess of the permissible ceiling would not be sufficient to con stitute corrupt practice. [392G 393A] Rananjaya Singh vs Baijnath Singh, ; ; Smt. Indira Gandhi vs RaI Narain, and Kunwar Lal Gupta vs A.N Chawla, , referred to. 6.2 Any voluntary expense incurred by a political party, well wishers, sympathisers or association of persons does not fail within the mischief of section 123(6), instead only that expenditure which is incurred by the candidate himself or authorised by him is material for the purpose ors. [392B] Dr. P. Nalla Thampy Terah vs Union of India & Ors., [1985] Supp. SCC 189, referred to. 6.3 The allegations contained in various sub paras of para 50 merely allege that a number of vehicles were plying with the flags of the party to which the returned candidate belonged and food was served in connection with the election meetings, distribution of badges and 375 leaflets. There is no allegation that the returned candidate incurred or authorised incurring of expenditure for the aforesaid purposes. Unless the allegations are specific that the candidate or his election agent authorised the expenses before the money was actually spent and that the candidate or his election agent reimbursed or undertook to reimburse the same the necessary ingredient of corrupt practice would not be complete and it would provide no cause of action to plead corrupt practice. The High Court was justified in striking out the same. [393G 394A] 7.1 If some developmental activity was carried on in the constituency and if it was completed during the election period it could not amount to any gift or promise to the voters. [394G] 7.2 The allegation in para 53(1)(A) does not disclose any material fact or particular regarding the alleged cor rupt practice of making gift which may amount to bribery within the meaning of section 123(1)(A). It merely states that Amethi railway station was being constructed and during the election its work was speeded up which persuaded the voters to cast their votes in favour of the returned candidate. There is no allegation that ,he returned candidate or his workers with his consent made any gift, offer or promise to any elector to vote or refrain from voting at an election. [394EF] 8.1 A candidate, his workers and supporters have every right under the law to canvass for the success of a particu lar candidate saying that if elected he would work for the development of the constituency. Such a promise does not in any way interfere with the free exercise of electoral right of the electors. [395E] 8.2 The allegations in paras 53(1)(B) and (C) that the returned candidate, his mother and their workers with their consent made promise through newspapers, pamphlets and speeches that voters should cast their votes in favour of the respondent for the sake of progress and development of the constituency, merely amounts to a representation being made by the party leader and the returned candidate and his workers. Such a statement of promise is a legitimate one and it does not fail within the definition of bribery and undue influence under section 123(1)(A) or section 123(2). [395B, D] 8.3 Declaration of public policy or a promise of public action or promise to develop the constituency in general do not interfere with free exercise of electoral rights as the same do not constitute bribery or undue influence. [396B] 376 Shiv Kirpal Singh vs V.V. Giri, [1971] 2 SCR 197 and H.V. Kamath vs Ch. Nitiraj singh; , , referred to. 9.1 Hiring or procuring of a vehicle by a candidate or his agent or by any other person with his consent is the first essential ingredient of the corrupt practice under section 123(5), the second such ingredient is that the hiring or procuring of the vehicle must be for conveyance of the voters to and from the polling station, and the third that conveyance of electors is free from any charge. If any of the three ingredients is not pleaded to make out a case of corrupt practice under section 123(5) the charge must fail. [397E, 399C] 9.2 The allegations contained in para 30 and 53(1)(D) conspicuously do not contain any pleading regarding hiring and procuring of the vehicles by the returned candidate or any of his workers with his consent for conveyance of the voters to and from polling station free of cost. No particu lars of any kind have been ' specified. The paras, therefore, do not make out any charge of corrupt practice as contem plated by section 123(5) and the High Court was justified in striking out the same. [399G 400A] Joshbhai Chunnibhai Patel vs Anwar Beg A. Mirza, ; ; Ch. Razik Ram vs Ch. J.S. Chouhan & Ors., ; Balwant Singh vs Lakshmi Narain, ; ; Dadasaheb Dattatraya Pawar & Ors. vs Pandurang Raoji Jagtap & Ors., ; ; Dharmesh Prasad Verma vs Faiyazal Azam, ; ; Rajendra Singh Yadav vs Chandra Sen & Ors., AIR 1979 SC 882 and Balwan Singh vs Prakash Chand & Ors., ; , referred to. 10.1 In order to constitute a corrupt practice under section 123(7), it is essential to clothe the petition with a cause of action which would call for an answer from the returned candidate and it should, therefore, plead mode of assist ance, measure of assistance and all facts pertaining to the assistance. The pleading should further indicate the kind or form of assistance obtained and in what manner the assist ance was obtained or procured or attempted to be procured by the candidate. for promoting the prospect of his election. The petitioner must state with exactness the time of assist ance, the manner of assistance and the persons from whom assistance was obtained or procured by the candidate. [400DE] 10.2 The allegations in sub paras 1, 2 and 3 of para 53(1)(E) that though the appellant had not appointed any counting agent but still 377 certain persons acted as his counting agents and the return ing officer did not hold any inquiry into his complaint, in sub para 4 that there was fear psychosis and it looked as if the police and other government officials wanted to help the returned candidate, in sub para 5 of certain persons helping the voters to cast their votes on the polling day and that some persons cast votes 100 to 200 times and their signa tures were not obtained do not make out any charge of cor rupt practice within the provisions of section 123(7). [400FG] 11. The allegations in para 53(2) that the presiding officers did not perform their duties in accordance with law inasmuch as they failed in their duty to remove the posters and other propaganda material from the polling booth and that the election symbol of the returned candidate was displayed within 100 metres of the polling booth in viola tion of the rules do not make out any charge of corrupt practice. If at all, it could be a ground under section 100(1)(d)(iv) for setting aside election on the ground of its being materially affected but no such plea was raised. [401EF] 12. The allegation in para 52 that the returned candi date had polled cent per cent votes in his favour in certain villages of the constituency do not make out any corrupt practice or any ground of challenge under section 100 and it was rightly struck off by the High Court. [394B] 13. Order VI Rule 17 of the Code of Civil Procedure permits amendment of an election petition but the same is subject to the provisions of the Act. Section 81 prescribes a period of 45 days from the date of the election for pre senting election petition calling in question the election of the returned candidate. After the expiry of that period no election petition is maintainable and the High Court or this Court has no jurisdiction to extend the period of limitation. An order of amendment permitting a new ground to be raised beyond the time specified in section 81 would amount to contravention of these provisions and is beyond the ambit of section 87 of the Act. A new ground cannot, thus, be raised or inserted in an election petition by way of amendment after the expiry of the period of limitation. [402CD] In the instant case, the election petition was presented to the Registrar of the High Court on the last day of the limitation. The amendments claimed by him are not in the nature of supplying particulars instead those seek to raise new grounds of challenge. Various paras of the election petition which are sought to be amended do not disclose 378 any cause of action. Therefore, it is not permissible to allow amendment after expiry of the period of limitation. [402A, E] 14.1 Court should not undertake to decide an issue unless it is a living issue between the parties, for if an issue is purely academic in that its decision one way or the other would have no impact on the position of the parties, it would be waste of public time to engage itself in decid ing it. [380D] Sun Life Assurance Company of Canada vs Jervis, , referred to. 14.2 Election is the essence of democratic system and purity of elections must be maintained to ensure fair elec tion. Election petition is a necessary process to hold inquiry into corrupt practice to maintain the purity of election. But there should be some time limit for holding this inquiry. [381E] 14.3 Parliament should consider the desirability of amending the election law to prescribe time limit for in quiry into the allegations of corrupt practice or to devise means to ensure that valuable time of this Court is not consumed in election matters which by afflux of time are reduced to mere academic interest. [381D]

The appellant J who was enrolled as an advocate in the Chief Court of Sind in May 1947 came to India at the end of the year 1948, and practiced in the Courts at Delhi. The Chief Justice of Punjab High Court prohibited the appellant from practicing as an advocate in the Courts of Delhi. At 962 the time the appellant was enrolled he was an advocate for the purposes of the , and so was entitled as of right to practice in any subordinate courts in what then was British India. The question was whether this right continued to exist, after Sind ceased to form a part of India. ^ Held, that the Chief Court of Sind which was a High Court for the purposes of , upto August 14, 1947, ceased to exist as a High Court for the purposes of the , with effect from August 15, 1947, by virtue of section 5 of the India (Adaptation of Existing Indian Law) Order, 1947. The necessary consequence of this was that the Roll maintained by the Chief Court of Sind was from August 15, 1947, no longer a roll maintained by a High Court within the meaning of the , and any person whose name was entered on the Roll of the Chief Court of Sind ceased to be an advocate for the purposes of section 14 of the , and therefore ceased to have the right under that section to practice in courts of India. In the present case even though the appellant had a right on August 14, 1947, to practice in the courts subordinate to any High Court in India, such a right ceased to exist after the India (Adaptation of Existing Indian Laws) Order, 1947.

The first respondent, in 1938, obtained a decree against the appellants branch of a joint family, and in 1941, commenced proceedings for the execution of the decree in Allahabad. Meanwhile, in 1939, a final decree had been passed in a suit for partitioning the family properties among the members of the joint family, and the matter was taken up in appeal to the High Court of Allahabad. Certain orders were passed by the High Court which were construed by the executing court in the years 1941 and 1942 as stay orders of the execution proceedings commenced by the respondent. The High Court passed a final decree in the partition suit in December 1949, but did not immediately discharge the Receivers who were appointed during the pendency of the suit. The respondent revived the execution proceedings in May 1,950 and a mill belonging to the joint family was attached and sold 'but the sale was set 'aside in 1955 as the appellant 's branch applied for relief under the U.P. Encumbered Estates Act, 1934. Thereafter, in ' 1956, the decree in favour of the respondent was transferred to Madras High Court for execution and on 13th August, 1956, the respondent filed an execution application, for attainment of certain properties which fell to the appellant 's share. High Court of Madras in Letters Patent Appeal held that the execution application was in time. On the question whether the execution application dated 13th August, 1956, was in time, or barred by limitation, HELD : (i) The respondent bonafide pursued execution against the mill and since his good faith was not questioned before the Appellate Court it was not open to the appellant to do so in this Court. [370 A, C] (ii) It was not possible to spell out any order of partial stay on the facts and circumstances of the present case. The facts that the Receivers were not finally discharged in 1949 when the final decree by the High Court was passed in the partition suit, and the understanding of the parties and the executing court that execution was stayed by the High Court, indicate that the stay was in unqualified terms. Therefore, the respondent could not have applied earlier 'for execution with respect to other property of the joint family either at Allahabad or at Madras. [369 A C, D G] (iii) Further, when the execution proceedings were revived in May 1950 the executing court held that execution proceedings had been stayed till December 1949 and the appellant did not challenge the order of attachment and sale of mill on the ground that the proceedings were barred by limitation. Therefore, the appellant was barred by the principle of res judicata from questioning the order of May 1950 on the ground of limitation. [371 D E] 365 (iv) Section 15 of the Limitation Act states that in computing the period of limitation prescribed the time of the continuance of the injunction staying execution shall be excluded. The word "prescribed" would apply not only to Limitation Act but also to the limitation prescribed in general statutes like the Civil Procedure Code. Section 48 of the Code, as it then stood, laid down 12 years as the maximum limit of the period of execution but it did not prescribe the period within which each application for execution was to be made. Such an application was to be made within three years from the dates mentioned in third column of Article 182 of the Limitation Act, 1908. Therefore, an application for execution of a decree must first satisfy Article 182 and it would then have to be found out as to whether section 48 of the Civil Procedure Code operated as a further bar. [370 C H; 371 A B] (v) Since the execution proceedings were stayed in the present case, the 'respondent was entitled to claim its benefit of section 15 of the Limitation Act in respect of the period of stay of the execution of his decree, from June 194.1 till end of 1949; and since the execution application of 1950 was finally disposed of in 1955, the present application filed in 1956 was within time. [372 E]

During the pendency of a civil writ petition in the Allahabad High Court, one N moved an application under section 476, Code of criminal Procedure, for making a complaint under section 93, Indian Penal Code, against T. A single judge who was seized of the case rejected the application. Thereupon N presented an appeal against the order of rejection of his application before the Supreme Court under section 476 B, Code of Criminal Procedure. Held, that the appeal did not lie to the Supreme Court but that it lay to the Appellate Bench of the High Court. The decrees of a single judge of the High Court exercising civil jurisdiction were ordinarily appealable to the High Court under cl. 1o of the Letters Patent of the Allahabad High Court read with cl. 13 of the U. P. High Courts (Amalgamation) Order, 1948, and as such the Court constituted by the single judge was a court subordinate to the Appellate Bench of the High Court within the meaning of section 195(3) of the Code. M. section Sheriff vs The State of Madras, [1954] S.C.R. 1144, distinguished.

The appellant was appointed as Store Keeper cum Accountant in one of the branches of the Madhya Pradesh Khadi and Village Industries Board, a body corporate constituted under the M.P. Khadi and Village Industries Act, 1959. His services were terminated by an Order dated 23.9.1964 after giving one month 's notice. The termination Was challenged before the Labour Court as amounting to retrenchment because it hat been passed without complying with provisions of the M.P. Industrial Relations Act, 1960, the charge sheet that was given to him on 27.4.1964 was based on false and baseless grounds and no enquiry was held prior to removal. The appellant claimed reinstatement with full wages. The Respondent Board contested the application contending that the Board was not an industry and that neither the M.P. Industrial Relations Act, 1960 nor the applied to it. The Labour Court held that the termination of the services of the appellant amounted to retrenchment, set aside the Order of termination and directed reinstatement with half salary from the date of the Order till reinstatement. The Board preferred a revision. The Industrial Court affirm ed the order of the Labour Court and dismissed the revision petition. 642 The Board filed a petition under article 225 and 227. The High Court allowed the writ petition, quashed the order of the Industrial Court and remitted the case to it to decide the facts afresh. The Industrial Court after taking fresh evidence, again held in favour of the appellant, reaffirming its previous decision to reinstate the appellant. The Board again moved the High Court, which set aside the orders of the Industrial Court and the Labour Court on the ground that they acted without jurisdiction. The appellant appealed to this Court by certificate which was resisted by the Board on two grounds: (i) that it is not an industry within the meaning of the Act and (ii) that it does not employ more than 100 persons. Allowing the appeal of the appellant employee, ^ HELD: 1. The order passed by the High Court is set aside and that of the Labour Court and the Industrial Court are restored. [651 B C] 2. The M.P. Industrial Relations Act, 1960 is a separate Act in the State of Madhya Pradesh to regulate the relations of employees in certain matters and makes provisions for settlement of Industrial disputes. Any concern, to become an industry, has to satisfy the definitions of "industry" and "undertaking" as contained in sections 2(19) and 2(33) thereof. Such concerns have to satisfy yet another condition to attract the provisions of the said Act which relates to the number of the employees the concern employs. Notification No. 9952 XVI dated 31st December, 1960 issued under sub 8. (3) of 8. 1 of the Act, makes the provisions of the Act applicable only to an undertaking in the industries specified in the Schedule wherein the number of the employees on any date during Twelve months preceeding or on the date of the notification or any day thereafter was or is more than one hundred. In the instant case, the evidence on record admits of no doubt that the Board employed more than 100 persons. [645 A H; 646 A 4; 647 C] 3. One of the functions of the Board under 8. 14 of the M.P. Khadi and Village Industries Act 1959 is "to support, encourage, assist and carry on Khadi and Village Industries and in the matters incidental to such trade or business". The evidence shows that the Board supplies raw wool to Co operative Societies, so 643 that the Societies can engage themselves in useful work. The Society after weaving raw wool, convert them into spun blankets and supply them to the Board. The blankets so spun are not the properties of the Societies. They have to be given back to the Board. The blankets so supplied from various centres to the Board, have necessarily to be sold in the open market. This act of sale would clearly come within the definition of the word 'trade ' or 'business ' as contemplated in Section 2(19) of the Act. m e conclusion is, therefore, irresistible that the Board engages itself in the business of selling blankets. It has, therefore, to be held that the Board is an 'industry ' within the meaning of the Act. [650 B D; 651 A B]

The respondent was a Government servant in one of the departments of the Bombay Government. He was sent on deputation to another department and after serving there for a long period and getting a number of promotions he was re verted back to his parent department and ordered to be posted at a considerably lower grade, while another Government servant who was below his rank was promoted as Assistant Secretary. Thereupon the respondent filed a petition under article 226 of the Constitution challenging the order of his posting. A preliminary objection was raised by the appellant that the petition was not maintainable. But the High Court held that the respondent was entitled to invoke the jurisdiction of the Court when there is a violation of a statutory rule and on merits it held that the respondent was entitled to the relief claimed. The present appeal was filed on a certificate granted by the High Court under article 133 of the Constitution. Before this Court in view of the decision State of U.P. vs Babu Ram Upadhya. ; it was not disputed that if there was a breach of a statutory rule framed under article 309 or continued under article 313 in relation to the condition of service the aggrieved Government servant could have recourse to the Court. The main contention on behalf of the appellant was that the respondent was not entitled to be appointed to any higher post than as a Senior Assistant or to receive a salary higher than that which had been granted to him by the im pugned order. Held: (i) Assuming that this was a case where the respon ,dent had a lien and his lien had not been suspended it was not possible to interpret Rule 50(b) of the Bombay Civil Service Rules as providing different criteria to cases where a Government servant had a lien and where his lien has been suspended. The Rule and the circular make it abundantly clear that an officer on deputation in another department shall be re stored to the position he would have occupied in his parent department had he not been deputed. (ii) Where promotions are based on seniority cum merit basis an officer on deputation has a legal right to claim pro motion to a higher post in his parent department provided his service in the department to which he is lent is satisfactory. This may not be the case in regard to selection posts.

The respondent was appointed on 15.7.1962 as a Chemistry lecturer in Kulohaskar Ashram Agriculture Intermediate College run by the appellant society. By a communication dated 20.6.1963, he was informed by the management that his services were no longer required after 15.7.1963. He filed a civil suit for permanent injunction restraining the manage ment from proceeding with the proposed action. But the management having withdrawn the letter, he withdrew the suit as having become infructuous. However on 28.8.1964, the respondent was placed under suspension whereupon he again filed a civil suit for a declaration that the order of suspension was illegal. The trial court dismissed the suit but the first appellate court allowed the appeal and decreed the suit as prayed for. On appeal the High Court affirmed that decision, on 9.4.69. During the pendency of the appeal before the High Court, the management appellant had passed a fresh order suspending the respondent pending enquiry on certain allegations. The respondent again filed a civil suit to challenge the competency of the managing committee to take action against him. In the said suit he also pleaded that the prior approval of the District Inspector of Schools having not been taken, the order placing him under suspen sion was bad. The Munsiff Court accepted the suit and de clared the suspension order as illegal and void. The first appellate court reversed that order and the respondent preferred second appeal to the High Court. During the pendency of the respondent 's second appeal, U.P. Secondary Educational Laws (Amendment) Act, 1976 came into force from 18.8.76 which inter alia provided that prior approval of the District Inspector of School was necessary before any action could be taken against teaching staff of a college. The respondent sought to amend the pleadings of second appeal in consonance with the Act but 451 the High Court declined but he succeeded on this question before this Court. Contemporaneously with the litigation set out above, the respondent filed a suit for recovery of arrears of salary, past pendente lite and future. It was claimed for the period between 21.2.1964 and 20.2.1967. The trial court decreed the suit for Rs.7812/92 p. being the arrears of salary for the period of three years. The management appealed to the Dis trict Court and the respondent filed cross objection. As stated earlier, the second appeal preferred by the respond ent was pending in the High Court. Hence the parties moved the High Court for withdrawing the appeal pending before the District Court for being disposed of alongwith the second appeal No. 2038/1970, which request was accepted and the said appeal came to be registered as First Appeal No. 460 of 1982. The High Court disposed of both the appeals by a common judgment whereby the second appeal was dismissed and the finding as to the validity of the suspension order was confirmed. However the First Appeal was allowed and the decree of the trial court was reversed and a suit for ar rears of salary filed by the respondent was dismissed. The respondent appealed to this Court and his appeal was allowed and his claim to salary between 20.2.1964 to 15.1.1966 was settled at Rs. 10,000 and the court further held that the order of suspension ceased to be operative w.e.f. 17.10.1975. Thereafter the respondent on May 18, 1986 moved the High Court under Article 227 of the Constitution for a writ of Mandamus against the State of U.P. and the management of the College for his reinstatement in service and for payment of entire arrears of salary. The High Court accepted the writ petition and granted him the relief asked for. Hence these appeals by the Management of the school and the State of U.P. Allowing the appeals, this Court, HELD: Indeed, the reinstatement would be an unwise move from any point of view. In educational institutions, the Court cannot focus only on the individual. The Court must have regard to varying circumstances in the academic atmos phere and radically changed position of the individual sought to be reinstated. The court must have regard to interests of students as well as the institution. [459E] In the instant case, during the gap of twenty five years, the respondent must have clearly lost touch with Chemistry as well as the 452 art of teaching. It must have been also deeply buried and disintegrated under the new acquisition of his legal knowl edge. Reinstatement of such a person seems to be unjustified and uncalled for. [459G] Legal profession may not be considered as an employment but the income from profession or avocation if not negligi ble, cannot be ignored while determining damages or back wages for payment. [463G] In a case like this. the Government cannot be saddled with the liability to make payment. There is no relationship of master and servant between Government and respondent and such relationship existed only between the management and respondent. So far as statutory liability to pay salary to teacher is concerned, the Government has been paying salary to Dr. Gopendra Kumar who has since been appointed as Lec turer in the place of the respondent. Therefore, the manage ment alone should pay the amount ordered. [464D E] Vaish Degree College vs Lakshmi Narain, ; G.R. Tiwari vs District Board, Agra and Anr., ; , 59; The Executive Committee of U.P. Warehousing Corpo ration Ltd. vs Chandra Kiran Tyagi, ; , 265; Bank of Baroda vs Jewan Lal Mehrotra, and Sirsi Municipality vs Kom Francis, ; ; Smt. J. Tiwari vs Smt. Jawala Devi Vidya Mandir & Ors., ; ; Deepak Kumar Biswas vs The Director of Public Instruc tions, ; Andi Mukta Sadguru Shree Muktajee Vandas Swami Suvaran Jayanti Mahotsav Samarak Trust & Ors. V.R. Rudani & Ors., ; at 697; TrilokChand Modichand & Ors. vs H.B. Munshi & Anr., ; Maimoona Khatun & Anr. vs State of U. P. & Anr. , ; ; Managing Director U.P. Warehousing Corporation & Anr. vs Vinay Narain Vajpayee, ; ; Maharaja Sayajirao University of Baroda & Ors. vs R.S. Thakur, AIR 1968 SC 2112 and S.M. Saiyad vs Baroda Municipal Corpora tion, [1984] Supp. SCC 378, referred to.

Appeal No. 37 of 1952. Appeal from the Judgment and Decree dated the 24th September, 1948, of the High Court of Judicature at Madras (Menon and Mack, JJ.) in A.A.O.No. 688 of. 1945 arising out of Judgment and Decree dated the 1st October 1945 of the Court of the ' District Judge of Anantapur in Original Petition No. 15 of 1945. D. Munikanniah (J. B. Dadachandji" with him) for the appellant. section P. Sinha(M. O. Chinnappa Reddi and K. B. Chowdhury withhim) for the respondents. October 29. The Judment of the Court was delivered by BHAGWATI J. The plaintiff filed 0. P. No. 15 of 1945 in the Court of the District Judge of Anantapur for setting aside an award the ground inter alia of legal misconduct of the arbitrator. The trial Court set aside the award. The High Court appeal reversed the judgment of the trial Court and dismissed the plaintiffs suit. This appeal has been filed by the plaintiff with the certificate of the High Court against that decision. One P.Narayanappa died in 1927 leaving him surviving the plaintiff his widow, the defendant I his undivided brother, the defendant 2 a son of his another pre deceased brother, and defedant 3 his son by his pre deceased wife. 'The deceased had purported to make a will dated 1st May, 1927 under which he had made certain provision for her maintenance , and residence, The plaintiff stayed with the family for 121 some time but had to leave the family house owing to disputes which arose between her and the senior wife of defendant 1. She lived with her mother for eleven years and ultimately filed a suit in forma pauperis 0. section No. 19 of 1943 in the Court of the District Judge of Anantapur, for maintenance, arrears of maintenance, residence and household utensils as also recovery of some jewels and clothes as her stridhanam properties. The defendants contested the claim of the plaintiff contending that sufficient arrangement bad been made for her maintenance and residence under the will dated the 1st May, 1927, that she had accordingly been in possession and enjoyment of the property and that her claim was unsustainable. The defendants also denied her claim for jewels and clothes. The suit came for hearing and final disposal before the Subordinate Judge of Anantapur. When the plaintiff was being examined as P.W. 1, in the suit the 27th February, 1945, all the parties filed a petition under section 21 of the Arbitration Act agreeing to appoint Sri Konakondla Rayalla Govindappa Garu as the 'sole arbitrator ' for settling the disputes in the suit and to abide by his decision, and asking the Court to send the plaint, written statement and other records to the arbitrator for his decision. A reference to arbitration was accordingly made by the Court. The arbitrator entered upon the reference and the 6th March, 1945, examined the plaintiff and got from her a statement which is Exhibit No. 4 in the record. He similarly examined the defendant I the 10th March, 1945, and got from him the statement which is Exhibit No. 5 in the record. After obtaining the two statements, the arbitrator made and published his award the 12th March, 1945. It was this award that was challenged by the plaintiff. The legal misconduct which was alleged against the arbitrator was that he examined each party in the absence of the other. It was contended behalf of 122 the plaintiff that even though the petition for reference to arbitration as also the statements Exhibits Nos. 4 & 5 authorised the arbitrator to settle the disputes according to law after perusing the plaint and the written statements, the arbitrator examined defendant I in the absence of the plaintiff and also perused what was called the settlement of the 1st May, 1927, without giving an opportunity to the plaintiff to have her say in the matter and was thus guilty of legal misconduct. It was contended the other hand by the defendants that what was done by the arbitrator was merely to obtain from the parties a reiteration of their request contained in the petition that he should give his award the basis of the pleadings, that not a single fact was recorded by the arbitrator from the defendant 1 which did not find a place in his written statement and that therefore the arbitrator was not guilty of legal misconduct. The petition filed by the parties the 27th February, 1915,did not give any special powers to the arbitrator. The arbitrator was appointed for settling the disputes in the suit and the parties agreed to abide by his decision. The plaint, the written, statement and the other records were agreed to be sent to him for his decision, and if the arbitrator was thus directed to make his award after perusing the plaint and the written statements which were give to him by the Court along with the order, we do not see why the arbitrator went to the plaintiff and defendant 1 and recorded their statements. The statement given by the plaintiff to the arbitrator did not mention anything beyond the request that be should peruse the plaint and written statement and give his decision according to law and justice. The statement which was obtained from the defendant 1 however did not merely repeat this request but contained several statements of facts, which did not find a place in his written statement. These statements were as follows: (1)"She felt glad with what was given to her by her husband. " 123 (2)"It is seen from the Government accounts that as per the settlement made by her husband, the lands given to her have been in her possession." (3)"Just like the plaintiff has her jewels in her possession, the other females in the house have their jewels in their respective possession only. The undivided family has no manner of right therein." and (4) "Considering the domestic circumstances our elder brother provided maintenance for the third wife, the plaintiff, just as he had provided maintenance for his second wife. " These statements constituted evidence given by the defendant I in addition to the averments contained in his written statement and it is futile for the defendant 1 to contend that in obtaining the statement Exhibit No. 5 from him the arbitrator merely obtained from him a narration of what was already found in his written statement: This position is confirmed when one turns to the award. The arbitrator stated that the Court had directed him to make the award after perusing the plaint and the written statements of the plaintiff and the defendants and that it had given him the plaint and the written statements along with the order. He however proceeded to state that in pursuance of the order he took statements from the plaintiff as well as the defendant I who was the manager of the defendant 's family. He further stated that he bad perused the settlement which the defendant 1 alleged as having been made Ist May, 1927, in favour of the plaintiff and proceeded to award to the plaintiff 8 acres 17 cents of land bearing Survey No. 507 in addition to the 40 acres of land already given by the deceased to her. It is clear from the terms of this award that the arbitrator took into consideration not only the plaint and the written statements of the parties but also the statement which he had obtained from the defendant I and the will dated 1st May, 1927. There is thus no doubt that the arbitrator heard the defendant 1 in the absence of the, plaintiff. No 124 notice of this hearing was given by the arbitrator to the plaintiff nor had she an opportunity of having the evidence of the defendant I taken in her presence so that she could suggest cross examination or herself cross examine the defendant I and also be able to find evidence, if she could, that would meet and answer the evidence given by the defendant 1. As was, observed by Lord Langdale M. R. in Harvey vs Shelton(1), "It is so ordinary a principle in the administration of justice, that no party to a cause can be allowed to use any means whatsoever to influence the mind of the Judge, which means are not known to and capable of being met and resisted by the, other party, that it is impossible, for a moment, not to see, that this was an extremely indiscreet mode of proceeding, to say the very least of it. , It is contrary to every principle to allow of such a thing, and I Wholly deny the difference which is alleged to exist between mercantile arbitrations and legal arbitrations. The first principles of justice must be equally applied in every case. Except in the few cases where exceptions are unavoidable, both sides must be heard and each in the presence of the other. In every case in which matters are litigated, you must attend to the representations made both sides, and you must not, in the administration of justice, in whatever form, whether in the regularly constituted Courts or in arbitrations, whether before lawyers or merchants, permit one side to use means of influencing the conduct and the decisions of the Judge, which means are not known to the other side. This case of Harvey vs Shelton(1) is the leading case this point and it has been followed not only in England but in India. (See Ganesh Narayan Singh vs Malida Koer(2). She had also no opportunity to have her say in the matter of the settlement of the 1st May, 1927. The course of proceeding adopted by the arbitrator was obviously contrary to the principles of ,natural justice. (i) ; at P. 462. (2) (1911) 13 c. L. J. 399 at pages 401, 402, 125 Shri section P. Sinha however urged before us that no prejudice was caused to the plaintiff by reason of the arbitrator having obtained the statement Exhibit No. 5 from defendant 1 and that therefore the arbitrator was not guilty of legal misconduct. This contention is unsound. The arbitrator may be a most respectable man; but even so, his conduct cannot be reconciled to general principles. "A Judge must not take upon himself to say, whether evidence improperly admitted had or had not an effect upon his mind The award may have done perfect justice: but upon general principles it cannot be supported. " Per Lord Eldon, Lord Chancellor, in Walker vs Frobisher(1). To the same effect are the observations of Lord Justice Knight Bruce in Haigh vs Haigh(1): "It is true that he states in his affidavit that he did not allow those explanations to influence him in his report upon the accounts, and I have no doubt he honestly intended this to be the case; but it is impossible to gauge the influence which such statements have upon the mind. We must hold, without meaning the least reflection the arbitrator, that he was guilty of legal misconduct and that was sufficient to vitiate the award. Shri section P. Sinha then urged that the plaintiff had waived her right if any to challenge the award the ground of legal misconduct. No waiver however was pleaded by the defendant I and it was not competent to him to urge this contention at this stage before us. The result therefore is that the judgment of the High Court cannot stand. Agent for the respondents M. section K. Aiyangar, (i) (18o1) at page 72.

Where, in an arbitration under section 21 of the Indian Arbitration Act, the arbitrator took statements from each of the parties in the absence of the other and made an award: Held, that it is one of the elementary principles of the administration of justice, whether by courts or by arbitration by lawyers or merchants, that a party should not be allowed to use any means whatsoever to influence 120 the mind of the judge or arbitrator, which means, are not known to and capable of being met and resisted by the other party; the arbitrator was accordingly guilty of legal misconduct; and this was sufficent to vitiate the award, irrespective of the fact whether this misconduct bad caused prejudice to any one. Harvey vs Shelton ; , Ganesh Narayan Singh vs Malida Koer , and Haigh vs Haigh ; , referred to.

The appellant is an Advocate. Gautam Chand was one of his old clients. The complainant Respondent No. l engaged the appellant on being introduced by Gautam Chand to file a Suit against Shri section Anantaraju for recovery of a sum of Rs.30,098 with Court costs and interest in the Court of City Civil Judge at Bangalore. The appellant passed on the papers to his junior advocate to file the Suit which he did. The complainant 's allegation is that the matter in dispute in the suit had not been settled at all and the appellant without the knowledge and without his instructions filed a memo in the Court to the effect that the matter has been settled out of Court and accordingly got the suit dismis sed and also received half of the institution court fee; about which the complainant was not aware, nor was he informed by the appellant. The complainant 's allegation is that he was not informed about the dates of hearing of the suit; when inquired he was simply told that the case is posted for filing written statement where his presence was not neces sary. When nothing was heard by the complainant from the appellant about the progress of his suit, he personally made inquiries and came to learn to his great surprise that the suit in question had in fact been withdrawn as settled out of Court. The version of the appellant Advocate is that Gautam Chand, his old client, had business dealings with the plaintiffs, Haradara (Complainant) and the defendant Anantaraju. Anantaraju had also executed an agreement on 9.8.80 to sell his house property to Gautam Chand. He received earnest money amounting to Rs.35,000 from Gautam Chand. Anantaraju however did not execute the sale deed within the specified time. Gautam Chand approached the appellant for legal advice. The appellant caused the issue of notice to Anantaraju calling upon him to execute the sale deed. A notice was also issued on behalf of the complainant calling upon the defendant Anantaraju demanding certain amounts due on 3 self bearer cheques amounting to PG NO 362 Rs. 30,098 issued by him in course of their mutual transactions. Gautam Chand and the complainant were friends having no conflict of interests Gautam Chand instructed the appellant and his junior Ashok that he was in possession of the said cheques issued by Anantaraju and that no amount was actually due from Anantaraju to Haradara Complainant. Gautam Chand desired Anantaraju to execute the sale deed. Anantaraju executed the sale deed on 27.11.81 in favour of Gautam Chand, even though an order of attachment before judg ment in respect of the said property was in existence. Consequent on the execution of the sale deed, the object of the suit was achieved. The complainant did not at any time object. In this back ground, the appellant had reasons to believe the information re: settlement of dispute conveyed by the three together on 9.12.81. Acting on the said informa tion, the appellant asked Ashok his erstwhile junior to take steps to withdraw the suit, which he did on 10.12.8l as per instructions received from the appellant noted on the docket of the brief. The state Bar Council, called for the comments of the appellant relating to the complaint. No charge was framed specifying the nature and content of the professional misconduct attributed to the appellant. Nor were any issues framed or prints for determination formulated. Instead thereof the Bar Council proceeded to record evidence. As the case could not be concluded within the time limit, the matter came to be transferred to the Bar Council of India. The Bar Council off India addressed itself to the three questions, viz. (i) Whether the complainant was the person who entrusted the brief to the appellant and whether the brief was entrusted by the complainant to the appellant. (ii) Whether report of settlement was made without instructions or knowledge of the complainant? (iii) Who was responsible for reporting settlement and instructions of the complainant ? The Disciplinary Committee of the Bar Council of India after considering the matter found appellant guilty of professional misconduct and suspended him for practising his profession for 3 years on the charge of having withdrawn a suit (not settled) without the instruction of the clients. PG NO 363 The appellant has filed the appeal u,s 38 of the Advocates Act. The following questions arose for consideration by this Court. (i) Whether a specific charge should have been framed apprising the appellant of the true nature and content of the professional misconduct ascribed to him: (ii) Whether the doctrine of benefit of doubt and the need of establishing the basic allegations were present in the mind of the Disciplinary Authority in recording the finding of guilt or in determining the nature and extent of the punishment inflicted on him; (iii) Whether in the absence of the charge and finding of dishonesty against him the appellant could be held guilty of professional misconduct even on the assumption that he had acted on the instructions of a person not authorised to act on behalf of his client if he was acting in good faith and in a bona fide manner. Would it amount to lack of prudence or non culpable negligence or would it constitute professional misconduct. Disposing of the appeal, the Court, HELD: That the appellant was not afforded reasonable and fair Opportunity of showing cause inasmuch as he was not apprised of the exact content of the professional misconduct attributed to him and was not made aware of the precise charge he was required to rebut. [376E F] That in recording the finding of facts on the three questions. referred to above. the applicability of the doctrine of benefit of doubt and the need for established the facts beyond reasonable doubt were not realized. Nor did the Disciplinary Committee consider the question as to whether the facts established that the appellant was acting with bona fides or mala fides whether the appellant was acting with any oblique and dishonest motive. whether there was any mens rea; whether the facts constituted negligence and if so whether it constituted culpable negligence. Nor has the Disciplinary Committee considered the question as regards the quantum of punishment in the light of the aforesaid considerations and the exact nature of the professional misconduct established against the appellant. [376F H; 377A] The Court, in view of the fact that "the matter is one of the ethics of the profession which the law has entrusted to the Bar Council of India" and it is in their opinion, "a case which must receive due weight" did not consider it PG NO 364 appropriate to examine the matter on merits without first having the opinion of the Bar Council of India. [377D] Remanding the matter to the Bar Council of India the Court directed it to consider whether it would constitute an imprudent act, an unwise act, a negligent act or whether it constituted negligence and if so a culpable negligence, or whether it constituted a professional misconduct deserving severe punishment, even when it was not established or at least not established beyond reasonable doubt that the concerned Advocate was acting with any oblique or dishonest motive or with mala fides. [377H; 378A] L.D. Jaisinghani vs Naraindas N. Punjabi, and Re: M. vs Distt. Judge Delhi, [1956] S.C.R. P. 811(814), referred to.

One C had obtained a lease of a cinema house which was to expire in May 1942. In the meantime litigation ensued between the owners of the cinema house, and the High Court appointed receivers to administer the property. In 1940 one I offered to take a lease of the cinema house for 21 years. The High Court offered C the option of taking the lease for 21 years but C was willing to take it only for 7 years upto May 1947. Thereupon the High Court ordered that a lease be given to C upto May 1947, and thereafter the lease be given to 1 upto May 1961. In accordance with this order the receivers executed two leases, one in favour of C and a reversionary lease in favour of I. Before the lease in favour of C expired the Madras (Lease & Rent Control) Act, 1946, came into force which protected tenants in 22 170 possession from eviction even after the expiry of their leases. This Act was replaced by the Madras Buildings (Lease & Rent Control) Act, 1949, which contained similar provisions. Section 13 of the 1949 Act empowered the State Government to "exempt any building or class of buildings from all or any of the provisions of this Act. " On the application of I the Government passed an order on June 4, 1952, under section 13 exempting the cinema house from all the provisions of the Act. Subsequently, the reasons for making the order were given by the Government to be: (i) C had deliberately, though he had been offered a lease for 21 years by the High Court, taken a lease for 7 years and he was seeking to take advantage of the Act after the expiry of his lease, (ii) C was an absentee lessee and had several other business and (iii) C had already been in possession for 5 years more than he was legitimately entitled to be. C filed a writ petition before the High Court for quashing the order on the grounds that section 13 of the Act vested in the Government an unguided and uncontrolled discretion and violated article 14 of the Constitution and that the order deprived C of the equal protection of the beneficial provisions of the Act. The High Court held that section 13 was not unconstitutional but that the order of the Government was ultra vires. I appealed to the Supreme Court. At the hearing C sought to challenge the validity of section 13 also. Held, that section 13 of the Act did not violate article 14 and was not unconstitutional. Enough guidance was afforded by the preamble and the operative provisions of the Act for the exercise of the discretionary power vested in the Government. The power tinder section 13 was to be exercised in cases where the protection given by the Act caused great hardship to the landlord or was the subject of abuse by the tenant. Ram Krishna Dalmia vs Sri justice Tendolkar, [1959] S.C.R. 279 and Sarday Inder Singh vs State of Rajasthan, ; , followed. Held, (per Sinha, C.J., Ayyangar and Mudholkar, jj.), that the order passed by the Government under section 13 was ultra vires and void. An order made under section 13 was subject to judicial review on the grounds that (a) it was discriminatory, (b) it was made on grounds which were not germane or relevant to the policy and purpose of the Act, and (c) it was made on grounds which were mala fide. In the present case the grounds given for granting the exemption were not those countenanced by the policy or purpose of the Act. The mere fact that C had taken the lease for 7 years and continued in possession after its expiry was no ground for eviction as the policy of the Act was to protect such possession. The fact that C had other business was immaterial; the Government failed to consider the question whether if C was evicted he could secure alternative accommodation where he could carry on the business which he was carrying on in the cinema house. 171 Per section K. Das and A. K. Sarkar, JJ. The order passed by the Government under section 13 was a competent and legal order. All that the court had to see was whether the power had been used for any extraneous purpose, i.e., not for achieving the object for which the power was granted. The purpose of the Act was to prevent unreasonable eviction and to control rent. Where, as in the present case, there was no risk of the landlord being able to realise illegal rent or premium the eviction would not be unreasonable. Further, if exemption was refused in the present case it would prevent the High Court from administering the property in its charge. The order was not unfair to C for he had been offered a lease for 21 years which he declined.

Respondent Dorothea and one Prafulla Kumar Mitra were married under the Special Marriage Act, 1872, in January 1952. Respondent asked for a divorce in 1961 and obtained a decree on May 2, 1962 and as per the decree she was to be paid Rs. 300.0 per month as alimony until she remarries. Respondent levied execution of the decree and the same was compromised and payment of arrears was undertaken to be made in instalments. On March 31, 1965, Mitra executed a will but made no provision therein for the satisfaction of the maintenance decree. He died on April 3, 1965 and the appellant who was the executrix under the will got it duty probated. Since no payment was made by the executrix after December 1975, rcspmldent filed execution in Matrimoniai Case 1 of 1977 claiming recovery of Rs. 19,500.00. Appellant objected to the claim under Section 47 of the Code of Civil Procedure by pleading that the order of alimony not being charged the claim under decree for alimony abated with the death of Mitra. The executing court overruled the objection and the Division Bench of the Calcutta High Court, while dismissing the revision petition, however, granted certificate of appeal to this Court. Dismissing the appeal, the Court ^ HELD :1:1. The language of Section 37 does not warrant the conclusion that there is extinguishment of the decree for alimony upon the death of the judgment debtor husband. [519 G] 1:2. The Special Marriage Act is a statute of 1954 made by the Indian Parliament after independence. There is no ambiguity in Section 37 for the interpretation of which it is necessary to go beyond the provision itself. It is one of the settled principles of interpretation that the Court should lean in favour of sustaining a decree and should not permit the benefits under a decree 517 to be lost unless there be Act, any special reason for it. In incorporating a provision like Section 37 in the Act, Parliament intended to protect the wife at the time of divorce by providing for payment of maintenance. If the husband has left behind an estate at the time of his death there can be no justification for the view that the decree is wiped out and the heirs would succeed to the property without the liability of satisfying ' the decree. [523 A C] 1:3. There is no doubt that matrimonial Proceedings abate on the death of either spouse and legal representatives cannot be brought on record and the proceedings cannot be continued any further and where maintenance has been made a charge on the husband 's estate, the death of the husband would not at all effect the decree and notwithstanding such death, the estate can be proceeded against for realisation of the maintenance dues for post death period. But, there is no rationality in the contention that where the matrimonial proceedings have terminated during the lifetime of the husband and a decree has emerged such a decree for maintence or alimony gets extinguished with the death of the husband when any other decree even though not charged on the husband 's property would not get so extinguished. A decrees against the husband is executable against the estate of the husband in the hands of the heirs and ' there is no personal liability. In law a maintenance decree would not make any difference. The decree indicates that maintenance was payable during the life time of the widow. To make such a decree contingent upon the life of the husband is contrary to the terms and the spirit of the decree. Therefore, the assets left behind by Mitra are liable to be proceeded against in the hands of his legal heirs for satisfaction of the decree for maintenance. [522 C H] 2. The phrase "at the instance of either party" occurring in sub section (2) of Section 37 of the Act are not confined to the spouses only. Sub section 3 clearly provides that on remarriage or on a finding that the wife is not leading a chaste life, the order of maintenance can be rescinded. Upon the husband 's death his estate passes on to his legal heirs and intention of the Legislature being clear that upon remarriage or non leading of a chaste life the benefit conferred by the statute should expire and the estate should become free from the liability of satisfying the decree for maintenance, the application for varying. modifying or rescinding the order for maintenance can be made even by those who have succeeded to the husband 's estate and the estate can be freed from the liability. Examining the scheme of the statute and the purpose for which such a provision has been made, it is clear; that the words `either party ' would also cover the legal heirs who have stepped into the shoes of the spouses under the law and such persons would also be competent to ask for variation, modification or rescission of the order for maintenance. That term would also include the holders of the estate with lawful title for the time being. [523 E H, 524 A B]

The respondent gave notice to the appellants terminating the lease of agricultural land situated within two miles of the limits of the Municipality and filed a suit for eviction. The suit was contested, inter alia, on the ground that under the provisions of the Bombay Tenancy Act, 1939, the defendants had acquired tenancy rights. The civil Judge, inter alia, held that the 1939 Act was repealed by the Bombay Tenancy and Agricultural Land Act, 1948, which did not apply to the suit land, as it was within two miles of the limits of the Surat Borough Municipality and decreed the suit. On appeal, the District Judge held that the 1948 Act applied to the Suit land and set aside the decree of the trial Court. In second appeal by the plaintiff, the High Court held that the suit land was within two miles of the limits of the Municipality and therefore, the 1948 Act did not apply to the suit land. On appeal by Special Leave the appellants contended that their rights under the 1939 Act were saved and preserved under section 89(2) of the 1948 Act with the result that the lease extended to 10 years under the 1939 Act was saved thereunder, and by reason of the Bombay Tenancy and Agricultural Lands (Amendment) Act, 1952, which brought the suit land within the scope of the 1948 Act, their rights so preserved came to be governed by the provisions of he 1948 Act and, therefore, they could not be evicted except in the manner prescribed by the provisions of the Act. The respondent contended that the saving provision in section 89(2) of the 1948 Act operates only if there is no express provision to the contrary and that the saving of the appellant 's right would be otiose, as he could not enforce his right under the 1948 Act. Held:(i) Before the suit was disposed of, the 1952 Act came into force, and by reason of the extension of the 1948 Act to the suit land, the respondent could not evict the appellants except in the manner prescribed by the 1948 Act. (ii)The respondent 's contention must be rejected. There is an express provision found in section 88(1) of the 1948 Act, in as much as it says that the provisions of sections 1 to 87 will not apply to the area in question. (iii)As there was a right recognized by law there was a remedy and, therefore. in the absence of any special provisions indicating a 774 particular forum for enforcing a particular right the general law of the land would naturally take its course. The High Court, therefore, was wrong in holding that the appellants could not claim the benefit of the provisions of the 1948 Act. Sakharam (a) Bapusaheb Narayan Sanas vs Manikchand Motichand Shah ; relied on.

Defendant No. 1 was the Sthanee of Kavalappara estate which was an impartible estate governed by Marumakkathayam law. The plaintiffs claimed maintenance based on a family custom entitling the members to maintenance out of the entire income of the Sthanam. Past maintenance was claimed as also future maintenance from the date of the suit. Defendant No. 1 denied that the plaintiffs had any right based on custom as claimed by them; according to him from older times two kalams of the Sthanam had been set apart for their maintenance. He claimed that the Privy Council in suit No. 46 of 1934 had declared him absolute owner of the Sthanam properties but despite that, out of generosity only he had been paying to the junior members of the Swaroopam Rs. 17.000/ annually. The trial court granted maintenance to the plaintiffs for the period claimed at the rate of Rs. 250/ per mensem for each of the plaintiffs. Defendant No. 1 appealed to the High Court and the plaintiffs filed cross objections as the rate of maintenance allowed to them was lower than they had claimed. The High Court partly allowed the appeal negativing the plaintiffs ' claim for arrears of maintenance, and dismissed the cross objections of the plaintiffs. Both the parties appealed to this Court. The questions that fell for consideration were: (i) whether the right to maintenance as claimed by the plaintiffs was based on custom; (ii) whether the High Court was right in disallowing the claim of the plaintiffs to arrears of maintenance; (iii) whether the rate of maintenance as ordered by the trial court and ' confirmed by the High Court was justified. HELD: (i) An alleged custom, in order to be valid, must be proved by testimony to have been obeyed from consciousness of its obligatory character. A mere convention between family members or an arrangement by mutual consent for peace and convenience cannot be recognised as custom. In order that a custom should acquire the character of law the custom must be accompanied by the intellectual element, the opinion necessitatis. the recognition that there is authority behind it. [45 B C; D E] Rarnrao vs Yeshwantrao, I.L.R. , applied. In the present case the evidence sufficiently proved a custom in Kavalappara estate by which the Sthanee was legally obliged to give maintenance to junior members of the family. It was possible that the practice of paying maintenance to junior members originated as an act of generosity of the previous Sthanee. But it had continued without interruption for such a length of time that it had acquired the character of a legal right. [42] Kochuni vs Kuttanunnt, A.I.R. 1948 (P.C.) 47, 52, explained. 37 (ii) Although it had been alleged by the plaintiffs that they had not been paid any maintenance, the High Court had ' found that maintenance had been given to the plaintiffs ' mother with whom the plaintiffs had been living. The High Court 's refusal to grant to the plaintiffs arrears of maintenance before the date of the, suit must, in the circumstances, be upheld. [46 C] (iii) The High Court in fixing the amount of maintenance for each of the plaintiffs at Rs. 250./ per month had taken into account all the relevant factors. It had further directed that it was open to the parties after two years to move the trial court for variation in the rate of maintenance fixed on the ground of altered circumstances of the Estate. There was no reason for interfering with the judgment of the High Court in this matter. [46. G]

The appellant in a suit against respondents claimed recovery of possession of the properties in Schedules 1, 2 and 3 as the sole heir of her mother. She claimed these properties exclusively, under section 12(1) (i) of the Mysore Hindu Law Women 's Rights Act, 1933. On challenge to her title by respondents she relied on a sale deed created in favour of her mother for a consideration of Rs. 28,000. Respondents ,set up title in respect of the suit properties in the appellant 's father alleging that her father had executed a will under which respondent I had been appointed an executor and as such, he got possession of the properties and handed them over to Respondent 2, as directed under the will. Alternatively, they urged that even if the property belonged to the appellant 's mother, she would not be entitled to claim exclusive title to it, because by succession it would devolve upon the appellant and her brothers; and her failure. to join her brothers made the suit incompetent for non joinder of necessary parties. The trial court dismissed the suit. On appeal, the High Court confirmed the decree of the trial court, but held that the main property in Schedule 1 did not belong to the appellant 's mother, but to her father and the sale deed in respect of the property was taken by her father in the name of her mother benami. On appeal by special leave, the appellant mainly contended that the property in question would fall under section 10(2)(b) :of the Act, and not under section 10(2)(d) as respondents had contended and therefore, she would be exclusively entitled to it and the plea of ,non joinder of her brothers would fail. Held: (Per, P. B. Gajendragadkar, K. Subba Rao, K. N. Wanchoo and N. Rajagopala Ayyangar JJ.). It would be straining the language of section 10(2)(b) of the Act to hold that the property purchased in the name of the wife with the money gifted to her by her husband should 'be taken to amount to a property gifted under section 10(2)(b). The re quirement of section 10(2)(b) is that the property which is the subject matter of devolution must itself be a gift from the husband to the wife. In deciding under which class of properties specified by cls. (b) and (d) of section 10(2) the present property falls, it would not be possible to entertain the argument that the gift of the money and the purchase of the property must be treated as one transaction and held on that basis that the property itself has been gifted by the husband to his wife. 134 159 S.C. 1. 2 The gift that is contemplated by section 10(2)(b) must be a gift of the very property in specie made by the husband or other relations therein mentioned. The trial court therefore, was right in holding that even if the property belonged to the appellant 's mother, her failure to implied her brothers who would inherit the property alongwith her made the suit incompetent. In the present case, the estate could be represented only when all the three heirs were before the court. When the appellant persisted in proceeding with the suit on the basis that she was exclusively entitled to the suit property she took the risk and it was now too late to allow her to amend the plaint by adding her brothers at this late stage. Naba Kumar Hazra vs Radheshyam Mahish, A.I.R. 1931 P.C., 225 followed. Per Mudholkar J. (dissenting) Upon the pleadings there is no, scope for spliting up the transaction into two parts, ie., a gift of the money by the father to the mother in the first instance and the purchase by the mother of that property subsequently with that money. It was not even an alternative contention of the respondents that the transaction was in two parts and that what the father gifted was the money and not the property. It would be indeed an artificial way of looking at the transaction, as was done by the trial court, as being constituted of two parts. Thus the transaction was one indivisible whole and that is, the father provided the money for acquiring the property in the mother 's name. Therefore, in effect it was the father who purchased the property with the intention of conferring the beneficial interest solely upon the mother. Such a transaction must therefore amount to a gift. In that view the property would not fall under cl. (d) of section 10 of the Act but under cl. (b) of that section. Therefore, the appellant would be the sole heir of her mother and the non joinder of her brothers would not defeat the suit so far as she is concerned.

In the course of consolidation proceedings under the U.P. Consolidation of Holdings Act, 1953, questions arose amongst the members of a family regarding the title to certain properties. Respondent No. 1 filed objections to the original entries in respect of lands in Khata No. 72 and 73 on the basis that he was the son of Chhota, one Of the sons of Teja, the common ancestor. Similarly, respondents Nos. 2 and 3 filed objections claiming shares in the lands in Khata No. 73 on the ground that the said holding was jointly acquired but was recorded in the name of Nanha in a repre sentative character. The appellant contested the claims of respondents Nos. 1, 2 and 3. The objections were considered by the Consolidation Officer, who held that respondent No. 1 was the son of Heera alias Chhota, brother of Nanha, and granted him his share in certain plots of the Khata No. 73. The appellant as well as respondents Nos. 2 and 3 fried appeals against the said order of the Consolidation Officer. The Assistant Settlement Officer (Consolidation) allowed the appeal of the appellant and directed that lands in Khata No. 73 will be continued in the name of the appellant alone. The respondents went in revision against the order of the Assistant Settlement Officer. The Deputy Director of Consolidation allowed the revision of respondent No. 1 in full in respect of share in Khata No. 72. As regards plots in Khata No. 73 the Deputy Director held that the name of Nanha was entered only in a representative capacity. The appellant filed a writ petition in the High Court to challenge the decision of the Deputy Director of Consolida tion which was dismissed in limine. 185 The appellant, thereafter, 'filed the civil suit for a declaration that the order of the Deputy Director of Consol idation was without jurisdiction. Contesting the suit, respondent No. 1 raised a preliminary objection that the suit was barred by section 49 of the Act. The Munsiff decid ed the preliminary objection in favour of respondent No. 1. The Additional District and Sessions Judge in appeal, af firmed the order of the Munsiff. The second appeal filed by the appellant was dismissed by the High Court in limine. Before this Court, it was contended on behalf of the appellant that the bar of section 49 of the Act was not applicable to the suit of the appellant because the orders passed by the consolidation authorities were without juris diction inasmuch as the consolidation authorities could not decide questions as to title to the lands as well as the question relating to the parentage of respondent No. 1 which the civil courts alone could decide. Dismissing the appeal, this Court, HELD: (1) The language used in section 49 of the U.P. Consolidation of Holdings Act, 1953 is wide and comprehen sive. Declaration and adjudication of rights of tenure holders in respect of land lying in the area covered by the notification under section 4(2) of the Act and adjudication of any other right arising out of consolidation proceedings and in regard to which a proceeding could or ought to have been taken under the Act, would cover adjudication of ques tions as to title in respect of the said lands. Accordingly, the jurisdiction of the civil or revenue courts to entertain any suit or proceeding with respect to rights in such land or with respect to any other matter for which a proceeding could or ought to have been taken under the Act has been taken away. [189D E; C] Suba Singh vs Mahendra Singh and Others, ; Gorakh Nath Dube vs Hari Narain Singh, , referred to. (2) In the instant case, respondent No. 1 was claiming an interest in the land lying in the area covered by the notification issued under section 4(2) on the basis that he was the son of Chhota, brother of Nanha, and that the lands were recorded in the name of Nanha in a representative capacity on behalf of himself and his other brothers. This claim which fell within the ambit of section 5(2) had to be adjudicated by the consolidation authorities under the Act, and the jurisdiction of the Civil Court to entertain the suit in respect of the said 186 matter was expressly barred by section 49 of the Act and the suit of the appellant was rightly dismissed on that ground. [194C D]

Appeal No. 303 of 1958. Appeal from the judgment and order dated August 3, 1956, of the Bombay High Court in Incometax Reference No. 10 of 1956. K. N. Rajagopal Sastri and D. Gupta, for the appellant. N. A. Palkhivala, section N. Andley, J. B. Dadachanji and Rameshwar Nath, for the respondents. May 4. The Judgment of the Court was delivered by HIDAYATULLAH, J. This is an appeal against the judgment and order of the High Court of Bombay dated August 3, 1956, in a reference under section 66 (1) of the Indian Income tax Act by the Appellate Tribunal, Bombay. The Tribunal referred four questions for the decision of the High Court. The High Court did not answer the first question because it was not pressed, and answered the remaining in the negative, after modifying them. It has certified this case as fit for appeal to this Court, and hence this appeal. The Com missioner of Income tax, Bombay City, is the appellant, and the Khatau Makanji Spinning and Weaving Co. Ltd., Bombay, (the assessee Company), is the respondent. The assessee Company has its year of account ending June 30 every year. At the close of the account year 1951, it carried forward profits amounting to Rs. 30,680. In that year, it appears it had earned a rebate by declaring dividends below the limit fixed by the Finance Act. For the account year 1952 its book profits were Rs. 28,67,235 less allowances for depreciation and tax. After these and other sundry adjustments, the balance available for distribution was Rs. 5,02,915. It may be pointed out that the Incometax Officer on processing the income found the total income to be Rs. 5,26,681. For the account year 1952, the assessee Company declared dividends amounting to Rs. 4,78,950 and carried forward the balance of Rs. 23,965. We are concerned with the assessment year 1953 54, and the Finance Act, 1953, is applicable. That Finance 875 Act applied the Finance Act, 1951, with some changes. The Finance Act, 1953, with the modifications will be referred to briefly, hereinafter, as the Finance Act. The Income tax Officer found that the assessee Company had declared excess dividends amounting to Rs. 1,87,691. He calculated additional income tax on it at 5 annas in the rupee after deducting income tax borne by the profits of the previous year at 4 annas per rupee, a surcharge of 5 per cent. less rebate of one anna in the rupee as allowed by the Finance Act. This additional tax amounted to Rs. 21,115 4 0. The appeals of the assessee Company under the Income tax Act failed. The Tribunal held that the excess dividends were deemed to be paid out of undistributed profits of earlier year ending June 30, 1951, amounting to Rs. 6,60,720 on which a rebate of 1 anna in the rupee was given in the assessment year, 1952 53. Tile Tribunal observed that additional incometax was also a tax on income, and that the Finance Act could say that the tax would be payable on the income of any year preceding the previous year. The Tribunal, however, referred four questions to the High Court, of which the first need not be quoted because it was abandoned before the High Court. The other questions were: " (ii) If the answer to question No. 1 is in the negative whether the said provisions go beyond the ambit and scope of the Indian Income tax Act ? (iii) Whether additional income tax can be levied, assessed and recovered under the provisions of the Indian Income tax Act ? (iv) Whether at any rate the additional incometax has been legally charged under the Indian Finance Act, 1953, read with the Indian Incometax Act?" The High Court compressed the three questions into one, and it reads: " Whether additional income tax has been legally charged under clause (ii) of the proviso to paragraph B of Part 1 of the. First Schedule to the Indian Finance Act, 1951, as applied to the assessment year 1953 54 by the Indian Finance Act, 1953, read with Section 3 of the Indian Income tax Act?" 876 This question was answered by the High Court in the negative. In the opinion of the High Court, section 3 of the Indian Income tax Act lays down the liability to tax, and it puts the tax on the total income of the previous year. The method of computing this total income is also to be found in the Finance Act. The Finance Act merely provides the rate applicable to the income so found. According to the High Court, the Finance Act in providing that additional income tax should be paid upon the accumulated profits of the previous years goes beyond the purpose for which the Central Act is passed every year, and cannot stand by itself without the support of section 3 of the Indian Income tax Act. The High Court held that the Finance Act had ' misfired ', because it did not resort to legislation which would have conformed to the object for which the Finance Act was passed every year. The learned Chief Justice, who delivered the judgment of the High Court, stated that there were several methods open to the legislature to achieve that purpose but that it had not resorted to any of them. This is what the learned Chief Justice observed: " The Legislature could have achieved this object by one of three methods. It could have treated the excess dividend declared by the company as a notional income and made it apart of the total income of the previous year. It could have provided for rectification of the assessment of the year in which these profits were charged at a lesser rate, and we now find that Parliament has actually provided for this in the Finance Act, 1956. Or, finally, it could have provided for a penalty imposed upon a company which transgressed the direction of Parliament that it should not pay dividend beyond a particular ceiling . The ambit of Section 3 is clear and the ambit is that the tax to be levied must be a tax on income and the power of Parliament is equally clear and that is to fix the rate at which income tax is to be charged upon the total income of the previous year of the assessee. In our opinion, the provision of the Finance Act travels beyond the ambit of Section 3, and if Parliament 877 has done so then no effective charge can be made on the total income of the previous year of the assessee under the provisions of the Finance Act which deals with additional tax on excess dividend. " It may be pointed out that before the High Court it was conceded that in order that the provisions of the Finance Act might be effective, the Finance Act had to come within the scope of section 3 of the Incometax Act. The point that was argued here was that it was not necessary to look only to section 3 of the Indian Income tax Act but also to the provisions of the Finance Act, through which Parliament could impose a new tax, if it so pleased. Other arguments involved modifications of language suitable to sustain the tax independently of section 3 of the Indian Income tax Act, a procedure which we do not think is open, for reasons which we have given in Civil Appeal No. 427 of 1957, decided today. These modifications, which were suggested, involve a recasting of the entire relevant paragraph of the Finance Act to make it independent of section 3 of the Indian Income tax Act, a course which is only open to a legislature and not to a Court. We need not give all the modifications suggested, because, in our opinion, the words of the Finance Act must be given their due meaning, and must be construed as they stand. The learned Chief Justice, with respect, very rightly pointed out that the Income tax Act puts the tax on income or something which it deems to be income. In other words, the tax deals with income and income only. It further provides that this tax shall be collected at a particular rate on the total income for which provision shall be made in an yearly Central Act. The Finance Act also follows the same scheme, and lays down the rate at which the tax is to be collected. In the Finance Act, the tax is laid on the total income, but two provisos modify the rate under certain circumstances. We may at this stage read the relevant provision (Part 1, First Schedule): 878 B. In the case of every company Rate. Surcharge. On the whole of Four annas One twentieth of total income. in the rupee. the rate specified in the preceding column: Provided that in the case of a company which, in respect of its profits liable to tax under the Income tax Act for the year ending on the 31st day of March, 1953, has made the prescribed arrangements for the declaration and payment within the territory of India excluding the State of Jammu and Kashmir, of the dividends payable out of such profits, and has deducted super tax from the dividends in accordance with the provisions of subsection (3D) or (3E) of section 18 of the Act (i) Where the total income, as reduced by seven annas in the rupee and by the amount, if any, exempt from income tax, exceeds the amount of any dividends (including dividends payable at a fixed rate) declared in respect of the whole or part of the previous year for the assessment for the year ending on the 31st day of March, 1953, and no order has been made under sub section (1) of section 23A of the Income tax Act, a rebate shall be allowed at the rate of one anna per rupee on the amount of such excess; (ii) Where the amount of dividends referred to in clause (i) above exceeds the total income as reduced by seven annas in the rupee and by the amount, if any, exempt from income tax, there shall be chargeable on the total income an additional income tax equal to the sum, if any, by which the aggregate amount of income tax actually borne by such excess (hereinafter referred to as ' excess dividend ') falls short of the amount calculated at the rate of five annas per rupee on the excess dividend. For the purpose of clause (ii) of the above proviso, the aggregate amount of income tax actually borne by the excess dividend shall be determined as follows : 879 (i) the excess dividend shall be deemed to be out, of the whole or such portion of the undistributed profits of one or more years immediately preceding; the previous year as would be just sufficient to cover the amount of the excess dividend and as have not likewise been taken into account to cover an excess dividend of a preceding year; (ii) such portion of the excess dividend as is deemed to be out of the undistributed profits of each of the said years shall be deemed to have borne tax, (a) if an order has been made under sub section (1) of section 23A of the Income tax Act, in respect of the undistributed profits of that year, at the rate of five annas in the rupee, and (b) in respect of any other year, at the rate applicable to the total income of the company for that year reduced by the rate at which rebate, if any, was allowed on the undistributed profits. " By the first Proviso, a rebate of one anna per rupee is given to a company which pays dividends less than 9 annas in the rupee out of its profits. By the second Proviso, the rebate disappears, and an additional income tax has to be paid on dividends in excess of that limit, paid in the year. The explanation says that " the excess dividend shall be deemed to be out of the whole or such portion of the undistributed profits of one or more years immediately preceding the previous year as would be just sufficient to cover the amount of the excess dividend and as have not likewise been taken into account to cover an excess dividend of a preceding year ". This fiction, as we have already pointed out, provides only that the dividends shall be deemed to be out of the profits not of the previous year under assessment but of some other years. What the Finance Act fails to do is to make them " total income ", so as to take in the rate which is prescribed for the total income in the Proviso. Unless the Finance Act stated that after the working out of the fiction the profits of the back year or years shall be deemed to be a part of the total income of the previous year under assessment, the purpose of the Act clearly fails. Income tax is a tax on income 880 of the previous year, and it would not cover something which is not the income of the previous year, or made fictionally so. The Finance Act could have gone further, as pointed out by the learned Chief Justice in the extract quoted, and made the profits a part of the total income of the previous year under assessment, but it did not do so. The Finance Act could have also resorted to some other fiction, which might conceivably have met the case; but it has failed to do so. Even if one considers the dividends as having come out of the profits of preceding years, they do not become the income of the relevant previous year, and unless the Finance Act expressly laid down that it should be taxed as part of the total income, the purpose is not achieved. Indeed, the Finance Act continues to say that the tax shall be on the total income, as defined in the Indian Income tax Act and as determined under that Act. It is impossible to say that the additional income tax was properly laid upon the total income, because what was actually taxed was never a part of the total income of the previous year. For these reasons, we are of opinion that the High Court was right in answering the question which it had framed, in the negative. In the result, the appeal fails, and is dismissed with costs. Appeal dismissed.

The Income tax Officer found that in the assessment year 1953 54 the respondent assessee company had declared excess dividends amounting to Rs. 1,87,691 and he levied additional income tax on it at 5 annas in the rupee after deducting incometax borne by the profits of the previous year at 4 annas per rupee, a surcharge of 5 per cent. less rebate of one anna in the rupee as allowed by the Finance Act, 1953. The Income tax Tribunal held that the excess dividends were deemed to be paid out of undistributed profits of the earlier year ending June 30, 1951 on which a rebate of one anna in the rupee was given in the assessment year 1952 53. It further observed that additional income tax was also a tax on income, and that the Finance Act could say that the tax would be payable on the income of any year preceding the previous year. The Tribunal, however, referred three questions to the High Court which the High Court compressed into one as below : " Whether additional income tax has been legally charged under Clause (ii) of the proviso to paragraph B of Part 1 of the First Schedule :to the Indian Finance Act, 1951, as applied to the assessment year 1953 54 by the Indian Finance Act, 1953, read with section 3 of the Indian Income tax Act? " The High Court held that section 3 of the Indian Income tax Act put the liability to tax on the total income of the previous year or what can be deemed to be income. The Finance Act provided the rate applicable to the income so found and a method of computing the total income. The Finance Act in providing that additional income tax should be paid upon the accumulated profits of the previous years went beyond the purpose for which the Finance Act was passed every year, and the Finance Act could not stand by itself without the support Of section 3 of the Indian Income tax Act. On appeal by the Commissioner of Income tax on certificate of the High Court: Held, that the High Court was right in answering the ques tion framed by it, in the negative. The Finance Act provided that the tax should be levied on the " total income " as defined in and determined under the Indian Income tax Act. The Additional income tax was not properly laid upon the total income because what was actually taxed was never a part of the total income of the previous year, nor deemed to be so. 874

The two questions for determination in this appeal were, (1) whether a settlement under section 8A of the Taxation of Income (Investigation Commission) Act, 1947 (30 Of 1947) made after the commencement of the Constitution was constitutionally valid and (2) whether the waiver of a fundamental right was permissible under the Constitution. The appellant 's case was on July 22, 1948, referred by the Central Government under section 5(1) of the Act to the Investigation Commission. for investigation and report. The Commission directed the authorised official under section 6 of the Act to examine the appellant 's accounts. He submitted his final report by the end of 1953. The Commission considered the report heard the assessee and came to the conclusion that Rs. 4,47,915 had escaped assessment. Thereupon the appellant on May 20, 1954, applied to the Commission for a settlement of his case under section 8A of the Act, agreeing to pay Rs. 3,50,000 by way of tax and penalty at the concessional rate. The Commission reported to the Central Government approving of the settlement, the Central Government accepted it and it was recorded by the Commission. The Central Government directed the recovery of the said amount under section 8A(2) of the Act. The appellant was permitted to make payments by monthly instalments of Rs. 5,000 and the total amount thus paid up to September 8, 1957, aggregated to Rs. 1,28,000. In the meantime the Income Tax Officer issued a certificate and certain properties of the appellant were attached. Relying on the decisions of this Court in Suraj Mall Mohta and Co. vs A. V. Visvanatha Sastri, ; and M. Ct. Muthiah vs The Commissioner of Income tax, Madras, ; , the appellant applied to the Commissioner of Income tax challenging the validity of the settlement made under section 8A of the Act on the ground that section 5(1) Of the Act on which it was founded had been declared void by this Court, and claimed that his properties might be released from attachment and the amount paid under the settlement might be refunded to him. , On January 29, 1958, the Commissioner of Income Tax sent a reply to the appellant maintaining that the settlement was valid and 529 that the appellant was bound thereunder to pay up the arrears of instalments and requesting him to continue to pay in future. Against this decision of the Commissioner of Income Tax the. appellant came up to the Supreme Court by special leave. It was contended on behalf of the respondent that the Act laid down two distinct and separate procedures, one for investigation and the other for settlement and it was the former alone and not the D, latter that was affected by the decisions of this Court. and that the appellant by voluntarily entering into the settlement had waived his fundamental right founded on article 14 of the Constitution. Held (Per Curiam), that both the contentions must fail. It was not correct to say that the Taxation of Income (In vestigation Commission) Act, 1947, laid down two different procedures, one for investigation and assessment under section 8(2) of the Act and another for settlement under section 8A of the Act and assessment in terms of such settlement and that while the decision of this Court in M. Ct. Muthiah vs The Commissioner of Incometax, Madras, declaring section 5(1) of the Act to be discriminatory and therefore void, affected only the former procedure and not the latter. The Act laid down but one procedure and in entertaining a proposal for settlement as in the investigation itself the Commission exercised the same jurisdiction, and powers and followed the one and the same procedure as laid down by sections 5, 6 and 7 Of the Act. Since the settlement in the instant case was no exception to that rule, it was covered by the decision and must be held to be violative of article 14 Of the Constitution. M. Ct. Muthiah vs The Commissioner of Income tax, Madras, ; , applied. The observations made in the majority judgment of this Court in Syed Qasim Razvi vs The State of Hyderabad, [1953] S.C.R. 589, must be kept strictly confined to the special facts of that case and had no application to the facts of the present case. Syed Qasim Razvi vs The State of Hyderabad, [1953] S.C.R. 589, held inapplicable. Per Das, C. J., and Kapur J. There could be no waiver of the fundamental right founded on article 14 Of the Constitution and it was not correct to contend that the appellant had by entering into the settlement under section 8A of the Act, waived his fundamental right under that Article. Article 14 was founded on a sound public policy recognised and valued all over the civilised world, its language was the language of command and it imposed an obligation on the State of which no person could, by his act or conduct, relieve it. As it was not strictly necessary for the disposal of this case, the question whether any other fundamental right could be waived need not be considered in this connection. Laxamanappa Hanumantappa jamkhandi vs The Union of India; , ; Dewan Bahadur Seth Gopal Das Moht 67 530 vs The Union of India, [1955] 1 S.C.R.773; Baburao Narayanrao Sanas vs The Union Of India, [1954] 26 I.T.R. 725; Subedar vs State, A.I.R. 1957 All. 396 and Pakhar Singh vs The State, A.I.R. 1958 Punj. 294, distinguished and held inapplicable. Per Bhagwati and gubba Rao, jj. There could be no waiver '.,not only of the fundamental right enshrined in article 14 but also of any other fundamental right guaranteed by Part III of the Constitution. The Constitution made no distinction between fundamental rights enacted for the benefit of the individual and those enacted in the public interest or on grounds of the public policy. There could, therefore, be no justification for importing American notions or authority of decided cases to whittle down the transcendental character of those rights, conceived in public interest and subject only to such limitations as the Constitution had itself thought fit to impose. Article 13(2) was in terms a constitutional mandate to the State in respect of all the fundamental rights enacted in Part III of the Constitution and no citizen could by waiver of any one of them relieve the State of the solemn obligation that lay on it. The view expressed by Mahajan, C. J., in Behram Khurshed Pesikaka vs The State of Bombay, , correctly laid down the law on the point. Since the arguments in the instant case had covered the entire field of fundamental rights, there was no reason why the answer should be confined to article 14 alone. Behram Khurshed Pesikaka vs The State of Bombay, ; State of Travancore Cochin vs The Bombay Co., Ltd., and The State of Bombay vs R. M. D. Chamarbaugwala; , , referred to. Per section K. Das, J. It seems clear that article 13 itself re cognises the distinction between absence of legislative power which will make the law made by an incompetent legislature wholly void, and exercise of legislative power in contravention of a restriction or check on such power, which will make the law void to the extent of the inconsistency or contravention; therefore the mere use of the word " void " in article 13 does not necessarily militate against the application of the doctrine of waiver in respect of the provisions contained in Part III of the Constitution. Behram Khurshed Pesikaka vs The State of Bombay, , considered. Bhikaji Narain Dhakyas vs The State of Madhya Pradesh, ; ; M. Ct. Muthiah vs The Commissioner of Income tax, Madras, ; and The State of Bombay vs R.M.D. Chamarbaugwala, ; , referred to. There was nothing in the two preambles to the Indian and the American Constitutions that could make the doctrine of waiver applicable to the one and not to the other; since the doctrine 531 applied to the constitutional rights under the American Constitution, there is no reason why it should not apply to the fundamental rights under the Indian Constitution. Case law considered. But it must be made clear that there is no absolute rule, or one formulated in the abstract, as to the applicability of that doctrine to fundamental rights and such applicability must depend on (1) the nature of fundamental right to which it is sought to be applied and (2) the foundation on the basis of which the plea is raised. The true test must be whether the fundamental right is one primarily meant for the benefit of individuals or for the benefit of the general public. Where, therefore, the Constitution vested the right in the individual, primarily intending to benefit him and such right did not impinge on the rights of others, there could be a waiver of such right provided it was not forbidden by law or did not contravene public policy or public morals. As in the instant case the respondents who had raised the plea, had failed to prove the necessary facts on which it could be sustained, the plea of waiver must fail. Per Subba Rao, J. Apart from the question as to whether there could be a waiver in respect of a fundamental right, section 5(1) of the Taxation of Income (Investigation Commission) Act, 1947, having been declared void by this Court in M. Ct. Muthiah vs The Commissioner of Income tax, Madras, as being violative of the fundamental right founded on Art ' 14 Of the Constitution and such decision being binding on all courts in India, the Commissioner of Income tax had no jurisdiction to continue the proceedings against the appellant under that Act and the appellant could not by a waiver of his right confer jurisdiction on him. No distinction could be made under article 13(1) of the Con stitution between the constitutional incompetency of a legislature and constitutional limitation placed on its power of legislation, for a statute declared void on either ground would continue to be so, so long as the inconsistency continued. As the inconsistency of section 5(1) of the Act with article 14 continued, it must continue to be void. Keshavan Madhava Menon vs The State of Bombay, [1951] S.C.R. 228; Behram Khurshed Pesihaka vs State of Bombay, and Bhikaji Narain Dhakras vs State of Madhya Pradesh, ; , referred to.

The assessee was a share holder in a private limited company whose ordinary business was not money lending business. He took a loan amounting to over Rs. 4 lakhs from a company. The Income tax Officer computed the assessee 's income at Rs. 3 lakhs and odd, under section 12(1B) read with section 2 (6A) (e) of the Income tax Act, 1922. That amount included a sum of over Rs. 2 lakhs representing the accumulated profits of the company. The assessee 's share in the accumulated profits, if distributed as dividend, would be an amount proportionate to the number of shares held by him. He therefore contended, that the balance of the accumulated profits was not his income and that the Legislature was not competent to enact the two sections according to which that amount was also treated as his income. His writ petition in the High Court challenging. the constitutional validity of the two sections was dismissed. He appealed to the Supreme Court. HELD (Per Gajendragadkar, C. J., Wanchoo, Hidayatullah and Mudholkar JJ.) : (i) The sections are not beyond the legislative competence of Parliament. The companies to which section 12(1B) applies are companies in which at least 75% of the voting power lies in the hands of persons other than the public. They are controlled by a group of persons allied together and having the same interest. The controlling group can determine whether the profits made by the company should be distributed as dividends or not. When they deliberately refused to distribute the accumulated profits as dividends but adopted the device of advancing the profits by way of loan to one of the shareholders, it was with the object of evading the payment of tax by the company on the accumulated profits. Section 12(1B) provides that if a controlled company adopts the device of making a loan to one of its shareholders, he will be deemed to have received the amount out of the accumulated profits as dividend and would be liable to pay tax on his income. The word "income" in Entry 82 in List I of the 7th Schedule to the Constitution must receive a wide interpretation depending on the facts of each case. Having regard to the fact that the Legislature was aware of the devices to evade tax, it would be within its competence to devise a fiction for treating an ostensible loan as the receipt of the dividend. [919 A H. 920 H; 921 C D] (ii) The absence of a provision enabling the income tax officer to consider in each case whether the loan was genuine or the result of a device does not make the section go beyond the competence of the Legislature. [921 D E] If the Legislature thought that in almost every case the advances or loans were the result of a device to evade tax, it would be competent to 910 it to prescribe a fiction and hold that in cases of such advances or loans, tax should be recovered from the shareholder on the basis that he had received a dividend. [921 G H] (iii) Section 12(lB) does,not impose an unreasonable restriction on the appellant 's fundamental rights under article 19(1) (f) and (g) of the Constitution. [922 A] The section does not affect the appellant 's right to borrow money. There is no element of unfairness, because the other shareholders have deliberately agreed to make the loan or the advance and the shareholder to whom the loan is advanced deliberately takes it with a view to assist the company to evade the payment of tax and to have the benefit of the use of the amount subject to the payment of interest. The company receives interest, the shareholder enjoys the use of the money and in the process the payment of tax is evaded. Further, past transactions were excluded from the operation of the sections by the issue of a circular by the Central Board of Revenue. [922 B F] Per Raghubar Dayal J. (dissenting) : (i) Sections 2(6A) (e) and 12(lB) of the Income tax Act, 1922 as they stood in 1955 are void. [923 B] It is not open 'to the Legislature to describe any payment of money by a company to a shareholder by the word "dividend" and then provide that such payment will come within the expression "income" in item 82, List I of Schedule 7. The definition of dividend must have a rational connection with concept of dividend in the context of the profits of the company and its distribution amongst the shareholders. The essence of an amount paid as dividend is that it has to represent the proportionate amount a particular shareholder is to get on the basis of the shares held by him out of the profits of the company set apart for payment of dividend to shareholders. Any ad hoc payment of money to a shareholder as advance or loan unrelated to his share in the accumulated profits cannot rationally come within the expression dividend. [926 E H] (ii) The provisions of the impugned sections impose unreasonable restrictions on the fundamental right to hold property under article 19(1)(f) of the Constitution. [928 E] If any enactment provides that certain profits of the company, though not distributed as dividend, be treated as used for the payment of dividends it should necessarily follow that a particular shareholder be deemed to have received a proportionate amount of such profits. It would be unreasonable to provide that a particular shareholder should be deemed to have received an amount in excess of his proportionate share as dividend. It is unreasonable that a particular shareholder who receives a loan or advance from a company be deemed to have received that entire amount as dividend when his proportionate share would be much less. [928 B E] Navinchandra Mafatlal vs Commissioner of Income tax, Bombay City, [1955] 1 S.C.R. 829, Sardar Baldev Singh vs Commissioner of Income tar, Delhi and Agra [1961] 1 S.C.R. 482 and Balaji vs Income tax Officer, Special Investigation Circle, ; , referred to.

The appellant made a provision for a sum of Rs.49,19,520/ in his books of account for the discharge of its tax liabil ities. The appellant claimed deduction of the said amount for computation of his net wealth on the ground that it was a debt owed by the assessee within the meaning of section 2(m) of the Wealth Tax Act. The claim was disallowed by the Wealth Tax Officer, the Appellate Asstt. Commissioner of Wealth Tax and the Tribunal. The High Court of Calcutta answered the reference in favour of the revenue and against the assessee relying on its earlier decision in the ease of Assam Oil Co. Ltd. Allowing the appeal by certificate, HELD: This Court has reversed the decision of Calcutta High Court in the case of Assam Oil Co. Ltd. In that case this Court held by majority that the amount set apart by an assessee in his balance sheet on the valuation date as an estimated provision for meeting its tax liability less the last instalment of the payment of the advance tax was a debt owed by the assessee within the meaning of section 2(m) of the Wealth Tax Act, 1957 and was deductible in computing its net wealth as on that date. The Court followed the said deci sion. [296C G] Assam Oil Co. vs Commissioner of Wealth Tax, Central Calcut ta, followed.

In the years prior to 1950 the respondent company with headquarters in the erstwhile state of Indore was assessed to tax under the Indore Industrial Rules, 1927 and also under the Indian Income tax Act, 1922 in so far as its income fell within sections 4(1) (a) and 4(1)(c) read with section 42 of the Act. Depreciation had been allowed to it under the Indore Industrial Rules as well as the Indian Act. The written down value of its assets for the purpose of 1950 51 and subsequent assessments had to be determined under the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950 which laid down in the proviso to paragraph 2 that .where in respect of any asset, depreciation has been allowed for any year, both in the assessment made in the Part B State and in the taxable territories, the greater of the two sums allowed shall only be taken into account. " The Income tax Officer found that up to and including the year 1944 the sum allowed as depreciation under the Indian Income tax Act was larger and therefore in computing written down value as on 1 1 49 he took the sum allowed as depreciation under the Indian Act up to the end of 1944 and under the Indore Industrial Rules after that date. In the assessments made for the period up to the end of 1944 the respondent company had been treated as a non resident and its taxable income under the Indian Income tax Act had been worked out under Rule 33 of the Indian Income tax Act, 1922 as a fraction of its total world income. In determining the total world income the depreciation claimable under the Indian Act had been allowed, and it was the full amount of this depreciation allowed against the total world income that the Income tax Officer took into account in determining the written down value of the respondent company 's assets for the purpose of the 1950 51 assessment. The respondent company claimed that as only a fraction of the total world income had been treated as taxable income, therefore only a fraction of the depreciation allowed against the world income should be taken as having been 'actually allowed ' in the terms of paragraph 2 of the Removal of Difficulties Order. The Income tax Officer, the Appellate Assistant Commissioner and the Appellate Tribunal having rejected this plea the matter went in reference to the High Court. That Court took the view contended for by the respondent viz. that only the proportionate amount of depreciation which was attributable to the taxable income could be taken into account. The Revenue appealed to this Court It was urged on behalf of the appellant that depreciation was allowed in respect of the use of the assets in the business, that the allowance did not depend on the assessable income, and that the High Court, therefore went wrong in striking a proportion on the basis of a part of the income 926 actually assessed under the Indian Income tax Act. The different expressions used in various parts of paragraph 2 of the Removal of Difficulties Order came for consideration. HELD : Per Subba Rao and Sikri, JJ. (i) The word "assessment" used in the proviso to paragraph 2 has been given a very wide meaning in decided cases. It means sometimes 'the computation of income ', sometimes the determination of the amount of tax payable; and some,times the procedure laid down in the Act for imposing liability upon the tax payer. The proviso used the word 'assessment ' both with reference to Part B States and also with reference to the taxable territories. But in the present case the different shades of meaning of the said word were not relevant. For the purpose of computing the written down value, the amount of depreciation allowed for the purpose of the assessment only was relevant. [931 G H; 932 A] (ii)The key to the understanding of paragraph 2 is the expression "allowed '. The expression 'actually allowed ' in the main paragraph, 'allowed ' in the proviso, and 'taken into account ' in the Explanation mean the same thing. What the Income tax Officer has to take into consideration in computing the written down value is the depreciation actually allowed under the Income tax Act or the laws obtaining in Part B States and adopt the greater of the two sums so allowed under that head. The determination of the depreciation actually allowed under the Income tax Act for the years up to and including 1944 must depend on the provisions of that Act. [932 B] (iii)Under the Income tax Act depreciation allowance is in respect of such assets as are used in the business and shall be calculated on the written down value, which means, in the case of assets acquired in the previous year, the actual cost to the assessee, and in the case of assets acquired before the previous year, the actual cost to the assessee less all depreciation actually allowed to him under the Act. The allowance towards depreciation is conditioned an the user of the assets, wholly or in part., during the accounting year and thus contributing to the earning of the income. Though it is not unrelated to the profits it does not depend upon the increase or decrease in the earning capacity of the assets, but is only linked up with physical depreciation in their value. Even so only amount of depreciation actually allowed can be deducted from the original cost of the assets to ascertain the written down value. De hors such an allowance. , it has no significance in income tax law. [932 F H;933 A B] (iv) During the years up to and including 1944 the assessee was taxed as a nonresident on the income which fell under section 4(1)(a) or unders. 4(1)(c), read with section 42 of the Indian Income tax Act. The assessee was only assessed during the said years in respect of that part of its profits which could be said to be attributable to the sale proceeds or goods received in British India or in regard to which contract , were signed in British India. Such income was brought to tax in terms of r. 33 of the Indian Income tax Rules, 1922. The method adopted was that the amount of income for the purpose of Indian Income tax was calculated on an amount which bore the same proportion to the total profits of the business as the receipts accruing or arising in India bore to the total receipts, of the business. By applying the formula in r. 33 the Income tax Officer had actually allowed only a fraction of the amount towards depreciation allowable in assessing the world income of the assessee. The mere fact that in the matter of calculation the total amount of depreciation was first deducted from the world income and thereafter the proportion was struck in terms of r. 33 does not amount to an actual allowance of the entire depreciation in ascertaining the tax 927 able income accrued in India. The Income tax Officer could have adopted a different method by first ascertaining the gross income accrued in India and then deducting from it the allowance under the Act proportionate to the said income. Whatever method was adopted only a fraction of the total depreciation was actually allowed in ascertaining the taxable income in India. The view taken by the High Court was therefore correct. [933 B H] Hakumchand Mills Ltd. vs Commissioner of Income (Central) Bombay, , endorsed. Per Shah, J. (dissenting) Under section 10 of the Income tax Act taxable profits or gains earned by an assessee under the head 'business ' after making appropriate allowances under Subs. (2) have to be computed. One of such allowances is depreciation in respect of the assets used for the purpose of business. But depreciation determined according to the rules merely enters into the computation of taxable profits, whether the assessee is a resident or a non resident. In the assessment of a company the same rates of tax apply under the Income tax Act, whether the company is resident or non resident. If the company is resident under section 4A(c) its entire world income would be chargeable, subject of course to special exemptions like those provided in section 14(2)(c) : if it is nonresident only a slice of the income would be chargeable. Under the scheme of the Indian Income tax Act depreciation like any other allowance has to be allowed in computing the total profit; after the total profit is determined depreciation does not survive as a separate head of allowance. A part only of the total profit of a company determined in the manner prescribed by section 10, may be taxable. But total profit being determined after depreciation is allowed, between the taxable profits which may be a fraction of total profits and depreciation there is no definable relation. Therefore it is wrong to presume that the depreciation allowed in the taxable territories which is to be taken into account under the proviso to paragraph 2 of the Removal of Difficulties Order is a fraction of the depreciation considered for computing total profits. [940 E H; 941 A D] The fact that income was computed under r. 33 made no difference. In the ascertainment of total profits either for the purposes of assessment in the ordinary manner when the income of the assessee is determined or when a fraction is to be adopted for the purpose of the second method contemplated by section 33, there is no scope for assuming that only a fraction of the depreciation is actually allowed. Depreciation is deducted only once and for all, and it is deducted in determining the total profits of the business. [942B D] There is therefore no warrant either in section 10(2)(vi) or in paragraph 2 of the Removal of Difficulties Order or in r. 33 framed under the Indian Income tax Act for the view that the depreciation allowed is a fraction of the total depreciation of the business. [942 H]

The Income tax Officer, Madura, issued notice under section 18A (1) of the Indian Income Tax Act, 1922, for payment of advance tax. R, the then manager of the Hindu Undivided family availed of the option to submit a revised estimate for the years 1946 47 and 1948 49. The assessment of these two years were completed respectively in November, 1950 and February, 1951, as the total income assessed far exceeded the estimate submitted by R, the Income tax Officer ordered the respondent, the legal representative of R, to pay the interest under section 18A (6) of the Act. On appeal, the Income tax Appellate Tribunal reduced the income and the Income tax Officer in giving effect to the said order reduced the interest and called upon the respondent to make payment. The respondent asked the Income tax Officer not to levy interest under section 18A (6), submitting that the levy was illegal and unjustified, alternatively he requested that the interest be waived by virtue of the powers vested on the Income tax Officer under proviso 5 to section 18A (6) which was added by section 13 of Act 25 of 1953, with retrospective effect from April 1952. The Income tax Officer and the Inspection Assistant Commissioner declined to accede to the request. The respondent then moved the High Court at Madras for a writ under article 226 cancelling the levy of interest on the ground among others that refusal by the Revenue authorities to cancel the levy was arbitrary and not based on any judicial exercise of the discretion vested by the Act. The High Court upheld the plea, ordered the Income tax Officer to decide whether the respondent had made out a case for the exercise of the discretion. The only question in the appeal before the Supreme Court was whether benefit of the said 5th proviso to section 18A (6) may be granted in respect of assessments of income which were completed by the Income tax officer before April 1952. 614 ^ Held, that the jurisdiction under 5th proviso of section 18A (6) of the Income tax Act may be exercised by the income tax Officer in all cases which were pending on April 1, 1952 before him or any superior authority having under the Act power to modify the assessment of income.

The appellant held shares in a company the Board of Directors of which by a resolution dated August 30, 1950 declared interim dividends. The appellant received a dividend warrant dated December 28, 1950 for a certain amount being the interim dividend in respect of its share holdings in the company. The appellant 's year of accounting had ended on September 30, 1950. The revenue authorities brought to tax the amount so received with other income of the appellant in the assessment year 1952 53 after rejecting the objection of the appellant that it represented income for the assessment year 1951 52. In a reference made under section 66(1) of the Indian Income tax Act, 1922, the High Court agreed with the Revenue authority that the dividend was in view of article 95 of the First Schedule to Indian Companies Act, 1913, liable to be included in the assessment year 1952 53. Held: A declaration of dividend by a company in a general meeting gives rise to a debt. In re Severn and Wile and Severn Bridge Railway Co. , referred to. But a mere resolution of the Directors resolving to pay a certain amount as interim dividend does not create a debt enforceable against the company for it is always open to the Directors to rescind the resolution before payment of the dividend. The Lagunas Nitrate Company (Ltd.) vs J. Henry Schroeder and Company, 17 Times Law Reports 625, referred to. Commissioner of Income tax, Bombay vs Laxmidas Mutraj Khatau, , distinguished. (ii) The test applied by Chagla C. J. (in C.I.T., Bombay vs Laxmidas Mulraj Khatau, that because the ,dividend becomes due to the assessee who has the right to deal with or dispose of the same in any manner he likes, it is taxable in the year in which it is declared cannot be regarded as correct. (iii) Dividend may he said to be paid within the meaning of section 16(2) of the Indian Income tax Act, 1922 when the company discharges its liability and makes the amount thereof unconditionally available to the member entitled thereto. Purshottamdas Thakurdas vs C.I.T., Bombay, , referred to. I P(1)) 1 S.C.I 17 (a) 580 (iv) The declaration of interim dividend capable of being rescinded by the directors does not operate as a payment under section 16(2) of the Income tax Act before the company has parted 'with the amount of dividend or discharged its obligation by some other act.

For the assessment year of 1968 69, the assessee appellant, a registered firm, returned a total income of Rs.3,94,483 and a provisional assessment was made. Subsequently, the Income Tax Officer found that for the said assessment year, the assessee had made an income of Rs. 11,82,056 and deducting therefrom three figures viz., (i) unabsorbed depreciation: Rs.1,59,181; (ii) unabsorbed development rebate: Rs.2,79,150; and (iii) unabsorbed business loss: Rs.3,49,242, aggregating to Rs.7,87,573 and arrived at the net income of Rs.3,94,483, which had been returned and accepted. The three figures were the figures carried over from the previous year for the assessment year 1967 68. The Income Tax Officer allowed the unabsorbed development 910 rebate pertaining to the assessment year of 1967 68 to be carried for ward and set off in computing the total income for the assessment year of 1968 69, but he did not allow the amounts of unabsorbed depreciation and unabsorbed business loss. He, therefore, added back the sum of Rs.5,08,423 (the aggregate of the amounts of unabsorbed depreciation and unabsorbed business loss) to the returned income for determining the total income for the assessment year of 1968 69. The action of the Income Tax Officer was confirmed by the Appellate Assistant Commissioners (A.A.C.). However, on further appeal, the Income tax Appellate Tribunal (A.T.) upheld the income tax Officer 's stand that the firm could not be allowed to carry forward and set off the business loss carried from the earlier year but, so far as the unabsorbed depreciation was concerned, it upheld the assessee 's contention. On these two issues a reference to the High Court was made and the High Court answered them against the assessee. For the assessment year 1967 68, the assessee filed a return on 30.6.67 showing a loss of Rs.7,87,515 but filed a revised return on 22.3.1972 showing a loss of Rs.5,46,351. On 14.3.73 the I.T.O. completed the assessment determining a loss of Rs.4,85,250. The assessee 's request that this loss should be carried forward to the subsequent assessment year was rejected by the I.T.O. This was confirmed by the A.A.C. On further appeal, the A.T. confirmed the order of the A.A.C., following the High Court 's decision for the assessment year 1968 69 which had by then been announced. The High Court answered the (question "Whether, on the facts and circumstances of the case, the Tribunal was justified in rejecting the claim for carry forward of business loss in the hands of the firm in view of the decision reported in 101I.T.R. 658? in the affirmative. Hence the assessee 's the appeals one appeal for the assessment year of 1968 69 and the other for the assessment year of 1967 68 under certificates of fitness granted by the High Court. On behalf of the assessee it was contended that the firm as well as the partners had been returning losses all along with the result that no part of the unabsorbed depreciation of the firm had been set off in the partner 's hands; that when there was an unabsorbed depreciation computed in the assessment of a registered firm for any year, for the 911 purpose of carry forward, it should be retained and carried forward by the firm only. On the other hand, it was submitted for the Revenue that once the assessment was completed and the total income or loss of the firm ascertained, it had to be apportioned amongst the partners. Thereafter there remained nothing in the assessment of the firm to be carried forward. Only each of the partners can carry forward his share of the unabsorbed loss, which also included the unabsorbed depreciation, as there was no difference between unabsorbed loss and unabsorbed depreciation; and that the amendment to the proviso to section 10(2)(vib) in 1953 of depreciation was intended to negative the claim of carry forward, by the firm which was earlier being accepted on the strength of the earlier language resulting in a double advantage. Allowing the appeals, this Court, HELD: 1. "Depreciation" is one of the notional allowances which expression means a deduction in respect an outgoing which is not an item of actual expenditure or is one which cannot be treated as an outgoing of a revenue nature permitted by the statute to be deducted in the computation of the profits and gains of a business. [921H 922B] 2. Initially, the depreciation allowances has to be deducted from the profits and gains of the business to which the assets earning the depreciation relate but, if it remains unabsorbed by such profits, the allowance has to be set off against the other business income of the assessee and, where that is also insufficient, against the other taxable income of the assessee. The carry forward of any depreciation as unabsorbed cannot arise until the stage of final assessment is reached and the total income of the assessee otherwise computed is insufficient to absorb the year 's depreciation allowance. [928E G] 3. An unabsorbed depreciation is a part of the "loss". This is so because, in the first place, "depreciation" is a normal outgoing, though in a sense notional, which has to be debited in the computation of the profits of a business on commercial principles (quite apart from statute) and it is difficult to see why, when such deduction yields a negative figure of profits, it cannot be a "loss" as generally understood. Where the depreciation allowance attributable to a particular business exceeds the profits otherwise computed for that business, the deduction of the depreciation allowance from such profits can only result in a "loss" from that business and a business loss has to be set off against income 912 from any other business, by way of intra head adjustment, under section 70 and the income under any other head, by way of intra head adjustment, under section 71. This is implicit in the provision that the excessive depreciation of one business can be "given effect toll against the profits and gains of another business in the same year and has been recognised by decisions holding that it can be set off against income from other heads. If unabsorbed depreciation is treated as a genus totally different from a "loss", there is no statutory provision that will permit its adjustment against other business income implicit in section 32(2) itself and against all other income of the assessee. "Loss" and "unabsorbed depreciation" should not be treated as antithetical to, or mutually exclusive of, each other. However, there is nothing anomalous or absurd in the statute providing for a dissection of the amount of loss for purposes of carry forward and providing for a special or different treatment to unabsorbed depreciation in this regard although it is a component element of the genus described as "loss" [931B C, 926C E, 93IC F] 4. Unabsorbed losses and unabsorbed depreciation are to be carried forward to future years to be set off against future income. There is, however, one important difference. Unabsorbed losses can be carried forward only for a period of eight years whereas unabsorbed depreciation can be carried forward indefinitely. [923G H] 5. There is also difference between the two in the matter of their carry forward in the case of assessment of a registered firm. In this case, the unabsorbed loss cannot be carried forward by the firm at all. The statute clearly so provides. So far as unabsorbed depreciation is concerned, three alternatives are possible to be urged: (i) It should be retained (without apportionment) and carried forward by the firm only. (ii) It should be apportioned among the partners. Thereafter, it can be dealt with even for carry forward purpose only in the assessment of each of the partners in respect of his aliquot share thereof. (iii) It should be apportioned among the partners each of whom may set off his share thereof against his other income. If, after this, any amount remains unabsorbed, it will revert to the firm. The firm will carry it forward, set it off against its other income in the succeeding year. This operation will be repeated every year indefinitely until the unabsorbed depreciation gets absorbed. [924B E] 6. The third alternative is the correct one: (a) The unabsorbed depreciation should be allocated among the partners and, like any other loss, will be available to the partners to the extent of his share therein for set off against his business income or other income in the same 913 assessment year. In fact section 32(2), in so far as it talks of depreciation being given effect to in the partners ' assessments recognises that such unabsorbed depreciation should be allocated among the partners. The question is what is to be done thereafter. [932A B] (b) When there is nothing in the sub section or the Act specifically providing even for an apportionment of the depreciation among the partners, it is too contrived a construction to read into the sub section several words intended to provide for a number of partners, each carrying forward his share of the unabsorbed depreciation to successive assessment years. It seems natural and reasonable to construe the section as envisaging the following steps where the assessee is a registered firm: (i) Excessive depreciation should be adjusted in the assessment of the assessee against other business income and against other heads of income; (ii) Depreciation, which remains unabsorbed under (i), will be apportioned to the partners and the share of each will be adjusted against the business and other income of each of the partners pro tanto; (iii) If full effect cannot be given to the depreciation allowance of the assessee by the above processes and some depreciation remains unadjusted, the assessee firm will carry it forward to the succeeding assessment year. [934C G] (c) The sub section, before its 1953 amendment, permitted all assesses and this included registered firms as well to carry forward their unabsorbed depreciation so that though the registered firm paid no tax, it could, on the language claim a carry forward of the depreciation which had been apportioned among the partners. This resulted in such carry forward being claimed even where the whole or a part of the unabsorbed depreciation of the firm had been set off in the assessment of individual partners. The amendment only seeks to make it clear that such carry forward will not be permitted to the extent it has been given effect to in the partners ' assessments; by necessary implication, the carry forward, to the extent it has not been effectively allowed to the partner, continues to be available. The amendment of 1953, therefore, does not help the case of the Revenue. [935F 936A] (d) The objection to the above course is also based on a mental imagery of the firm and its partners as altogether different assesses 914 and of the impermissibility of "bringing back" to the firm 's "file" what has gone away to the* files of the partners. This approach of viewing the two assessments in water tight compartments for all purposes is not correct. In any event, any such theoretical dichotomy cannot prevail over the provisions of section 32(2). [934G 935A] (e) The construction suggested does not result in any double advantage to the partners. [936D] (f) It is true that the construction may result in a certain amount of imbalance in the quantum of relief available as among different partners. But similar imbalance is inherent in the application of any of the three possible alternatives. [936E F] 7. The assessee appellant firm is entitled to carry forward the unabsorbed depreciation computed for the assessment year 1967 68 and have it set off in its assessment for the assessment year 1968 69. The unabsorbed loss for the assessment year, 1967 68, however, cannot be carried forward by the firm to be set off in its assessment for the assessment year 1968 69. [937A B] K. T. Wire Products vs Union of India, ; Garden Silk Weaving Factory, ; Garden Silk Weaving Factory, C. I. T. vs Ram Swarup Gupta, ; Raj Narayan Aggarwala vs C.I.T., [1979] 75 ITR I (Del.); Shankaranarayana Construction Co. vs C. I. T., ; Ballarpur Collieries Co. vs C.I.T., ; C. 1. T. vs Nagpur Gas & Domestic Appliances, ; CIT vs Nagapattinam Import and Export Corp., ; CIT vs Madras Wire Products, ; CIT vs Madras Wire Products, ; CIT vs J. Patel & Co., ; CIT vs Shrinivas Sugar Co., ; CIT vs Singh Transport Co., ; Pearl Wollen Mills vs CIT, ; CIT vs Mahavir Steel Rolling Mills, & H) and CIT vs R. J. Trivedi & Sons, , referred to. IT vs Jaipuria China Clay Mines (P.) Ltd., and Rajapalayam Mills Ltd. vs C. I. T., , followed.

Appeal No. 312 of 1959. Appeal from the judgment and order dated August 23, 1956, of the Bombay High Court in Income tax Reference No. 21 of 1956. Hardyal Hardy and D. Gupta, for the appellant. A.V. Viswanatha Sastri and I. N. Shroff, for the respondent. December 6. The Judgment of the Court was delivered by KAPUR, J. This is an appeal by special leave brought by the Commissioner of Income tax against the judgment and order of the High Court of Bombay answering the question in favour of the assessee. The question referred by the Tribunal was: "Whether on the facts and in the circumstances of the case the amount of Rs. 3,20,162 is an allowable deduction under Section 10(2)(xi) or 10(2)(xv) of the Income tax Act?" which was amended by the High Court as follows: "Whether on the facts and in the circumstances of the case the amount Rs. 3,20,162 is an allowable deduction" and was answered in the affirmative and against the appellant. The facts of the case shortly stated are these: The respondent is a registered firm carrying on business as commission agents. It was treated as the agent of a non resident principal Haji Mohamed Syed Ali Barbari of Port Sudan (hereinafter 'referred to as the nonresident principal. It was carrying on the business of export of cloth and kariana (i.e., miscellaneous goods) to Aden, Saudi Arabia and sudan. It used to supply goods from India to the nonresident principal, who on his part, was sending cotton to the respondent and other merchants for sale in India. For the years 1942 43, 1943 44, 1944 45 and 1945 46, the respondent firm was treated as the agent of the nonresident principal under section 43 of the Income tax Act 951 (which will hereinafter be termed 'the Act ') for the purpose of income tax and Excess Profits Tax. The respondent firm had to pay in all Rs. 3,78,491 under section 42(1) of the Act and after allowing for the amounts which were in its hands the account of the principal non resident showed a debit balance of Rs. 3,20,162. For the year of assessment, 1953 54, the respondent firm treated this amount as a bad debt and claimed it as a deductible loss to be set off against profits. The Income tax Officer treating this claim as one under section 10(2)(xv) of the Act, disallowed it. The Appellate Assistant Commissioner treated it as one under section 10 (2)(xi) of the Act and he also disallowed it. On appeal to the Income tax Appellate Tribunal it was held to be a bad debt and an allowable deduction as it was incurred as a result of the business activities which the respondent firm was carrying on with the nonresident principal. At the instance of the Commissioner of Income tax, the case was stated to the High Court and the High Court modified the question and answered the same in the affirmative, i.e., against the appellant. The High Court held that as the law imposed an obligation upon the respondent firm to discharge the liability and it was incidental to the business of the respondent the amount was a deductible loss; and even if it was not a debt, then also the amount could be claimed by the assessee as a business or trading loss, because in arriving at the true profit of the respondent 's business that loss had to be deducted. The High Court thus applied section 10(1) of the Act to the amount claimed by the respondent. The allowability of the amount in dispute depends upon the nature of the liability imposed upon the respondent firm. The contention of the respondent 's counsel was that it was carrying on foreign trade and had dealings with a foreign merchant and in the course of the business there were imports and exports and therefore the interconnection between the respondent firm and the non ' resident principal was so intimate as to invite the application of section 42(1), i.e., the establishment of agency as 'contemplated in that section. The liability to pay arises under a. 42(2) which provides 952 "Where a person not resident or not ordinarily resident in the taxable territories carries on business with a person resident in the taxable territories, and it appears to the Income tax Officer that owing to the close connection between such persons the course of business is so arranged that the business done by the resident person with the person not resident or not ordinarily resident produces to the resident either no profits or less than the ordinary profits which might be expected to arise in that business, the profits derived therefrom or which may reasonably be deemed to have been derived therefrom, shall be chargeable to income tax in the name of the resident person who shall be deemed to be, for all the purposes of this Act, the assessee in respect of such income tax." Relying on this provision it was argued that the nature of the respondent 's business was foreign trade which was inter connected with the business of the non resident principal. Its nature was such as to attract the imposition of liability on the respondent firm under section 42(2) of the Act and therefore the loss so incurred must be taken to be incidental to and arising out of the business of the respondent. "The thing to be taxed", said Lord Halsbury, L. C., "is the amount of profits and gains. The word 'profits ' I think is to be understood in its natural and proper sense in a sense which no commercial man would. misunderstand": Gresham Life Assurance Society V. Styles (1). Hence even if a deduction is not specifically enumerated in sub section (2) of B. 10 it would still be a debatable item to reflect the taxable profits. The Privy Council in Commissioner of Income tax vs Sir section M. Chitnavis (1) held that the Act nowhere authorises the deduction of bad debts of a business, such a deduction is necessarily allowable because what is chargeable to income tax in respect of a business are the profits and gains of a year and in assessing the amount of profits and gains of that, year account must necessarily be taken of all losses incurred, otherwise true profits and gains cannot be ascertained. In order (1)(1892) , 188 (H.L.). (2)(1932) L.R. 59 I.A. 290, 296. 953 that a loss may be deductible it must be a loss in the business of the assessee and not payment relating to the business of somebody else which under the provisions of the Act is deemed to be and becomes the liability of the assessee. The loss becomes allowable if it "springs directly from and is incidental" to the business of the assessee. The decision therefore mainly depends upon whether the loss claimed is a business loss of that nature. In our opinion the amount which became payable by the respondent firm cannot be called its business loss. In order to be deductible the loss must be in the nature of a commercial loss and, as has been said above, must spring directly out of it and must really be incidental to the business itself. It is not sufficient that it falls on the trader in some 'other capacity or is merely connected with his business. Counsel for the respondent relied upon a judgment of this Court in Badridas Daga vs The Commissioner of Income tax (1). In that case an agent of the assessee engaged for the purpose of carrying on of the assessee 's business had authority to operate a bank account. Acting under such authority the agent withdrew from the bank monies and put them to his personal use. The assessee was able to recover from the agent only a part of the amount misappropriated and the balance was written off as irrecoverable debt and it was held that it was not allowable under section 10(2)(xi) or 10(2)(xv) of the Act but it was a loss deductible in computing the profits under section 10(1) of the Act as a loss incidental to the carrying on of his business. Counsel relied on the following observation of Venkatarama Ayyar, J., at p. 695: "The result is that when a claim is made for a deduction for which there is no specific provision in section 10(2), whether it is admissible or not will depend on whether having regard to accepted commercial practice and trading principles it can be said to arise out of the carrying on of the business and to be incidental to it. ,, That passage has to be read in the circumstances of (1)[1959] S.C.R. 690. 954 that case where the employment of agents was incidental to the carrying on of the business and it was observed that it logically followed that the losses which were incidental to such employment were also incidental to the carrying on of the business. At page 696, it was observed: "At the same time it should be emphasised that the loss for which a deduction could be made under section 10(1) must be one that springs directly from the carrying on of the business and is incidental to it and not any loss sustained by the assessee, even if it has some connection with his business." Reference may also be made to an English decision in Curtis vs J. & G. Oldfield Ltd. (1). In that case the managing director of a company of wine and spirit merchants embezzled monies of the ' company and that. was claimed as a loss as a bad debt and it was held that it was not a trading loss and was therefore not an admissible deduction. In that case the contention of the Crown *as that the sum was not an ordinary trading debt and therefore could not be a bad debt and that the loss was not connected with, and did not arise out of the trade. Rowlatt, J., said at p. 330: "When the Rule speaks of a bad debt it means a debt which is a debt that would have come into the balance sheet as a trading debt in the trade that is in question and that it is bad. It does not really mean any bad debt which, when it was a good debt, would not have come in to swell the profit. " In the present case the liability was imposed upon the respondent firm because it was treated as an agent within the meaning of section 42(1) of the Act and the liability was imposed because of the deeming provision in sub section (2) of section 42 of the Act. can it be said, in the present case, that the liability imposed upon the respondent firm was a business debt arising out of the business of the respondent or to use the words of Venkatarama Ayyar, J., "springs directly from the carrying on of the business and is incidental to it or is a trading debt in the business of the respondent firm. " As we have said above, that condition has not (1)(1925) 955 been fulfilled and the loss which the respondent has incurred is not in its own business but the liability arose because of the business of another person and that is not a permissible deduction within section 10(1) of the Act. It is not a loss which has to be deducted in respect of the business of the respondent from the profits and gains of the respondent 's business. Counsel for the respondent also relied on Lord 's Dairy Farm Ltd. vs Commissioner of Income tax, Bombay(1). That 'was a case of embezzlement by an employee and it was held that the loss directly arose from the necessity of employing cashiers and therefore the loss by embezzlement was a trading loss but in that very case it was held that before a claim could be made for deduction of a debt as bad debt it must be a debt in law. That case is not applicable to the facts of the present case and is of little assistance in the decision of the question before us. Counsel for the respondent next relied on Calcutta Co., Ltd. vs The Commissioner of Income tax (2). It was held in that case that the expression "profits and gains" has to be understood in its commercial sense and that there could be no computation of profits and gains until the expenditure necessary for earning those profits and gains is deducted therefrom and that when there is no specific provision in section 10(2) in regard to claim made, its allowability will depend on accepted commercial practice and trading principles and it will be allowed if it can be said to arise out of the carrying on of the business and is incidental to it. As a principle it is unexceptionable but it does not carry the matter any further. It was next contended that the matter falls within section 10(2)(xi) of the Act, i.e., it is in respect of the busi ness. This contention has even less substance than the claim of deduction under section 10(1). Under cl. (xi) also a debt is only allowable when it is a debt and arises out of and as an incident to the trade. Except in money lending trade debts can only be so described (1) (2) [1959] 37 I.T.R. 956 if they are due from customers for goods supplied or loans toconstituents or transactions of a similar kind. In every case the test is, was the debt due as an incident to the business; if it is not of that character it will be a capital loss. Thus a loan advanced by a firm of Solicitors to a company in the formation of which it acted as legal adviser is not deductible on its becoming irrecoverable because that is not a part of the profession of a Solicitor: C. I. R. vs Hagart & Burn Murdoch (1). In our opinion the High Court 'was in error in answering the question in favour of the respondent. We therefore allow this appeal, set aside the judgment and order of the High Court and answer the question against the respondent. The appellant will have his costs in this Court and in the High Court. Appeal allowed.

The respondent was a registered firm carrying on business as commission agents, and for the purpose of income tax it was treated as the agent of a non resident principal doing business outside India. Under section 42(1) of the Indian Income tax Act the respondent was deemed to be the assessee and had to pay Rs. 3,78,49r as income tax on behalf of the non resident principal. After allowing for the amounts lying with the respondentfirm the account of the non resident principal showed a debit balance of RS. 3,20,162. The respondent treated this amount as a bad debt and claimed it as a deductible loss. The Incometax Officer and the Appellate Assistant Commissioner disallowed the respondent 's claim but the Income Tax Appellate Tribunal held it to be an allowable deduction being a bad debt incurred as a result of the respondent 's business activities with the nonresident principal. The High Court treating the amount as a deductible business loss incurred by the respondent affirmed the decision of the Income tax Tribunal. On appeal by the Commissioner of Income tax, Held, that the respondent was not entitled to the reduction claimed by it. The liability to pay imposed upon it under section 42(2) of the Income tax Act did not arise directly from the carrying on of the business nor was it incidental to the business. The loss was not a commercial loss incurred in the respondentfirm 's own business but it arose out of the business of another person and that was not a permissible deduction within section io(1) or section 10(2)(Xi) of the Act. Gresham Life Assurance Society vs Styles, L.), referred to. Commissioner of Income tax vs Sir section M. Chitnavis, (1932) L. R 59 I. A. 290, followed. Badridas Daga vs Commissioner of Income tax, [1959] S.C.R. 690 and Curtis vs I. and G. Oldfield, Ltd., (1925) 9 T. C. 319, discussed. Lord 's Dairy Farm Ltd. vs Commissioner of Income tax, Bom bay, , Calcutta Co., Ltd. vs Commissioner of Income tax, and C.I.R. vs Hagart and Burn Murdoch; ; , not applicable '. 120 950

The appellant, a partnership firm, was assessed by the Sales Tax Officer, who estimated the turnover for the Calendar year 1971, and for the first six months of the year 1972 and made two orders of assessment dated 26 March 1973 under section 33 of the Bombay Sales Tax Act, 1959 levying Sales Tax and penalty. Against the assessment and penalty orders for the two periods, the appellant appealed under clause (a) of sub section (1) of section 55 of the Act to the Assistant Commissioner. By a common order dated 29th September, 1973 the Assistant Commissioner reduced the quantum of the turnover and, consequently, the tax liability for each of the periods. Not fully satisfied by the relief granted, the appellant proceeded in second appeal to the Sales Tax Tribunal on 8th December, 1973. During the pendency of the appeals before the Tribunal, the Deputy Commissioner, issued two notices to the appellant on 24th April, 1974 requiring it to show cause why the appellate orders dated 29th September, 1973 passed by the Assistant Commissioner should not be revised under section 57 of the Act. The appellant objected to the exercise of revisional power by the Deputy Commissioner during the pendency of the appeals before the Tribunal. On 12th September 1975 the Deputy Commissioner rejected the objection. Against the order of rejection the appellant filed two appeals before the Tribunal, and by its order dated 27th October, 1977 the Tribunal dismissed the appeals. The Tribunal took the view that its deciding those appeals would result in nullifying the revisional power vested in the Deputy Commissioner. The two second appeals filed by the appellant against the appellate orders dated 19th September, 1973 passed by the Assistant Commissioner were adjourned. The appellant filed a writ petition in the High Court against the order of the Deputy Commissioner dated 12th September, 1975 rejecting its preliminary objection and also against the order passed by the Tribunal on 27th October, 1977 dismissing his appeals as well as the notices issued by the Deputy Commissioner on 24th April, 1974 in the purported exercise of his revisional power, contending that the Commissioner of Sales Tax could not exercise his revisional power against the appellate order of the Assistant Commissioner when a second appeal against that order was pending before the Tribunal. 98 The High Court rejected the appellant 's contention observing that as the statute did not provide any other forum or jurisdiction for protecting the interests of the Revenue, it was always open to the Commissioner to interfere in revision with an order prejudicial to the Revenue notwithstanding that such order may be already under appeal before the Tribunal. Allowing the appeal to this Court, ^ HELD: 1. It is not open to the Commissioner to invoke his power under clause (a) of sub section (1) of section 57 and summon the record of an order over which the Tribunal has already assumed appellate jurisdiction. The subordinate status of the Commissioner precludes that. [102 G] 2. An assessment order under the Bombay Sales Tax Act is appealable under section 55 of the Act. When the order is made by the Sales Tax Officer an appeal goes to the Assistant Commissioner. If the order is made by the Assistant Commissioner an appeal goes to the Commissioner and if it has been made by the Commissioner or Deputy Commissioner or Additional Commissioner an appeal lies before the Tribunal. Sub section (2) of section 55 provides for a second appeal against the appellate order of the Assistant Commissioner. The second appeal lies at the option of the appellant to the Commissioner or the Tribunal. The Tribunal exercises appellate jurisdiction by way of second appeal in respect of an assessment order made by the Sales Tax Officer. It also exercises by way of first appeal, appellate jurisdiction over an assessment order made by the Commissioner. It is at the apex of the appellate hierarchy, the Sales Tax Officer, the Assistant Commissioner and the Commissioner all of them being, subordinate to it. [101 C E] 3. While the Commissioner exercises revisional jurisdiction over an order passed by any officer or person subordinate to him, the Tribunal is the revisional authority over an order of the Commissioner. The Act constitutes the Tribunal an appellate as well as a revisional authority over the Commissioner. In quasi judicial matters the Commissioner is therefore subordinate to the Tribunal. [102 D] 4. The Tribunal is the supreme appellate and revisional authority under the statute. It cannot be divested of its jurisdiction to decide on the correctness of an order, it cannot be frustrated in the exercise of that jurisdiction, merely, because a subordinate authority, the Commissioner, has also been vested with jurisdiction over that order. Unless the statute plainly provides to the contrary that appears to be incontrovertible. [102 F] 5. The High Court was in error in concluding that the power to enhance an assessment can be discovered only in the revisional jurisdiction of the Commissioner and nowhere else. [104 H 105 A] 6. In a second appeal under sub section (2) of section 55 of the Bombay Sales Tax Act, the Tribunal has power to enhance the assessment. That being so, it is open to the Revenue to invoke that power in a pending second appeal filed by the dealer before the Tribunal. [104 G] 7. The Commissioner being a subordinate authority to the Tribunal cannot interfere with an order pending in appeal before the Tribunal, especially when 99 the interest of the Revenue is protected by the power of enhancement vested in the Tribunal while disposing of a second appeal filed by a dealer. [105 G] Commissioner of Sales Tax vs Motor and Machinery Manufacturers Ltd., (1976) 38 STC 78 over ruled. Commissioner of Income Tax vs Amritlal Bhogilal distinguished. Ramlal Onkarmal vs Commissioner of Income Tax, Assam , Kelpunj Enterprises vs Commissioner of Income Tax Kerala. , Russell Properties (P.) Ltd. vs A. Chowdhury, inapplicable.

For the assessment years 1961 62 and 1962 63, the corresponding valuation dates of which were March 31, 1961 and March 31, 1962, assessment orders were made under the Wealth Tax Act on March 24, 1961 and March 23, 1962 respectively while the notice of demands were served on the assessee on April 11, 1961 and April 11, 1962 respectively. Against the said notices of demand the assessee preferred appeals on May 9, 1961 and May 9, 1962 respectively. For the purpose of determining the assessee 's net wealth, the assessee 's claim for a deduction of certain sums representing the estimated liabilities on account O? ' income tax and wealth tax was rejected in both assessments by the Wealth Tax Officer. On appeal by the assessee, the Appellate Assistant Commissioner of Wealth Tax allowed a part of the claim. In appeal before the Appellate Tribunal, the Revenue contended that since the assessee had disputed the wealth tax liability of Rs. 22,679/ in respect of the assessment year 1960 61 and the sum of Rs. 39,692/ in respect of the assessment year 1961 62, he was not entitled to a deduction of the same, being barred by reason of the provisions of section 2(m) (iii) (a) of the Wealth Tax Act. The Tribunal rejected the said contention and held that section 2 (m)(a) was not attracted as the tax had not become payable on the relevant valuation dates. The Wealth Tax References made at the instance of the Revenue were decided in favor of the assessee by the High Court of Gujarat by its common judgement in Commissioner of Wealth Tax vs Kantilal Manilal reported in The present appeal by special leave arises therefrom. Dismissing the appeal, the Court ^ HELD: 1.1 In order to invoke the bar prescribed by Section 2(m) (iii) (a) of the Wealth Tax Act it is necessary for the Revenue to establish that both 298 requirements therein are satisfied, that is to say, that an amount of the tax is outstanding on the valuation date and further that the amount is claimed by the assessee in an appeal as not being payable by him. [302E F] 1.2 An amount of tax is outstanding if it is payable and has remained unpaid. In other words, if there is a debt due and there has been no payment of the debt. There are three stages in respect of an income tax liability. The tax liability comes into existence on the last day o f the previous year relevant to the assessment year. Thereafter when the assessment proceedings take place an assessment order is made quantifying the assessable income and determining the tax payable. Thereupon, a notice of demand is served for payment of the tax, and the tax then becomes payable and a debt becomes due to the Revenue. A survey of the provisions of the Wealth Tax Act contained in Sections 14 to 17 and Section 30 makes it clear that in all material respects the scheme of the Wealth Tax Act is in this regard substantially, the same as that incorporated in the Income Tax Act. The notice of demand requiring payment of the tax, interest or penalty is issued pursuant to Section 30 of the Act. If the amount remains unpaid within the periods specified in the notice the amount of the tax is said to be outstanding [303D F] 1.3 Section 2(m)(iii)(a) of the Wealth Tax Act comes into play only after a demand for payment of tax has been made. The clause, read in its entirety, speaks of a debt owed by the assessee represented by an amount of tax "payable in consequence of any order" passed under the relevant tax statute and "outstanding on the valuation dates." [303H; 304A] 1.4 The expression "debt owed" is a debt which the assessee is under an obligation to pay and, therefore, it includes both a liability to pay in present as well as a liability to pay in future an ascertainable sum of money. Both kinds of liabilities are included within the expression "debt owed". But Section 2(m)(iii)(a) narrows the scope down to a liability which exists in present time because the clause speaks of tax outstanding in consequence of an order passed under the relevant taxing statute. [304B C] 1.5 In the present case, the notice of demand in each case was served after the valuation date had been passed. There was no demand already subsisting on the respective valuation dates. As the notices of demand respecting the wealth tax liability of Rs. 22,679 and Rs. 39,692 were served on the assessee subsequent to the valuation dates, if cannot be said that on the respective valuation dates the amount of tax were outstanding. In the result a material requirement of Section 2(m) (iii) (a) is not satisfied and therefore, it cannot be invoked by the Revenue. [304D E] Commissioner of Wealth Tax vs Kantilal Manilal, , approved. Doorga Prasad vs The Secretary of State, , quoted with approval 299 Kesoram Industries & Cotton Mills Ltd. vs Commissioner of Wealth Tax (Central), Calcutta, ; , followed. 1.6 The appeals in the present case, though filed subsequent to the respective valuation dates, would none the less have sufficed to bring the second requirement of section 2 (m) (iii) (a) into operation. But for Section 2 (m) (iii) (a) an amount of a tax outstanding on the valuation date would constitute a debt owed by the assessee on the valuation date, and the assessee would be entitled to claim its deduction in the process of computing his net wealth. Parliament, however, intended that if the amount of the tax was challenged by the assessee as not being payable by him by recourse to any of the statutory remedies prescribed in the relevant Act, such claim to deduction would be barred. Plainly, in order to give full effect to that intent it is immaterial whether the statutory remedy is being availed of on the valuation date or has been taken thereafter. A challenge by the assessee that the amount outstanding is not payable by him is sufficient to bar his claim to deduction whether the challenge is subsisting on the valuation date or is initiated after the valuation date has passed. [305 D; A C] Late P. Appauoo Pillai vs Commissioner of Wealth Tax, Madras, overtuled.

One Nanalal Karsandas, who was a brick manufacturer, held a priority certificate for purchasing coal under the Colliery Control Order and purchased a certain quantity of coal from M/s. section G. Rungta Colliery through the respondents who were commission agents. The respondents applied to the Collector for determining whether they could be described as "dealers" under the Bombay Sales Tax Act, 1953. The Collector held that they were dealers but the Sales Tax Tribunal held otherwise. No step was taken thereafter for a reference to the High 368 Court under sections 34(1) and 30(1) of the Act. On appeal by the State of Bombay by special leave, Held, that the respondents could not be described as "dealers" under the Act as the nature of their business as disclosed by them did not show that they were carrying on the business of selling goods in the State of Bombay but were only commission agents arranging sales to other persons. The proper course for the appellant was to move the High Court and exhaust all his remedies before invoking the jurisdiction of this court under article 136 of the Constitution.

For the assessment year 1959 60, the Income Tax Officer disallowed the loss claimed by the Respondent assessee, on the sale of certain shares, to its allied concern, on the grounds that the sale price was much below the market quota tion and that the motive behind the transactions was to set off the loss against the profits and hence the transactions were not genuine. On appeal by the assessee the Appellate Assistant Com missioner held that the losses on both the transactions cannot be held to be business losses. ion a further appeal by the assessee, the Tribunal observed that there was nothing to show that the transac tions in question had anything to do with the control of the companies concerned. It also relied upon the circumstance that the sales were at the market rates or going rates and held that there was no question of making a bogus loss. Based on these facts and circumstances, the Tribunal held that the losses in respect of the sales of the shares in question, were liable to be allowed as business losses. 639 The Commissioner of Income Tax made an application to the Tribunal for referring certain questions for the deter mination of the High Court. The Tribunal declined to refer the questions on the ground that they were not questions of law, which deserved to be referred to the Court for determi nation. This order of the Tribunal was confirmed by the High Court. This appeal, by special leave, is against the said order of the High Court. Dismissing the appeal, HELD: 1. Where the Tribunal has come to the conclusion that the loss incurred by the assessee in the sale of shares held by it was a trading loss and it is not the case of the Department that in arriving at its decision the Tribunal had taken into consideration any irrelevant material or failed to take into consideration any relevant material, there is no room for interference by the court. It is well settled that the Tribunal is the final fact finding body. The ques tions whether a particular loss is a trading loss or a capital loss and whether the loss is genuine or bogus are primarily questions which have to be determined on the appreciation of facts. The findings of the Tribunal on these questions are not liable to be interfered with unless the Tribunal has taken into consideration any irrelevant materi al or has failed to take into consideration any relevant material or the conclusion arrived at by the Tribunal is perverse in the sense that no reasonable person on the basis of the facts before the Tribunal could have come to the conclusion to which the Tribunal has come. [645B D] C.I.T., Bihar & Orissa vs Dalmia Jain & Co. Ltd., , relied on. It is equally well settled that the decision of the Tribunal has not to be scrutinised sentence by sentence merely to find out whether all facts have been set out in detail by the Tribunal or whether some incidental fact which appears on record has not been noticed by the Tribunal in its judgment. If the court, on a fair reading of the judg ment of the Tribunal, finds that it has taken into account all relevant material and has not taken into account any irrelevant or impermissible material in basing its conclu sions, the decision of the Tribunal is not liable to be interfered with, unless, of 640 course, the conclusions arrived at by the Tribunal are perverse [645DF] 3. In the instant case, the Tribunal has taken note of all the relevant circumstances which appear on record and which were referred to by the Departmental Representatives before the Tribunal. It has not taken into account any material which could he said to be irrelevant in arriving at its conclusions. In considering whether the shares of Bharat Starch & Chemicals Ltd. and Greaves Cotton & Co. Ltd. were held by the assessee as stock in trade or as capital, the Tribunal has taken into account the fact that the assessee was earlier treated by the Department as a dealer in shares, that circumstances cannot he regarded as irrelevant. The decision arrived at by the Tribunal cannot be said to he perverse. [645F H] Karam Chand Thapar & Bros. (P) Ltd. vs Commissioner of Income tax (Central), Calcutta, ; re ferred to. 4. It is not necessary for the Tribunal to state in its judgment specifically or in express words that it has taken into account the cumulative effect of the circumstances or has considered the totality of facts, as if that were a magic formula; if the judgment of the Tribunal shows that it has, in fact, done so, there is no reason to interfere with the decision of the Tribunal. [646B C]

At the sale held by the Official Liquidator under the orders of the Bombay High Court, the appellant a public limited company, purchased the "Hirji Textile Mills" minus its goodwill and its workmen who were discharged earlier. The appellant invested some fresh capital in the business, renovated the machinery and employed workmen on fresh contracts which included 70% of the workmen formerly working in that factory and commenced to produce certain never types of things at the factory w.e.f. November 12, 1955, after obtaining a new licence to run it. When by the end of February, 1956 the Regional Provident Fund Commissioner made certain enquiries about the working of the factory in order to enforce the provisions Provident Fund Act against the appellant, the appellant wrote to him stating that The factory was an infant factory having been established on November 12,1955 and the period of three years had not elapsed from that date within the meaning of Section 16(1) (b) of the Act. When the Regional Provident Fund Commissioner was not convinced about its explanation, the appellant first filed a writ petition under Article 226 of the Constitution before High Court of Bombay in Miscellaneous Application No. 76 of 1957 challenging the applicability of the Act to the factory and after withdrawing it, filed Short Cause Suit No. 2088 of 1958 before the City Civil Court at Bombay for a declaration that the Act and the scheme framed thereunder could not be enforced against the factory until the expiry of three years from November 12, 1955 and that the appellant was not liable to make any contributions under the Act. The trial Court dismissed the suit holding, that in view of the several facts established in the case it could not be presumed that a new factory was established by the 517 appellant on November 12, 1955, that the continuity of the old factory had A not been broken and as such the appellant was liable to make contributions under the Act. The judgment of the trial Court was affirmed by the Bombay High Court in Appeal No.406/64. Hence the appeal by special leave. Dismissing the appeal, the Court, ^ HELD: 1.1. Every statute should be construed so as to advance the object with which it is passed and as far as possible, avoiding any construction which would facilitate evasion of the Act. [521 C] 1.2. In consonance with the directions enshrined in Article 43 of the Constitution, Employees ' Provident Fund Scheme is intended to encourage the habit of thrift amongst the employees and to make available to them either at the time of their retirement or earlier, if necessary, substantial amounts for their use from out of the provident fund amount standing to their credit which is made up of the contributions made by the employers as well as the employees concerned. The Act being a beneficent statue and section 16 of the Act being a clause granting exemption to the employer from the liability to make contributions, section 16 should receive a strict construction [521A B, 522A] 2.1. The criterion for earning exemption under section 16(1)(b) of the Act is that a period of three years has not yet elapsed from the date of establishment of the factory in question. It has no reference to the date on which the employer who is liable to make contributions acquired title to the factory which once established may be interrupted on account of factory holidays, strikes, lock outs, temporary breakdown of machinery, periodic repairs to be effected to the machinery in the factory, non availability of raw materials, paucity of finance etc., and also on account of an order of court as in the present case. Interruptions in the running of factory which is governed by the Act brought about by any of these reasons without more cannot be construed as resulting in the factory ceasing to the factory governed by the Act and on its restarting it cannot be said that a new factory is or has been established. On the resumption of the manufacturing work in the factory it would continue to be governed by the Act which does not state that any kind of stoppage in the working of the factory would give rise to a fresh period of exemption. In other words the period of three years should be counted from the date on which the factory was first established and the fact that there had been a change in the owners p makes no difference to the counting of period. [522A D, 524D E] Lakshmi Rattan Engineering Work vs Regional Provident Fund Commissioner, Punjab & Ors. SC, reiterated. Chaganlal Textile Mills Pvt. Ltd. Y.P.A. Bhaskar Misc. Appln. No. 289 of 1956 disposed of on November 5, 1956: M/s. Bharat Board Mills Ltd. vs The Regional Provident Fund Commissioner & Ors. Vegetable Products Ltd. vs Regional Provident Fund Commissioner W. Bengal & Ors. ; Jamnadas Agarwala & Anr. vs The Regional Provident Fund Commissioner West Bengal & Ors. ; 518 Robindra Textile Mills vs Secretary Ministry of Labour Govt. of India New Delhi & Anr A.I.R. 1936 Punjab 55. Hindustan Electric Co. Ltd. vs Regional Provident Fund Commissioner Punjub & Anr. A I.R 1959 Punjab 27 Regional Provident Fund Commissioner Punjab & Anr. v Lakshmi Rattan Engineering Works Ltd M/s. R.L. Sahni & Co vs Union of India represented by the Regional Provident Commissioner Madras & Anr. A.l.R. ; Kunnath Textile vs Regional Provident Fund Commisioner ; The New Ahmedabad v Bansidar Mills Pvt Ltd. Ahmedabad vs Union of India & Ors. A I R. 1968 Gujarat 71; approved. Provident Fund Inspector Trivendrum vs Secretary N.S. section Co operative Society Changanacherry ; Vithaldas Jagnnathdas & Anr. vs The Regional Provident Fund Commissioner Madras & Anr. ; distinguished.

The question for determination in the appeal was whether the Union of India was entitled to levy and recover arrears of excise duty on cotton cloth for the period April 1, 1949, to March 31, 1950, payable by the respondent, a cloth mill in the State of Rajasthan, under the Rajasthan Excise Duties Ordinance, 1949. After the coming into force of the Indian Constitution and the extension of the Central Excise and Salt Act, 1944, and the rules framed thereunder to the State of Rajasthan by section II of the Finance Act of 1950, the duty in respect of cloth manufactured on and from April 1, 1950, became payable under that Act. The appellant Union, however, claimed that as a result of the agreement entered into on February 25, 1950, by the President of India with the Rajpramukh of Rajasthan under article 278 and article 295 of the Constitution, the Union of India became entitled as from April 1, 1950, to claim and recover all arrears of excise duties which the State of Rajasthan was entitled to recover from the respondent before the Central Excise and Salt Act, 1944, was extended to Rajasthan. Notice having been accordingly served on the respondent demanding payment of the outstanding amount of Rs. 1,36,551 12 as payable by it, it moved the High Court under article 226 of the Constitution. On a reference by the Division Bench which heard the matter in the first instance, the Full Bench finding in favour of the respondent held that article 277 was a complete refutation of the said claim by the Union and article 278 and the said agreement were overridden by it. Held, that the provisions of articles 277 and 278 of the Con stitution, properly construed, leave no manner of doubt that article 277 was in the nature of a saving provision, subject in terms to the provisions of article 278, permitting the States to levy a tax or duty which, after the Constitution could be levied only by the centre. But article 277 had to yield place to any agreement in respect of such taxes and duties made between the Union Government and the Government of a Part B State under article 278. Since there could not be the least doubt in the instant case that the agreement between the President and the Rajpramukh of Rajasthan conceded to the Union the right to levy and collect the arrears of the cotton excise duty in Rajasthan, the High Court was wrong in taking a contrary view of the matter.

The Income tax Officer issued a notice to the assessee under section 34 on the ground that two items of the assessee 's income, namely forest income and interest income, were not included in the original assessment for the year 1942 43. In response the assessee filed a return fully disclosing his interest income but raised the plea that his forest income was not taxable. The, Income tax Officer however, assessed both items to tax. On appeal, the Appellate Tribunal in its order dated April 25, 1961, although dealing only with the forest income and holding that the Income tax Officer had no jurisdiction to initiate proceedings under section 34 in respect of such income, by inadvertence or by mistake, set aside the entire order of reassessment both in respect of forest income, as well as the interest income. The Department did not take any steps to rectify the mistake under section 35 or to have the question of illegality referred to the High Court. Having allowed the order of the Tribunal to become final, the Income tax Officer initiated fresh proceedings under section 34 in respect of the interest income and made a revised assessment order which included this income. The Appellate Tribunal confirmed the assessment but the High Court, on a reference to it under section 66(1), took the view that fresh proceedings under section 24 could not be taken for the reason, inter alia, that the Tribunal 's order dated April 25, 1949 had become final. HELD : The Tribunal had committed a mistake in setting aside the reassessment order in respect of interest income also, but the income tax Officer did not resort to the obvious remedy of having the mistake rectified as provided for under section 35 and allowed the Tribunal 's order dated April 25, 1949 to become final. He could not in the circumstances, reopen the assessment by initiating proceedings under section 34, as otherwise there would be an unrestricted power of review in the hands of the Income tax Officer to go behind the findings of a hierarchy of Tribunals and Courts. [995 E F; 996 F H] C.I.T. Bombay and Aden vs Khemchand Ramdas, (1938)6 I.T.R. 414 and C.I.T. West Punjab vs The Tribune Trust, Lahore, (1948)16 I.T.R. 214, referred to. R. K. Das & Co. vs C.I.T., West Bengal, (1956)30 I.T.R. 439 and C.I.T., Bihar & Orissa vs Maharaja Pratapsingh Bahadur of Gidhaur, distinguished.

iminal Appeals Nos. 57 and 58 of 1960. Appeals by special leave from the judgment and order dated November 5/6, 1958, of the Bombay High Court at Nagpur in Criminal Appeal No. 94 of 1958. Jai Gopal Sethi and G. C. Mathur, for the appellant (in Cr. A. No. 57 of 1960). G. C. Mathur, for the appellant (in Cr. A. No. 58 of 1960). Gopal Singh and D. Gupta, for the respondent. December 5. The Judgment of the Court was delivered by SUBBA RAO, J. These two appeals raise rather an important question on the interpretation of the provisions of section 207A of the Criminal Procedure Code (hereinafter referred to as the Code). ' The facts that have given rise to these appeals may be briefly stated. The appeals arise out of an incident that took place on November 29, 1957, when one Sadashiv was murdered in the courtyard of his house in village Nimgaon. The case of the prosecution was that the four appellants, armed with sticks, went to the house of the deceased, dragged him 'out of the house and beat him with sticks in the courtyard; and that as a result of the beating he died on the next day at about 5 p.m. at Bhandara Hospital. After investigation, the police submitted their report to the Magistrate under 'section 173 of the Code along with the relevant documents. After forwarding the report, the officer in charge of the; police station furnished 892 the appellants with a copy of the report forwarded under sub section (1) of section 173, the First Information Report recorded under section 154 and all other documents or relevant extracts thereof on which the prosecution proposed to rely, including the statements recorded under sub section (3) of section 161 and also intimated them of the persons the: prosecution proposed to. examine as its witnesses. The Magistrate posted the case for inquiry on February 10, 1958 and on that date the prosecution intimated that it did not intend to examine any witnesses in the Magistrate 's Court., , On behalf of the appellants no objection was raised, to,that course. But the Magistrate adjourned the inquiry to February 12, 1958, as he wanted to consider whether any evidence was necessary to be recorded before commitment. On February 12, 1958, reexpressed his opinion that no witness need. be examined at that stage; thereafter, he framed charges against accused appellants under section 302, read with section 34, of the Indian Penal Code, and also under section 448 thereof and committed the appellants to the Sessions Court. Before the learned Sessions Judge the prosecution led four types of evidence, i.e. (1) eye witnesses, namely, P.Ws. 6, 11, 20 and 25; (2) dying declaration, exhibit P 15, supported by P. Ws. 18,22 and 19; (3) the identification of the appellants in jail by P.Ws. 20 and 25; and (4) recovery of various articles at, the instance of the accused appellants. The defence examined four witnesses. On a consideration of the entire evidence, the learned Sessions Judge held that,the prosecution, case had been amply borne out and that the four appellants entered into the house of the deceased and beat him in the manner described by the prosecution wit nesses. no less than 12 confused wounds were inflicted on the deceased, which resulted in the fracture of his ribs and injury to the lung,. and as the, doctor opined that the death was due to shock and haemorrhage resulting from said fracture, the learned Sessions Judge hold that the accused appellants were guilty of murder and convicted them under s.302, read with a. 34, Indian Penal Code,and he further convicted them, under section 448 of the Indian 893 Penal Code for trespassing into the house of the deceased. On these findings the learned Sessions Judge sentenced the appellants to undergo imprisonment for life on the first count and for 3 months rigorous imprisonment on the second count. The appellants preferred an appeal against their convictions and sentences to the High Court of Bombay at Nagpur. The learned Judges of the High Court, on a resurvey of the entire evidence, agreeing with the learned Sessions Judge, accepted the prosecution case, but they held that the appellants were guilty only under section 304, Part 1, read with section 34, Indian Penal Code, and in the result they reduced the sentence from life imprisonment to 10 years ' rigorous imprisonment in regard to appellant 1 and to 7 years ' rigorous imprisonment in regard to appellants 2 to 4. Against the said convictions and sentences, the appellants have preferred, by special leave, appeals to this Court. Criminal Appeal No. 57 of 1960 has been preferred by the first appellant and Criminal Appeal No. 58 of 1960 by appel lants 2 to 4. Learned counsel for the appellants raised before us the following two points: (1) The Sessions Court and, on appeal, the High Court have not properly appreciated the evidence and the circumstances of the case in holding that the appellants had committed the offences. (2) The trial and conviction of the appellants by the Sessions Court were null and void, as the Magistrate had no jurisdiction to commit the appellants to Sessions without examining witnesses under sub section (4) of section 207A of the Code and that, as the order of 'committal was without jurisdiction, the defect was not cured either under section 532 or section 537 of the Code. The first question does not merit any consideration. Both the courts below have, carefully considered the evidence adduced by the prosecution as well as the accused appellants and have accepted the prosecution case. It is a well established practice of this Court not to interfere on questions of fact, particularly when they are concurrent findings, except under exceptional circumstances. We find, no such exceptional 894 circumstances in this case. We, therefore, reject the first contention. The second contention turns upon the interpretation of the relevant provisions of section 207A of the Code. Before attempting to construe the relevant provisions of the section it would be helpful to notice briefly the history of the said section. Under the Criminal Procedure Code, as it originally stood, in the matter of committal proceedings there was no distinction between the proceeding instituated on a police report and that instituted otherwise than on police report. The main object of the committal proceedings was to hold an inquiry to ascertain and record the case which was to be tried before the Court of Sessions. It was primarily to give an opportunity to an accused to know in advance the particulars of evidence that would be adduced against him in the Court of Sessions so that he could be in a position to prepare his defence. Another object, which was no less important, was to enable the Magistrate to discharge an accused if there was no prima facie case against him. This procedure prevented unnecessary harassment to such accused and at the same time saved the valuable time of the Sessions Court. In practice the committal proceeding, whether intended by the Legislature or not, served another purpose, namely, it gave an opportunity to the accused to test the credibility of witnesses by bringing out the discrepancies between their evidence in the committing court, the statements made by them to the police under section 161 of the Code and the evidence given by them in the Court of Sessions. Though very often accused persons took full advantage of this additional opportunity to test the veracity of the witnesses, as often as not, it had turned out to be duplication of trials with the resultants long delays in the disposal of criminal cases. The advantage of committal proceeding. was not solely for the accused, for the. prosecution by examining the witnesses before the committing Magistrate secured their testimony in the sense that though it was tampered subsequenty it is unfortunately a frequent phenomenon in criminal, cases it could use the said evidence as substantive 895 one under section 288 of the Code. The Legislature, in its wisdom, presumably thought that undue delay in the disposal of sessions cases was due to the elaborate and ' prolonged committal proceedings and stepped in to amend the Code in that respect. The whole of section 207A has been inserted by Act XXVI of 1955. While the section simplified the procedure in regard to commitment proceedings instituted on a police report, it confined the existing procedure to proceedings initiated otherwise than on a police report. This distinc tion between the two classes of cases had a reasonable factual basis. In the case of a police report, a thorough inquiry would have been made and the investigating officer would have sent a report to the Magistrate under section 173 of the Code. The amended section 173 of the Code also enjoins on the officer in charge of the police station a duty to furnish before trial, free of cost, to the accused copies of the report forwarded under that section to the Magistrate, the First Information Report recorded under section 154 and all other documents or relevant extracts thereof on which the prosecution proposes to rely, including the statements, if any, recorded under section 164 of the Code and those recorded under sub section (3) of section 161 and a list of witnesses whom the prosecution proposes to examine as its witnesses. The Magistrate in a proceeding instituted on police report would ordinarily be in a position, on the said material to understand the case of the prosecution and know the nature of the evidence that would be adduced on the basis of which the accused is sought to be proceeded against. The accused also would have an opportunity to know beforehand the case he would have to meet and the evidence that would be adduced against him. But in a proceeding instituted otherwise than on a police report, no such maternal would be available and therefore the old procedure continued to apply to such a case. With this background let us look at the provisions of section 207A of the Code. The relevant provisions of section 207A of the Code may now be read: Section 207A: (1) When, in any proceeding instituted on a police report, the Magistrate receives the 896 report forwarded under section 173, he shall, for the purpose of holding an inquiry under this section, fix a date which shall be a date not later than fourteen days from the date of the receipt of the report, unless the Magistrate, for reasons to be recorded, fixes any later date. If, at any time before such date, the officer conducting the prosecution applies to the Magistrate to issue a process to compel the attendance of any witness or the production of any document or thing, the Magistrate shall issue such process unless, for reasons to be recorded, he deems it unnecessary to do so. At the commencement of the inquiry, the Magistrate shall, when the accused appears or is brought before him, satisfy himself that the documents referred to in section 173 have been furnished to the accused and if he finds that the accused has not been furnished with such documents or any of them, he shall cause the same to be so furnished. The Magistrate shall then proceed to take the evidence of such persons, if any, as may be produced by the prosecution as witnesses to the actual commission of the offence alleged, and if the Magistrate is. of opinion that it is necessary in the interests of justice to take the evidence of any one or more of the other witnesses for the prosecution, he may take such evidence also. The accused shall be at liberty to cross examine the witnesses examined under sub section (4), and in such case, the prosecutor may re examine them. (6) When the evidence referred to in sub section (4) has been taken and the Magistrate has considered all the documents referred to in section 173 and has, if necessary, examined the accused for the purpose of enabling him to explain any circumstances appearing in the evidence against him and given the prosecution and the accused an opportunity of being heard, such Magistrate shall, if he is of opinion that such evidence and documents disclose no grounds for committing the accused person for trial, record his reasons ,and discharge him, unless it appears to the Magistrate 897 that such person should be tried before himself or some other Magistrate, in which case he shall proceed, accordingly. When, upon such evidence being taken, such documents being considered, such examination (if any) being made and the prosecution and the accused being given an opportunity of being heard, the Magistrate is of opinion that the accused should be committed for trial, he shall frame a charge under his hand, declaring with what offence the accused is charged. On the interpretation, of sub section (4), which is the main sub section under scrutiny in the present case, the High Courts in India have expressed conflicting views. It would not be necessary to consider the said decisions in detail, but it would be enough if we state the conflicting views, which areas follow: (1) Under sub section (4) the prosecution is bound to examine all the eye witnesses indicated in the police report, and the discretion of the Magistrate to examine witnesses under the second part of the said sub section is only in respect of witnesses other than the eye wit nesses: vide M. Pavalappa vs State of Mysore (1), State vs Andi Betankar (2), Ghisa vs State (3 ) and Chandu Satyanarayana vs The State (4). (2) The Magistrate 's power to examine eye witnesses under the first part of sub section (4) is confined only to such witnesses as are produced in court by the officer conducting the prosecution and if he has not produced any such witnesses, the Magistrate cannot examine any eye witnesses under the second part of the said sub section, for, according to this view, the second part deals with only witnesses other than eye ,witnesses. (3) If the prosecution has not produced any eye witnesses the court may not in its discretion examine any witness under the second part, but can, if satisfied, discharge or commit the accused to sessions on the basis of the documents referred to in section 178 of the Code: vide State vs Lakshmi Narain (5), State, of U. P. vs Satyavir (6). (4) The first part confers a power on a Magistrate only to examine the eyewitnesses produced, but (1) A.I.R. (3) A.I.R. 1919 Raj. (5) A.I.R. 1960 All. 237. (2) A.I.R. 1958 Orissa 241. (4) A.I.R. 1959 A.P.651. (6) A.I.R. 1959 All. 898 the second part empowers him to examine any witness other than those produced, whether eyewitnesses or not, and in a case where the prosecution failed to discharge its duty to produce any witnesses or any important eye witnesses, the court would not be exercising its judicial discretion if it commits the accused to sessions on the basis of documents referred to under section 173 of the Code without examining at least the important witnesses: vide State vs Yasin (1), In re Pedda Amma Muttigadu (2), A. Ishaque vs The State (3) and Manik Chand vs The State (4). We have gone through the judgments of the High Courts cited at the Bar and derived considerable assistance from them for deciding the question raised. But as the question is to be primarily decided on the interpretation of the relevant provisions, we think, without any disrespect to the learned Judges, that it is not necessary to consider the said decisions in detail. Now let us look at the relevant provisions of section 207A of the Code to ascertain its intendment. Sub section (4) is the most important section vis a vis the taking of evidence. It is in two parts, the first part provides for the examination of witnesses produced by the prosecution and the second part for the examination of other witnesses. One of the fundamental rules of interpretation is that if the words of a statute are in themselves precise and unambiguous "no more is necessary than, to expound those words in their natural and ordinary sense, the words themselves in such case best declaring the intention of the legislature". The first part of the sub section reads: "The. Magistrate shall then proceed to take the evidence of such persons, if any, as may be produced by the prosecution as witnesses to the actual commission of the offence alleged. " The word "shall" imposes a peremptory duty on the Magistrate to take the evidence; but the nature of the said evidence is clearly defined thereafter. The clause "as may be produced by the prosecution as witnesses to the actual commission of the offence alleged" governs the words "such persons"; (1) A.I.R. 1958 All. (3) A.I.R. 1958 Cal. (2) A.I.R. 1959 A.P. 469. (4) A.I.R. 1958 Cal. 324. 899 with the result that the duty of the Magistrate to take evidence is only confined to the witnesses produced by the prosecution. Learned counsel for the appellants contends that it could not have been the intention of the Legislature to permit the prosecution to keep back the eye witnesses in the committal court and therefore the word "produced" should be read as "cited". To accept this interpretation is to substitute the word "cited" in place of the word "produced": such a construction is not permissible, especially, when the plain meaning of the word used by the Legislature is clear and unambiguous, and the acceptance of that meaning does not make the section otiose. The phrase "if any" between the words "such persons" and the aforesaid clause emphasizes that the prosecution may not produce any such persons, in which case the obligation to examine such witnesses cannot arise. The wording of the second part of the sub section is also without any ambiguity and it reads: "and if the Magistrate is of opinion that it is necessary in the interests of justice to take the evidence of any one or more of the other witnesses for the prosecution, he may take such evidence also. " No doubt the word "may" in the clause "he may take evidence" imposes duty upon the Magistrate to take other evidence; but that duty can arise only if he is of opinion that it is necessary in the interests of justice to take the evidence. The fulfilment of the condition that gives rise to the duty is left to the discretion of the Magistrate. The duty to take evidence arises only if he is of the requisite opinion. Doubtless the discretion being a judicial one, it should be exercised reasonably by the Magistrate. If he exercises it perversely, it may be liable to be set aside by a superior court. If so, what do the words "other. witnesses" mean? Do they mean witnesses other than eyewitnesses or witnesses, eye witnesses or not, other than those produced before the Magistrate, by the prosecution? The witnesses who will depose to the prosecution case may be of different categories, namely, (i) witnesses who are eye witnesses to the actual commission of the offence alleged; (ii) witnesses who speak to the facts 900 which afford a motive for the commission of the offence; (iii) witnesses who speak to the investigation and to the facts unfurled by the investigation; and (iv) witnesses who speak to the circumstances and facts probablizing the commission of the offence, which is technically described as substantive evidence. Sub section (4) enjoins on the Magistrate a duty to examine the first category of witnesses produced by the prosecution. The word "actual" qualifying the word "commission" emphasises the fact that the said witnesses should be those who have seen the commission of the offence. We have held in interpreting the first part that the Magistrate should examine only such witnesses who are produced before him by the prosecution; but there may not be eyewitnesses in a case, or, if there are, the prosecution may not have produced all of them before the Magistrate. The second part of the sub section therefore confers a discretionary power on the Magistrate to examine any one or more of witnesses of all categories, including the eye witnesses who have not been produced by the prosecution within the meaning of the first part of the said sub section. But it is said that sub sections (6) and (7) indicate that taking of evidence by the Magistrate is a condition precedent for making an order of discharge or of committal and, therefore, the provisions of Sub section (4) must be so construed as to impose a duty on the Magistrate to examine some witnesses. Firstly, we cannot hold that the sub sections impose any such condition. The argument is that the clause in subs. (6), namely, "When the evidence referred to in subsection (4) has been taken" is a condition precedent for making an order of discharge. The adverb "when" in the clause in the context denotes a point of time and not a condition precedent. The clause means nothing more than that an order of discharge can be made under sub section (6) after the events mentioned therein have taken place. Secondly, the two clauses necessarily refer to the corresponding or appropriate situations under the earlier sub sections. The first clause will not come into play if the Magistrate has not taken any evidence. So too, in sub section (7) also the 901 adverb "when" denotes the time when the Magistrate can make the order of committal. If evidence has, not been taken, that sub section is not applicable a the Magistrate proceeds to make an order of committal on other material referred to in the sub section. On the other hand ', if the said two sub sections are construed as imposing a condition precedent for making an order of discharge or commitment, as the case may be, the said two sub sections will directly, come into conflict with the provisions of sub section When one. sub section clearly confers a discretion on the Magistrate to take or not to take evidence, the other subsections take it away. It is not permissible to create conflict by construction, when by an alternative construction all the three sub sections can be harmonized and reconciled. If the construction suggested by learned counsel for the appellants be adopted, it would also lead to an anomaly in that the Magistrate, though the documents referred to in section 173 clearly pronounce the innocence of the accused, has to go through the pretence of examining one or more witnesses to satisfy the provisions of the sub section. Reliance is placed upon section 251A of the Code relating to warrant cases whereunder the Magistrate is authorized, upon consideration of all the documents referred to in section 173 and upon making such examination of the accused as the Magistrate thinks necessary and after giving the prosecution and the accused an opportunity of being heard, to discharge the accused, if he considers the charge against the accused to be groundless; but if he is of opinion that there is ground that the accused has committed an offence alleged against him, he shall frame in writing a charge against the accused. By contrasting this provision with section 207A, it is contended that if the construction put forward by learned counsel is not accepted, the obvious difference between the two. procedures indicated by the Legislature would be obliterated. We cannot agree with this contention. The difference between the two procedures is that, in a case covered by section 207A, evidence will have to be taken under certain 902 contingencies, whereas under section 251A no evidence need be taken at all. That distinguishes the different procedures under the two sections and it is not the province of the court to add any further conditions or limitations to those provided by the Legislature. We are fortified in our view by a decision of this Court in Macherla Hanumantha Rao vs The State of Andhra Pradesh (1). There the point in controversy was whether sa. 207 and 207A, inserted in the Code by the Amending Act XXVI of 1955, violated the provisions of article 14 of the Constitution. In support of the contention that they violated article 14 of the Constitution, it was sought to be made out that the provisions of section 207A of the Code, in comparison and contrast with other provisions of Ch. XVIII of the Code, prescribed a less advantageous position for the accused persons in a proceeding started under a police report than the procedure prescribed in other cases in the succeeding provisions of that chapter. This Court held that there was a reasonable classification to support the difference in the procedures. Sinha J., as he then was, who spoke for the Court, in order to meet the argument based on discri mination, considered the scope of the new section. In doing so, the learned Judge observed thus at p. 403: "The magistrate then has to record the evidence of such witnesses as figure as eye witnesses to the occurrence, and are produced before him. He has also the power ' in the interest of justice, to record such other evidence of the prosecution as he may think necessary, but he is not obliged to record any evidence. Without recording any evidence but after considering all the documents referred to in section 1973 and after examining the accused person and after hearing the parties, it is open to the magistrate to discharge the accused person after recording his reasons that no ground for committing the accused 1 for trial has been made out, unless he decides to try the accused himself or to send him for trial by another magistrate. If, on the other hand, he finds that the accused should be committed for trial, he is required to frame a charge (1) ; 903 disclosing the offence with which the accused is charged. " Then the learned Judge proceeded to consider the scope of section 208 of the Code. After having found that there was obvious difference in the procedure, the learned Judge came to the conclusion that "the Legislature has provided for a clear classification between the two kinds of proceedings at the commitment stage based upon a very relevant consideration, namely, whether or not there has been a previous inquiry by a responsible public servant whose duty it is to discover crime and to bring criminals to speedy justice". It will thus be seen that the observations of the learned Judge at p. 403 cannot be said to be obiter, as learned counsel asks us to hold, for the construction of the provisions of section 207A was necessary to ascertain whether there was reasonable classification or not. Assuming that the said observations are obiter, even then, they record the considered opinion of five learned Judges of this Court. The view we have expressed also is consistent with the said observations. Our view could now be expressed in the following propositions: (1) In a proceeding instituted on a police report, the Magistrate is bound to take evidence of only such eye witnesses as are actually produced by the prosecution in court. (2) The Magistrate, if he is of opinion that it is in the interest of justice to take evidence, whether of eye witnesses or others, he has a duty to do so. (3) If the Magistrate is not of that opinion and if the prosecution has not examined any eye witnesses, he has jurisdiction to discharge or commit the accused to sessions on the basis of the documents referred to in s, 173 of the Code. (4) The discretion of the Magistrate under sub section (4) is a judicial discretion and, therefore, in appropriate cases the order of discharge or committal, as the case may be, is liable to be set aside by a superior court. Before closing we would like to make some observations. Rarely we come across cases where the prosecution does not examine important eye witnesses, for such a procedure would entail the danger of the said witnesses being tampered with by the accused, with 904 the result that there will not be any evidence taken by the committing Magistrate which could be used as substantive evidence under section 288 of the Code. Even if the prosecution takes that risk, the Magistrate shall exercise a sound judicial discretion under the second part of sub section (4) of section 207A in forming the opinion whether witnesses should be examined or not, and any perverse exercise of that discretion can always be rectified by a superior court. Rut there may be a case where the Magistrate can make up his mind definitely on the documents referred to in section 173 without the aid of any oral evidence and in that event he would be within his rights to discharge or commit the accused, as the case may be. In this view, it is not necessary to express our opinion whether even if the Magistrate acted illegally in committing an accused without taking any evidence, the said illegality is cured either by section 537 of the Code or any other section thereof. In the result, the appeals fail and are dismissed. Appeals dismissed.

On the date fixed for the inquiry the prosecution intimated to the Magistrate that it did not intend to examine any witness in the Magistrate 's Court. The Magistrate adjourned the inquiry to consider whether it was necessary to record any evidence before commitment. On the adjourned date he expressed his opinion that no witnesses need be examined, framed charges against the appellants and committed them to the Sessions Court. The appellants contended that the Magistrate had ' no jurisdiction to commit them to Sessions without examining witnesses under sub section (4) of section 207 A of the Code of Criminal Procedure. Held, that the order of commitment was valid and the Magistrate had jurisdiction to make it 'Without recording any evidence. The position under section 207 A of the Code is that: (i) the Magistrate is bound to take evidence of only such eye witnesses as are actually produced by the prosecution before the Committing Court; 891 (ii) the Magistrate if he is of opinion that it is in the interests of justice to take evidence whether of. eye witnesses, or of others, he has a duty to do so; (iii). .the Magistrate, if he is not of that opinion and if the prosecution has not examined any eye witnesses, he has jurisdiction to discharge or commit the accused on the basis of the documents referred to in section 173 of the Code; (iv).the discretion of the Magistrate is a judicial dis cretion which is liable to be corrected by a superior Court, Macherla Hanumantha Rao vs The State of Andhra Pradesh, ; , relied on.

A and B were tried together at one trial, A of offences under sections 120 B, 409,477 A and 471 read with section 476 Indian Penal Code and B of offences under sections 120 B,409 read with 109 298 and 471 read with 467 Indian Penal Code. The Sessions judge who tried them convicted A of all the offences charged and B of the first two charges. On appeal the High Court acquitted both of them. The State appealed to the Supreme Court. The respondents contended: (i) that there was a misjoinder of charges and persons on account of the cumulative use of the various clauses of section 239 of the Code of Criminal Procedure which was not permissible, (ii) that no charge of conspiracy could be framed after the conspiracy had fructified, (iii) that the Sessions judge had failed to inform the accused of their right under 3. 342 ( 4 ) of the Code to examine themselves as witnesses, (iv) that the pardon had been granted to the approver illegally, (v) that the approver had been allowed illegally to refresh his memory by reference to documents at the time when he was examined before the Court, and (vi) that the account books of certain firms which contained no entries regarding payments alleged to have been made to them were inadmissible in evidence. Held that there was no misjoinder of charges and of accused persons. It is open to the Court to avail itself cumula tively of the provisions of the different clauses of section 239 of the Code for the purpose of framing charges. Sections 233 to 236 do not override the provisions of section 239. But the provisions of sections 234 to 236 can also be resorted to in the case of a joint trial of several persons permissible under section 239. Even if there was a misjoinder the High Court was incompetent to set aside the convictions without coming to the definite conclusion that the misjoinder bad occasioned failure of justice. Re: Fankaralapati Gopala Rao, A.I.R. 1936 Andhra 21 and T.B. Mukherji vs State, A.I.R. 1954 All. 501, not approved. State of Andhra Pradesh vs Kandimalla Subbaiah, , K.V. Kriahna Murthy Iyer vs State of Madras, A.I.R. 1954 S.C. 406, Willi (William) Slaney vs State of Madhya Pradesh. ; , Birichh Bhuian vs The State of Bihar. (1964) Supp. 2 S.C.R. 328. Held further that where offences have been committed in pursuance of a conspiracy, it is legally permissible to charge the accused with these offences as well as with the conspiracy to commit those offences. Conspiracy is an entirely independent offence and though other offences are committed in pursuance of the conspiracy, the liability of the conspirators for the conspiracy itself cannot disappear. 299 State of Andhra Pradesh vs Kandimalla Subbaiah. , relied on. S, Swamirathnam vs State of Madras, A.I.R. 1957 S.C. 340 and Natwarlal Sakarlal Mody vs State of Bombay, Cr. A. No. 111 of 1959, dt 19.1.196 1, referred to. Held further, that there was no violation of the provisions of section 342 of the Code. The Sessions Judge had erred on the side of overcautiousness by putting every circumstance appearing in the evidence to the accused. Copies of the questions put to the accused were given to them before hand. Any point left over in the questions was covered in the written statements filed by the accused. In such circumstance the length of the questions or of the examination could not prejudice the accused. Further, there was no duty cast on the Court to inform the accused of their right under section 342 (4) to examine themselves as witnesses. They were represented by counsel who must have been aware of this provision. Held further, that the pardon was legally granted to the approver under section 337 of the Code and was a valid pardon. The offences with which the accused were charged were all such in respect of which a pardon could be granted under section 337 (1). The offences under section 467 read with section 471 which was exclusively triable by a court of sessions and the offence under section 477 A which was mentioned in section 337 (1) itself and thus both fell within the ambit of section 377 (1). the offence under section 409. and consequently the offence under section 120 B also, was punishable with imprisonment for life or with imprisonment not exceeding ten years and was an "offence punishable with imprisonment which may extend to ten years" within the meaning of section 337 (1). Further, tinder G.O. No. 3106 dated September 9, 1949, the Madras Government, the power of a District Magistrate to grant pardon was specifically conferred on Additional District Magistrates, and the Additional District Magistrate, (Independent) who granted the pardon in the present case was competent to do so. Held further, that the Sessions judge acted legally and properly in allowing the approver to refresh his memory, while deposing, by referring to the account books and other documents produced in the case. Where a witness has to depose to a large number of transactions and those transactions are referred to or mentioned either in the account books or in other documents there is nothing wrong in allowing the witness to refer to the account books and the documents 300 while questions are put to him. Such a course is specifically permitted by sections 19 and 160 of the Evidence Act. Held further, that the account books of the firms which contained no entries with respect to payments alleged to have been made were not relevant under section 34 of the Evidence Act, as that section is applicable only to entries in account books regularly kept and says nothing about non existence of entries. But they were relevant under section I I of the Act as the absence of the entries would be inconsistent with the receipt of the amounts which was a fact in issue. They were also relevant under section 5 to prove the facts alleged by the prosecution that payments were never made to these firms and that those firms maintained their accounts in the regular course of business, and both these were relevant facts. Queen Empress V. Grees Chander Banerjee (1884) I.L.R. IO Cal, 1024, and Ram Pershad Singh vs Lakhpati Koer, Cal. 231, referred to.

The appellants were convicted by the High Court for com mitting three murders. In this case the High Court considered the testimony of one "Parwati", given by her in the committing court. She was in eye witness of the occurrence according to her testimony in the committing court. In the sessions court she resiled from her previous statement before the committing Magistrate and made a definite statement that she had not seen the occurrence. Her evidence before the committing court was tendered as evidence under section 288 Criminal Procedure Code in the court of sessions. Her evidence before the committing court was not corroborated in respect of participation in the occurrence by four appellants. The High Court convicted the appellants on the basis of the statement made by Parwati before the committing Magistrate on the ground that it was substantive evidence which did not require any corrobo ration. Held, that the evidence of a witness tendered under section 288 of the Code of Criminal Procedure before the Sessions Court is substantive evidence. In law such evidence is not required to be corroborated. But where a person has made two contradictory statements on oath it is ordinarily unsafe to rely implicitly on her 590 evidence and the judge, before he accepts one or the other of the statements as true, must be satisfied that this is so. For such satisfaction it will ordinarily be necessary for the evidence to be supported by extrinsic evidence not only as to the occurrence in general but also about the participation of the accused in particular. But in a case where even without any extrinsic evidence the judge is satisfied about the truth of one of the statements, his duty will be to rely on such evidence and act accordingly. Bhuboni Sahu vs The King, A.I.R. 1949 P.C. 257, relied on. On the facts of this case, it was held that without corrobo ration from extrinsic evidence, the High Court was not justified in acting on the evidence of the only eye witness Parwati, given in the committing court.

In a writ petition filed under article 226 of the Constitu tion impugning his dismissal from service, the respondent contended that since he had not been given a reasonable opportunity of meeting the allegations against him, his dismissal was void. writ petition was dismissed. Thereupon, the respondent flied a suit in a civil court challenging his dismissal on the ground, among others, that since he had been appointed by the Inspector General of Po lice, his dismissal by the Deputy Inspector General of Police was wrong. The State took the plea that the suit was barred by res judicata. Dismissing the suit, the trial court held that it was not barred by res judicata. The first appellate court dismissed the respondent 's appeal. Purporting to follow a line of decisions of this Court, the High Court held that only that issue between the parties would be res judicata which was raised in the earlier writ petition and was decided by the High Court after contest and since in this case the respondent did not raise in the earlier writ petition the plea of competence of the Deputy Inspector General of Police to dismiss him. the parties were never at issue on it and that the High Court never consid ered and decided this issue in the writ petition. On the question of invoking the principle of constructive res judicata by a party to the subsequent suit on the ground that the matter might or ought to have been raised in the earlier proceedings, the High Court held that this question was left open by the Supreme Court in Gulabchand Chhotalal Parikh vs State of Bombay ; , and allowed the respondent 's appeal. Allowing the States appeal to this Court. HELD: The High Court was wrong in its view because the law in regard to the applicability of the principle of constructive res judicata having been clearly laid down in Devi Lal Modi vs Sales Tax Officer Ratlam and Others ; it was not necessary to reiterate it in Gulabchand 's case as it did not arise for consideration in that case. The clarificatory observation in Gulabchand 's case was misunderstood by the High Court in observing that the matter had been left open by this Court. The doctrine of res judicata is based on two theo ries: (i) the finality and conclusiveness of judicial deci sions for the final termination of disputes in the general interest of the community as a matter of public policy, and (ii) the interest of the individual that he should be pro tected from multiplication of litigation. [430 D] 2. (a) In certain cases, the same set of facts may give rise to two or more causes of action. In such cases res judicata is not confined to the issues which the Court is actually asked to decide but covers issues or facts which are so clearly part of the subject matter of the litigation and so clearly could have been raised that it would be an abuse of the process of the court to allow a new proceeding to be started in respect of them. This rule has sometimes been referred to as constructive res judicata which is an aspect or amplification of the general principle. [431 A] (b) Section 11 of the Code of Civil Procedure, with its six explanations, covers almost the whole field, but the section has, in terms, no application to a petition for the issue of a high prerogative writ. [431 D] (c) Although in the Amalgamated Coalfields Ltd. and others vs Janapada Sabha, ; this Court held that constructive res judicata being a special and artifi cial form of res judicata should not generally be applied to writ petitions, in Devilat Modi 's this Court held that if the doctrine of constructive 429 res judicata was not applied to writ proceedings, it would be open to a party to take one proceeding after another and urge new grounds every time, which was plainly inconsistent with considerations of public policy. The principle of constructive res judicata was, therefore, held applicable to writ petitions as well. [433 G & 434 D] 3. The High Court missed the significance of these deci sions and relied upon L. Jankirama lyer and 'Others vs P.M. Nilakanta lyer and Others [1962] Supp. 1 S.C.R. 206 which had no bearing on the controversy. In Gulabchand 's case, this Court observed that it did not consider it necessary to examine whether the principle of constructive res judicata could be invoked by a party to the subsequent suit oft the ground that a matter which might or ought to have been raised in the earlier proceeding but was not so raised therein could be raised again relying on which the High COurt concluded that the question was left open by this Court. This in turn led the High Court to hold that the principle of resjudicata could not be made applicable to a writ petition. [435 E F] In the instant case, the respondent did not raise the plea that he could not be dismissed by the Deputy Inspector General of Police. This was an important plea which was within his knowledge and could well have been taken in the writ petition. Instead he raised the plea that he was not afforded a reasonable opportunity of meeting the case in the departmental inquiry. It was therefore not permissible for him to take in the subsequent suit the plea that he had been dismissed by an authority subordinate to that by which he was appointed. That was clearly barred by the principle of constructive res judicata and the High Court erred in taking a contrary view. [436 A B]

The appellants father and son (A 1 and A 2) were tried under Sections 302, 201 and 120 B I.P.C. for causing murder of the wife of A.2. The deceased was married to A 2 in 1961. Two sons and one daughter were born to them. Their matrimonial fife was not smooth. There were frequent quarrels. It was in the evidence that the deceased was not healthy both physically and mentally. She was also admitted in 821 mental hospital once. She used to confine herself to her room and she appeared to be somewhat mentally deranged. On 18.3.82 the dead body of the deceased was found in her room in the house of the accused. At that time admitted ly A 2 was not in the house and he was at Suratgarh. On being informed about the death, A 1 sent for a doctor, who examined the deceased and declared her to be dead. Thereaf ter A 1 informed P.W. S, the father of the deceased. The brother of the deceased, P.W. 6 told P.W. 5 that he had seen the dead body lying in the room and that it was giving rotten smell. P.W. 6 lodged a report before the Police. The investigation was taken up, held the inquest, exam ined the witnesses and sent the dead body for post mortem. The Doctor P.W. 2, who conducted the post mortem, opined that the death was due to head injury and pressure in the neck region. After completion of the investigation, the charge sheet was laid. 22 witnesses were examined on behalf of the prose cution. The accused denied the offences. A 1 stated that he was away from 14.3.1982 onwards and was at Jodhpur in his daughter 's house. In support of his plea D.W. 1, the neighb out of A 1 's daughter and his grand danghter, D.W. 2, namely the daughter of A 2 and the deceased were examined. A 2 stated that he was at Suratgarh from 11.3.1982 onwards. Both of them 'denied the allegations of the pfrosecution. The trial court held that there was no evidence of conspiracy between the A 1 and A 2 for murdering the de ceased and the circumstances relied upon by the prosecution were hardly sufficient to connect them with the murder and the accused were acquitted by the trial court. The State preferred an appeal before the Division Bonch of the High Court and the High Court convicted them under Section 120 B and Section 302 read with 34 of the I.P.C. and sentenced each of them to undergo imprisonment for life, against which this appeal was preferred under Section 2(a) of the Supreme Court (Enlargement of General Appellate Jurisdiction) Act, 1970. The appellants contended that the High Court acted an prejudice and suspicion and that there was absolutely no material to prove the conspiracy and muchless to connect the two accused in any manner with the murder. 822 The respondent supported the findings of the High Court and also contended that the accused would at least be liable of having committed other offences. Disposing of the appeal by making modification in the sentence, this Court, HELD: 1. The second accused was not present in the scene house, where the occurrence took place from 11th to 20th March, 1982 and that the first accused was at Jodhpur in his daughter 's house from 14.3.82 to 17.3.82 and returned to Jaipur on 18.3.82. Therefore, they were not present in the house when the deceased died. The Medical Officer, P.W. 2 could not say definitely as to whether the death has occurred before four days of his examination and there is absolutely no evidence either circumstantial or direct to hold that the death took place on 11.3.82 itself as found by the High Court. The evidence of D.W. 2 who is none other than the daughter of the deceased and was very much in the house throughout categorically stated that her mother was alive on 15th March, also. Apart from D.W. 2 the only other inmate of the house during the crucial period was the moth er in law of the deceased who was not even charge sheeted. The letter exhibit P 15 written by the first accused does not in any manner incriminate them and the High Court has grossly erred in holding that A 1 and A 2 entered into conspiracy merely on the basis of conjectures and surmises drawn from theletter. P.Ws. 4, 9 and 10 have not supported the prosecu tion case and the remaining evidence does not in any manner implicate A 1 and A 2 and the other remaining inmate of the house, the mother in law of the deceased, was not even suspected. Therefore having given anxious and careful con sideration to the facts and circumstances of the case it is felt by the Court that the prosecution has miserably failed to bring home the guilt of the appellants. [835A E] 2. Section 202 I.P.C. punishes the illegal omission of those who under law are bound to give information in respect of an offence which he is legally bound to give, particular ly being the head of the family. Under this provision it is necessary for the prosecution to prove (1) that the accused had knowledge or reason to believe that some offence had been committed (2) that the accused had intentionally omit ted to give information respecting that offence and (3) that the accused was legally bound to give that information. [836G H] 3. A 1 was at least under an obligation to give infor mation about the death of the deceased since the same was unnatural. From the 823 medical evidence, it is clear that it was not a natural death and consequently the death should at least be noted as one of suicide. Even in the case of suicide an offence of abetment punishable under Section 306 is inherent. Therefore even in the case of a suicide there is an obligation on the person, who knows or has reason to believe 'that such a suicidal death has occured, to give information. [835G 836A] 4. In the instant case A 1 returned to his house where the dead body was lying on 18.3.82 and the circumstances clearly go to show that he had knowledge that the deceased died of an unnatural death. Therefore he had knowledge or at least had reason to believe that an offence had been commit ted even if, at that stage, be thought that it was only a suicide. Therefore it was his bounden duty particularly as head of the family to inform the authorities. He omitted to do so. On the other hand, he went about telling that the deceased was still alive and her condition was serious. But when P.W. 6, the brother of the deceased, came to the house and enquired, A 1 told him that the body would be Cremated and he intended to do so without informing the authorities. Therefore all the ingredients of Section 202 are made out against him and he clearly committed the offence punishable under this Section at. that stage. [838B D] 5. The fact that A 1 himself was made an accused in other offences subsequently does not absolve him of his complicity in respect of the offence punishable under Sec tion 202 I.P.C. [838D] Kalidas Achamma vs The State ofA.P S.H.O. Karimnagar, I Town P.S., , Approved. Harishchandrasing Sajjansingh Rathod and Another vs State of Gujarat, , Distinguished.

The appellants along with four others were tried and convicted by the Sessions Judge for the offences of dacoity and murder and sentenced to undergo imprisonment for life. On appeal the High Court confirmed the conviction and sentence. Pending that appeal it issued a rule for enhancement of the sentence, and finally the rule was made absolute and they were ordered to be hanged. The appellants thereupon filed the present appeals by special leave granted by this Court, The main point raised before this Court was that the High Court misconceived the ambit and scope of the decision of this Court in Ram Prakash vs State of Punjab [1959] S.C.R. 121 and that the High Court committed an error in law in treating the confession made by the co accused as substantive evidence against the appellants. Held: (i) Though a confession mentioned in section 30 of the Indian Evidence Act is not evidence as defined by section 3 of the _Act, it is an element which may be taken into consideration by the criminal courts and in that sense, it may be described as evidence in a non technical way. But in dealing with a case against an accused person, the court cannot start with the confession of a co accused person, it must begin with other evidence adduced by the prosecution and after it has formed its opinion ,with regard to the quality and effect of the said evidence, then it is per missible to turn to the confession in order to lend assurance to the conclusion of guilt which the judicial mind is about to reach on the said other evidence. Kashmira Singh vs State of Madhya Pradesh, [1952] S.C.R. 526, Emperor vs Lalit Mohan Chukerbutty, Cal. In re: Perivsswami Moopan, Mad. 75 and Bhuboni Sahu vs The King, [1949] 76 I.A. 147, followed. (ii) The distinction between evidence of an accomplice under section 133 and confession tinder section 33 Evidence Act is that the former is evidence under section 3 and the court may treat it as substantive evidence and seek corroboration in other evidence but the latter is not evidence under section 3, and the court should first start from other evidence and then find assurance in the confessional statement for conviction. 624 (iii) The High Court was in error in taking the view that the decision in Ram Prakash 's case was intended to strike a dissenting note from the well established principles in regard to the admissibility and the effect of confessional statement made by accused persons. Ram Prakash vs State of Punjab , explained. (iv) On examining the evidence in the present case on the above principles it is found that there is no sufficient evidence to prove the prosecution case.

Ram Sanehi received two gun shot wounds on his chest, and died within ten minutes. Two of his children claimed to have witnessed the occurrence. The dead body was subjected to post mortem only after about 24 hours had elapsed. The same evening, appellant Subhash surrendered, and appellant Shyam Narain was arrested, though for another offence altogether. The Sessions Court convicted them under section 302 I.P.C. and sentenced Subhash to death and Shyam Narain to imprisonment for life. The accused moved the High Court in appeal, while the Sessions Court referred the matter to it under section 374, for confirmation of the death sentence. The question before this Court was, whether in the case of such references, the High Court was obliged to examine the entire evidence independently. Allowing the appeal, the Court, ^ HELD: On a reference for confirmation of the sentence of death, the High Court is under an obligation to proceed in accordance with the provisions of sections 375 and 376 of the Criminal Procedure Code. The High Court must not only see whether the other order passed by the Sessions Court is correct but it is under an obligation to examine the entire evidence for itself, apart from and independently of the Sessions Court 's appraisal and assessment of that evidence. [589A B] Jumman and Ors. vs The State of Punjab AIR 1957 S.C. 460; Ram Shanker Singh and Ors. vs State of West Bengal [1962] Supp. 1 SCR 49 at 59 and Bhupendra Singh vs The State of Punjab ; , followed.

The respondent Municipality issued a notice under sub section (1) Of section 153A of the Bombay District Municipal Act, 1901, as adapted and applied to the State of Saurashtra and as amended by Act XI Of 1955, calling upon the appellant to show cause why it should not be directed to discharge the effluent Of it 's chemical works in the manner specified in the notice. On the appellant objecting to the notice and the requisition contained therein, a Special Officer was appointed by the Government under sub section (3) of that section to hold an enquiry in the matter. The Special Officer treated some of the issues raised,, as preliminary issues of law and held that the question whether the discharge of the effluent polluted the water and adversely affected the fertility of the soil was a matter for the subjective satisfaction of the Municipality and binding on him and was as such beyond the scope of his enquiry. The question for determination in this appeal was whether the Special Officer was right in the view he took of section 153A(3) Of the Act and in restricting the scope of the enquiry in the way he did. 389 Held, that Special Officer took a wrong view of his jurisdiction under section 153A(3) Of the Act and was in error in restricting the scope of the enquiry. There could be no doubt on a proper appreciation of the scheme laid down by the provision of section 153A of the Act, correctly construed, that while the subjective satisfaction of the Municipality as to the existence of the nuisance could not be questioned at the initial stage when it sought to put the machinery provided by sub section (1) in motion or under sub section (2) where such existence was admitted, the situation contemplated by sub section (3) where the notice and the requisition were wholly disputed, and no mere modification of the requisition sought, was entirely different. The language of sub section (3) and particularly the words " to hold an enquiry into the matter " used by it clearly indicated that where there was such a contest, it was the duty of the Special Officer to enquire into the existence of the alleged nuisance and come to a finding of his own. The status of the Special Official and powers conferred on him by the relevant provisions of the Act, clearly indicated that sub section (3) was intended by the Legislature to be a protection against any arbitrary exercise of its power by the Municipality. It was of the utmost importance that such proceedings should in the interest of the community, be disposed of with all possible expedition. 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.

Appeals Nos. 351 356 and 358 369 of 1960. Appeals by special leave from the Award Part 1 of the Industrial Court, Bombay, in References IC Nos. 261, 297, 238, 241, 248, 263, 266, 271, 301, 302, 257, 237 296: 299, 300, 283 and 284 of 1959. 3 N. A. Palkhivala, I. M. Nanavati, section N. Andley J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the appellants in C. A. No. 351 of 1960. N. A. Palkhivala, J. B. Mehta, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the appellant; in C.As. Nos. 352 and 358 of 1960. R. J. Kolah, J. B. Mehta, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the appellants in C.As. Nos. 353 and 362 of 1960. I. M. Nanavati, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the appellants in C. As. Nos. 354, 356, 363 365, 367 and 369 of 1960. J. B. Mehta, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the appellants in C. As. Nos. 355, 359 361, 366 and 368 of 1960. section R. Vasavada, for the respondent in C. As. Nos. 351, 352, 355, 358, 360 364, and 368 of 1960. N. H. Shaikh, for the respondent in C. As. Nos. 353 and 365 of 1960. N. M. Barot, for the respondent in C. As. Nos. 354, 359 and 367 of 1960. K. L. Hathi, for the respondent in C. As. Nos. 366 and 369 of 1960. December 7. The Judgment of Gajendragadkar, Sarkar, Wanchoo and Mudholkar, JJ. was delivered by Wanchoo, J. Subba Rao, J. delivered a separate Judgment. WANCHOO, J. These eighteen appeals by ' special leave raise a common question and will be dealt with by this judgment. The appellants are certain cotton textile mills in Ahmedabad while the respondent in each appeal is the Textile Labour Association, Ahmedabad, which is a representative union of the cotton textile workers in Ahmedabad. The total number of cotton textile mills in Ahmedabad is 66; therefore, 66 references under section 73 A of the Bombay Industrial Relations Act, No. XI of 1947 (hereinafter called the Act), were made to the industrial court for arbitration of disputes arising out of notices of change 4 given by the respondent making a demand for bonus for employees of textile mills in Ahmedabad. It appears that there was an agreement between the Textile Labour Association and the Ahmedabad Mill owners ' Association representing the member mills on June 27, 1955 (hereinafter referred to as the Agreement), with respect to payment of bonus by the mills to their employees. The Agreement was to remain in force for a period of five years, beginning with January 1, 1953, and ending with December 31, 1957, and related to bonus for the five calendar years from 1953 to 1957 (both inclusive). When the Agreement came to an end disputes arose about bonus for the year 1958. The Agreement was not extended and a notice of change under section 42 of the Act was given by the Textile Labour Association to the Ahmedabad Mill owners ' Association on July 21, 1959, claiming that all the employees employed during the year 1958 in the member mills be paid an adequate amount of bonus having regard to the volume of profits, if any, or some bonus irrespective of profits to fill the gap between the existing wage and the living wage so as to avoid unrest among the employees. It further appears that notice in the same terms was given to individual mills about the same time. As no agreement was arrived at between the parties, 66 references with respect to the sixty six mills were made to the industrial court as already mentioned above. The industrial court considered all the sixty six references together and came to the conclusion that the Agreement of 1955 had worked fairly to both sides and was substantially in accord with the long standing practice in the industry in Ahmedabad even before the Agreement and that its extension for one year was essential for keeping industrial peace. It therefore ordered the extension of the Agreement for the year 1958 and directed the parties to file within six weeks from the date of the award calculations of bonus payable for the year 1958 in the light of the decision and thereafter the court would proceed to award appropriate bonus in the case of each individual mill. Thereupon there were fifty two applications for special leave to 5 appeal to this Court in which special leave was granted. Thirty four of the appeals arising out of the special leave petitions have been withdrawn and only eighteen now remain for decision. It appears that the remaining fourteen mills accepted the decision of the industrial court, so that now forty eight mills are out of the picture and only eighteen are before the Court. The main contention of the appellants before the industrial court was that in view of the law laid down as to bonus by this Court in the Associated Cement Companies Ltd. vs The Workmen (1), it was not open to it to extend the Agreement for the year 1958 as that would be against the concept of bonus as understood in industrial law. The same point is being urged before us and the question that falls for decision is whether the industrial court was right in law in extending the Agreement for another year. In order to appreciate the dispute between the parties with respect to the extension of the Agreement we may refer to the salient terms of the Agreement. Before we do so, we may mention that the Agreement was "without renouncing the general principles enunciated in decisions and awards of the arbitration boards, the industrial court, the Labour Appellate Tribunal and the Supreme Court in respect of bonus or the rights and privileges created thereunder". It was entered into only with a view to creating goodwill among workers and for the purpose of maintaining peace in the industry and without creating a precedent for the future. The Agreement in the first place provided that the claim of the employees for bonus would only arise if there is an available surplus of profit after making provision for all the prior charges. These prior charges were: (i) statutory depreciation and the development rebate; (ii) taxes; (iii) reserve for rehabilitation, replacement and modernisation of block as calculated by the industrial court (basic year 1947); (iv) six per centum return on paid up capital including bonus shares; and (v) two per cent. return on reserves employed as working capital. After the available surplus was determined thus, a mill (1) 6 having an available surplus of profit had to pay to its employees bonus which would in no case be less than an amount equivalent to 4.8% of basic wages earned during the year; nor was it to exceed an amount equivalent to 25% of the basic wages earned during the year. It was also provided that in case the available surplus was more than sufficient for granting bonus at a higher figure than the ceiling of twenty five per centum of basic wages earned during the year and the maximum bonus of 25 per centum was paid, such a mill would be deemed to have set aside a part of the residue of available surplus after grant of maximum bonus not exceeding 25 per cent. of the basic wages earned during the year as a reserve for bonus for purposes of "set on" (adjustment) in subsequent years. Secondly it was provided that where in the case of a mill, the available surplus was not more than the ceiling of 25 per cent. of basic wages fixed for bonus, the bonus would be fixed after deducting at least Rs. 10,000 from the available surplus. Further it was provided that if a mill had an available surplus of profits which would suffice to pay bonus at a rate lower than the minimum of 4.8 per cent. it would pay the minimum and would be entitled to set off the excess amount thus paid against the available surplus in a subsequent year or years and there were provisions how this set off would be worked out. Lastly it was provided that if the profits of a mill were not sufficient to provide for all prior charges as mentioned above, though it had made profits, or where the mill had actually suffered a loss, such a mill would a& a special case for creating goodwill among its workers and for continuing peace in the industry but without creating a precedent pay to its employees the minimum bonus equivalent to 4.8 per cent. of the basic wages but would be entitled to set off this amount towards any available surplus in any subsequent years, subject, however, always to a payment of a minimum bonus at the rate of 4.8 per cent. of basic wages earned during the year. It has been contended on behalf of the appellants that the formula under the Agreement departs in 7 some vital aspects from what is known as the Full Bench formula evolved by the Labour Appellate Tribunal in The Mill owners ' Association, Bombay vs The Bashtriya Mill Mazdoor Sangh (1), which has been approved by this Court in the Associated Cement Companies ' case (2) and is thus the law of the land so far as bonus is concerned. It is urged therefore that inasmuch as the formula under the Agreement departs from the Full Bench formula which is now the law of the land, it was not open to the industrial court to extend the Agreement in the face of the decision of this Court in Associated Cement Companies ' case(1) and in so far as the industrial court has done so it has gone against the law relating to bonus and therefore the award should be set aside. Two questions immediately arise in this connection: the first relates to the jurisdiction of the industrial court to impose new obligations upon the parties and the second is whether if the industrial court has jurisdiction to impose new obligations it could do so in a matter of this kind considering the concept of bonus as laid down by the decisions of this Court. So far as the first question is concerned (namely, the general power of an industrial court to impose new obligations upon the parties), the matter is now well settled by the decisions of the Federal Court and also of this Court. It was held by the Federal Court in Western India Automobile Association vs Industrial Tribunal, Bombay and Others (3) that " adjudication does not in our opinion mean adjudication according to the strict law of master and servant. The award of the tribunal may contain provisions for settlement of a dispute which no court could order if it was bound by ordinary law, but the tribunal is not fettered in any way by these limitations. " The Federal Court also approved the view of Ludwig Teller that "industrial arbitration may involve the extension of an agreement or the making of a new one, or in (1) (2) (3) 8 general the creation of new obligations or modification of old ones while commercial arbitration generally concerns itself with interpretation of existing obligations and disputes relating to existing agreements (see p. 345)." This Court also in Rohtas Industries Ltd. vs Brijnandan Pandey (1) held that " a court of law proceeds on the footing that no power exists in the courts to make contracts for the people; and the parties must make their own contracts. The Courts reach their limit of power when they enforce contracts which the parties have made. An industrial tribunal is not so fettered and may create new obligations or modify contracts in the interests of industrial peace, to protect legitimate trade union activities and to prevent unfair practice and/or victimisation (see p. 810). " In Patna Electric Supply Co. vs Patna Electric Supply Workers ' Union (2), this Court held that "there is no doubt 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 full cooperation between them (see p. 1038)." and approved of the decision of the Federal Court in Western India Automobile Association 's case (3). There is no doubt therefore that it is open to an industrial court in an appropriate case to impose new obligations on the parties before it or modify contracts in the interest of industrial peace or give awards which may have the effect of extending existing agreement or making a new one. This, however, does not mean than an industrial court can do anything and every thing when dealing with an industrial dispute. This power is conditioned by the subject matter with which it is dealing and also by the existing industrial law and it would not be open to it while dealing with a particular matter before it to overlook the industrial (1) ; (2) [1959] SUPP. 2 S.C.R. 761. (3) 9 law relating to that matter as laid down by the legislature or by this Court. This brings us to the second question, which is the real question in dispute in this case, namely, when dealing with a bonus case, like the present, was it open to the industrial court to overlook the law laid 7 down by this Court in Associated Cement Companies ' case (1) and make an award extending the Agreement for a further period of one year? In order to determine this question, we have to look at the concept of bonus as evolved in the industrial law of this country by industrial tribunals and now by the decision of this Court. So far as we can see, there are four types of bonus which have been evolved under the industrial law as laid down by this Court. Firstly, there is what is called a production bonus or incentive wage (see Titaghur Paper Mills V. Its Workmen (2) ); the second is bonus as an implied term of contract between the parties (see Messrs. Ispahani Ltd. vs Ispahani Employees ' Union (3)); the third is customary bonus in connection with some festival (see The Graham Trading Co. vs Its Workmen (4)) and the fourth is profit bonus which was evolved by the Labour Appellate Tribunal in The Mill owners ' Association Bombay vs The Rashtriya Mill Mazdoor Sangh, Bombay (5), and which has been considered by this Court fully in two cases. We are in the present case dealing with bonus of the fourth kind, namely, profit bonus and what we say subsequently refers only to this kind of bonus. What is the concept of profit bonus with which we are concerned in this case, for it is this concept which will determine whether it was open to the industrial court in this case to extend the Agreement for 1958? In Muir Mills Co. Ltd. vs Suti Mills Mazdoor Union (6), this Court pointed out that "There are two conditions, which have to be satisfied before a demand for bonus can be justified and (1) [1959] SUPP. 2 S.C.R. 1012. (3) [1960] 1 S.C.R. 24.(4) [1960] 1 S.C.R. 107. (5) [1955] 1 S.C.R. 991. 2 10 they are: (1) when wages fall short of the living standard, and (2) industry makes huge profits part of which are due to the contribution which the workmen make in increasing production. The demand for bonus becomes an industrial claim. . The basis for the claim is that labour and capital both contribute to the earning of the industrial concern and it is fair that labour should ' derive some benefit, if there is a surplus after meeting prior or necessary charges. . . The surplus that remained after meeting the aforesaid prior charges would be available for distribution as bonus. " The matter was again considered by this Court in the Associated Cement Companies ' case (1) where the Full Bench formula evolved by the Labour Appellate Tribunal was gone into at length. The workmen contended in that case that the formula required revision as the employers were becoming increasingly more rehabilitation conscious and their appetite for the provision for rehabilitation was fast growing with the result that in most cases, after allowing for rehabilitation, there was no surplus left for the purpose of bonus and the main object of the formula was thus frustrated. It was further contended for the workmen that the whole of rehabilitation expenses should not be provided for out of trading profits and that the claim for rehabilitation should be fixed at a reasonable amount and the industry should be required to find the balance from other sources. It was there held that"though there may be some force in the plea made for the revision of the Full Bench formula, the problem raised by the said plea is of such a character that it can appropriately be considered only by a high powered commission and not by this Court, while hearing the present group of appeals. "This Court also held that "the Full Bench formula had on the whole work ed fairly satisfactorily in a large number of industries all over the country, and the claim for bonus should be decided by the Tribunals on the basis of this formula without attempting to revise it. The (1) 11 formula was elastic enough to meet reasonably the claims of the industry and labour for fair play and justice. . It was based on two considerations: first, that labour was entitled to claim a share in the trading profits of the industry, because it had parti ally contributed to the same; and second, that labour was entitled to claim that the gap between its actual wage and the living wage should within reasonable limits be filled up. " The Full Bench formula provided for arriving at the available surplus after meeting prior charges, namely, (i) depreciation, (ii) taxes, (iii) return on paid up capital, (iv) return on working capital and (v) rehabilitation. The formula further dealt with the claim for bonus on the basis that the relevant year is a selfsufficient unit and appropriate accounts have to be made in respect of the said year. Finally, it was pointed out that it was only after all the prior charges had thus been determined and deducted from the gross profits that the available surplus could be ascertained for payment of bonus, and that when the available surplus had been ascertained, there were three parties entitled to claim shares therein, namely, (i) labour 's claim for bonus, (ii) industry 's claim for the purpose of expansion and other needs, and (iii) the shareholders ' claim for additional return on the capital invested by them; the ratio of distribution would neces sarily depend on several factors. It would thus be clear that the essential concept of profit bonus is that there should be an available surplus determined according to the principles laid down in the cases mentioned above for distribution. If there is no such available surplus for distribution, there can be no case for payment of profit bonus. This is the industrial law as laid down by this Court with respect to this kind of bonus in Associated Cement Companies ' case (1). It would in our opinion be not open to an industrial court or tribunal to ignore this law as to bonus and to extend an agreement for payment of bonus, which is against the basic concept of bonus as laid down by the decisions of this Court on the ground that an (1) 12 industrial court has power generally to extend agreements or to create new obligations. As already pointed out, that power has to be exercised keeping in view the subject matter before the tribunal and the law laid down by the legislature or by the decisions of this Court, with respect to that subject matter. The industrial court in this case was not unaware of this position, viz., that it *as departing from the law laid down in the Associated Cement Companies ' case (1) and other bonus cases; but it held that this Court was dealing in those cases with individual units, and not with a case where there were numerous concerns in an industry at one centre, with its particular historical back ground, where previous awards had been on an industry wise basis. It therefore held that the decisions of this Court could not apply in their entirety to the dispute before it and that this Court could not have intended that in a case where there was the additional circumstance that the parties had themselves voluntarily modified the bonus formula in some respects by a long term agreement, that could not be extended by an industrial court. It is the correctness of this view which has been strongly disputed before us by the appellants. Before deal with this matter, we should like to point out that the fact that there are numerous concerns in a particular place can have no relevance in considering the question whether the Full Bench formula can apply to cases like the present. Even though this Court was dealing with the case of one concern, namely, the Associated Cement Companies, it pointed out that the Full Bench formula had worked fairly satisfactorily all over the country and should continue to be applied without revision till such time as a high powered commission went into the question. There is in our opinion no question of industry cum region approach in the matter of a bonus dispute of this kind. There is no doubt that in many matters, like wages, conditions of service, over time allowance, dearness allowance, gratuity, and so on, industry cum region approach has been made by industrial courts (1) 13 in this country and, rightly so. But there is, in our opinion, no scope for an approach of this kind in the case of bonus, the basic concept of which is that payment depends on surplus of profits available according to some formula in the case of each industrial concern. Nor can it be said that the Agreement in this case is dealing with bonus in what is known as industry cumregion basis. Its salient terms as set out above will show that it deals with bonus according to available surplus of each mill, so that bonus paid by each mill depends on its own available surplus and the sixty six mills situate in Ahmedabad may pay different amounts of bonus varying from a minimum of 4 8 per cent. of the basic wages to 25 per cent. of the basic wages. Similar differences will arise if the Full Bench formula is applied to the sixty six mills in Ahmedabad. Thus the Agreement which has been extended, is not based on industry cum region approach, as it is understood. That approach, say, with respect to wages means that wages of all concerns situate in a particular area engaged in a particular industry should be the same. On that approach the bonus of all these sixty six mills should also be the same percentage for each mill in that area; but that is not the basis on which the Agreement was arrived at. The basis of the Agreement is that each individual mill is treated as a separate unit and its available surplus worked out according to the formula in the Agreement itself. This is also the basis of the Full Bench formula and the available surplus of each unit is worked out according to that formula, though the result of the application of the two formulae in each case may not be the same. There is in our opinion therefore no justification for the view that the Full Bench formula approved by this Court in the Associated Cement Companies ' case (1) can have no application where there are numerous concerns of one nature at one centre. Some bonus awards were brought to our notice to show that they were on industry cum region basis, namely, The Sugar Mills of Bihar vs Their Workmen (2) and The Sugar Mills, Uttar Pradesh vs (1) (2) [1951] I. L. L. J. 469. 14 Their Workmen(1). These awards related to sugar industry in Uttar Pradesh and in Bihar. As we read these decisions, we do not find real industry cumregion approach which would result in uniform bonus for all the mills dealt with by these two awards. What we find is that a different formula was worked out for awarding profit bonus linked with production on the basis that there were profits; but when the formula is worked for each mill the bonus would differ from mill to mill according to its production. Further, we find that in the Uttar Pradesh case there were certain exemptions granted to certain factories, presumably on the ground that they were not in a position to pay bonus for want of sufficient profits. It is true that in the Bihar case it was said that the question of bonus could be considered on industry wise and not on unit wise basis, but that only meant that one formula was evolved for the whole of Bihar and applied to every mill in that area. That is what exactly the Full Bench formula also has done, for it is the same formula which applies to all industrial concerns all over the country now after the decision of this Court. In the Bihar case, an argument was addressed to apply the Full Bench formula, but that was not accepted on the ground that balance sheets and profit and loss accounts were not reliable and therefore bonus was linked with production. In the Bihar case also some factories were exempted from paying bonus presumably on the ground that they were unable to do so not having made profits. These cases therefore are not instances of real industry cum region approach. Reference was also made to The, Textile Mills in Coimbatore District vs Their Workmen (2) relating to Coimbatore textile mills. In that case the industrial court considered whether bonus at a flat rate for all the mills should be awarded or whether a distinction should be made between mills and mills. It held that the mills themselves when they paid bonus observed or maintained no distinction; therefore in the peculiar circumstances of that case a uniform rate of 33 1/3 per cent. was awarded for all the mills as specially all the mills had (1) (2) 15 without exception 'made unique profits. As we have said already the basic concept of profit bonus, as it appears from the judgments of this Court, is that there should be an available surplus of profits in a particular concern in a particular year, to which the bonus relates and on this basic concept there is no scope for an approach on the basis of industry cum region in the matter of bonus in the sense that every mill in a region should pay the same bonus. There is therefore no question of industry cum region approach in the present case, and even the formula in the Agreement is not on a real industry cum region approach and has to be worked out from mill to mill, which is like the Full Bench formula. The reasons therefore which led the industrial court in this case to distinguish and depart from the decision of this Court in The Associated Cement Companies ' case (1) do not appear to us to be substantial and there was therefore no ground for departing from that decision for those reasons. This brings us to a consideration of the formula as provided in the Agreement and the Full Bench formula as approved by this Court. It was urged on behalf of the respondent that the two formulae were basically the same; both provided for prior charges and in both bonus was to be paid on the availability of surplus profits, though it was admitted that in certain respects there were differences. Now if these differences were merely of detail and did not affect some of the vital aspects of the Full Bench formula it might be said that there was no ignoring of the law as laid down by this Court and therefore the tribunal was not unjustified in extending the Agreement for a year. But a comparison of the formula in the Agreement with the Full Bench formula shows differences in three vital aspects. In the first place, rehabilitation provided in the Agreement differs vitally from rehabilitation as explained in The Associated Cement Companies case (1). In the second place, the formula in the Agreement provides for payment of a minimum bonus even though there may be no available surplus and even though the particular mill might have made actual (1) 16 loss. Thirdly, while the Full Bench formula as approved by this Court treats a particular year as a selfsufficient unit, there is provision for set off and set on in the formula in the Agreement. Can it therefore be said that the formula in the Agreement which departs in these vital particulars from the Full Bench formula in the matter of bonus could be extended for another year by the industrial court in the face of the decisions of this Court laying down the law as to what profit bonus is and how it should be worked out? The tribunal therefore when it extended the formula in the Agreement which departed from the Full Bench formula in certain vital aspects was undoubtedly ignoring the industrial law as laid down by this Court and going against it. It was its duty when dealing with the question of profit bonus to apply the Full Bench formula, as approved by this Court and then arrive at the quantum of bonus to be awarded in the case of each mill. In particular by extending the Agreement the tribunal made it possible for payment of a minimum bonus even when there was either insufficient available surplus to pay bonus or no available surplus at all or even actual loss; the tribunal was thus definitely going against the industrial law relating to bonus as laid down by this Court. It had in our opinion no power to do so and the reasons which it gave for departing from the law laid down by this Court are unsubstantial and do not commend themselves to us. In these circumstances the order of the tribunal extending the Agreement for a year cannot be upheld. Further it was urged that in any case the Agreement contemplates payment of bonus out of profits of the industry at Ahmedabad as a whole and that is why it has provided for set off and set on. Whatever may be said about this provision on a long term basis, the tribunal 's jurisdiction was limited by its terms of reference. There was not one reference before the tribunal on industry cum region basis but sixty six separate references, one relating to each mill. It was required to consider the question of bonus for each mill for the year 1958 only and thus had nothing to 17 do with set off and set on or the profits of the industry as a whole at Ahmedabad. The tribunal was only concerned with 1958 and no consideration as to what happened before that year or what may happen after 1958 could enter into its decision of the question of bonus for the year 1958. The principle of set off and set on therefore to be found in the Agreement could not convert payment of bonus for 1958, say, by a loss making mill into profit bonus as laid down by the decisions of this Court. The tribunal 's award in this case therefore would clearly be against the law as to bonus laid down by this Court, for its jurisdiction was confined only to the year 1958 and no more. It was however urged on behalf of the respondent that there is a fifth kind of bonus, namely, goodwill bonus and that the Agreement when it provides for a minimum bonus irrespective of availability of profits provides for such bonus in the interest of industrial peace. It is enough to say that so far as what is called goodwill bonus is concerned it pre supposes that it is given by the employer out of his own free will without any compulsion by an industrial court. As its very name implies it is a bonus which is given by the employer out of his free consent in order that there may be goodwill between him and his workmen; but there can be no question of imposing a goodwill bonus by industrial courts, as imposition of such a bonus is a contradiction of its very concept. We have already referred to four kinds of bonus which prevail in the industrial law in India and which can in certain circumstances be imposed by industrial tribunals; but there can be no question of the imposition of the so called goodwill bonus, for that bonus depends upon the goodwill of the parties and on their free consent. In the absence of such free consent, there can be no question of any goodwill bonus. Before we part with these appeals, however, we must briefly advert to the general considerations which have been pressed before us very strongly by Mr. Vasavada for the respondents and Mr. Ambekar for the intervening parties. It has been urged before us 18 that we should be reluctant to interfere with the agreement because it has worked satisfactorily in Ahmedabad, and the reversal of the award under appeal may lead to discontent in a very important centre of.textile industry in this country. It has also been strenuously argued that the Agreement offers a very reasonable solution to the vexed problem of bonus and the pattern set by it has been copied in Bombay, Madhya Pradesh and Coimbatore. If the pattern thus set for determining the textile employees ' claim for bonus has been adopted by a substantial part of the textile industry in this country, the Court should desist from disturbing the smooth working of the said pattern unless it is com pelled to do so. It may be conceded that some features of the Agreement are undoubtedly very reasonable and in the interest of the industry as a whole. The agreement has put a ceiling on bonus and that is a term very much in favour of the employer, because in some cases where the available surplus is very large, then under the working of the Full Bench formula the employees are tempted to claim, and industrial tribunals are justified in awarding, a pro portionately substantial amount as bonus reaching or even exceeding in some cases the level of basic wages of even 8 or 9 months. This trend has been controlled by the Agreement. It is true that the Agreement requires the payment of the minimum bonus but this provision is intended to work as a part of the larger agreement spreading over some years and the employer has agreed to pay the minimum bonus even though in a particular year he may have no available surplus, because he and his employees expect or anticipate that the employer may have available surplus in the succeeding year. The working of the Agreement is really intended to spread over a number of years and the account between the employers and the employees in that behalf is conceived as a continuing and running account. These features of the Agreement may be regarded as commendable. The problem of rehabilitation which has assumed a complex form has also been attempted to be solved by the Agreement in a practical way. The solution 19 adopted by the Agreement in that behalf, it is claimed, is based on the historical and factual genesis of the original formula evolved by the Full Bench of the Labour Appellate Tribunal when it dealt with the problem of the textile industry in Bombay. The argument is that until 1962, the Agreement should be allowed to work when the position may be reviewed at length. Since this Court delivered its judgment in the case of The Associated Cement Companies (1) it has come to our notice that in cases where the employer claims an exaggerated amount for rehabilitation, or where a reasonable claim made by the employer in that behalf is unreasonably challenged by the employees, the dispute is protracted. The trial of the issue tends to become complicated, and that leads to bitterness between the parties. It has been urged before us that time has now come when the industrial courts will have to face the problem of radically changing the formula. It is argued that modern economic thought does not encourage the theory that the whole of the rehabilitation amount must come from the current profits of the industry, and it was stated before us that Government may have gradually to step in to assist the industry by advancing sufficient loans on reasonable terms to enable the industry to meet the demand of its rehabilitation. However, as we pointed out in our decision in the case of The Associated Cement Companies (1) these matters can be properly and effectively decided by an industrial court if the major representative industries in the country and their employees are brought before it with a proper reference, or it can be tackled more appropriately by a high power commission appointed in that behalf. We were told that the Government of India has taken a decision to appoint such a commission, and that it would soon resolve this problem on a more rational and scientific basis. During the course of the hearing of these appeals we suggested to the parties that in view of the pending appointment of the commission, parties may settle the present dispute amicably and that the appellant mills may fall in line with the rest (1) 20 of the mills in Ahmedabad, but despite their best efforts the parties could not settle the dispute and wanted a decision from this Court on the points of law raised in the present appeals; that is why we have had to decide the points of law, and in doing so inevitably general considerations to which we have just adverted cannot play a material part. In the course of the argument reference was made by Mr. Ambekar to the concept of goodwill bonus; that again is a matter which may be evolved by agreement between the parties or decided by a highpower commission. If the matter has to be decided according to law as has been laid down by this Court then the conclusion would be inevitable that on essential points the Agreement departs from the Full Bench formula, and however commendable it may be on the whole it can continue only by agreement and cannot be enforced by industrial adjudication against the will of any of the parties; that is why we have come to the conclusion, though not without regret, that the appeals must be allowed and the matter must be sent back to the tribunal for disposing of the issue before it in accordance with law. We direct that the tribunal should proceed to try the question whether any bonus should be awarded to the employees of the eighteen mills before us on the basis of the Full Bench formula as interpreted by this Court in the case of The Associated Cement Companies (1). In the circumstances there will be no order as to costs. SUBBA RAO, J. I have had the advantage of perusing the judgment prepared by my learned brother, Wanchoo, J. I regret my inability to agree. As mine is a solitary dissent, it may not serve any useful purpose to elaborate on the question raised at great length. I would, therefore, briefly refer to the relevant facts which have already been fully stated by my learned brother and express my views concisely on the question. presented before us. These appeals raise a dispute between the Textile Labour Association,, Ahmedabad, the representative (1) 21 union of the textile industry in Ahmedabad, and the various textile mills in that area in respect of the bonus payable for the year 1958. The said Labour Union entered into a five year pact with the Ahmedabad Mill Owners ' Association, representing the member mills, in regard to payment of bonus for the years 1953 to 1957. The Labour Union demanded bonus for the year 1958 on the basis of the said pact. The mill owners claimed that the said pact was contrary to the law laid down by the decision of this Court in the case of The Associated Cement Companies Ltd., Dwarka Cement Works, Dwarka vs Its Workmen (1) and that, if the rehabilitation cost was calculated on the basis of the principles laid down therein, there would not be any "available surplus" to sustain the claim for bonus. The Industrial Court to which the dispute was referred elaborately. considered the arguments advanced and came to the conclusion that the five year pact which originated in Ahmedabad was not only fair in itself but also an important contribution to industrial peace, and that it did not in any way run counter to the law laid down by the Supreme Court. On that finding it extended the operation of the pact for one more year and directed the parties to file within six weeks from the date of the award calculations in respect of the bonus payable for the year 1958, in the light of its decision and on the footing that the five year pact was for six years. The main question in the appeals is whether the said pact violates the law laid down by this Court. Before considering this contention it would be convenient to notice the terms of the said pact. The said pact is a lengthy document, though precisely drawn, and to read it in full is to unnecessarily burden the judgment. I shall, therefore, briefly summarize its terms. The contracting parties were the Textile Labour Association of Ahmedabad, a representative union for the local area of Ahmedabad on the one part, and the Ahmedabad Mill Owners ' Association, Ahmedabad, representing its local member mills, on the other part. (1) 22 It was executed on June 27, 1955, to cover a period of five years from 1953 to 1957, inclusive of both years, for grant of bonus to the employees of the Cotton Textile Mills of Ahmedabad. The object of the agreement was to create good will among the workers and for the purpose of maintaining peace in the industry. The basis of the agreement was that it applied for the entire Ahmedabad Textile Industry and for a period of five years. The "available surplus" of each mill was ascertained in accordance with the Full Bench Formula laid down by the Labour Appellate Tribunal in Mill Owners ' Association, Bombay vs The Rashtriya Mill Mazdoor Sangh, Bombay (1). The maximum bonus payable by every mill of the said area was fixed at 25 per cent. of the total basic wages earned during the year, and the minimum was fixed at 4.8 per cent. of the said basic wages. If in a particular year a mill had an "available surplus" adequate for granting bonus at a higher quantum than the ceiling of 25 per cent. of the basic wages. it would nationally set aside the part of the residue of the "available surplus" after the grant of the maximum bonus not exceeding an amount equivalent to 25 per cent. of the basic wages earned during that year as a reserve for bonus for the purpose of "set on" (adjustment) in subsequent years. If the "available surplus" was adequate only to grant bonus at a rate lower than the ceiling, the quantum of bonus would be fixed in such a manner that there would remain with the mill at least a minimum of Rs. 10,000. If in respect of any year a mill had an "available surplus" adequate to pay bonus at a rate lower than the minimum rate, it would be entitled to "set off" the excess amount of bonus that would be payable in a subsequent year or years. In setting off the said amount of bonus that, would be payable against subsequent year or years, if the surplus was adequate only to grant bonus at a rate lower than the maximum rate, the mill would first set aside out of the "available surplus" an amount of Rs. 10,000 and, then out of the balance, it would further take out the excess amount paid by it as bonus in the previous (1) 23 year, and then it would distribute the remainder as bonus. Even if a mill had made a loss in a particular year, it had to pay the minimum bonus, but it would be entitled to "set off" the amount thus paid against the amount of bonus that would be payable in the subsequent year or years, in the same manner as in the case of a surplus adequate to grant bonus only at a rate lower than 25 per cent. of the basic wages. In short, when the surplus was adequate to pay bonus at 25 per cent. of the basic wages earned during the year, a mill had to pay the maximum of 25 per cent. of the basic wages. When it was adequate only to grant bonus of less than 25 per cent. of the basic wages, it would pay the said bonus after reserving a sum of Rs. 10,000 for itself. If there was loss, it would pay the minimum bonus. Whatever amounts were paid were adjusted on the principle of "set on" and "set off" in the subsequent years. There was also a provision that after the prescribed period all the outstanding liabilities under the formula of "set on" and "set off" would come to an end. Three principles clearly underlie the entire scheme, namely, (i) that though for the purpose of ascertaining the surplus, the profits of a particular mill were taken as the criterion, the position of the entire Ahmedabad Textile Industry was taken into consideration; (ii) that the beneficent features of the scheme could be gathered only by its long term operation; and (iii) that though in a particular year in the case of a particular mill there might not be "available surplus", the principles of "set on" and "set off" indicate that the bonus was linked with profits. As reasonable men trying to settle their disputes, both the parties, representing their respective associations, adopted an optimistic attitude and proceeded on the basis that the entire industry would make a profit and that every mill could be expected to make reasonable profits in at least some of the five years, though it might incur loss in other years. The validity of the agreement should be judged on the basis adopted. In the Ahmedabad Textile Industry, it is in evidence, the average monthly wage for workers in 1957 24 was Rs. 54. Fifteen days ' basic wages, i.e., the minimum bonus prescribed under the pact, would come to an average total wages for 5 days; and 3 months ' basic wages would come to 19 days ' total wages on the average. Prima facie the bonus fixed is very reasonable and cannot be said to be oppressive to the mill owners. The said bonus agreement, by its reasonableness and beneficent effects on the industry, attracted the attention of other mills throughout India. Exhibit U 2 shows the particulars of other mills which have adopted the agreement. The Bombay Textile Industry, The Madhya Bharat Mill owners ' Association, The Modi Spinning & Weaving Mills, Modinagar, and the cotton mills at Surendranagar (Saurashtra) ' Sidhpur, Viramgam Nadiad and Petlad, Cambay Baroda, Surat adopted the said scheme with suitable modifications. The silk industry in Bombay and the plantation industry in Madras also accepted the principles underlying the said agreement. We are told that even the Coimbatore area has recently adopted a similar agreement. The fact that the said five year pact was followed by so many other mills is a fair indication that it was basically sound and capable of yielding good results. Experienced members of the Industrial Courts spoke highly of the pact. Late Shri section H. Naik, a Member of the Industrial Court, adopted the pact in a dispute between the Bombay Mill Owners ' Association and the Rashtriya Mill Mazdoor Sangh, and in making an award in terms of a similar pact, made the following observations: "This award, based upon an agreement arrived at as a result of persistent and continued efforts on the part of both the parties, keeping in view the prosperity of the employers as well as the well being of the employees, will go down in history as a significant landmark in collective bargaining. It augurs well for the future of the industry, as well as those employed therein, particularly in view of the ambitious Second Five Year Plan on which the country will shortly launch. It also avoids, for 25 some time, and let us hope for all time to come, the bonus dispute which cropped up every year since 1947. I congratulate both the parties and compliment them on the successful termination of their efforts to bring peace to the industry and set an example to the employers and employees in the country. " The said weighty observations apply mutatis mutandis to the agreement in question. Shri H. V. Divatia, another experienced Member of the Industrial Court, in his award on the bonus dispute of the Ahmedabad Textile Mills for 1952 observed: "Ever since the former practice of taking all the textile mills in one centre as one unit for the purpose of determining the bonus was given up, there has been dissatisfaction on both sides on the bonus question every year and in my view this change as well as the formula set up by the Labour Appellate Tribunal have made the bonus issue a very complicated one resulting in bitterness on both the sides instead of promoting peace and harmony between the employers and workers. I hope the whole matter is reconsidered at the highest level. If bonus is to be given, it must be awarded in such a way that it does not defeat its purpose. " The agreement did nothing more than reverting to the former practice of taking all the textile mills in one centre as one unit for the purpose of determining. the bonus, though for ascertaining the quantum of bonus payable the balance sheets of individual units were taken into consideration. In making the present award the Industrial Court on a consideration of the entire material placed before it came to a definite finding that on the. whole the five year pact had worked fairly for both the parties and that the extension of the said agreement for one more year would help in promoting peace in that industry in Ahmedabad and that owing to the goodwill created by the five year bonus pact, the industry also benefited by schemes of rationalization. It was also brought to our notice that in the textile industry 4 26 in Ahmedabad area there were never any strike and the disputes in the recent years were settled amicably across the table. In such a situation this Court was asked under article 136 of the Constitution to set aside the award and to bring about chaos where peace existed and to introduce unrest and disharmony where stability and harmony prevailed. It was said that this Court had no option but to do so as the agreement was contrary to law as laid down by this Court. I shall now examine briefly the relevant decisions laying down the principle governing bonus to ascertain whether the impugned agreement is in any way inconsistent with them. In Muir Mills Co. Limited vs Suti Mills Mazdoor Union, Kanpur (1) this Court defined the term "bonus" and laid down the conditions which would give rise to the claim for bonus. Bhagwati, J., after considering the relevant decisions and text books on the subject, accepted the following definition of "bonus" given by the Textile Labour Inquiry Committee: "The term bonus is applied to a cash payment made in addition to wages. It generally represents the cash incentive given conditionally on certain standards of attendance and efficiency being attained. " The learned Judge then proceeded to state at p. 998 thus: "There are however two conditions 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 contribution which the workmen make in increasing production. The demand for bonus becomes an industrial claim when either or both these conditions are satisfied. " The learned Judge then referred to the formula evolved by the Full Bench of the Labour Appellate Tribunal in the Mill Owners ' Association, Bombay vs Rashtreeya Mill Mazdoor Sangh, Bombay (2) and narrated the first charges on the gross profits as laid. down by (1) ; (2) 27 that decision. The learned Judge then expressed his view thus at p. 999: "It is therefore clear that the claim for bonus can be made by the employees only if as a result of the joint contribution of capital and labour the industrial concern has earned profits. If in any particular year the working of the industrial concern has resulted in loss there is no basis nor justification for a demand for bonus. Bonus is not a deferred wage." This decision lays down in clear terms that the payment of bonus is linked with profits. But this decision was given in a dispute between one specified mill, namely, Muir Mills Co. Limited and the Union, representing its employees. This Court was not considering a case of a bonus claim on industry cum region basis. The principle of the decision, namely, that the claim for bonus is linked with profits, may equally apply to such a case; but the working of the principle must necessarily depend upon the peculiarities of such a claim. Industrial law is in the process of evolution and it cannot be put in a straight jacket, but must be allowed to grow to meet varying situations that present themselves to industrial tribunals, subject of course to the statutory provisions and the general principles laid down by courts. The application of the principles laid down by this decision to a bonus claim on industry cum region basis would, to some extent, be different from its application to a single unit. I shall consider this aspect at a later stage of the judgment. It is unnecessary to consider the other decisions on this subject except the recent decision of this Court in The Associated Cement Companies Ltd., Dwarka Cement Works, Dwarka vs Its Workmen That decision reviewed the entire law on the subject vis a vis the profit bonus. It accepted the principles laid down by the said Full Bench Formula and elaborately considered the mode of application of the prin. ciples for ascertaining the "available surplus. " Gajendragadkar, J., who spoke for the Court, referred to the earlier decision and restated the basis for awarding bonus thus at p. 995: (1) 28 "We have already noticed that the formula for awarding bonus to workmen is based on two considerations: first, that labour is entitled to claim a share in the trading profits of the industry because it has partially contributed 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. " Then the learned Judge, after referring to the earlier decisions, gave the various amounts that should be deducted from the bonus year 's profits and the 'manner in which they should be done to ascertain the "available surplus." According to the learned Judge the following items have to be deducted: "(1) Depreciation, which should be the notional normal depreciation. (2) Income tax. (3) A return on paid up capital as well as working capital. Though the usual rates were mentioned, it was made clear that the rates were not inflexible but would vary according to the circumstances of each case. (4) Rehabilitation: For ascertaining the amount necessary for rehabilitation, it was pointed out that a multiplier and divisor should be adopted; the former to ascertain the probable price which may have to be paid for the rehabilitation, replacement or modernization of machinery, and the latter in order to ascertain the annual requirement of the employer in that behalf year by year. " Out of the balance, which was described as "available surplus", it was stated that three parties, namely, the labour, the industry and the shareholders, were entitled to claim shares. This is the broad picture drawn by that decision for fixing the bonus. That decision, therefore, restated the pre existing law and reaffirmed the doctrine that bonus is linked with profits and also the Full Bench Formula for ascertaining the "available surplus". That decision was also not concerned with a claim for bonus on industry cum region basis, but only with a claim in regard to a particular unit. It also did not lay down that employer and 29 employee could not agree in regard to the distribution of the available surplus or in respect of the amount required for rehabilitation. It also did not purport to prevent the parties from agreeing on the payment of bonus linked with profits on industry cum region basis spread over a number of years. Some of the observations in the judgment indicate the consciousness of the court that the formula accepted or the directions given therein could not meet every conceiv able situation that might arise in the complicated field of industrial relations. Does the impugned pact contravene the law laid down by this Court? It is contended that it infringes the law mainly in three respects, namely, (i) bonus was payable thereunder by a mill incurring loss; (ii) the pact did not provide for rehabilitation of the post 1947 block; and (iii) the depreciation and the interest on the reserves allowed were not in accordance with the formula. The first objection appears to be plausible and has also been upheld by my learned brethren. But, in my view, there is a fallacy underlying it. The contention invokes the law of bonus laid down in respect of an industrial claim for bonus for a particular year made by the employees of a single mill and seeks to apply it to a case of an agreement evolving a scheme of bonus on the basis of industry cum region spread over a reasonable period of time. Though the fundamental principle, namely, that bonus is linked with profits, applies to both, the application of the same to two different situations must necessarily differ. The short question is whether under the impugned agreement the claim for bonus was not based on profits. The agreement was a multilateral one involving mutual obligations. It was on industry cum region basis, that is, it was entered into between the employers of the entire industry and the employees thereof. The basis of the agreement was that the entire industry would make a profit. For the purpose of convenient payment of bonus it was worked out on the unit basis. All the parties to the agreement, the employers and the 30 employees of different mills in Ahmedabad, desired in dustrial peace in order to build up the textile industry. The industry comprised many units with varying prospects and different strata of financial stability and prosperity. Some mills may earn profits throughout the period, some may earn profits in some years and incur loss in other years and under extremely unfortunate and unexpected circumstances, a mill may incur loss throughout. Though a,particular mill may earn abnormal profits, another mill may be just able to make its both ends meet and another may have a narrow margin of profits or even incur loss. But all of them were sincerely interested in the general prosperity of the industry as a whole in the said area which would have its repercussions on individual units. A mill which earns large profits may have to pay more than 25 per cent. of basic wages for the year as bonus and a mill which incurs loss may not have to pay bonus at all. The employees of a particular mill may be entitled in a particular year, having regard to the profits, to get bonus far in excess of 25 per cent. of the basic wages. But in the general interest of all concerned, they were all willing to make a little sacrifice for the common good. Each mill undertook the liability to pay bonus to its employees with a minimum and maximum limits in consideration of a similar undertaking of liability by other mills. So too, the employees, in consideration of a minimum bonus being guaranteed to them, agreed not to claim more than the maximum fixed and the mills as a whole guaranteed payment of the minimum bonus. But what is important to remember is that the entire scheme of payment of bonus was linked with profits. It would be paid on the basis of profits earned or to be earned by a mill. If a mill did not make profits in a particular year, bonus would be paid on account to be adjusted in subsequent years. The formula of "set on" and "set off" emphasizes the integral connection between bonus and profits, and the fact that the total loss incurred by a particular mill during the entire period may break that formula does not affect the basis of 31 the agreement. In effect and substance, under the agreement, each of the mills agreed for a consideration on the happening of a contingency to treat certain amounts as notional profits adequate to pay the minimum bonus with a right to "set off" in subsequent years against larger profits, if any, earned by them. In the premises, it is not correct to state that bonus is not linked with profits for four reasons, namely, (i) the agreement was between the employers and employees of the entire textile industry in Ahmedabad; (ii) the basis of the agreement was that the industry as a whole would make a profit; there is nothing illegal in parties to the agreement, who had ,intimate knowledge of the financial position of the entire industry, from accepting that position; (iii) instead of the profits of the entire industry being ascertained and bonus paid to all the employees, under the agreement, each mill for a consideration, namely, obligations undertaken by other parties, agreed to pay bonus ranging between a maximum and a minimum; and (iv) each mill also agreed for a consideration, even if in fact it incurred a loss in a particular year. , to set apart a notional amount as profits adequate to pay the minimum bonus with a right to readjust its bonus account in subsequent years. In this view the impugned pact does not contravene the law of the land for the simple reason that there is no decision of this Court which prevents the making of ouch agreements so long as the fundamental principle is not violated; and in this case, for the reason given by me, I am of the view that the said principle, viz., that bonus should be linked with profits has been adhered to in the agreement. Now let us see whether the Full Bench Formula in regard to rehabilitation has been contravened by the impugned pact. The main emphasis is on the want of a provision in the agreement in regard to valuation of the block subsequent to 1947. In The Associated Cement Companies ' case (1) this Court observed at p. 971 thus: "it has also been observed by the Labour Appellate Tribunal that if an appropriate multiplier and (1) 32 divisor are determined they are generally used because the tribunals take the view that the reconsideration of the said multiplier and divisor should not be hastily undertaken and could be justified only on the basis 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 cost of replacement." The Industrial Court in the bonus. case of the textile industry at Ahmedabad for the year 1949 fixed the cost of replacement of the block of the entire industry at Ahmedabad at Rs. 33.89 crores spread over 15 years from 1947. The Industrial Court, on the material placed before it, fixed the multiplier at 2.7 and the divisor at 15. The result is that the cost of the machinery and building as it existed in 1947 was multiplied by 2.7 and after making the necessary deduction therefrom, such as that of depreciation and reserves available and the breakdown value of machinery, divided the surplus by 15 years. Ordinarily, change in the said multiplier and divisor, as laid down by this Court, should not be hastily undertaken and could 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. In the impugned pact the parties agreed to abide by the said multiplier and divisor and they did not think fit to revise the same. The decisions of this Court do not preclude employers and employees from agreeing to a particular valuation of the block or to their agreeing to a particular multiplier and 'divisor having regard to the circumstances obtaining at the time of the agreement. Nor does the agreement infringe any of the principles laid down by the Full Bench Formula in the matter of fixing the prior charges. A perusal of paragraph 2(a) of the agreement shows that the prior charges mentioned therein are only those that are stated in the Full Bench Formula, though there is certainly a difference in the particulars under different heads, such as, interest, etc. Certainly the decisions of this Court do not preclude the parties from 33 agreeing to certain amounts or to certain rates under different heads of prior charges. As the agreement does not infringe the law laid down by this Court, it cannot be contended that the Industrial Court could not extend the said agreement, if it is necessary to secure industrial peace for another year. In effect and substance, the Industrial Court adopted the said agreement as a part of the award by giving it a span of six years instead of five years; with the result that the entire formula of "set on" and "set off" would automatically apply in the sixth year. Courts have held that Industrial Courts have power to extend agreements in appropriate circum stances. The Federal Court of India in Western India Automobile Association vs Industrial Tribunal, Bombay (1) explained the scope of industrial adjudication and the functions of an industrial tribunal in labour disputes thus at p. 345: "Adjudication does not, in our opinion, mean adjudication according to the strict law of master and servant. The award of the Tribunal may contain provisions for settlement of a dispute which no Court could order if it was bound by ordinary law, but the Tribunal is not fettered in any way by these limitations. In Volume 1 of 'Labour Disputes and Collectiv e Bargaining ' by Ludwig Teller, it is said at page 536, '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 modifications of old ones, while commercial arbitration generally concerns itself with interpretation of existing obligations and disputes relating to existing agreements '. In our opinion, it is a true statement about the functions of an Industrial Tribunal in labour disputes." The same view in different phraseology has been expressed by this Court in Bohtas Industries Limited vs Brijnandan Pandey (2), section K. Das, J., speaking for the Court, observed at p. 810 thus: (1) [1949] F.C.R 321. (2) ; 5 34 "A Court of law proceeds on the footing that no power exists in the courts to make contracts for people; and the parties must make their own contracts. The courts reach their limit of power when they enforce contracts which the parties have made. An Industrial Tribunal is not so fettered and may create new obligations or modify contracts in the interests of industrial peace, to protect legitimate trade union activities and to prevent unfair practice or victimization. We cannot, however, accept the extreme position canvassed before us that an Industrial Tribunal can ignore altogether an existing agreement or existing obligations for no rhyme or reason whatsoever." This Court again reiterated the same principle in the case of Patna Electricity Supply Co. Limited (1) thus at p. 1038: "There is no doubt 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 full cooperation between them. This view about the jurisdiction and power of Industrial Tribunals has been consistently recognized in this country since the decision of the Federal Court in Western India Automobile Association vs Industrial Tribunal, Bombay (2)". These authorities clearly establish the proposition that an Industrial Tribunal can extend an existing agreement or make a new one if, for good reasons, it comes to the conclusion that such extension promotes industrial peace. If, as I have held, the impugned pact was lawful and did not contravene the law laid down by this Court, the Industrial Court in the present case was certainly within its rights to extend that pact for another year for the very good reasons given by it for doing so. I shall now state my view in the form of the following propositions: (1) Neither the Full Bench Formula nor the decisions of this Court affirming it preclude an (1) [1959] SUPP. 2 S.C.R. 76r. (2) 35 Industrial Court in appropriate cases from extending the terms of a pact by another year if that was necessary to maintain industrial peace. (2) The law laid down by the Federal Court and the Supreme Court recognizes such a power in an Industrial Court. (3) The fact that the subsequent block has not been valued does not affect the question, for the parties can certainly agree, for various reasons, that the value of the existing block should govern the situation for a specified period. (4) The impugned five year pact is not contrary to industrial law as laid down by this Court; indeed, it expressly followed the principles laid down in the Full Bench Formula which was subsequently affirmed by this Court in the case of Associated Cement Companies (1). (5) The impugned pact also does not infringe the principle that bonus depends upon profits; but it applied the same by evolving a formula of "set on" and "set off" to a complicated situation of the entire industry in a particular area for a number of years. For the foregoing reasons, and in view of the aforesaid definite findings of the Industrial Court, I hold that this is eminently a fit case for extending the agreement for the bonus year 1958. Before closing I must express my appreciation of the way in which the impugned pact was brought about between the parties. It is in the interest of both the employers and the employees while the employees of every mill are assured of payment of a minimum bonus, the employers of every mill also are assured protection against extravagant claims. The agreement avoided complicated and acrimonious disputes in courts every year in regard to bonus. The working of this agreement certainly helped the mills to achieve the introduction of schemes of rationalization. The agreement has become a model one for other mills. Ironically the Full Bench Formula, affirmed by this Court in the case of Associated Cement Companies Limited (1), mainly evolved to fix the amount required for rehabilitation in the interest of industrial peace, turned out to be the sheet anchor for (1) 36 the employers to depart from the path of negotiation and agreement which they were following all these years and to enter the arena of open fight with the employees. It may be, though it may turn out to be wrong, that they are under the belief that the Full Bench Formula, if strictly followed, would not leave any surplus and that they need not pay any bonus to the employees. This attitude is neither reasonable nor in the interest of industrial peace. I hope and trust that the parties, in spite of the temporary success in these appeals, would see better light and settle their disputes as they had been doing all these years. In the result, the appeals fail and are dismissed with costs. By COURT : In accordance with the opinion of the majority, the appeals are allowed and the matter sent back to the Tribunal for disposing of the issue before it in accordance with law. We direct that the Tribunal should proceed to try the question whether any bonus should be awarded to the employees of the eighteen mills before us on the basis of the Full Bench Formula as interpreted by this Court in the case of The Associated Cement Companies (1). In the circumstances, there will be no order as to costs. Appeals allowed. Cases remanded to the Tribunal.

The respondent, the Textile Labour Association at Ahmedabad, entered into a five years pact with the Ahmedabad Mill Owners ' Association, representing the member mills, in regard to payment of bonus to the employees of the mills for the years 1953 57. The Labour Union demanded bonus for the year 1958 on the basis of the pact, but the mill owners claimed that the pact was contrary to the formula evolved by the Full Bench in Mill Owners ' Association, Bombay vs The Rashtriya Mill Mazdoor Sangh, Bombay, , which was approved by the Supreme Court in The Associated Cement Companies Ltd. vs Its Workmen, , inasmuch as (1) rehabilitation provided in the Agreement differed vitally from rehabilitation as explained in that decision, (2) the Agreement provided for payment of a minimum bonus even though there may be no available surplus and even though the particular mill might have made actual loss, and (3) while the Full Bench Formula, as approved by the Supreme Court treated a particular year as a self sufficient unit, there was provision for set off and set on in the Agreement. The Industrial Tribunal to which the dispute was referred in the. form of sixty six references, one relating to each mill, took the view that the pact did not in any way run counter to the law laid down by the Supreme Court, and that the extension of the agreement for one more year would help in promoting peace in the industry in Ahmedabad. Held (Subba Rao, J. dissenting) that the Agreement in question departed from the Full Bench Formula in the matter of bonus, in certain vital aspects and that the Tribunal when it extended the Agreement for the year 1958 was ignoring the law as laid down by the Supreme Court as, to what profit, bonus,was and how it should be worked out. 2 The Tribunal had no power by extending the Agreement to make it possible for payment of a minimum bonus for the year 1958 even when there was either insufficient available surplus to pay bonus or no available surplus at all or even actual loss. The jurisdiction of the Tribunal was limited by its terms of reference, which was not on industry cum region basis, but one for each mill to consider the question of bonus for each mill for the year 1958 and, consequently, it had no jurisdiction to apply the principle of set off and set on to be found in the Agreement in respect of payment of bonus or take into account the profits of the industry as a whole in Ahmedabad. Per Gajendragadkar, Sarkar, Wanchoo and Mudholkar, JJ.It is open to an industrial court in an appropriate case to impose new obligations on the parties before it or modify contracts in the interest of industrial peace or give awards which may have the effect of extending Agreement or making new one, but this power is conditioned by the subject matter with which it is dealing and also by the existing industrial law and it would,not be open to it while dealing with a particular matter before it to overlook the industrial law relating to that matter as laid down by the legislature or by the Supreme Court. Western India Automobile Association vs Industrial Tribunal, Bombay, , Rohtas Industries Limited vs Brijnandan Pandey; , and Patna Electricity Supply Co.v. Patna Electric Supply Workers ' Union, [1959] SUPP. 2 S.C.R. 761, relied on. Per Subba Rao, J. (1) The impugned five years pact was not contrary to industrial law as laid down by the Supreme Court. (2) The pact also did not infringe the principle that bonus depends upon profits; but it applied the same by evolving a formula of set off and set on to a complicated situation of the entire industry in a particular area for a number of years. (3) The Full Bench Formula in regard to rehabilitation was not contravened by the pact. The decisions of the Supreme Court did not preclude employers and employees from agreeing to a particular valuation of the block having regard to the circumstances obtaining at the time of the agreement. (4) Neither the Full Bench Formula nor the decisions of the Supreme Court affirming it precluded the Tribunal from extending the terms of the pact by another year if that was necessary to maintain industrial peace.

Nine employees of the octroi department, 13 employees of the water works. department and a time keeper of Nagpur Corporation applied under section 20 of the Minimum Wages Act to the Small Causes Court of Nagpur for overtime wages at the rate of double the wages for the period they worked beyond prescribed hours and holidays. The authority raised several issues but they were decided against the applicants and their applications were dismissed. Being aggrieved the said decision, four applications were presented before the High Court under article 227 of the Constitution and the High Court also upheld the view of the authority. It was contended by the appellants that under Rule 25 of M.P. Minimum Wages Rules, 1,1951, they were entitled to overtime wages at double the ordinary rate of wages for the period they worked beyond prescribed hours and holidays. For their claims they relied on 2 minimum wages notification one dated 21 2 51 and the other dated 23 2 56. On behalf of the appellants the only point canvassed before this Court was the rejection of their claim with regard to overtime work done by them and work done on weekly rest days. The respondent contended that as the employees of the Corporation were paid higher wages than those fixed under the Act as minimum wages, the Act did not operate, and the employer could not be compelled to pay higher wages. Secondly, the second notification did not supersede the first notification which only applied to unskilled labour as to, cover all employees skilled or unskilled. Further, the provision inquiring payment at double the ordinary rate of wages contained in Rule 25 must be read as the ordinary rate of minimum wages fixed. Allowing the appeal, HELD : (i) Rule 25 contemplates overtime work at double the rate of wages, which the worker actually receives, including the casual requisite and other advantages mentioned in the explanation. By using the phrase "double the ordinary rate of wages", the rule making authority intended that the worker should be the recipient of double the remuneration which he, in fact, ordinarily receives, and not double the rate of minimum wages fixed for him under the Act. Had it been intended to provide for merely double the minimum rate of wages fixed under the Act, the rule making authority could have so expressed its intention in clear and explicit words. The word "Ordinary" used in rule 25 reflects the actuality rather than the workers ' minimum entitlement under the Act. 169A D] (ii) The second notification was not applicable to all categories of labour as wrongly held by the High Court. The second notification has to be read in the background of the first notification with the result that 162 the later notification must also to, be held to be confined to unskilled labour in so far as it varies revises some of the rates fixed in the earlier notification without extending its operational boundaries by deleting the word "unskilled" from the explanation "unskilled labour". [170G] Union of India v B. D. Rathi, A,. I. R . 1963, Bom,. 54, referred to and distinguished.

The respondent landlord sought eviction of the appellants tenants under section 12 (1) of the Madhya Pradesh Accommodation Control Act, 1961 on the main ground that the landlord bonafide required the premises for locating his gold and silver ornaments factory after demolishing and reconstructing the building. The courts below found that the requirement of the landlord was bonafide and ordered eviction of the tenants under section 12 (l) (f) and (h) of the Act. In these appeals the tenants contended that since the eviction ordered was under section 12 (l) (h), section 18 of the Act was attracted and it was obligatory on the part of the landlord to provide accommodation of equal extent to the tenants in the new building to be constructed by him. Dismissing the appeals, ^ HELD: In Ramnilal P. Mehta vs Indradaman Amritlal this Court observed that once the landlord establishes that he bonafide requires the premises for his occupation, he is entitled to recover possession of it from the tenant under the provisions of sub clause (g) of section 13 (1) of the Bombay Rents, Hotel and Lodging House. Rates Control Act, 1947 irrespective of the fact whether he would occupy the premises without making any alterations or after making tho necessary alterations. [948B C] Ramnilal P. Mehta vs Indradaman Amritlal Sheth, ; , referred to. Section 13 (1) (g) of the Bombay Rents, Hotel and Lodging House, Rates Control Act, 1947 corresponds to section 12 (1) (f) of tho Madhya Pradesh Accommodation Control Act. [948A] Applying the above principle to the facts of the instant case, though the Courts below have passed the order of eviction under section 12 (1) (f) and (h) the Court is of the opinion that the order of eviction is based really and substan 946 tially only under section 12 (1) (f) of the Act. The fact that section 12 (1) (h) is also mentioned in the order of the Court below does not make the order of eviction purely one under that section, for the main ground of requirement of the landlord is bonafide personal requirement for locating his proposed factory for the manufacture of gold or silver ornaments. Therefore there is no case for the application of section 18 to the facts of the present case. [947F G]

Respondent No. 1 in the appeals instituted a suit for partition against his younger brothers and sisters, and the heirs of his deceased brothers. The plaintiff was the eldest among the brothers and sisters. The 1st and 2nd Defendants were his brothers, the 3rd Defendant his sister, the 4th and 5th Defendants, the widow and son respectively of the third brother. Defendant 6 was the widow of the fourth brother, and Defendants 7 to 12 were his children, while Defendant No. 14 was the wife of Defendant No. 1, and Defendants 13, 15, 16 and 17 were their children. The subject matter of the appeals related only to one item of property known as "Naroda Chawl" measuring 7 acres and 2 gunthas of land, where 115 rooms and huts stood con structed, out of which 114 rooms had been let out to ten ants, and one room was retained for the caretaker. According to Defendants No. 6 to 12 this property exclu sively belonged to defendant No. 6 and was not liable to partition. The other defendants however supported the plain tiff 's case that it belonged to the 233 joint family and was liable to partition. Defendants 6 to 12 pleaded that the plaintiff 's father Bapalal orally gifted this property to his daughter in law Defendant No. 6 in March 1946 and made a statement before the Revenue authorities on . the basis of which her name was mutated and she was put in possession thereof, that although she came in peaceful possession, the management which in cluded realisation of rent was in the hands of Defendant No. 1, that as some dispute arose in 1952 she assumed direct charge of the chawl and had remained in possession thereaf ter, and that she had acquired good title therein by adverse possession before the suit was filed in 1960. The City Civil Judge who tried the suit, held that there was a joint Hindu family and a business was carried on for the benefit of the family and the income therefrom was thrown into the common pool and all the properties including the disputed chawl were treated as belonging to the family. As the case of Defendant No. 6 about the gift, the mutation of her name, and her exclusive possession from 1946 till the date of the suit was found correct, it was held that she had acquired title by adverse possession, and the suit was dismissed with respect to the disputed chawl. The plaintiff appealed to the High Court. Some of the defendants also filed appeals in respect of the other items of property. All these appeals were heard and disposed of by a common judgment. The High Court reversed the finding of adverse posses sion in regard to the disputed chawl and granted a decree for partition. It held that Defendant No. 6 remained in exclusive possession of the property only since 1952, the period was thus short of the time required for prescription of title. It further held that since the rents of the chawl from 1952 were collected by her husband and after his death by her son (Defendant No. 7), she was liable to render accounts till the death of her husband, and she along with Defendant No. 7 would be jointly liable for the period thereafter. Separate Appeals were preferred by Defendant Nos. 6 and 7 to this Court. Allowing the Appeals, setting aside the decision of the High Court and restoring that of the Trial Court. 234 HELD: 1. The principle that revenue entry furnishes presumptive evidence of title is inapplicable in the instant case. It cannot be denied that title to Naroda Chawl could not have passed to Defendant No. 6 by virtue of the entry Ext. The value of the chawl even in 1946 was large and no registered instrument of transfer was executed. Besides Ext. 247 describes the plaintiff 's father (Bapalal) and Defendant No. 6 (Chandrakanta) as Kabjedar, that is occu pant. In such circumstances, the presumption which can be raised in favour of Defendant No. 6 from this entry is with respect of her possession and possession only. [238F G] Gangabai and others vs Fakirgowda Somaypagowda Desai and others, AIR 1930 Privy Council 93; and Desai Navinkant Kesarlal vs Prabhat Kabhai, 9 Gujarat Law Reporter 694, referred to. The account books have to be rejected as not reli able. It is apparent from the evidence that nobody takes the responsibility of supporting the correctness of the entries therein. Many of the documents produced by Defendant No. 1 were accepted, but the account books which were section Nos. 123 75 to 123 97 of Ext. 123 were in express terms not admitted. The plaintiff filed his objection Ext. Defendant No. 6 also filed her objection Ext. The books were admitted in evidence and marked as exhibits on the statement of the plaintiff which he made in cross exami nation. The plaintiff by saying that he had written as per the instructions of Defendant No. 1 made it clear that he Could not vouchsafe for its reliability. Defendant No. 1 could not summon courage to support them either personally or through any witness. No reason has been suggested as to why he did not produce other important documents in his possession which could have supported the account books and the joint case of the parties resisting the appellant 's claim. [243B E] 3. Defendant No. 1 cannot be treated to be in joint possession as he was actually collecting the rents from the tenants. it is well settled that the possession of the agent is the possession of the principal and in view of the fidu ciary relationship, Defendant No. 1 cannot be permitted to claim his own possession. [247D E] David Lyeii vs John Lawson Kennedy, [1889] XIV H.L.(E) 437; Williams vs Pott, L.R. XII Equity Cases 149 and Secre tary of State for India vs Krishnamoni Gupta, 29 Indian Appeals 104, referred to. It is the intention to claim exclusive title which makes 235 possession adverse and this animus possidendi must be evi denced and effectuated by the manner of occupancy which again depends upon the nature of the property. The manner of possession depends upon the kind of possession which the particular property is susceptible. That possession to the extent to which it is capable of demonstration must be hostile and exclusive and will cover only to the extent of the owner 's possession. [246E F] (b). The title to the chawl as owner, subject to the tenancy was an interest in immovable property so as to be covered by Article 144 of the Indian Limitation Act, 1908, which specifically mentioned, ". or any interest therein". [246E] In the instant case, the parties have been fighting for the rent from the chawl so long as it continued in posses sion of the tenants. Before the gift of 1946 the Defendant No. 1 was collecting the rent and he continued to do so even thereafter till 1952. The appellant has, however, estab lished her case that the Defendant No. 1 acted as her agent after 1946 and when he repudiated this agency in 1952 he was effectively removed from the management of the chawl. Since 1946 the tenants attorned to the Defendant No. 6 and paid rent to her under printed receipts announcing her ownership, but of course through her agent the Defendant No. 1. The fact that the tenants have been in actual physical posses sion of the chawl is, in the circumstances, of no assistance to the respondents. What is material is that they paid the rent to the Defendant No. 6. Defendant No. 6 was in adverse possession from the period 1946 to 1952 through her agent Defendant No. 1 and thereafter through her husband and son Defendant No. 7 till 1960 when the suit was filed, the total period being more than 12 years. [246G H; 248G] Uppalapati Veera Venkata Satyanarayanaraju and another vs Josyula Hanumayamma and another, and Hari Prasad Agarwalla and another vs Abdul Haw and others, A.I.R. 1951 Patna 160, referred to.

In these matters, the petitioners viz., four companies in the private sector, two public sector corporations owned substantially by a State Government, and a private individu al sought clarifications and directions in relation to the orders passed by this Hon 'ble Court on 30.4.87 and 6.10.87 on the Writ Petition. All these petitions arose out of applications for grant of right for the mining of chrome ore or chromite in the State of Orissa. Since chrome ore is one of the minerals specified in the first and second schedules to, and not a 'minor mineral ' within the meaning of Section 3(f) of the Mines and Minerals (Development and Regulation) Act, 1957, the right to grant the mining right in respect of this mineral is vested in the State Government subject to the control by Union of India, and as such they are respond ents in these matters. While disposing of the matters, this Court referred the entire controversy to the Secretary to Government of India in the Ministry of Mines, viz., Mr. Rao, for a detailed consideration of the claims made by the parties. Before Mr. Rao, the two public sector undertakings also put forward their claims that the public sector units in the State were entitled to the grant of mining rights in the State to the exclusion of all private parties in as much as there was a reservation in their favour by an appropriate notification issued by the State Government. The other parties raised objection on the ground that the claims were made at a belated stage of the proceedings. On applications made by the Public Sector Undertakings, this Court directed that their claims would also be examined by Rao. 28 In his report dated 1.2.1988 Rao accepted the claim of reservation made by the two Public Sector Undertakings, viz., Orissa Mining Corporation (OMC) and Industrial Devel opment Corporation of Orissa Ltd. (IDCOL). He also partially accepted the claims of the three private parties. viz., Indian Metals and Ferro Alloys Limited (IMFA); Ferro Alloys Corporation Limited (FACOR); and Aikath and rejected the claims of the other two private parties viz., Orissa Cements Ltd. (OCL) and Orissa Industries Ltd. (ORIND). Though he accepted the claim of the two public sector undertakings, he recommended for them leases in respect of only the balance of the lands left, after fulfilling the claim of the others which he had accepted. The present petitions biter alia sought directions on the report of Rao. It was contended that Rao was nothing more than a Commissioner appointed by this Court to examine the various parties and hence this Court should pass appro priate orders on his report. Various contentions were ad vanced by the petitioners as well as respondents as regards the legal character of the Rao Report and of giving effect to it either in toto or with modifications in certain re spects. Reservation in favour of Public Sector Undertakings was challenged by the private parties. Plea of Promissory Estoppel was also raised on behalf of some of the petition ers. Disposing of the matters, this Court, HELD: 1. The statute must lay down clearer guidelines and procedure. Having regard to the new avenues for vast industrial development in the country, a more workable procedure would be for the State Government to call for applications in respect of specified blocks by a particular date and deal with them together, other later entrants not being permitted in the field. Otherwise only confusion will result, as here. There was a time when the State Government looked to private enterprises for mineral development in its territory. Of late, however, competition has crept in. The State Government has its own public sector corporations and various enterpreneurs are interested in having mining leases for their purposes. It is, therefore, vital that there should be a better and detailed analysis, district wise and area wise and that a schedule for consideration of applica tions in respect of define areas should be drawn up with a strict time frame so that the State is no longer constrained to deal with sporadic applications or make a routine grant of leases in order of priority of applications. These are aspects which call for careful consideration and appropriate amendments to the Mines and Minerals (Development and Regu lation) Act, 1957 and the Rules made thereunder. [72D G] 29 2. Chromite ore is an important major mineral and the importance of its conservation and proper utilisation for our country 's development cannot be gainsaid. The State Government rightly decided upon a policy of reservation in 1967 and this was kept up till 1974. In February 1974 the State Government was in favour of free issue of mining leases but gave up this policy in pursuance of the Central Government 's letter of 15.5.74. Reservation was, therefore, clamped in 1977 again. Applications could still be consid ered to see how far a relaxation was permissible having regard to the nature of the applicant 's needs, the purpose for which the lease was asked for, the nature of the ore sought to be exploited, the relative needs of the State, the availability of a public undertaking to carry out the mining more efficiently and other relevant considerations. There is no material on record to substantiate the plea that the State Government has been acting arbitrarily or mala fide in its policy formulations in this regard. [82C E] Venkataraman vs Union, ; , referred to. Rao 's decision, that the leases that have been grant ed already in favour of IMFA, FACOR be confirmed, should be upheld. These should be treated as leases legitimately granted to them in exercise of the powers of relaxation under rule 59(2). It is true that the orders granting the leases do not elaborately record the reasons but they were passed in the context of this litigation and have to be considered in the light of the affidavits and counter affi davits filed herein. Rao 's decision regarding the grant of a lease to AIKATH (not yet implemented) should also be upheld. In these three cases, the records disclose sufficiently the reasons on the basis of which the leases have been decided upon and are adequate to justify the mining leases actually granted. ]89B D] 4. The claims of OCL and ORIND have been rejected sum marily by Rao without an advertence to the various consider ation urged by them. This part of Rao 's decision has to be set aside as being too cryptic and unsustainable. Pursuant to this conclusion, it is directed that these claims be considered afresh by the Central Government. It would be more expedient if the claims of OCL and ORIND are restored, for detailed consideration in all their several aspects, before the State Government, as the State Government has had no opportunity to consider the various aspects pointed out and as this course will also provide an opportunity to the claimants to approach the Central Government again, if dissatisfied with the State Government 's decision to consid er whether, despite the reservation, some relaxation can be made also in 30 Favour of these two companies The State Government has to take into account various factors and aspects before grant ing a mining lease to an individual concern carving out an exception to its reservation policy. It has done this in respect of IMFA and FACOR for certain special reasons re corded by it. Whether it would do so also in favour of OCL and ORIND is for the State to consider. It would be noticed that the applications of these two companies have not been considered in this light earlier The applications of OCL and ORIND are restored for the consideration of the State Government. [94B G] 5. The State Government has rejected ORIND 's applica tion, inter alia, on the ground that, in view of the penden cy of the Writ Petition before this Court, it could not at that stage pass any order on the application. It would, therefore, be open to ORIND to ask the State Government to reconsider the application in the light of the present order. There is no necessity for insisting on such a formal request and therefore, the State Government is directed to consider ORIND 's application afresh in the light of this judgment. [95A B] 6. So far as OMC and IDCOL are concerned, Rao has recomamended that the areas left after the grants to IMFA and FACOR, be given on lease to OMC. There were huge areas of mineral bearing lands which have been reserved for the public sector. Its interests do not clash or come into conflict with those of private applicants which can only claim a right to the extent the State Government is willing to relax the rule of reservation. This Court does not think OMC or IDCOL have any voice in requiring that the State Government should keep certain extent of land reserved and should not grant any mining lease at all in favour of any private party. The interests of these corporations are safe in the hands of the State Government and the allocation of mining leases to these organisations is a matter of discre tion with the State Government strictly speaking, therefore, no question of any application by them for mining lease need arise at all. But, when made, their applications are consid ered by the State Government and, on revision by the Central Government as a matter of form. To this extent, they have a statutory remedy. [95C El 7. When the State Government agreed to lease out the areas to MFA and FACOR it was pointed out that this could not be given effect to without the Central Government 's approval. This Court thereupon directed that the State Government should seek such approval. The direction to the Central Government is only that its approval should be given within the particular time limit set out therein It cannot be 31 construed, reasonably, as a direction compelling the Central Government to grant approval whether it agreed with the State Government 's decision or not. Thus the grant of mining leases to IMFA and FACOR are to be treated as having been made in exercise of the power of relaxation under Rule 59(2). Though there is no specific recording of reasons by the State Government or Central Government inasmuch as these leases came to be granted by way of compromise, it is a fair inference that the compromise proposals were prompted by the, at least partial, acceptance of the claim put forward by these parties. Since the grant of leases to these parties can be attributed to the relaxation of the reservation rule in particular cases, the finding of Rao that these leases may be confirmed deserves acceptance. [90C F] 8.1 AIKATH is admittedly an individual who discovered chromite ore in the State. He had secured a lease as early as in 1952 though that lease was annulled by the State when it took over. Again, as against a lease of 640 acres which he had once obtained and started operating upon, the State Government has finally approved of a lease in respect of only 140 acres. AIKATH had been actually working some mines from 1.5.53. His original grant had been approved before the areas was reserved on 3.7.62. If the State Government con siders these to be weighty considerations and entered into a compromise with him for a lease of 140 acres and this has also been recorded by the High Court, these are no grounds to interfere with that decision of the State Government. [89D F] 8.2 Though the State Government and AIKATH had entered into a compromise as early as 4.12.1984, no lease has yet been granted in his favour perhaps as the Central Government has had no occasion to consider the matter earlier. However, no useful purpose would be served by remitting the matter and asking the State Government to seek the formal approval of the Central Government therefore. The decision of Rao itself can be taken as containing the approval of the Cen tral Government in this regard and is thus upheld. The State Government is ' directed to execute, at as early a date as possible, a mining lease in Favour of AIKATH in respect of the 140 acres agreed to be leased to him under the compro mise dated 4.12.1984. [90G H; 91A] 9. Although Rao has approved the grants made in favour of IMFA and FACOR by the State Government (which, he re marks, were perhaps based on the observations made by this Court), he has clearly reached his conclusions on these independently. In fact, he has set out a basis for justify ing the grants of IMFA and FACOR. It is also clear that 32 there were no Court orders that could have influenced his decisions on the claims of the other parties. [87F G] 10.1 In the context of the scheme of the Act and the importance of a lease being granted to one or more of the better qualified candidates where there are a number of them, it would not be correct to say that, as the State Government 's order of 29.10.1973 has been set aside, ORIND 's application should be restored for reconsideration on the basis of the situation that prevailed as on 29.10.1973 and that, therefore, it has to be straightaway granted as there was no other application pending on that date before the State Government. In matters ,like this, subsequent applica tions cannot be ignored and a rule of thumb applied. [74C E] 10.2 Though section 11 tries to enunciate a simple general principle of "first come, first served", in practice, prior ity of an application in point of time does not conclude the issue. In this case itself, for instance, during the period ORIND 's application of 1971 has been under consideration before various authorities and in the writ petition filed in the High Court, several other competitors have come into the picture. The statutory provision is not clear as to which of the applications in respect of any particular area, are to be considered together. If ORIND 's application of 1971 were to be considered only on the basis of the persons who had made applications at that time or a short time before or after, one result would follow; if, on the other hand, all the applications pending for disposal at the time ORIND 's application is to be granted or rejected are to be consid ered, the result would be totally different. Since the interest of the nation require that no lease for mining rights should be granted without all applicants therefore at any point of time being considered and the best among them chosen or the area distributed among such of them as are most efficient and capable, the latter is the only reasona ble and practical procedure. That is why this Court, in its order dated 30.4.87, laid down that all applications pending for consideration as on 30.4.87 should be considered by Rao. [71G H; 72A B] Ferro Alloys Corporation of India vs Union, ILR 1977 Delhi 189 and Mysore Cements Ltd. vs Union, AIR , distinguished. 11.1 Previously, rule 58 did not enable the State Gov ernment to reserve any area in the State for exploitation in the public sector. The existence and validity of such a power of reservation was upheld by this Court. Rule 58 has been amended in 1980 to confer such a power on the State Government. It is also not in dispute that a notification of reservation was made on 3.8.77. The State Government, OMC and IDCOL are, 33 therefore, right in contending that, ex facie, the areas in question are not available for grant to any person other than the State Government or a public sector corporation unless the availability for grant is renotified in accord ance with law (rule 59(1)(e) or the Central Government decides to relax the provisions of rule 59(1). [79D F] Amritlal Nathubhai Shah and Ors. vs Union of India and Anr. ; , relied on. Kotiah Naidu vs State of A.P., AIR 1959 AP 185 and Amritlal Nathubhai Shah vs Union, AIR 1973 Gujarat 117, referred to. 11.2 In the present matters, except for two or three instances. where leases have been granted by the State Government on its own, the State Government has generally and consistently adhered to its stand that the chromite bearing lands are reserved for exploitation in the public sector. The rules permit the Central Government to relax the rigid requirements of reservation in individual cases after recording special reasons. Such exceptional and isolated instances of lease are not sufficient to sustain the plea of the parties that the policy of reservation is merely being raised as a formal defence and has never been seriously implemented by the State Government. [81G H; 82A B] 11.3 The conclusion that the areas in question before this Court were all duly reserved for public sector exploi tation does not, however, mean that private parties cannot be granted any lease at all in respect of these areas for, as pointed out earlier, it is open to the Central Government to relax the reservation for recorded reasons. Nor does this mean that the public sector undertakings should get the leases asked for by them. This is so for two reasons. In the first place, the reservation is of a general nature and does not directly confer any rights on the Public Sector Under takings. This reservation is of two types. Under section 17A(1), inserted in 1986, the Central Government may after consult ing the State Government just reserve any area not covered by a Private Lease or a Mining Lease with a view to conserv ing any mineral. Apparently, the idea of such reservations is that the minerals in this area will not be exploited at all, neither by private parties nor in the public sector. The second type of reservation was provided for in rule 58 and such reservation could have been made by the State Government (without any necessity for approval by the Cen tral Government) and was intended to reserve areas for exploitation, broadly speaking, in the public sector. The notification itself might specify the Government Corporation or Company that was to exploit the areas or may be just general, on the 34 lines of the rule itself. Whether such areas are to be leased out to OMC or IDCOL or some other public sector corporation or a Government Company or are to be exploited by the government itself is for the Government to determine de hors the statute and the rules. There is nothing in either of them which gives a right to OMC or IDCOL to insist that the leases should be given only to them and to no one else in the public sector. There are no competitive applica tions from organisations in the public sector controlled either by the State Government or the Central Government, but even if there were, it would be open to the State Gov ernment to decide how far the lands or any portion of them should be exploited by each of such Corporations or by the Central Government or State Government. , Both the Corpora tions are admittedly instrumentalities of the State Govern ment and the decision of the State Government is binding on them. If the State Government decides not to grant a lease in respect of the reserved area to an instrumentality of the State Government, that instrumentality has no right to insist that a Mining Lease should be granted to it. It is open to the State Government to exercise at any time, a choice of the State or any one of the instrumentalities specified in the rule. It is true that if, eventually, the State Government decides to grant a lease to one or other of them in respect of such land, the instrumentality whose application is rejected may be aggrieved by the choice of another for the lease. The question whether OMC or IDCOL can object to the grant to any of the private parties on the ground that a reservation has been made in favour of the public sector, has to be answered in the negative in view of the statutory provisions. For the State Government could always denotify the reservation and make the areas available for grant to private parties. Or, short of actually deserv ing a notified area, persuade the Central government to relax the restrictions of rule 59(1) in any particular case. It is, therefore, open to the State Government to grant private leases even in respect of areas covered by a notifi cation of the State Government and this cannot be challenged by any instrumentality in the public sector. [82F H; 83A H; 84A C] 12. In these matters, no grounds have been made out which could support a plea of promissory estoppel. The grant of a lease to ORIND had to be approved by the Central Gov ernment. The Central Government never approved of it. The mere fact that the State Government, at one stage, recom mended the grant cannot stand in the way of their disposing of the application of ORIND in the light of the Central Government 's directives. [78E F] Kanai Lal Sur vs Paramnidhi Sadhukhan, ; M/s 35 Motilal Padampat Sugar Mills Co. (P) Ltd. vs State of Uttar Pradesh and Ors., ; ; Gujarat State Financial Corporation vs M/s Lotus Hotels Pvt. Ltd., ; Surya Narain Yadav & Or,5. vs Bihar State Electricity Board Godfrey Philips India Ltd., [1985] Suppl. 3 SCR 123 and Mahabir Auto Stores & Ors. vs Indian Oil Corporation Ors., [1990] JT I SC 363, referred to.

The appellant and its workmen, represented by their unio.n called the Indoxco Labour Union, Jamshedpur, made a joint application to the Government referring certain disputes to the Industrial Tribunal. The application stated that the number of workmen employed in the undertaking affected were those employed in the company 's factory at Jamshedput, and that the same number were likely to be affected by the disputes. The Government referred the disputes to the Industrial Tribunal, and the notification also stated that the disputes were between the management of the appellant company 's factory at Jamshedpur and their workmen represented by Indoxco Labour Union. Two of the demands were (1) payment of overtime to office staff should be 1 1/2 times the ordinary rate .and (2) the union representatives should be allowed special leave to attend law courts for matters connected with the workers and the management, to attend the annual conventions of their federation, to attend to Executive Committee meetings of the union federation and the conventions of the central organisation i.e., INTUC. The union at a general meeting, held prior to the reference, had passed a resolution changing the name of the union to Indian Oxygen Workers Union and making the workmen of all the establishments of the Appellant company in Bihar eligible for its membership. By a letter the union informed the appellant company at Jamshedpur of this amendment. The Tribunal held that (i) the award in this case was to apply to all of the workmen and could not be restricted to the workman working at Jamshedpur; (ii) 11/2 times the ordinary wages 'for overtime work exceeding 39 hours but not exceeding 48 hours per week should be paid; and if the overtime exceeded 48 hours per week, the company would be liable to pay double the ordinary rate of wages; and (iii) the appellant company had been allowing without loss of pay the representatives of the workmen to attend proceedings before conciliation officers and Industrial Tribunals, and that this concession was sufficient; therefore the Tribunal rejected the demand for special Leave with pay to attend the law courts; but held the union 's representatives were to be given special leave to attend (a) meetings of its executive committee, (b) meetings of the federation of the union, (c) the annual convention of that federation when held at Jamshedpur and (d) the convention of the INTUC. In appeal to this Court, HELD: (i) The award was operative only in respect of the workmen of the appellant company 's factory at Jamshedpur and not the workmen of its other establishments. [561 C D] The agreement by which the parties agreed to refer the said disputes for adjudication was between the management of the appellant company 's factory at Jamshedpur. and the wo 'rkmen employed in that factory and represented by their said union, the Indoxco Labour Union. Under the notification of the Government also 'the disputes referred to the Tribunal 551 were those set out in the said agreement. Even assuming that the Indoxco Labour Union validly amended its constitution so as to extend its membership to the company 's other workmen in its other establishments, inasmuch as the disputes referred to. the Tribunal were only those set out in the said agreement, any award made by the Tribunal in respect of those disputes must necessarily be confined to the disputes refered to it, the parties to those disputes and the parties who had agreed to refer those disputes for adjudication. There is nothing to show in that notification that other workmen of the company had raised similar demands. or that there were any disputes existing or apprehended which were included in that reference. [555 D G] The Union did not produce any evidence to show that the amendments purported to have been carried out by the resolution were sent to the Registrar as provided in sections 6(g), 28(3), 29 and 30(3) of the Trade Union Act and regulation 9 of the Central Trade Union Regulation, nor did it produce any communication of the Registrar notifying the fact of his having registered the said amendments. The only evidence it produced was its letter to the appellant company which indicated that the Registrar notified to the union of his having registered the said amendments. The Tribunal 's conclusion, therefore, that the union 'section constitution, was duly amended or that the Indian Oxygen Workers Union represented the workmen of the company 's factory at Jamshedpur and that consequently it made no difference that the name of Indoxco Labour Union as representing the workmen concerned was mentioned in the said agreement and the said statement and not that of the Indian Oxygen Workers Union is erroneous and cannot be sustained. Any award, therefore, made by the Tribunal in these circumstances can operate only in respect of the workmen of the appellant company 's factory at Jamshedpur and the Tribunal 's extension of that award to workmen in the company 's other establishments was clearly without jurisdiction. [557 D G] The Associated Cement Companies Ltd. vs Their Workmen, ; a 'nd Ramnagar Cane and Sugar Co. Ltd. vs Jatin Chakravorty, , distinguished. (ii) Under the conditions of service of the co.mpany, the total hours of work per week were 39 hours. The Bihar Shops and Establishments Act fixes the maximum number of hours of work allowable thereunder, i.e. 48 hours a week, and provides for double the rate of ordinary wages for work done over and above 48 hours. But no reliance can be placed on the provisions of that Act for the company 's contention that it cannot be called upon to. pay for overtime work anything more than its ordinary rate of wages if the workmen do work beyond 39 hours but not exceeding 49 hours a week. Any workman asked 'to work beyond 39 hours would obviously be working overtime and the company in fairness would be expected to pay him compensation for such overtime work. If the company pays at the ordinary rate of wages for work done beyond 39 hours but not exceeding 48 hours work a week, it would be paying no extra compensation at all for the work done beyond the agreed hours of work. The company would thus be indirectly increasing the hours of work and consequently altering its condition of service. [558 C F] If after taking into consideration the fact of the comparatively higher scale of wages prevailing in the appellant company, the Tribunal fixed the rate for overtime work at 11/2 times the ordinary rate of wages, it is impossible to say that the Tribunal erred in doing so or acted unjustly. (iii) The demand for special leave must be disallowed. 552 The appellant company. has been allowing those,of its workmen who are the union 's representatives to attend without loss of pay proceedings before conciliation officers and industrial tribunals. In conceding the demand of the union for more leave the Tribunal does not appear to have considered the adverse effect on the company 's production if furthern absenteeism were to be allowed especially when the crying need of the country 's economy is more and more production. In awarding this demand the Tribunal also did not specify on how many ' occasions the executive committee meetings of the union and other meetings would be held when the company would be obliged to give special leave with pay to the union 's representatives. Similarly, there is no knowing how many delegates the union would send to attend the conventions of the federation and the INTUC. The Tribunal could not in the very nature of things specify or limit the number of such meetings for such an attempt would amount to interference in the administration of the union and its autonomy. Its order must of necessity, therefore, have to be indefinite with the result that the appellant company would not know before hand on how many occasions and to how many of its workmen it would be called upon to grant special leave. Further, in case there are more than one union in the company 's establishment, the representatives of all such unions would also have to be given such leave to attend the aforesaid meetings. In considering such a demand, the question as to why the meetings of the executive committee of the union cannot be 'held outside the hours of work should be considered. It was said that it may not be possible always to do so if an emergency arises. But emergencies are not of regular occurrence and if there be one, the representatives can certainly sacrifice one of their earned leave. Similarly the meetings of the federation and the annual conventions of the INTUC too can be artended by the union 's delegates by availing themselves of their earned leave. [559 D E; 560 C H] J. K. Cotton and Spinning and Weaving Mills vs Badri Malt, [19641 3 S.C.R. 724, referred to.

In June, 1950, goods belonging to the appellant company were stolen and as the result of an enquiry the respondent was dismissed on the ground of gross negligence and misconduct. He was prosecuted on a charge of theft but was acquitted in March, 1952, and thereupon he made an application before the Labour Commissioner 957 for reinstatement and compensation under section 16(2) of the Central Provinces and Barar Industrial Disputes Settlement Act, 1947. It was contended for the appellant that the application was not main tainable because (1) the respondent was not an employee on the date of the application, having been dismissed long prior thereto and (2) his dispute was an individual and not an industrial dispute Held, (1) that the definition of "employee" in section 2(10) of the Act includes one who has been dismissed and has ceased to be in service, and that the inclusive clause therein was inserted ex abundanti cautela to repel a possible contention that employees discharged under sections 31 and 32 of the Act would not fall with Ins. 2(10) and cannot be read as importing an intention generally to exclude dismissed employees from that definition. Western India Automobile Association vs Industrial Tribunal Bombay ([1949] F.C.R. 321), relied on. (2) that a dispute between an employer and an employee who has been dismissed and who makes a claim for reinstatement and compensation, would be an industrial dispute within the meaning of section 2(12) of the Act, and section 16 enables the employee to enforce his individual rights against an order of dismissal, discharge, removal or suspension. Quaere, whether a dispute simpliciter between an employer and a workman would be an industrial dispute within section 2(k) of the (XIV of 1947).

The appellant employed workmen in his bidi factory who had to work at the factory and were not at liberty to work at their houses; their attendance were noted in the factory and they had to work within the factory hours, though they were not bound to work for the entire period and could come and go away when they liked; but if they came after midday they were not supplied with tobacco and thus not allowed to work even though the factory closed at 7 p.m.; further they could be removed from service if absent for 8 days. Payment was made on piece rates according to the amount of work done, and the bidis which did not come upto the proper standard could be rejected. The respondent workmen applied for leave for 15 days and did not go to work, for which period the appellants did not pay their wages; in consequence the concerned workmen applied to the Payment of Wages Authority for payment of wages to them. The appellant 's contention that the respondent workmen were not his workmen within the meaning of the , was rejected and the claim for payment of wages was allowed. The question therefore was whether the appellants were workmen within the meaning of the . Held, that the nature of extent of control varies in different industries and cannot by its very nature be precisely defined. When the operation was of a simple nature and could not be supervised all the time and the control was at the end of day by the method of rejecting the work done which did not come up to proper standard, then, it was the right to supervise and not so much the mode in which it was exercised which would determine whether a person was a workman or an independent contractor. The mere fact that a worker was a piece rate worker would not necessarily take him out of the category of a worker within the meaning of section 2(1) Of the . In the instant case the respondent workmen could not be said to be independent contractors and were workmen within the meaning of section 2(1) of the . Held, further, that the leave provided for under section 79 of the arose as a matter of right when a worker had put 21 162 in a minimum number of working days and he was entitled to it. The fact that the workman remained absent for a longer period had no bearing on his right to leave. State vs Shankar Balaji Waje, A.I.R. 1960 Bom. 296, approved. Dharangadhara Chemical Works Ltd. vs State of Saurashtra, ; and Shri Chintaman Rao vs The State of Madhya Pradesh, ; , referred to.

133 of 1959. Petition under article 32 of the Constitution of India for enforcement of Fundamental Rights. A. V. Viswanatha Sastri and G. Gopalakrishnan, for the petitioner. D. Narasa Raju, Advocate General, of Andhra Pradesh, D. Venkatappayya Sastri and ' T. M. Sen, for respondents Nos. T. V. R. Tatachari, for respondent '1 No. 4. 1960. December 6. The Judgment of the Court was delivered by section K. DAS, J. This is a writ petition under article 32 of the Constitution. Gazula Dasarstha Rama Rao is the petitioner. The respondents are (1) the State of Andhra Pradesh, (2) the Board of Revenue, Andhra Pradesh, (3) the Collector of Guntur in Andhra Pradesh and (4) Vishnu Molakala Chahdramowlesshwara 933 Rao. The petitioner prays that this Court must declare section 6 of the Madras Hereditary Village Offices Act,, 1895 (Madras Act III of 1895), hereinafter called the Act, as void in so far as it infringes the fundamental right of the petitioner under articles 14 and 16 of the Constitution, and further asks for an appropriate writ or direction quashing certain orders passed by respondents 1 to 3 in favour of respondent No. 4 in the matter of the latter 's appointment as Village Munsif of a newly constituted village called Peravalipalem. When this petition first came up for hearing we directed a notice to go to other States of the Union inasmuch as the question raised as to the constitutional validity of the law relating to a hereditary village office was of a general nature and might arise in relation to the existing laws in force in other States. Except the State of Andhra Pradesh which has entered appearance through its Advocate General, none of the other States have entered appearance. The Advocate General of Andhra Pradesh has appeared for respondents 1 to 3, and respondent 4 has been separately represented before us. These respondents have contested the application and have pleaded that section 6 of the Act does not violate any fundamental right, nor are the impugned orders of respondents 1 to 3 invalid in law. The short facts are these: Village Peravali in Tenali taluq of the district of Guntur in the State of Andhra Pradesh was originally comprised of a village of the same name and a fairly large hamlet called Peravalipalem. The two were divided by a big drainage channel. It is stated that for purposes of village administration the villagers felt some difficulties in the two being treated as one unit So the villagers, particularly those of the hamlet, but in an application to the Revenue authorities for constituting the hamlet into a separate village. This application was re commended by the Tehsildar and was accepted by the Board of Revenue and the State Government. By an order dated August 25, 1956, Peravali village was bifurcated and two villages were constituted. The 118 934 order was published in the District Gazette on October 115,1956, and was in these terms: "The Board sanctions the bifurcation of Peravali village of Tenali taluq, Guntur district, into two villages, viz., (1) Peravali and (2) Peravalipalem along the boundary line shown in the map submitted by the Collector of Guntur with his letter Re. A. 4. 28150/55 dated 30th June, 1956. These orders will come into effect from the date of publication in the District Gazette. The Board sanctions the following establishments on the existing scale of pay for the two villages: Peravali: 1 Village Munsif. 1 Karnam. 1 Talayari. 3 Vettians. Peravalipalem: 1 Village Munsif. 1 Karnam. 1 Talayari. 1 Vettian. " It is convenient to read at this stage sub section (1) of section 6 of the Act under which the bifurcation was made: "section 6(1). In any local area in which this Act is in force the Board of Revenue may subject to rules made in this behalf under section 20, group or amalgamate any two or more villages or portions thereof so as to form a single new village or divide any village into two or more villages and, thereupon, all hereditary village offices (of the classes defined in section 3, clause (1), of this Act) in the villages or portions of villages or village grouped, amalgamated or divided as aforesaid, shall cease to exist I and new offices, which shall also be hereditary shall the created for the new village or villages. In choosing persons to fill such new offices, the Collector shall select the persons whom he may consider the best qualified from among the families of the last holders of the offices which have been abolished. " 935 On the division of the village into two villages, all the hereditary village offices of the original village ceased to exist under the aforesaid sub section, and new offices were created for the two villages. We are concerned in this case with the appointment to the office of Village Munsif in the newly constituted village of Peravalipalem. In accordance with the provisions of sub section (1) of section 6 and certain Standing Orders of the Board of Revenue, the Revenue Divisional Officer, Tenali, invited applications for the post of Village Munsif of Peravalipalem. Eight applications were made including one by the petitioner and another by respondent 4. Respondent 4, be it noted, is a son of the Village Munsif of the old village Peravali. By an order dated October, 18, 1956, the Revenue Divisional Officer, appointed the petitioner as Village Munsif of Peravalipalem. From the order of the Revenue Divisional Officer, respondent 4 and some of the other unsuccessful applicants preferred appeals to respondent 3, the Collector of Guntur. By an order dated April 1, 1957, respondent 3 allowed the appeal of respondent 4 and appointed him as Village Munsif of Peravalipalem. In his order respondent 3 said: "Shri V. Chandramowleswara Rao is qualified for the post. He is the son of the present Village Munsif of Peravali and is, therefore, heir to that post. section 6(1) of the Hereditary Village Offices Act states that in choosing a person to fill a new office of this kind the Collector shall select the person whom he may consider best qualified from among the family of the last holder of the office which has been abolished. The Village Munsif 's post of the undivided village of Peravali was abolished when the village was divided and the new post of Village Munsif of Peravalipalem has to be filled up from among the family of the previous Village Munsif. The same instructions are contained in Board 's Standing Order 148(2). " The petitioner then carried an appeal from the order of respondent 3 to the Board of Revenue. By an order dated April 24, 1958, the Board dismissed the appeal and stated: "According to section 6, in choosing the person to fill 936 in a new office like this, the Collector shall select the person whom he considers best qualified from among the families of the last holders of the office, which have been abolished. Here the office of the Village Munsif was abolished and two new offices have been created. As the last holder of the office was appointed to the new village, Peravali, after bifurcation,, the Collector has appointed the son of the last office holder as Village Munsif of Peravalipalem as he is the nearest heir. The appellant before the Board cannot claim any preference over the son of the last office holder. 'The Board, therefore, holds that the Collector 's order is in accordance with the law on the subject. No interference, is, therefore, called for." The petitioner then moved respondent, 1, but without success. Thereafter, he filed the present writ petition. The petitioner relies mainly on clauses (1) and (2) of article 16 of the Constitution. We may read those clauses here: "article 16(1). There shall be equality of opportunity for all citizens in matters relating to employment or appointment to any office under the State: (2) No citizen shall, on grounds only of religion, race, caste, sex, descent, place of birth, residence or any of them, be ineligible for, or discriminated against in respect of, any employment or office under the State. " On behalf of the petitioner it has been contended that (1) the office of Village Munsif of Peravalipalem is an office under the State, and (2) respondents 1 to 3 in passing their orders in favour of respondent 4 expressly stated that they proceeded on the basis of the hereditary principle laid down in section 6(1) of the Act and discriminated against him as a citizen. on the ground of descent only. This discrimination, it is argued violates the guarantee of equal opportunity enshrined in article 16, cls. (1) and (2) and section 6(1) of the Act to the extent that it permits such discrimination is void under article 13(1) of the Constitution. The first question before us is if the office of Village 937 Munsif under the Act is an office under the State within the meaning of cls. (1) and (2) of article 16 of the Constitution. For determining that question it is necessary to examine the scheme and various provisions of the Act. The long title shows that it was an Act made to repeal Madras Regulation VI of 1831 and for other purposes. The purposes mentioned in the preamble are "to provide more precisely for the succession to certain hereditary village offices in the State; for the hearing and disposal of claims to such offices or the emoluments annexed thereto; for the appointment of persons to hold such offices and the control of 'the holders thereof, and for certain other purposes. " Section 3 of the Act refers to classes of village offices to which the Act applies and Village Munsif is one of such offices. Under section 4 "emoluments" of the office means and includes (i) lands; (ii) assignment of revenue payable in respect of lands; (iii) fees in money or agricultural produce; and (iv) money salaries and all other kinds of remuneration granted or continued in respect of, or annexed to, any office by the State. Section 5 lays down that the emoluments of village offices, whether such offices be or be not hereditary, shall not be liable to be transferred or encumbered in any manner whatsoever and it shall not be lawful for any Court to attach or sell such emoluments or any portion thereof Sub section (1) of section 6 relates to the grouping or division of villages; this sub section we have already read. Sub section (2) of section 6 gives a right to the Board of Revenue, subject to the approval of Government, to reduce the number of village offices, and on such reduction the Collector is empowered to dispense with the services of the officers no longer required. Sub section (3) of6 which was subsequently added in 1930 says thatminor shall not be ineligible for selection by reasonof his minority only. Section 7 states the circumstances in which the Collector may, of his own motion or on complaint and after enquiry suspend, remove or dismiss, etc. , some of the village officers mentioned in section 3. A similar power of punishment is also given to the Tehsildar. Under these provisions the Collector may suspend, remove 938 or dismiss the Village Munsif. Section 10 lays down certain rules which are to be observed in making appointments to some of the village offices and these rules lay down, among other things, the general qualifications requisite for appointment to the offices in question. For example, for the appointment to the office of Village Munsif no person. is eligible unless he has attained the age of. majority, is physically and mentally capable of discharging the duties of the office, has qualified according to the educational test prescribed for the office by the Board of Revenue, has not been convicted by a Criminal Court of any offence which, in the opinion of the Collector, disqualifies him for holding the office and has not been dismissed from any post under the Government on any ground which the Collector considers sufficient to disqualify him for holding the office. One of the qualifications prescribed by section 10 as it originally stood required that the applicant must be of the male sex. This requirement was deleted by the Adaptation (Amendment) Order of 1950, presumably to bring the section into conformity with articles 15 and 16 of the Constitution which prohibit discrimination on the ground of sex. Sub section (2) of section 10 says that the succession shall devolve on a single heir according to the general custom and rule of primogeniture governing succession to impartable zamindar is in Southern India. ' Sub section (3) of section 10 says that where the next heir is not qualified, the Collector shall appoint the person next in order of succession, who is so qualified, and, in the absence of any such person in the line of succession, may appoint any person duly qualified. Sub sections (4), (5) and (6) of section 10 deal with matters with which we ore not directly concerned. Section 11 lays down the rules to be observed in making appointments to certain offices in proprietary estates and one of the rules is that succession shall devolve in accordance with the law or custom applicable to the office in question. Section 13 in effect says that any person may sue before the Collector for any of the village offices specified in section 3 or for the recovery of the emoluments of, any such office on the ground that he is entitled to hold such office and 939 enjoy such emoluments. There are some provisos to the section which lay down limitations on the right of suit. With those limitations we are not concerned in the present case. Section 14 lays down the period of limitation for bringing a suit. Sections 15, 16 and 17 relate to the transfer and trial of such suits and the decrees or orders to be passed therein. Section 20 empowers the Board of Revenue to make rules and section 21 bars the jurisdiction of Civil Courts. Section 23 provides for appeals. The above gives in brief the scheme and provisions of the Act. These provisions show, in our opinion, that the office of Village Munsif under the Act is an office under the State. The appointment is made by the Collector, the emoluments are granted or continued by the State, the Collector has disciplinary powers over the Village Munsif including the power to remove, suspend or dismiss him, the qualifications for appointment can be laid down by the Board of Revenue all these show that the office is not a private office under a private employer but is an office under the State. The nature of the duties to be performed by the Village Munsif under different provisions of the law empowering him in that behalf also shows that he holds a public office. He not only aids in collecting the revenue but exercises power of a magistrate and of a Civil Judge in petty cases. He has also certain police duties as to repressing and informing about crime, etc. The learned Advocate General appearing for respondents 1 to 3 has contended that the expression " office under the State" in article 16 has no reference to an office like that of the Village Munsif, which in its origin was a customary village office later recognised and regulated by law. His contention is that the expression has reference to a post in a Civil 'Service and an ex cadre post under a contract of service,, as are referred to in articles 309 and 310 in Part XIV of the Constitution relating to the Services under the Union and the States. He has referred in support of his contention to Ilbert 's Supplement to the Government of India Act, 1915, p. 261, where a similar 940 provision with regard to the Indian Civil Service has been referred to as laying down that "no native of British India. . is by reason only of his religion, place of birth, descent, or colour, or any of them disabled from holding any place, office or employment under His Majesty in India" and has pointed out that the aforesaid provision reproduced section 87 of the Act of 1833 and historically the office to which the provision related was an office or employment in a Service directly under the East India Company or the Crown. He also referred to section 298 of the Government of India Act, 1935, which said inter alia that "no subject of His Majesty domiciled in India shall on grounds only of religion, place of birth, descent, colour or any of them be ineligible for office under the Crown in India. " The argument ' of the learned Advocate General is that article 16 embodies the same principle as inspired the earlier provisions referred to above, and like the earlier provisions it should be confined to an office or post in an organised public Service or an excadre post under a contract of service directly under the Union or the State. He has further suggested that the deletion of the requirement as to sex in section 10 of the Act was by reason of article 15 and not article 16 of the Constitution. The argument is plausible, but on a careful consideration we are unable to accept it as correct. Even if we assume for the purpose of argument that articles 309 and 310 and other Articles in Chapter 1, Part XIV, of the Constitution relate only to an organised public Service like the Indian Administrative Service, etc., and ex cadre posts under a direct contract of service which have not yet been incorporated into a Service, we do not think that the scope and effect of cls. (1) and (2) of article 16 can be out down by reference to the provisions in the Services Chapter of the Constitution. Article 14 enshrines the fundamental right of equality before the law or the equal protection of the laws within the territory of India. It is available to all, irrespective of whether the person claiming it is a citizen or not. Article 15 prohibits discrimination on some special grounds religion, race, caste, sex, place 941 of birth or any of them. It is available to citizens only, but is not restricted to any employment or office under the State. Article 16, cl. (1), guarantees equality of opportunity for all citizens in matters relating to employment or appointment to any office under the State; and el. (2) prohibits discrimination on certain grounds in respect of any such employment or appointment. It would thus appear that article 14 guarantees the general right of equality; articles 15 and 16 are instances of the same right in favour of citizens in some special circumstances. Article 15 is more general than article 16, the latter being confined to matters relating to employment or appointment to any office under the State. It is also worthy of note that article 15 does not mention 'descent ' as one of the prohibited grounds of discrimination, whereas article 16 does. We do not see any reason why the full ambit of the fundamental right guaranteed by article 16 in the matter of employment or appointment to any office under the State should be cut down by a reference to the provisions in Part XIV of the Constitution which relate to Services or to provisions in the earlier Constitution Acts relating to the same subject. These Service provisions do not enshrine any fundamental right of citizens; they relate to recruitment, conditions and tenure of service of persons, citizens or otherwise, appointed to a Civil Service or to posts in connection with the affairs of the Union or any State. The word 'State ', be it noted, has a different connotation in Part III relating to Fundamental Rights: it includes the Government and Parliament of India, the Government and Legislature of each of the States and all local or other authorities within the territory of India, etc. Therefore, the scope and ambit of the Service provisions are to a large extent distinct and different from the scope and ambit of the fundamental right guaranteeing to all citizens an equality of opportunity in matters of public employment. The preamble to, the Constitution states that one of its objects is to secure to all citizens equality of status and opportunity; article 16 gives equality of opportunity in matters 119 942 of public employment. We think that it would be wrong in principle to cut down the amplitude of a fundamental right by reference to provisions which have an altogether different scope and purpose. Article 13 of the Constitution lays down inter alia that all laws in force in the territory of India immediately before the commencement of the Constitution, in so far as they are inconsistent with fundamental rights, shall to the extent of the inconsistency be void. In that Article 'law ' includes custom or usage having the force of law. Therefore, even if there was a custom which has been recognised by law with regard to a hereditary village office, that custom must yield to a fundamental right. Our attention has also been drawn to cl. (4) of article 16 which enables the State to. make provision for the reservation of appointments or posts in favour of any backward class of citizens which, in the opinion of the State, is not adequately represented in the services under the State. The argument is that this clause refers to appointments or posts and further talks of inadequate representation in the services, and the learned Advocate General has sought to restrict the scope of cls. (1) and (2) of article 16 by reason of the provisions in el. We are not concerned in this case with the true scope and effect of cl. (4) and we express no opinion with regard to it. All that we say is that the expression 'office under the State ' in cls. (1) and (2) of article 16 must be given its natural meaning. We are unable, therefore, to accept the argument of the learned Advocate General that the expression " office under the State ' in article 16 has a restricted connotation and does not include a, village office like that of the Village Munsif. In M. Ramappa vs Sangappa and Others (1) the question arose whether certain village offices governed by the Mysore Villages Offices Act, 1908, were offices of profit under the Government of any State within the meaning of article 191 of the Constitution. This Court held that the offices were offices of profit under the Government and said. "An office has to be held under someone for it is impossible to conceive of an office held under no one. (1) 943 The appointment being by the Government, the office to which it is made must be held under it, for there is no one else under whom it can be held. The learned Advocate said that the office was held under the village community. But such, a thing is an impossibility for village communities have since a very long time, ceased to have any corporate existence. " Learned Counsel for respondent 4 has presented a somewhat different argument on this question. He has submitted that the office of Village Munsif is not merely an office simpliciter; but it is an office cum property. His argument is that article 16 does not apply to a hereditary village office because a person entitled to it under the Act has a pre existing right to the office and its emoluments, which he can enforce by a suit. We now proceed to consider this argument. Learned Counsel for respondent 4 has relied on the decision of this Court in Angurbala Mullick vs Debabrata Mullick (1) where it was held that in the conception of shebaiti under Hindu law, 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. He has argued that on the same analogy the office of a village Munsif must be held to be an office cum property. We do not think that the analogy holds. As this Court pointed out in Kalipada Chakraborti and Another vs Palani Bala Devi and Others (2) shebaitship is property of a peculiar and anomalous character and it is difficult to say that it comes under the category of immovable property as it is known to law. As to the office of a Village Munsif under the Act, the provisions of the Act itself and a long line of decisions make it quite clear that what go with the office are its emoluments, whether in the shape of land, assignment of revenue, agricultural produce, money, salary or any other kind of remuneration. These emoluments are granted or continued in respect of, or annexed to, the office by the State. This is made clear by section 4 of the Act. Apart from the office there is no right to the emoluments. In other words, when a person is appoint (1) (2) 944 ed to be a "Village Munsif" it is an appointment to a an office by the State to be remunerated either by the use of land or by money, salary, etc. ; it is not the case of a grant of land burdened with service, a distinction which was explained by the Privy Council in Lakhamgouda Basavprabhu Sardesai vs Baswantrao and Others (1). In Venkata vs Rama (2) where the question for decision was the effect of the enfranchisement of lands forming the emoluments of the hereditary village office of Karnam, it was pointed out: "Emoluments for the discharge of the duties of the office were provided either in the shape of land exempt from revenue or subject to a lighter assessment, or of fees in grain or cash, or of both land and fees. . . . . . . . . . When the emoluments consisted of land, the land did not became the family property of the person appointed to the office, whether in virtue of an hereditary claim to the office or otherwise. It was an appanage of the office inalienable by the office holder and designed to be the emolument of the officer into whose hands soever the office might pass. If the Revenue authorities thought fit to disregard the claim of a person who asserted an hereditary right to the office and conferred it on a stranger, the person appointed to the office at once become entitled to the lands which constituted its emolument. " The same view was re affirmed in, Musti Venkata Jagannada Sharma vs Musti Veerabhadrayya (3) where the history of the office of Karnam was examined and it was observed that the "Karnam of the village occupies his office not by hereditary or family right, but as personal appointee, though in certain cases that appointment is primarily exercised in favour of a suitable person who is a member of a particular family." This latter decision was considered by a Full Bench of the Madras High Court in Manubolu Ranga Reddi vs Maram Reddi Dasaradharami. Reddi (4) (1) A.I.R. 1931 P.C. 157. (3) A.I.R. 1922 P.C. 96. (2) I.L.R. 8 'Mad. (4) I.L.R. 945 and it was pointed out that their Lordships of the Privy Council, though they indicated the nature of the right which the Karnam had, did not consider the ' question whether on the creation of an office under section 6(1), the members of the family of the last holder of the abolished office had the right to compel the Collector to carry out the duty cast upon him by the section. It was held that section 6(1) creates a right in the family which can be enforced by suit. Learned Counsel for respondent 4 has relied on this decision. It is worthy of note, however, that the decision was given on the footing that section 6(1) was valid and mandatory in character. No question arose or could at that time arise of the contravention of a fundamental right guaranteed by the Constitution, by_ the hereditary principle embodied in section 6(1) of the Act. The decision proceeded on the footing that the Act recognised a 'right vested in a family ' to the office in question and contained provisions to enforce that right. It did not proceed upon the footing that the family had a right to the property in the shape of emoluments, independent or irrespective of the office. In other words, the decision cannot be relied upon in support of the contention that a hereditary village office is like a shebaiti, that is, office cum property. That was not the ratio of the decision. The ratio simply was this that the Act bad recognised the right vested in a family to the office in question. That decision cannot assist respondent 4 in support of his contention that article 16, cls. (1) and (2), do not apply to the office, even though the office is an office under the State. In Ramachandurani purshotham vs Ramachandurani Venkatappa and Another (1) the question was whether the office of Karnam was 'property ' within the meaning of article 19(1)(f) of the Constitution. It was held that it was not property within the meaning of that Article. The same view was expressed in Pasala Rama Rao vs Board of Revenue (2) where if was observed that the right to succeed to a hereditary office was not property and the relation back of an adopted son 's rights was only with regard to property. (1) A.I.R. 1952 Mad. (2) A.I.R. 1954 Mad. 946 This view was not accepted in Chandra Chowdary vs The Board of Revenue (1) where it was observed that the fact that the adoption was posthumous did not make any difference and the adoption being to the last office holder, the adopted son must be deemed to have been in existence at the time of the death of the male holder and had the right to succeed to the office. It was further observed that the office of a Village Munsif was 'property ' so as to attract the operation of the rule that the adoption related back to the date of the death of the last male holder. We are not concerned in this case with the doctrine of relation back in the matter of a posthumous adoption. The simple question before us is whether the office, though it is an office under the State, is of such a nature that cls. (1) and (2) of article 16 of the Constitution are not attracted to it. We are of the view that there is nothing in the nature of the office which takes it out of the ambit of cls. (1) and (2) of article 16 of the Constitution. An office has its emoluments, and it would be wrong to hold that though the office is an office under the State, it is not within the ambit of article 16 because at a time prior to the Constitution, the law recognised a custom by which there was a preferential right to the office in the members of a particular family. The real question is is that custom which is recognised and regulated by the Act consistent with the fundamental right guaranteed by article 16? We do not agree with learned Counsel for respondent 4 that the family had: any pre existing right to property in the shape of the emoluments of the office, independent or irrespective of the office. If there was no such pre existing right to property apart from the office, then the answer must clearly be that article 16 applies and section 6(1) of the Act in so far as it makes a discrimination on the ground of descent only, is violative of the fundamental right of the petitioner. There can be no doubt that section 6(1) of the Act does embody a principle of discrimination on the ground of descent only. It says that in choosing the persons to fill the new offices, the Collector shall select the persons whom he may consider the best qualified from (1) A.I.R. 1959 Andhra Pradesh 343. 947 among the families of the last holders of the offices which have been abolished. This, in our opinion, is discrimination on the ground of descent only and is in contravention of article 16(2) of the Constitution. Learned Counsel for respondent 4 has also submitted that the petitioner cannot be permitted to assert the invalidity of section 6(1) of the Act when he himself made an application for appointment as Village Munsif under the Act. He has drawn our attention to the decision in Bapatla Venkata Subba Rao v, Sikharam Ramakrishna Rao(1). That was a case where the appellant was appointed as a hereditary Karnam under the Act and but for the Act, he would not have had any claim to be appointed to the office of Karnam. It was held that he could not be permitted to contend for the first time in appeal that the very Act but for which he would not have had any right to the office, was unconstitutional. Apart from the question whether a fundamental right can be waived, a question which does not fall for consideration in this case, it is clear to us that the facts here are entirely different. The petitioner had the right to make an application for the new village office and he was accepted by the Revenue Divisional Officer. Respondents 1 to 3, however, passed orders adverse to him and in favour of respondent 4, :acting on the principle of discrimination on the ground of descent only as embodied in section 6(1) of the Act. It is, we think, open to the petitioner to say that section 6(1) of the Act in so far as it violates his fundamental right guaranteed under article 16 of the Constitution is void and his application for appointment must, therefore, be decided on merits. Finally, we must notice one other argument advanced by the learned Advocate General on behalf of respondents 1 to 3. The argument is based on the distinction between articles 15 and 16. We have said earlier that article 15 is, in one respect, more general than article 16 because its operation is not restricted to public employment; it operates in the entire field of State discrimination. But in another sense, with (1) A.I.R. 1958 Andhra Pradesh 322. 948 regard to the grounds of discrimination, it is perhaps less wide than article 16, because it does not include , descent ' amongst the grounds of discrimination. The argument before us is that the provision impugned in this case must be tested in the light of article 15 and not article 16. It is submitted by the learned Advocate General that the larger variety of grounds mentioned in article 16 should lead us to the conclusion that article 16 does not apply to offices where the law recognises a right based on descent. We consider that such an argument assumes as correct the very point which is disputed. If we assume that article 16 does not apply, then the question itself is decided. But why should we make that assumptions If the office in question is an office under the State, then article 16 in terms applies; therefore, the question is whether the office of Village Munsif is an office under the State. We have held that it is. It is perhaps necessary to point out here that cl. (5) of article 16 shows that the Article does not bear the restricted meaning which the learned Advocate General has canvassed for; because an incumbent of an office in connexion with the affairs of any religious or denominational institution need not necessarily be a member of the Civil Service. For the reasons given above, we allow the petition. The orders of respondents 1 to 3 in respect of the appointment to the post of Village Munsif of Peravalipalem in favour of respondent 4 are set aside and we direct that the application of the petitioner for the said office be now considered on merits by the Revenue authorities concerned on the footing that section 6(1) of the Act in so far as it infringes the fundamental right of the citizens of India. under article 16 of the Constitution is void. The petitioner will be entitled to his costs of the hearing in this Court. Petition allowed.

Village P in the State of Andhra Pradesh was originally comprised of a village of the same name and a fairly large hamlet called PP, but in view of the difficulties in the two being treated as one unit for purposes of village administration the Board of Revenue sanctioned the bifurcation of P into two villages, P and PP. On the division of the village all the hereditary village offices of the original village ceased to exist under section 6(1) of the Madras Hereditary Village Offices Act, 1895, and new offices were created for the two villages. The section provided, inter alia, that "in choosing persons to fill such new offices the Collector shall select the persons whom he may consider the best qualified from among the families of the last holders of the offices which have been abolished." Though applications for the post of Village Munsif of PP had been invited by the Revenue authorities and the petitioner among others had made the application, respondent 4 who was the son of the Village Munsif of the old village, P, was selected on the ground that in view of section 6(1) of the Act, as the last holder of the office was appointed to the new village, P, after bifurcation, respondent 4 as the son of the last holder and nearest heir had a preferential claim for the post of Village Munsif for PP. The petitioner challenged the validity of the order of the Revenue authorities on the grounds (1) that the office of Village Munsif was an office under the State, and that the order in favour of 932 respondent 4 which expressly stated that they proceeded on the basis of the hereditary principle laid down in section 6(1) of the Act, discriminated against him as a citizen on the ground of descent only and violated the guarantee of equal opportunity enshrined in article 16 of the Constitution of India, and (2) that section 6(1) of the Act, to the extent that it permitted such discrimination was void under article 13(1) of the Constitution. The plea of the respondents was (1) that the expression "office under the State" in article 16 had no, reference to an office like that of the Village Munsif which in its origin was a customary village office later recognised and regulated by law, and (2) that article 16 did not apply to a hereditary office because a person entitled to it under the Act had a pre existing right to the office and its emoluments which could be enforced by a suit. Held: (1) that a village office like that of the Village Munsif was an office under the State within the meaning of article 16 of the Constitution of India; M. Ramappa vs Sangappa and otheys; , 167, referred to. (2) that a person entitled to an office under section 6(1) of the Madras Hereditary Village Offices Act, 1895, did not have any pre existing right to property in the shape of emoluments of the office, independent or irrespective of the office, and consequently to such an office article 16 applied; and, (3) that section 6(1) of the Act embodied a principle of discrimination on the ground of descent only and was in contravention of article 16(2) of the Constitution.

The appellant, who was a Matadhipati, moved the High Court for a writ quashing the notice served on him in 1952 by the Executive Officer to band ever to the latter the administration and the properties 253 of the Mutt in enforcement of a scheme framed in 1939 under section 63 of the Madras Act 11 of 1927. The predecessor of the appellant had filed a suit in the District Judge 's Court to set aside that scheme. The suit failed and the scheme was confirmed subject to minor modifications. In 1951 the Madras Hindu Religious and Charitable Endowments Act, 1951, repealed and replaced the Madras Act 11 of 1927. It was urged on behalf of the appellant in the High Court that the scheme contravened his fundamental rights guaranteed by the Constitution. The single Judge who heard the matter found in his favour and held that the scheme contravened article 19(1)(f) of the Constitution. On appeal by the respondent, the Division Bench reversed the decision of the Single Judge. The High Court granted certificate to the appellant to appeal to this Court. It was contended that although the scheme was valid as framed tinder the earlier Act, it incumbent under section 103(d) of the Act of 1951 that the validity of the all the provisions of the scheme must be tested in the light of its provisions. Held:Section 103(d) of the Madras Hindu Religious and Charitable Endowments Act, 1951, properly construed, merely meant that earlier schemes framed under Madras Act It of 1927 would be operative as though they were framed under the Act of 1951. It was not intended by the section that those schemes must be examined and reframed in the light of the relevant provisions of the Act. Section 62(3)(a) of the Act which provided for the modification of such schemes made this amply clear. Unless the schemes could be modified under that section they must be deemed to have been validly made under the Act of 1951 and enforced as such. East End Dwellings Co. Ltd. vs Finsbury Borough Council, , considered. Although the scheme in question had not been completely implemented before the Constitution, that was no ground for examining its provision in the light of article 19 of the Constitution. The fundamental rights conferred by the Constitution are not retrospective in operation and the observation made by this Court in Seth Shanti Sarup vs Union of India, are not applicable to the present case. Seth Shanti Sarup vs Union of India, A.I.R. 1955 S.C. 624, explained and distinguished.

Disposing off the petition, making certain observations and expressing its inability to issue any directions, except awarding costs, the Court. ^ HELD: 1. Giving directions in a matter like this, where availability of resources has a material bearing, policy regarding priorities is involved, expertise is very much in issue is not prudent to issue any directions. Ordinarily the powers of the court to deal with a matter such as this, which prima facie appears to be wholly within the domain of the Executive must be examined. [723 H, 724 A] The Govt. have limitations, both of resources and capacity. Yet, it is hoped that the Government and the Administration would rise to the necessity of the occasion and take it as a challenge to improve this great public utility (Railways) in an effective way and with an adequate sense of urgency. If, necessary, it shall set up a high powered body to quickly handle the many faced problems standing in the way. [723 G H] 2. As the present case is a public interest litigation, the petitioner is entitled to consolidated costs of Rs. 5,000 recoverable from the Railway Ministry of the Union Government. [724 F G] 3. There is hardly any scope to doubt that the guarantees provided in Part III of the Constitution are Fundamental and it is the paramount obligation of the State to ensure availability of situations, circumstances, and environments in which every citizen can effectively exercise and enjoy these rights. The right to life has recently been held by the Supreme Court to connote not merely animal existence but to have a much wider meaning to include the finer graces of human civilization. If these rights of the citizens are to be ensured, 710 it is undoubtedly the obligation of the Union of India and its instrumentalities to improve the established means of communication in this country. [722 E G] 3.2. The Railways are a public utility service run on monopoly basis. Since it is a public utility, there is no justification to run it merely as a commercial venture with a view to making profits. It is not known if a monopoly based public utility should ever be a commercial venture geared to supply the general revenue of the State but there is no doubt that the common man 's mode of transport closely connected with the free play of his fundamental right should not be. [722 H, 723 A] 3.3. The Union Government should be free to collect the entire operational cost which would include the interest on the capital outlay out of the national exchequer. Small marginal profits cannot be ruled out. The massive operation will require a margin of adjustment and, therefore, marginal profits should be admissible. [723 B C] 3.4. On the other hand, it is of paramount importance that the services should be prompt. The quality of the service should improve. Travel comforts, facilities in running trains and quality of accommodation and availability thereof should be ensured. The Administration should remain always alive to the position that every bonafide passenger is a guest of the service. Ticketless travelling has to be totally wiped out. It is this class of passengers which is a menace to the system without any payment, these law breakers disturb the administration and genuine passengers. Stringent laws should be made and strictly enforced to free the Railways from this deep rooted evil Security both of the travelling public as also to the travelling citizens must be provided and this means that accidents have to be avoided, attack on the persons of the passengers and prying on their property has to stop. Scientific improvements made in other countries and suitable to the system in our country must be briskly adopted. The obligations cast by the Railways Act and the Rules under it must be complied with. [723 C F] 3.5. At the same time, no purpose is served by placing the blame at the doors of the Government of the day. All of us should have realism and condour Independence has been secured at great cost and sacrifice. It is every citizen 's obligation to maintain it and create an environment in which its fruits can be harvested and shared. [719 D E] 3.6 Freedom brings responsibility. There can be no rights without responsibilities. In our country unfortunately individual rights have received disproportionate emphasis without proper stress on corresponding social obligations and responsibilities. In a welfare State like ours the citizen is for ever encountering public officials at various levels, regulators and dispensers of social services and managers of State operated enterprises. It is of utmost importance that the encounters are as just and as free from arbitrariness as are the familiar encounters of the rights. What is, therefore, of paramount importance is that every citizen must get involved in the determined march to resurrect the society and subordinate his will and passion to the primordial necessity of order in 711 social life. If is only in a country of that order that the common man will have his voice heard. The dream can become a reality if every citizen becomes aware of his duty and before asking for enforcement of his right, volunteers to perform his obligation. [719 E F, 720 B C, D, 724 E]

Section 3 of the U.P. Special Powers Act, 1932 (XIV Of 1932), provided as follows: "Whoever, by word, either spoken or written, or by signs or by visible representations, or otherwise, instigates, expressly or by implication, any person or class of persons not to pay or to defer payment of any liability, and whoever does any act, with intent or knowing it to be likely that any words, signs or visible representations containing such instigation shall thereby be communicated directly or indirectly to any person or class of persons, in any manner whatsoever, shall be punishable with imprisonment which may extend to six months, or with fine, extending to Rs. 250, or with both. " The appellant, who was prosecuted under the section for delivering speeches instigating cultivators not to pay enhanced irrigation rates to the Government, applied to the High Court for a writ of habeas corpus on the ground, amongst others, that the said section was inconsistent with article 19(1) (a) of the Constitution and as such void. The High Court decided in favour of the appellant and he was released. The State appealed to this Court and the question for determination was whether the impugned section embodied reasonable restrictions in the interests of public order and was thus protected by article 19(2) of the Constitution. Held, that even though in a comprehensive sense all the grounds specified in article 19(2) of the Constitution on which any reasonable restrictions on the right to freedom of speech must be based can be brought under the general head "public order", that expression, inserted into the Article by the Constitution (First Amendment) Act, 1951, must be demarcated from the other grounds and ordinarily read in an exclusive sense to mean public peace, safety and tranquility in contradistinction to national upheavals, such as revolution, civil strife and war, affecting the security of the State. Romesh Thappar vs The State of Madras ; , Brij Bhushan vs The State of Delhi. ; , The State of Bihar vs Shailabala Devi. ; and Cantewell vs Connecticut. ; , discussed. 822 It is well settled by decisions of this Court that in a restriction in order to be reasonable must have a reasonable relation to the object the Legislation has in view and must not go beyond it. Restrictions, therefore, meant to be in the interest of public order which have no proximate relationship or nexus with it but can be only remotely or hypothetically connected with it, cannot be reasonable within the meaning of article 19(2) of the Constitution. Rex vs Basudeva, A.I.R.(1950) F.C. 67, applied. Ramji Lal Modi vs The State of U.P. and Virendra vs The State of Punjab, ; , explained. So judged, it cannot be said that the acts prohibited under the wide and sweeping provisions of section 3 of the Act can have any proximate or even foreseeable connection with public order sought to be protected by it, and, consequently, that section, being violative of the right to freedom of speech guaranteed by article 19(1) (a) of the Constitution, must be struck down as unconstitutional. It would be incorrect to argue that since instigation by a single individual not to pay taxes might ultimately lead to a revolution resulting in distruction of public order, that instigation must have a proximate connection with public order. No fundamental rights can be restricted on such hypothetical and imaginary consideration. Nor is it possible to accept the argument that in a demo cratic set up there can be no scope for agitational approach or that any instigation to break a bad law must by itself constitute a breach of public order, for to do so without obvious limitations would be to destroy the right to freedom of speech on which democracy is founded. It is not possible to apply the doctrine of severability relating to fundamental rights as enunciated by this Court to the provisions of the impugned section, since it is not possible to precisely determine whether the various categories of instigation mentioned therein fall within or without the constitutionally permissible limits of legislation and separate the valid parts from the invalid. R.M.D. Chamarbaugwalla vs The Union of India (1957) S.C.R. 93o, explained and distinguished. Romesh Thappar vs The State of Madras ; and Chintaman Rao vs The State o Madhya Pradesh. (1950) S.C.R. 759, referred to.

Respondent No. 1 obtained a mortgage decree for Rs. 1,14,581/14/6 against one Rao Raja Inder Singh (the judgment debtor). The mortgage money was advanced under three mortgages, and the mortgaged properties consisted of Jagirs and some non Jagir immovable property. The latter property was sold in execution and Rs. 33,750/ paid to the decree holder in partial satisfaction of the decree. Then the decree holder filed an execution petition in the Court of the District Judge for the balance amount i.e. Rs. 99,965/3/6, praying for attachment of the amount of compensation and rehabilitation grant which would be paid to the judgment debtor on account of resumption of his Jagir. The judgmment debtor submitted two applications in which he claimed relief under sections 5 and 7 of the Rajasthan Jagirdars ' Debt Reduction Act. The decree holder, in his reply, to those petitions urged that the provisions relied in were ultra vires the Constitution of India, being in contravention of articles 14, 19 and 31 of the Constitution. Thereafter the decree holder moved a petition under article 228 of the Constitution before the High Court, praying that the execution case pending in the Court of the District Judge, be withdrawn from that court to the High Court. The High Court transferred the case to its file. By its judgment the High Court could held that apart from the later part of section 2(e) excluding certain debts and section 7 (2) of the Act, the rest of the Act was valid. The High Court granted a certificate under article 133(1)(c) of the Constitution to the State of Rajasthan to file an appeal to this Court. Hence the appeal: Held: (i) That the impugned part of section 2(e) infringes article 14 of the Constitution for the reason that no reasonable classification is disclosed for the purpose of sustaining the impugned part of section 2(e). It is now well settled that in order to pass the test of permissible classification, two conditions must be fulfilled, namely, (1) that the classification must be founded on an intelligible differentiation which distinguishes persons or things that are to be put together from others left out of the group, and (2) that the differential must have a rational relationship to the object sought to be achieved by the statute in question. The said condition No. 2 above has clearly not been satisfied in this case. The object sought to be achieved by the impugned Act was to reduce the debts secured on the Jagir lands which had been resumed under the provisions of the Rajasthan Land Reforms and Resumption of Jagirs Act. The fact that the debts are owed to a Government or local authority or other bodies mentioned in the impugned part of section (2) (e) has no rational relationship with the object sought to be achieved by the Act. Further, no intelligible principle underlies the exempted categories of debts. The reason why a debt advanced on behalf of a person by the Court of Wards is clubbed with a debt due to a State or a scheduled bank and why a debt due to a non scheduled bank is not excluded from the purview of the Act is not discernible. Manna Lal vs Collector of Jhalwar. ; , Nand Ram Chhotey Lai vs Kishore Raman Singh, A.I.R. (1962) All 521 and 905 Jamnalal Ramlal Kimtee vs Kishendas and State of Hyderabad, A.I.R. (1955) Hyd. 194, distinguished. (ii) Section 7(2) is valid as it imposes reasonable restrictions, in the interests of general public. on the rights of a secured creditor. This sub section has been designed with the object of rehabilitating a Jagirdar whose Jagir properties have been taken over by the State for a public purpose at a low valuation. If this provision was not made, the Jagirdar would find it diffcult to start life afresh because his future income and acquired properties would be liable to attachment and sale for the purpose of satisfying the demands of such creditors.

The petitioners in Writ Petition 106 of 1980 are working in Group IV Services in various departments of the Government of Andhra Pradesh. Most of them were appointed after 1974, under the General Rule 10(a)(i)(l) on a purely temporary basis due to the existence of a ban on direct recruitment. After the lifting of the ban partially special qualifying tests were held for regularising their services in 1974 and 1976. As they did not put in two years of qualifying service as on 1.1.73 and 1.1.76 respectively, they could not take the said examinations. In 1976 there was another test conducted by the Public Service Commission wherein about 82000 candidates appeared. The petitioners did not appear in the said test. Among the several candidates who were appointed sometimes hl 1977 and 1978 were Respondents 18 to 108. The petitioners were, however, granted complete exemption from appearing at any examination by GOMS 646 dated 14.7.1979 and the posts held by them were withdrawn from the purview of the Public Service Commission. Earlier to the said Notification Government issued a memo No. 1806/ Ser B/78 2 Gad dated 25.1.79 proposing to fix inter se seniority between the Public Service Commission candidates who qualified in 1976 and the temporary employees including the petitioners who did not appear at the qualifying test. Being aggrieved, the Service Commission candidates including respondents 18 to 108 in the Writ Petition, filed R.P. No. 447/79 before the State Administrative Tribunal whose decision went in favour of the Service Commission candidates. Hence the Civil Appeal No. 2735/86 by the State of Andhra Pradesh. In both the 508 Writ Petitions and the appeal the question related to the computation of seniority of the Service Commission candidates and the temporary employees whose services were regularised by GOMS 647 dated 14.9.79 after exempting them from passing the qualifying examination etc. by GOMS 646 dated 14.9.1979. Dismissing the petition and the appeal, the Court, ^ HELD: l. The petitioners cannot claim that their seniority should be computed from the respective dates of their appointments after April 1974. The petitioners were not appointed on a regular basis, but by way of stop gap arrangements to be replaced by the appointment of qualified candidates. The petitioners failed to avail themselves of the opportunity of qualifying themselves for regular appointments by appearing at the special qualifying test held in 1976, although they. were eligible for the test. The Government order being GOMS No. 647 dated September 14, 1979 does not support their claim of seniority from the respective dates of their appointments after April 1974. Under the said GOMS No. 647, the services of the employees belonging to Group IV services would be regularised from the date of last regular appointment in that category or from the date of temporary appointment, whichever is later and subject to the decision of the Andhra Pradesh Administrative Tribunal. The Andhra Pradesh Administrative Tribunal held that the appointments of the Public Service Commission candidates were regular appointments. The appointments of the Public Service Commission candidates are, therefore, the last regular appointments as contemplated by GOMS No. 647. In view of the said decision of the Andhra Pradesh administrative Tribunal and the directions contained in GOMS No. 647, the services of the petitioners will be regularised subsequent to the respective dates of appointments of the respondents Nos. 18 to 108 or the other employees in Group IV services, who were appointed pursuant to their being successful in the special qualifying test held by the Public Service Commission in 1976. The petitioners have not challenged the said GOMS No. 647; on the contrary, they have placed reliance upon the same and have also prayed for the implementation of the same. [512B G]

The petitioners who were displaced persons from West Pakistan put forward certain claims in regard to village houses which they had left there, but which were rejected by the Rehabilitation authorities. The claims were for amounts above Rs. 20,000 in the case of some of the petitioners and above Rs. 10,000 in the case of the others. By r. 5 framed under the , claims could be verified provided, inter alia, that where a claimant had been allotted any agricultural land in India and such land so allotted exceeded four acres, the value of the building in respect of which the claim was made shall not be less than Rs. 20,000 and where it did not exceed four acres the claim made was not less than Rs. 10,000 Rule 65 of the , provided that any person to whom more than four acres of agricultural land had been allotted shall not be entitled to receive compensation separately in respect of his verified claim for any rural building the assessed value of which was less than Rs. 20,000, and any person allotted four acres or less was not entitled to receive compensation where the value was less than Rs. 10,000 The petitioners challenged the validity of the aforesaid rules as being discriminatory and thereby contravening article 14 of the Constitution of India on the grounds that the object of the various Acts and the rules made thereunder was to rehabilitate displaced persons but by the rules, classifications had been made with reference to houses in rural areas which were discriminatory as neither the classes were based on intelligible differentia nor was there a rational nexus between that differentia and the object sought to be achieved. It was found that the impugned rules were made in pursuance of an Inter Dominion Agreement between the two Governments with regard to evaluation of evacuee property, which had received recognition in article 31(5) (b)(iii) of the Constitution. Held, that the impugned rules afforded a reasonable justifi cation for the classification and did not contravene article 14 of the Constitution.

The appellant Chhotu Singh, who had been granted C.L. III licence for vending country liquor in Village Sawli, applied for permission to shift his liquor shop from Village Sawli to Village Narsi Chaurasta as there was very little demand for country liquor in Sawli with a small population. The Collector recommended the transfer of the shop of the appellant after making due enquiries contemplated in the guidelines laid down in the government circular dated April 27, 1984 for shifting shops. The State Government granted the permission applied for by the appellant. Upon the appellant 's shop being shifted to Narsi Chaurasta, the respondent No. S in the appeals, who already had a liquor shop in Narsi Chaurasta, challenged by a Writ Petition the permission granted by the Government to the appellant to shift his liquor shop to Narsi Chaurasta. The High Court allowed the Writ Petition, quashing the order of the Government granting permission for shifting the liquor shop, on the ground that the said permission had been granted without the criteria laid down in the Government circular dated March 18,1982 being duly considered. A review petition against the order of the High Court, allowing the Writ Petition, was dismissed. The appellant Chhotu Singh has moved the Court by special leave against the orders of the High Court, allowing the Writ Petition and dismissing the review application, and the only question for consideration in the matter is whether the permission granted by the State Government for shifting the appellant 's C.L. III liquor shop from Village Sawli to Village Narsi Chaurasta is supported by the guidelines laid down in the latest government circular dated April 27,1984, which has superseded all the previous such circulars. Allowing the appeals, the Court, 304 ^ HELD: The Collector had recommended permission for shifting the liquor shop of the appellant from Village Sawli to Village Narsi Chaurasta after making due enquiries, with regard to the shifting of the said shop, in accordance with the guidelines contained in the latest government circular on the subject, dated April 27, 1984, which had superseded the guidelines in the previous such circulars. The sanction accorded to the shifting of the appellant 's shop is not in breach of the said latest circular dated April 27, 1984 and it cannot be assailed as arbitrary. [306G, B; 307E, B C]

l Appeal c, No. 380 of 1957. Appeal from the judgment and order dated March 8, 1956, of the Bombay High Court in Income tax Reference No. 4 of 1956. N. A. Palkhivala, section N. Andley, Rameshwar Nath, J. B. Dadachanji and P. L. Vohra, for the appellant. A. N. Kripal and D. Gupta, for the respondent. December 7. The Judgment of the Court was delivered by HIDAYATULLAH, J. This appeal, on a certificate by the High Court, has been filed by Shree Changdeo Sugar Mills, Ltd., to which section 23A of the Income tax Act (prior to its amendment by the Finance Act, 1955) was applied in respect of the assessment year, 1948 49. The question which was referred to the High Court was whether at the relevant time the assessee Company could be deemed to be a Company, in which the public were substantially interested. This question was answered in the negative by the High Court. During the assessment year, the Company had not distributed dividends to the extent of 60 per cent. of its profits, and an order under section 23A(1) of the Indian Income tax Act was passed by the Income tax Officer. The Company appealed to the Appellate Assistant Commissioner, who dismissed the appeal. It next appealed to the Tribunal, but was unsuccessful. The Tribunal, however, referred the above question which, as already stated, was answered in the negative by the High Court. The issued, subscribed and paid up capital of the assessee Company consisted of 60,000 shares, which were distributed as follows: 992 (1) 11 Directors of the Company 41,500 shares. (2) The Managing Agency Firm 2,300 shares. (3) Mysore Merchants Ltd. 11,880 shares. (4) Others. . 4,320 shares. 60,000 shares. The question arose in determining whether the public were substantially interested in the Company, that is to say, held 25 per cent. of the voting power. The Bombay High Court in determining this point followed its decision in Raghuvanshi Mills V. Commissioner of Income tax (1), and held that no holding by the Directors of a company could be regarded as one in which the public were substantially interested. We have heard Civil Appeal No. 30 of 1957 from the decision of the Bombay High Court in the Raghuvanshi Mills case (1), in which judgment has been pronounced today, and have held that that is not the correct test to apply. We have remanded the said appeal, after setting out the correct test to apply. What we have said there applies equally here. There is yet another question, which arose in this appeal but not in the appeal of the Raghuvanshi Mills. As we have already stated, Mysore Merchants Ltd., held 11,880 shares of the assessee Company. If these shares could be said to be held by the public along with 4,320 shares, the public would be holding 25 per cent of the voting power, whether or not the Directors of the Company held the rest of the shares. It was. , therefore, necessary for the High Court to consider whether the shares held by Mysore Merchants 'Ltd., could be said to be held by the public. The High Court held against the assessee Company that they could not be counted as part of the holding by the public, and, in our judgment, the High Court has reached the correct conclusion. The matter has to be judged under the third proviso to section 23A(1), which read as follows: "Provided further that this sub section shall not apply to any company in which the public are (1) 993 substantially interested or to a subsidiary company of such a company if the whole of the share capital of such subsidiary company is held by the parent company or by the nominees thereof. Explanation. For the purpose of this sub section, a company shall be deemed to be a company in which the public are substantially interested if shares of the company (not being shares entitled to a fixed rate of dividend, whether with or without a further right to participate in profits) carrying not less than twenty five per cent of the voting power have been allotted unconditionally to, or acquired unconditio nally by, and are at the end of the previous year beneficially held by, the public (not including a company to which the provisions of this sub section apply), and if any such shares have in the course of such previous year been the subject of dealings in any stock exchange in British India or are in fact freely transferable by the holders to other members of the public. " In applying the proviso and the Explanation, we have to give effect to the words "not including a company to which the provisions of this sub section apply", and have to determine whether Mysore Merchants Ltd., is a Company, to which the provisions of section 23A can be said to be applicable. Learned counsel for the assessee Company contends that in deciding this, we have to be satisfied on three points, which he summarises as follows: (a)The public should not be substantially interested in that Company; (b)It must have assessable profits for the relevant assessment year; and (c)It must not have distributed 60 per cent of its net assessable profits. He contends that unless these three conditions are fulfiled, section 23A will not apply to Mysore Merchants Ltd., and that the shares held by it will be deemed to be held by the public. He points out that Mysore Merchants Ltd., had no assessable income in the corresponding assessment year and had suffered a loss, that conditions (b) and (c) did not, therefore, apply, and 994 that section 23A is not applicable to that Company. In our opinion, the paramount condition is that even in that Company the public should be beneficially interested in 25 per cent. of the voting power, and it was admitted before us that it was not a public Company at all but a private Company, and that, therefore, the public were not interested in that Company. The shares held by Mysore Merchants Ltd., cannot at all be counted as a holding in which the public are beneficially interested, in view of the exclusion contained in the Explanation. This point will not, therefore, be open for the determination of the High Court, when the question is reconsidered by the High Court in the light of our observations in The Raghuvanshi Mills.Ltd. vs Commissioner of Income tax, Bombay (1), decided today. Learned counsel for the assessee Company also contended that in view of cl. 14 of the Part B States (Taxation Concessions) Order, 1950, the provisions of section 23A could not be applied to Mysore Merchants Ltd. That clause reads as follows: " 14. Requiring distribution of dividends by private companies. The provisions of section 23A of the Act shall not be applied in respect of the profits and gains of any previous year ending before the appointed day unless the State law contained a provision corresponding thereto. " This Concession would be open to Mysore Merchants Ltd., if it satisfied the terms of Cl. That, however, cannot detract from the application of section 23A to determine whether the shares hold by it can be described as those in which the public are beneficially interested in another company. The Explanation requires that the shares held by a company should be considered as held by the public, only if section 23A does not apply to it. The Concessions Order does not seek to negative this test; it only confers a benefit on a company, to which cl. 14 applies. Mysore Merchants Ltd., may be able to avail of that concession, and still fall within (1) ; 995 section 23A for other purposes. This contention has no force. The appeal is allowed, and the case is remitted to s the High Court for deciding the question in the light of the observations in our decision in the Raghuvanshi Mills case (1). As the case is remanded, the costs of this appeal shall be paid by the respondent, but the costs in the High Court will abide the result. Appeal allowed.

During the assessment year, the company had not distributed dividends to the extent of 60% of its profits and an order under section 23A(1) of the Act was passed by the Income tax Officer. The question referred by the Tribunal to the High Court was whether at the relevant time the assessee company could be deemed to be a company in which the public were substantially interested, i.e., held 25% of the voting power, was answered in the negative. Held, that the test that no holding by the Directors of a company could be regarded as one in which the public were substantially interested was not the correct test to apply. The test as laid down in Raghuvanshi Mills vs Commissioner of Income tax, ; , would apply to this Case. Held, further, that the paramount condition in applying the proviso and the explanation of section 23A(1) was that the public should be beneficially interested in 25% of the voting power. , The explanation to section 23A required that shares held by the company should be considered as held by the public, only if section 23A did not apply to it. The concession order in cl. 14 of the; Part B States (Taxation Concession) Order, 1950, did not seek to negative that test, it only conferred a benefit on a company, 991 to which cl. 14 applied, and the company could avail that concession, and still might fall within section 23A for other purposes. The Raghuvanshi Mills Ltd. vs Commissioner of Income tax, SI ' Bombay, ; , applied.

The assessee firm consisted of two partners who were managers of their respective Hindu Undivided Families. The firm sold its goods to the aforesaid families and the families again sold the goods on their own account. In income tax proceedings for the years 1959 60, 1960 61 and 1961 62 the firm and the Hindu Undivided Families were separately assessed in respect of their incomes. Subsequently the Income tax Authorities took view that the sale of goods by the firm to the families was only a device to divert the profits of the firm and on this view issued notices under section 147 of the Incometax Act, 1961 requiring the assessee to show cause why the assessments for the years 1959 60, 1960 61 and 1961 62 should not be reopened. The High Court of Gujarat in a petition for a writ under article 226 of the Constitution quashed those notices and restrained the Income tax Officer from taking proceedings in pursuance thereof. With special leave granted by this Court, the Revenue appealed. Held:(i) The High Court may issue a high prerogative writ prohibiting the Income tax Officer from proceeding with reassessment when it appears that the Income tax Officer had no jurisdiction to commence proceedings because the conditions precedent do not exist. [12G H; 13B C] Calcutta Discount Co. Ltd. vs Income tax Officer, Companies District 1, Calcutta, & Anr. , followed. It is however not open to the High Court exercising powers under article 226 to set aside or vacate the notice for reassessment by itself re appraising the evidence. [15B] (ii)The condition which invests the Income tax Officer with jurisdiction has two branches: (i) that the Income tax Officer has reason to believe that income chargeable to tax has escaped assessment; and (ii) that it is in consequence of information which he has in his possession and that he has reason so to believe. The expression 'information ' in the context of which it occurs must mean instruction or knowledge derived from an external source concerning facts or particulars, or as to law relating to a matter bearing on the assessment. If he has such information the Income tax Officer may commence proceedings under section 147(1)(b). But to commence such a proceeding it is not necessary that on the materials which came to the notice of the Income tax Officer, the previous order of assessment was vitiated by some error of fact or law. [13C G] (iii)In the present case however the pre conditions for the issue of a notice of re assessment did not exist. The law does not oblige a trader to make the maximum profit that he can out of his 11 trading transactions. Income which accrues to a trader is taxable in his hands: income which he could have, but has not earned is not made taxable as income accrued to him. Avoidance of tax liability by so arranging commercial affairs that charge of tax is distributed is not prohibited. [15D G]

The appellant, a firm of Surat, had a branch at Bangkok, to which it exported cloth, and the branch also made purchases locally and sold them. During the war the business of the branch had been in abeyance, but was re started after the termination of the hostilities. in its return for the assessment year 1949 50 the appellant did not include any profit of the branch, but stated that the books of account of branch were not available, and therefore its profits might now be assessed on an estimate basis subject to 561 action under s.34 or 35.The assessment was made on the basis of profit at 5 % on the export to the branch appearing in the Surat books. A similar estimate was made for year 1950 51. For the year 1951 52 also the business profits of the branch were not shown but the Income tax officerissued a notice to the assessee to produce the relevant accountsand books. The appellant excused itself by promising that in thefollowing year these accounts for the year 1950 would be produced. Thereupon the Income tax Officer made an estimate of the sales of the branch and of the net profits at 5 % thereon, amounting to Rs. 37,500/ , and the same day he issued a notice to show cause why a penalty for concealment of the particulars of the income of 1951 52 should not be levied. Subsequently, the Income tax Officer imposed a penalty of Rs. 20,000/ on it as its explanation was not acceptable. In the meantime assessment proceedings for the year 1952 53 had commenced and the appellant adopted a similar attitude. The Income tax Officer was insistent and, therefore, appellants had to produce the accounts and books of the branch, from which it appeared that for the year 1951 52 the appellant had made a profit of Rs. 1,25,520/ . The Income tax Officer issued a further notice to the appellant to show cause why penalty should not be levied for deliberately concealing income for the year 1951 52. Pursuant to this notice the Income tax Officer passed another order imposing a penalty of Rs. 68,501/ . The appellant 's appeal to the Appellate Assistant Commissioner against both the orders of penalty was rejected. On appeal, the Tribunal cancelled the first order of penalty but confirmed the second one. This hereafter, the appellant obtained a reference to the High Court on the question: "Whether the levy of Rs. 68,501/ as penalty for concealment in the original return for the assessment year 1951 52 is legal?" The High Court answered the question in the affirmative. On the appeal by special leave it was urged that the second order for penalty was illegal because there was one concealment and in respect of that a penalty of Rs. 20,000/ had earlier been imposed, that there was no jurisdiction to make the second order of penalty while the first order stood and for that reason the second order must be treated as a nullity; and that the fact that the first order was subsequently cancelled by the Tribunal would not set the second order on its feet for it was from the beginning a nullity as having been made when the first order stood. Held: (i) The contentions must be rejected. The Income tax Officer had full jurisdiction to make the second order and he would not lose that jurisdiction because he had omitted to recall the earlier order, though it may be that the two orders in respect of the same concealment could not be enforced simultaneously or stand together. When the Income tax Officer ascertained the true facts and realised that a much higher penalty could have been imposed, he was entitled to recall the earlier order and pass another order imposing the higher penalty. If he had omitted to recall the earlier order that would not make the second order invalid, 1 SCI/64 36 562 (ii)In the present case the earlier order having been cancelled and no objection to the cancellation having been taken, there is only one order, which is a legal order. C.V. Govindarajulu Iyer vs Commissioner of Income tax, Madras, , distinguished.

Sahu Jain was a private limited company during the assessment years l952 53 and 1953 54. All the shareholders of the company are the family member J of Mr. section P. Jain except two employees who held 20 out of 50,000 shares and excepting the three Companies which were also sister concerns. Under section 23A of the Income Tax Act, 1922, prior to its amendment in the year 1955, where the Income Tax officer is satisfied that in respect of any previous year the profits and gains distributed as dividends by any Company are less than 60 per cent of the assessable income of the company as reduced by the Income Tax and Super Tax payable by the company in respect there of, he shall unless he is satisfied that having regard to the loss incurred by the company in earlier years or to the smallness of the profit made, the payment of a dividend or a larger dividend than declared would be unreasonable, make an order in writing that the undistributed portion of the income of the company of that previous year as computed for income tax purposes and reduced by the amount of income tax and supertax payable by the company in respect thereof shall be deemed to have been distributed as dividends amongst the shareholders. The proviso to the said section provides that the provisions of the section would not apply to any company in which the public are substantially interested if shares of the company carrying not less than 25 per cent of the voting power have been allotted unconditionally to or acquired unconditionally by the public or beneficially held by public. The Income Tax officer held that the provisions of section 23A were attracted in the case of the company for both the years. The Appellate Assistant Commissioner confirmed the order of the Income Tax officer. The Tribunal held that section 23A was not applicable to the company in respect of both the assessment years. The Tribunal held that unless. it is presumed that because of relationship Shri section P. Jain, Smt. Rama Jain and Shri A. K. Jain should be regarded as acting in concert there is no other material on record on the basis of which such a conclusion could be supported. On a reference made by the Tribunal, The High Court answered the question in favour of the assessee and against the Revenue. In an appeal by special leave the appellant contended: 1. 80 per cent of the share capital was held by section P. Jain and his wife and two sons. One of whom was a minor throughout the period and another for a portion of the period and that the remaining shares were held by tho company which were under the control of section P. Jain and that only 20 share out of 50,000 shares were held by two employees under the control of section P Jain. A. K. Jain was appointed as a Director when he was a minor and he became a Managing Director on a salary of Rs. 6,000/ per month when he was 20 years old. 3. section P. Jain who was a Director resigned making room for his Private Secretary for appointment as Director. The Company showed a loss of Rs. 2 lacs and odd in a transaction in hessian and the same was shown as profit by Smt. Rama Jain wife of section P. Jain. section P. Jain, A. K. Jain. R. Sharma and N. C. Jain were the promoters of the company ant were signatories to the Memorandum of Association. 399 The respondent contended: 1. Smt. Rama Jain and A. K. Jain were independent assessees. A. K. Jain was taking independent decisions as a competent Director. Mere relationship would not lead to the conclusion that the said two shareholders acted in concert with section P. Jain. A. K. Jain was an independent shareholder and was not under the control of section P. Jain or any other Director or shareholder. N. C. Jain was Director from 1950 to 1954 and section P. Jain became Managing Director subject to the approval of the Government. A. K Jain was appointed as Deputy Managing Director on a remuneration of Rs. 6,000/ per month subject to the approval of the Central Government. The transactions like one of hessian are common transactions and no undue importance can be attached to it. Merely because some persons are promoters or employees of a Company that would not affect their character as shareholders of the Company. Allowing the appeals by special leave, ^ HELD: 1. The controversy is whether the company is one in which the public has 25 per cent or more shares. [404C] 2. This Court held in the case of Commissioner of Income Tax West Bengal vs East Coast Commercial Co. Ltd., that the word 'public ' is used in the explanation to section 23A in contra distinction to one or more persons who act in unison and amongst whom the voting power constitute s a block. This Court also held that the Tribunal had to decide in the first instance wreathe there was a group of persons acting in concert holding a sufficient number of shares which may control the voting as a block. But the existence of block is not decisive. The company would still be a company in which public are substantially interested if 25 per cent or more of the voting power has been allotted unconditionally to and beneficially held by the public. This Court also held that the relationship and position as Director are not by themselves decisive. But if the relatives act not freely but with others they cannot be said to belong to the public. The test is not whether they have actually acted in concert but whether the circumstances are such that human experience tells us that it can safely be taken that they must be acting together. [406A, C D, H, 407A] 3. It is clear that this company was a family concern with only 20 shares out of 50,000 shares allotted to the two outsiders who again happened to be paid employees. The presence of these two outsiders is of the least significance in the matter of management of the affairs of the company. A. K. Jain became a Director even when he was a. minor. He would not ordinarily be able to play the role he is supposed to have done in the Board meetings unless section P. Jain was confident that the Board was carrying out its mandates with regard to the affairs of the Company. The fact that A. K. Jain and others were authorised to sign agreements on behalf of the Company is not of great significance. There is no evidence whatsoever to show that Rama Jain wife of section P. Jain was at all independently acting. [409G, H, 410] 4. When a company is composed mostly of family member owning lion 's share in the entire share capital of the company the onus to keep clear of the reach of section 23A will be on the shareholders by adducing some positive evidence about the absence of control by the controlling shareholders. [410 B] 5. No single factor can be decisive but having regard to the totality of the circumstances revealed in the case and the conduct of the transactions of the company taken with the relationship which in the circumstances of this case is not a negligible element this Court is dearly of the opinion that it is a case in which it cannot be said that the public is substantially interested in 25 per cent or more shares of the company. [410D E] 6. Even if A. K. Jain is said to be a member of the public, his shares together with the shares of Ashoka Agencies Limited is 500 less than the r minimum shareholding requisite to earn the benefit of the third proviso to section 23A read with the explanation. [410 E] 400 7. Between August 11, 1951 and May 1, 1952, A. K. Jain and 2 employee Directors apparently took all decisions for the company in the Board 's meetings. This is not ordinarily possible but for collaboration with the major shareholders. This is a case where more is meant than meets the eye. [410E F] 8. It is A clear case of all the shareholders acting in concert and in unison and the two employee Directors were merely dummies. There is not the slightest inkling of the public being interested far less substantially interested in this company. [410G] 9. The intimate relationship of the shareholders, with not the least evidence of disconcert amongst them, the ordinary expectation for individual profit in commercial undertaking, the history of the company and its continued smooth working is inconsistent with anything but full unison amongst the shareholders. The Board 's meetings are evidence of well organised, well knit, close unity of vie vs in all affairs which in ordinary course of human conduct would not have been at all possible but for a single or concerted action in the company management by a controlling group. [410D F]

The appellant company was incorporated as an investment company which by its memorandum of association enabled it, inter alia, to deal in investments and properties. For the purposes of assessment to income tax the appellant claimed, for the assessment year in question, to be treated as an investor and not as a ,dealer on the ground that it did not carry on any business in the purchase or sale of shares, securities or properties. The Incometax Appellate Tribunal held that according to the company 's memorandum of association and its own assertions made all along in the past, it should be treated as a dealer in investments and properties and that its income arising from the sales of shares and properties should be taxed as business profits. The appellant 's applications for a reference to the High Court were rejected on the ground that no question of law arose out of the order of the Tribunal. Held, that the question whether the appellant 's business amounted to dealing in shares and properties or to investment, is a mixed question of law and fact and that the legal effect of the facts found by the Tribunal as a result of which the appellant could be treated as a dealer or an investor, is a question of law. Accordingly, the order of the High Court was set aside and the case remitted to the High Court for directing the Tribunal to state a case. (1) 50 Meenakshi Mills, Madurai vs Commissioner of Income Tax, Madras, ; , applied. Case law reviewed.

The assessee company carried on a business of manufacture and sale of textile goods. The manufacture was made at its mills in Indore which was an Indian State before integra tion and had its own law as to income tax known as the Indore Industrial Tax Rules, 1927. The sales of textile goods so manufactured were made at various places, some inside and some outside the taxable territories of the then British India. For and upto assessment year 1949 50 the assessee company was treated as a non resident. Indore became a part of the taxable territories within the meaning of the Indian 311 Income tax Act, 1922 in the two assessment years 1950 51 and 1951 52 and the asscssee company was held to be "resident and ordinarily resident" within the meaning of that Act. Upto the assessment year 1949 50 that part of its profits which was received by the assessee company in British India was subjected to tax together with it. ,; other income which accrued in British India. In making the calculation of business profits or loss received or arising in the taxable territories, a proportion was struck between the total turnover and its sales the proceeds whereof were received in the taxable territories. The assessee company raised two questions in the course of the assessment proceedings, one of which with regard to the entire loss of Rs. 5,19,590/ of the year 1948 49 which it claimed to set off against the profits made in its business in the two assessment years. The assessee company contended that the business was one and under section 24 it was entitled to set off the losses which it had sustained in 1948 49. The High Court decided this question against the assessee company, but gave a certificate under section 66A of the Act. Held, on appeal, that the High Court correctly answered the questions the provisions of section 24 of the Act read with the provisions in section 4(1) (a) and (c) and section 14(2)(c) make it clear that sub s(1) of s: 24 when it talks of profits or gains has reference to taxable profits or taxable gains ; it has no reference to income accruing or arising without the taxable territories which were not liable to be assessed in the case of non residents. In determining the nature of the losses under consideration in these appeals the relevant year was 1948 49, the year in which the losses occurred, and the High Court rightly took the view that for the application of sub s (2) of section 24, the losses must be such losses as could have been set off under sub s.(1) of section 24.

In respect of its business as a middleman relating mainly to sales of coal and coke in the course of inter State trade, the appellant firm was assessed to Central sales tax under section 8(2) of the , by the Commercial Tax officer. The appellant without availing itself of the remedies under the Act, applied for and obtained special leave to appeal under article 136 of the Constitution of India directly against the order of assessment When the appeal was taken up for hearing, the question was raised as to whether it should be entertained, when even the facts had not been finally determined by the final fact finding authority under the Act, nor had the jurisdiction of the High Court been invoked to exercise its powers under the Act. Held, that an assessee is not entitled ordinarily to come up to the Supreme Court directly against the judgment of the Assessing Authority and invoke the Court 's jurisdiction under article 136 of the Constitution without first exhausting the remedies provided by the taxing statutes. Mahadayal Premchandras vs Commercial Tax Officer Calcutta, and The State of Bombay vs M/s. Ratilal Vedilal, [1961] 2 section C. R. 367, explained. Chandi Prasad Chokhani vs The State of Bihar, [1962] 2 section G. R. 276 and Kanhaiyalal Lohia v, Commissioner of Income Tax Bengal, [1962] 2 section C. R. 839, followed. ^ Held, further, that in the present case, in which there, were no special circumstances and in which the facts had not yet been finally determined, the appeal must be considered to be incompetent.

% The assessee contended in the gift tax assessment proceedings that the 480 shares in the English Company acquired as gift were not quoted in the stock exchange, that their value be determined on the average break up value indicated by the balance sheets of the Company as on 31.3.1964 and 31.3.1965, and that in view of the decision of the General Body of the Company dated 4.10.1961 to increase its share capital by issue of additional shares the value of the shares constituting the subject matter of the gifts which were transferred "ex right" would stand depreciated. The Gift Tax officer valued the shares on the basis of the breakup value yielded by and deducible from the balance sheet as on 31.3.1964. The Appellate Assistant Commissioner dismissed the assessee 's appeal. In the further appeal before the Income tax Appellate Tribunal, the Tribunal, relying on the ratio laid down in the English Case, Lynall and another, vs Inland Revenue Commissioner, valued the shares at Rs.450 each, said to represent the break up value on the basis of the balance sheet of 31.3.1963, holding that it could not take into consideration any other document except the published information, which was the aforesaid balance sheet. The Tribunal stated a case and referred the matter to the High Court, for its opinion. The High Court held that since the only information which was available on the date of the gifts was in the form of the balance sheet as of March 31, 1963, the Tribunal was right in taking the same into consideration, for the purpose of arriving at the value of the shares by the 'break up ' method. 342 In the appeal to this Court it was contended on behalf of the Revenue that the principle of valuation relied upon by the High Court was erroneous, and that the case was covered by the decisions of this Court in Commissioner of Wealth Tax, Assam vs Mahadeo Jalan & Ors., and Commissioner of Gift Tax, Bombay vs Smt. Kusumben . Mahadevia, On behalf of the assessee it was urged that in view of the consensus between the parties as to the basis of valuation, it was not now open to the Revenue to urge the application of an altogether different principle. Disposing of the appeal, ^ HELD:1. The correct principle of valuation applicable to a given case is a question of law. The parties can agree upon a principle permissible and recognised by law. If two or more alternative principles arc equally valid and available it might be permissible for the parties to agree upon one of the alternative modes of valuation in preference to another. [346G H] In the instant case, the Revenue cannot be precluded from urging the correct legal position. [347A] 2. When the shares in a public limited company are not quoted on the stock exchange. Or are in a private limited company the proper method of valuation to be adopted would be the profit earning method.[346B C] Commissioner of Gift Tax, Bombay vs Smt. Kusumben D. Mahadevia, , relied upon. Commissioner of Wealth Tax, Assam vs Mahadeo Jalan . & Ors. , and, Williams J in Mc. Cathie vs Federal Commissioner of Taxation, ; , referred to. In the instant case, the view of the High Court as to the principle of valuation in determining the value of the kinds of shares concerned cannot be held to be correct. As a logical consequence, the Tribunal would have to go through, over again, the exercise of determination of the value of the shares adopting the correct principle. But, having regard to the fact that the matter is already two and a half decades old, and that the magnitude of the mechanism for the re fixation of the value of the gifts by adopting the somewhat intricate process inherent in the 343 "profit method" of valuation, and the difference in the quantum of tax that might result in, do not bear a reasonable or senible proportion, the valuation is left undisturbed.[347A D]

Appeal No. 108/ 56. Appeal by special leave from the Judgment and decree dated May 27, 1953, of the Punjab High Court in Regular Second Appeal No. 176 of 1949, against the judgment and decree dated December 20, 1948, of the District Judge, Ludhiana, arising out of the Judgment and decree dated February 6, 1948, of the Subordinate Judge, 11 Class, Ludhiana, in Suit No. 918 of 1946. Gopal Singh, for the appellants. C. B. Aggarwala and K. P. Gupta, for the respondents. May 6. The Judgment of the Court was delivered by DAS GUPTA, J. The suit out of which this appeal has arisen was instituted by the respondents I and 2 Sher Singh and Labh Singh, for a declaration that a deed of gift executed by the first appellant, Jai Kaur, in respect of 8 (1 10) Bighas of land which she had inherited from her husband, Dev Singh, in favour of her two daughters, the 2nd & 3rd appellants before us, " shall be null and void against the reversionary rights of the plaintiffs ", and defendant Nos. 4 to 6 after the death of defendant No. 1 (i.e., Jai Kaur) and shall not be binding upon them. The plaintiffs ' case was that these lands left by Dev Singh were all ancestral lands qua the plaintiffs and according to the customary law which governs the Jats belonging to Grewal got to which these parties belong daughters do not succeed to property left by sonless fathers and so the gift by Dev Singh 's widow in favour of her daughters would be null and void as against the plaintiffs and others who would be entitled on Jai Kaur 's death to succeed to the estate as reversioners. In the alternative, the plaintiffs contended that even if the land in suit was not ancestral qua the plaintiffs then also the deed of gift would be null and void as against their reversionary interests inasmuch as even as regards nonancestral property daughters do not succeed among the Grewal Jats. The main contention of defendants 1 to 3 (the appellants before us) was that the suit land was not ancestral qua the plaintiffs and defendants 977 Nos. 4 to 6, and that according to the customary law governing the Jats of the Grewal got, daughters exclude collaterals as regards non ancestral property and a widow is competent to make a gift of such property in favour of her daughters. It was pleaded on behalf of the two daughters that they being preferential heirs in respect of the land in suit as against the plaintiffs, the gift is tantamount to acceleration of succession and is valid in every way. The Trial Judge held that 2B 2B,14 B out of the land in suit was ancestral and the gift was invalid to that extent, because as regards ancestral property a daughter does not succeed in the presence of collaterals. As regards the remainder of the suit land which he held was non ancestral, the learned Judge was of opinion that the gift was merely an acceleration of succession as under the customary law governing the parties daughters exclude collaterals as regards succession to non ancestral property. Accordingly he gave the plaintiffs a decree as prayed for as regards 2 B 2B, 14 B out of the land in suit and dismissed it as regards the remaining portion of the land in suit. The plaintiffs appealed to the District Judge, Ludhiana, against this decree and cross objections were filed by the defendants Nos. 1 to 3. The Trial Court 's finding about a portion of the land being ancestral and the rest non ancestral was not disputed before the appeal court. On the question of custom the learned District Judge agreed with the Trial Judge 's view that among the Grewal Jats of Ludhiana the daughter excluded collaterals as regards non ancestral property. He held, therefore, agreeing with the Trial Judge that as regards the non ancestral property the deed of gift was merely an act of acceleration of succession and was, therefore, valid and binding. The appeal was accordingly dismissed and so also were the cross objections which appear not to have been pressed. On second appeal the learned judges of the East Punjab High Court accepted the contention urged on behalf of the plaintiffs that a special custom was proved to be in force among the Grewal Jats under which the daughter does not inherit even as regards 978 non ancestral property. In that view they held that even as regards the non ancestral property the gift by Jai Kaur would be valid only during her lifetime, and allowed the appeal. Against this decree of the High Court defendants Nos. 1 to 3 Jai Kaur and her two daughters, the donees have filed this appeal on the strength of special leave granted by this Court. Two questions arise for consideration in this appeal. The first is whether under the customary law governing the Jats of the Grewal got in Ludhiana to which the parties belong, the daughter or the collaterals are the preferential heirs as regards non ancestral property. If the answer to this question be that daughters have preference over collaterals (the plaintiffs here), the other question which arises is whether this gift is such acceleration of succession in favour of the daughters as is permissible under the law. On the question of custom the appellants rely on the statements in paragraph 23 of Rattigan 's Digest of Customary Law (Thirteenth Edition) that in regard to the acquired property of her father the daughter is preferred to collaterals. It is not disputed that nonancestral property is " acquired property " within the meaning of this statement by Rattigan. Against this the plaintiffs respondents rely on the answers to question No. 43 relating to Hindu Grewal Jats of Ludhiana as appear in the Riwaji am prepared at the revised settlement of 1882. The question and the answer are in these words: Question: " Under what circumstances can daughters inherit ? If there are sons, widows or near collaterals, do they exclude the daughter ? If the collaterals exclude her, is there any fixed limit of relationship or degree within which such Dear kindred must stand Answer: " In our tribe the daughter does not succeed under any circumstances. If a person dies sonless, his collaterals succeed him. There is no fixed limit of relationship for purposes of excluding her. 979 If there are no collaterals of the deceased, the owners of the Thulla or Patti or village would be owners of his property." The authoritative value of Rattigan 's compilation of customary law is now beyond controversy, having been recognised in the judicial decisions of the Punjab courts too numerous to mention, which have also received the approval of the Judicial Committee of the Privy Council. Therefore it is not, and cannot be disputed that under the general customary law of the Punjab daughters exclude collaterals in succession to non ancestral property. The value of entries in the Riwaj i am has, also however, been repeatedly stressed. That they are relevant evidence under section 35 of the Evidence Act is clear and the fact that the entries therein the the result of careful research of persons who might also be considered to have become experts in these matters, after an open and public enquiry has given them a value which should not be lightly underestimated. There is ', therefore, an initial presumption of correctness as regards the entries in the Riwaj i am and when the custom as recorded in the Riwaj i am is in conflict with the general custom as recorded in Rattigan 's Digest or ascertained otherwise, the entries in the Riwaj i am should ordinarily prevail except that as was pointed out by the Judicial Committee of the Privy Council in a recent decision in Mt. Subhani vs Nawab (1), that where, as in the present case, the Riwaj i am affects adversely the rights of females who had no opportunity whatever of appearing before the revenue authorities, the presumption would be weak, and only a few instances would suffice to rebut it. In the present appeal the oral. testimony given on behalf of either party is practically valueless to show an ,, instance in favour of the custom pleaded by them. If, therefore, the Riwaj i am does show as urged by the plaintiffs a custom of daughters being excluded by collaterals in respect of non ancestral property, it is clear that Riwaji i am would prevail. The real controversy in this litigation is, however, on the question whether the entries in the Riwaj i am on which (1) A.I. R. 1941 (P.C.) 21. 980 the plaintiffs rely refer at all to non ancestral property or not. This controversy has 'engaged the attention of the courts in Punjab for a number of years beginning with 1916. In that year in Mst. Raj Kaur vs Talok Singh (1) Sir Donald Johnstone, the Chief Justice held that the Riwaj i am as compiled, did not cover self acquired property and that where the Riwaj i am talked about succession to land without discrimination between ancestral and self acquired, the rule laid down could usually only be taken to apply to ancestral property. A similar view was taken by Shadilal and Wil be force, JJ., in Budhi Prakash vs Chandra Bhan (2 ). The view taken in these cases was followed by other judges of the High Court in Narain vs Mst. Gaindo (3 ) and Fatima Bibi vs Shah Nawaz (4). In Sham Das vs Moolu Bai (5) the learned judges (LeRossignol and Fforde, JJ.) also laid down the same principles, without any reference to the previous decisions, in these words : "It is true in the Riwaj i ain no distinction is made between ancestral and acquired property, but it is a well recognised rule that unless there are clear indications to the contrary, such an entry in a record of custom refers only to the succession to ancestral property. " After this view had been followed in several other decisions a different line was struck in Jatan vs Jiwan Singh (6). That was a case between Grewal Jats and the contest lay between collaterals of the last male holder and his married daughter with respect to his non ancestral property. The learned judges were of opinion that the Question No. 43 in the Riwaj i am related to both ancestral and non ancestral property and so the answer to the question recorded in Riwaj iam proved that as regards the non ancestral property also the daughter was excluded by collaterals. In coming to this conclusion they laid stress on the fact that in two previous decisions, Ishar Kuar vs Raja Singh (7) and Pratap Singh vs Panjabu (8) the questions and answers in the Riwajiam as regards daughter 's (1) A.I.R. 1916 Lah. (3) A.I.R 1918 Lah. 304 (5) A.I.R. 1926; Lah. 210 (7) (2) A.T.R. 19T8 Lah. (4) A.I.R. 1921 Lah. (6) A.I.R. 1933 Lah. (8) 981 right to succession were interpreted as covering nonancestral property also and if it was contemplated that a daughter should succeed to self acquired property, one would have expected that fact to be mentioned in the answer. It was in view of the conflicting views which had thus arisen on the question whether Question No. 43 in the Riwaj i ani in the absence of a clear indication to the contrary related to ancestral property only or to both ancestral and non ancestral property that a reference was made by Mr. Justice Abdur Rahman in Mt. Hurmate vs Hoshiaru 1 to a Full Bench of the High Court. The Full Bench reviewed the numerous decisions of the Punjab courts in this matter and also took into consideration the fact that Mr. Gordon Walker who had prepared the Riwaj i am in 1882 had stated in the preface that no distinction between self acquired and inherited pro perty in land appeared to be recognised and the rules of succession, restriction on alienation, etc., applied to both alike; and after a careful consideration of all the relevant factors recorded their conclusion that " Question No. 43 of the Customary Law of Ludhiana district relates to ancestral property only and can in no circumstances be so interpreted as to cover self acquired property as well. " Mr. Justice Din Mohammad who delivered the leading judgment observed :" The raison d ' entre of those cases which lay down that the manuals of Customary Law were ordinarily concerned with ancestral property only is quite intelligible. Collaterals are, as stated by Addison, J., in 13 Lab. 458, really speaking interested in that property only which descends from their common ancestor and this is the only basis of the agnatic theory. What a male holder acquires himself is really no concern of theirs. It is reasonable, therefore, to assume that when manuals of Customary Law were originally prepared and subsequently revised, the persons questioned, unless specific ally told to the contrary, could normally reply in the light of their own interest alone and that, as stated above, was confined to the ancestral property only. The fact that on some occasions (1) A.I.R. 1944 Lah. 21, 127 982 the questioner had particularly drawn some distinction between ancestral and non ancestral property would not have put them on their guard in every case, considering their lack of education and lack of intelligence in general. Similarly, the use of the terms " in no case " or " under no circumstances " would refer to ancestral property only and not be extended so as to cover self acquired property unless the context favoured that construction. " One would have thought that after this pronouncement by a Full Bench of the High Court the controversy would have been set at rest for at least the Punjab courts. Surprisingly, however, only a few years after the above pronouncement, the question was raised again before a Division Bench of the East Punjab High Court in Mohinder Singh vs Kher Singh(1). The learned judges there chose to consider the matter afresh and in fact disregarded the pronouncement of the Full Bench in a manner which can only be said to be unceremonious. Teja Singh, J., who delivered the leading judgment said that the Full Bench, though noticing the cases of Ishar Kaur vs Raja Singh (2) and Pratap Singh vs Panjabu (3), had not said that those cases had been wrongly decided. It has to be noticed that the Full Bench in no uncertain terms expressed their conclusion that question No. 43 of the Customary Law of the Ludhiana district related to ancestral property only and could in no circumstances be so interpreted as to cover self acquired property as well. In coming to that conclusion they had considered numerous decisions of the Punjab courts in support of the general proposition that unless there are clear indications to the contrary the questions relate to ancestral property, considered the cases in which a contrary view had been taken including the three cases of Jattan vs Jiwan Singh (4), Ishar Kaur vs Raja Singh (2 ) and Pratap Singh vs Panjabu (3) and gave their own reasons why the view that unless there are clear indications to the contrary the manuals of customary law should be taken to refer to ancestral property only, and after considering the (1) A.I.R. 1949. East Punjab 328 (3) (2) (4) A.I.R. 1933 Lah. 983 question and answer in question No. 43 in the case before them as regards the Mohammadan Rajputs, recorded their final conclusion. It is neither correct nor fair to say that the learned judges of the Full Bench did not hold Jattan 's Case, Pratap Singh 's Case and Ishar Kaur 's Case to have been wrongly decided in so far as these decisions held the question No. 43 of the Customary Law of the Ludhiana dis trict to refer both to ancestral and non ancestral property. It is true that they did not say in so many words that these cases were wrongly decided; but when a Full Bench decides a question in a particular way every previous decision which had answered the same question in a different way cannot but he held to have been wrongly decided. We had recently occasion to disapprove of the action of a Division Bench in another High Court in taking it upon themselves to hold that a contrary decision of another Division Bench on a question of law was erroneous and stressed the importance of the well recognised judicial practice that when a Division Bench differs from the decision of a previous decision of another Division Bench the matter should be referred to a larger Bench for final decision. If, as we pointed out there, considerations of judicial decorum and legal propriety require that Division Benches should not themselves pronounce decisions of other Division Benches to be wrong, such considerations should stand even more firmly in the way of Division Benches disagreeing with a previous decision of the Full Bench of the same court. In our opinion, the view taken by the Full Bench in Mt. Hurmate vs Hoshiaru (1) is consonant with reasons and consistent with probability. The fact that the great majority of judges, who brought to bear on the question, an intimate knowledge of the ways and habits of the Punjab peasantry thought that when tribesmen were asked about succession to property, they would ordinarily think that they were being asked about succession to ancestral property, is entitled to great weight. It cannot, we think, be seriously disputed that at least in the early years (1) A.I.R. 1944 Lah 21. 984 when the Riwaj i am was in course of preparation most of the property in the countryside was ancestral property, and " self acquisitions " were few and far between. This fact, it is reasonable to think, had the consequence of concentrating the attention of the tribesmen on the importance of having the tribal custom correctly recorded by the Settlement Officers and their agents, as regards succession to ancestral property, and of attracting little attention, if any, to matters regarding non ancestral property. Unless the questions put to these simple folk, were so framed as to draw pointed attention to the fact that the enquiries were in respect of non ancestral property also, they could not reasonably be expected to understand from the mere fact of user of general words in the questions that these referred to both ancestral and non ancestral property. As Din Mohammad, J., said in his judgment in the Full Bench, even the fact that on some occasions, the questioner had drawn some distinction between ancestral and nonancestral property, could not have put them (i.e. , the persons questioned) on their guard in every case, considering their lack of intelligence in general. Their minds being obsessed with the idea that such enquiries would only refer to ancestral property, they would direct their answers to matters in respect of ancestral property only, and in using forceful terms like " in no case " and " under no circumstances these persons were really saying that " in no case would ancestral property devolve in a particular way and have a particular incidence; and under no " cir cumstances " would ancestral property devolve in a particular way, and have a particular incidence. These considerations, we think, outweigh the statement made by Mr. Gordon Walker that no distinction between self acquired and inherited property in land appeared to be recognised, and the rules of succession, restriction on alienation, etc., applied to both alike. We think, therefore,, that the view taken by the Full Bench, and the many previous cases mentioned in the judgment of the Full Bench, that questions and answers in the Riwaj i am refer ordinarily to 985 ancestral property, unless there is clear indication to the contrary, is correct. Question No. 43 in the Ludhiana district, appears to be the same for all the tribes. There is not the slightest indication there that the questioner wanted information about nonancestral property also. The answer given by the Grewal Jats to this question also gives no reason to think that the persons questioned were thinking in giving the answers of both ancestral and non ancestral property. We have, therefore, come to the conclusion that the entries in the Riwaj i am on which the plaintiffs respondents rely do not refer at all to non ancestral property, and are, therefore, not even relevant evidence to establish the existence of a custom among Grewal Jats of Ludhiana district, entitling collaterals to succession to non ancestral property, in preference to daughters. Reliance was next placed on behalf of these respondents on the fact that the existence of such a custom was recognised in a number of judicial decisions, viz., Jattan vs Jiwan Singh (1), I shar Kaur vs Raja Singh (2) and Pratap Singh vs Panjabu (3). If these decisions in so far as they recognised the existence of such a custom, had been solely or even mainly based on evidence, other than entries in the Riwaji i am, they might have been of some assistance. Examination of these cases, however, shows unmistakably that they were either wholly, or mainly based on the entries in the Riwaj i am on the assumption that these entries referred to both ancestral and non ancestral property. This assumption having been established to be baseless, these decisions are valueless, to show that the custom as alleged by the plaintiffs respondents did exist as regards non ancestral property. Further, the oral evidence produced in the present case is wholly insufficient to prove such a custom. It must, therefore, be held that the customary law among the Grewal Jats of Ludhiana district as regards succession to non ancestral property is the same as recorded generally for the Punjab in Paragraph 23 of Rattigan 's Digest i.e. , the daughter is preferred to (1) A.I.R. 1933 Lah. 553. (2) (3) 986 collaterals, and consequently, the second and the third appellants, were the next reversioners to that portion of Dev Singh 's property which has been found to be non ancestral. This brings us to the question whether the gift of this portion, by the first appellant to these reversioners, gives them a good title, beyond the widow 's lifetime. We have to remember in this connection that as regards the ancestral property, these daughters were not the reversioners, and the further fact that out of the ancestral property, the house was not included in the deed of gift. The position, therefore, is that out of the property in which the first appellant held a widow 's estate, she gave by the deed of gift a portion to the reversioners as regards that portion, a portion to persons who were strangers to the reversion as regards that portion and a portion was retained by her. The doctrine of Hindu law according to which, a limited owner can accelerate the reversion, by surrendering her interest, to the next reversioner, is based on a theory of self effacement of the limited owner. That is why it has been laid down that in order that a surrender by a limited owner to a reversioner, may be effective, the surrender must be of the entire interest of the limited owner in the entire property. The exception made in favour of the retention of a small portion of the property for her maintenance, does not affect the strictness of the requirement that a surren der to be effective, must be of the entire interest in the entire property: Vide Rangasami Gounden vs Nachiappa Gounden (1) and Phool Kaur vs Pem Kaur (2).) In so far as there is gift to a stranger, there is no effacement of the limited owner; nor is there any effacement in respect of the property which is retained. We find it impossible to say, therefore, that there is such effacement of the limited owner in this case, as would accelerate the daughter 's rights by converting the future contingent right into a present vested right. On behalf of the appellants it is argued that there is certainly a total effacement in respect of the nonancestral property, so that the right of the next reversioners the daughters in that property has (1) (1918) L.R. 46 I.A. 72. (2) ; , 987 been accelerated. We do not think we shall be justified in recognising this novel doctrine of the possibility of effacement of the limited owner vis a vis the next reversioner of the non ancestral property when there is no effacement vis a vis the reversioner of the ancestral property, and vice versa. Effacement cannot be broken up into two or more parts in this manner; and however much the limited owner may wish to efface herself only vis a vis those next reversioners whom she wants to benefit, law does not recognise such " partial effacement ". The Hindu Law doctrine of surrender does not, therefore, make the gift of the non ancestral property to the daughters valid beyond the widow 's lifetime. It is not suggested that there is any customary law, by which such surrender can be made. Though, therefore, we have found disagreeing with the learned judges of the High Court that tinder the customary law governing the Grewal got of Jats to which the parties belong, the daughters the second and the third appellants are preferential heirs to the non ancestral portion of the suit land, we hold that their conclusion that this deed of gift in favour of the daughters is not valid even as regards the non ancestral property, beyond the donor 's lifetime is correct and must be maintained. As a last attempt Mr. Gopal Singh, counsel for the appellants, wanted us to hold that under section 14 of the Hindu Succession Act, which became law in 1956, either the mother or the daughters have become full owners of this property, and so the plaintiffs ' suit should be dismissed. As the Hindu Succession Act was not on the statute book, when the written statement was filed or at any time before the suit was disposed of in the courts below, the defence under section 14 of that Act could not be thought of and was not raised. The necessary consequence is that evidence was not adduced, with the facts material for the application of section 14 in view, by either party. Mr. Agarwala has, on behalf of the plaintiffs respondents, contended that as the record stands the mother had ceased to be in possession and could not get the benefit of section 14 of the Hindu Succession Act, and that the 988 daughters in possession, would not become full owners under section 14. We do not think it would be proper to consider these questions in the present suit in this haphazard manner when on the all important question of possession, the appellants themselves do not wish to say whether the mother was in possession actually or constructively, whether the daughters ' possession was merely permissive, or whether the daughters were in independent possession, on their own behalf These and other questions of fact, and the questions of law that have to be considered in deciding a claim by the first appellant or the other two appellants under section 14 of the Hindu Succession Act, should properly be considered in any suit that they may bring in future, if so advised. We express no opinion on any of these questions. For the reasons which have been mentioned earlier, we hold that the High Court rightly decreed the suit in favour of the plaintiffs in respect of the nonancestral property also, and dismiss the appeal. In the circumstances of the case, we order that the parties will bear their own costs throughout. Appeal dismissed.

Under the customary law prevalent amongst the Hindu Jats of Grewal got in Ludhiana, a daughter is a preferential heir to her father in respect of his self acquired property to his collaterals. Rattigan 's Digest of Customary Law, paragraph 23, which records the correct law on the point, is not in conflict with Riwaji am, 1882, Question NO. 43, which refers only to ancestral property and not to self acquired property at all. Mt. Hurmate vs Hoshiaru, A.I.R. 1944 Lah. 21, approved. Mohinder Singh vs Kher Singh, A.I.R. 1949 East Punjab 328, disapproved. Mt. Subhani vs Nawab, A.I.R. 1941 (P.C.) 21, referred to. Case law discussed. The doctrine of surrender in Hindu Law is based on a theory of complete self effacement by the widow in favour of the reversioner and in order that such surrender can accelerate the reversion, it must be of the entire interest in the entire property. The law does not recognise a partial self effacement nor a division between ancestral and non ancestral property. The exception made in respect of a small portion of the property retained for the widow 's maintenance does not detract from the rigour of the rule. Rangaswami Gounden vs Nachiappa Gounden, (1918) L.R. 46 I.A. 72 and Phool Kaur vs Prem Kaur, ; , referred to. Consequently, in a case where a Hindu widow of the Jat Grewal got made a gift only of the self acquired property of her husband to her daughters such gift had not the effect of a surrender in law so as to accelerate the daughters ' succession and the gift could not be valid beyond her lifetime.

One Lala Gurdin, who had acquired extensive landed property in Kanpur died on December 10, 1861 leaving behind his widow Smt. Amrit Kuer and three daughters: Smt. Hazarao Kuer from his predeceased wife, and Smt. Mewa Kuer and Smt. Prago Kuer from Smt. Amrit Kuer. After the death of Gurdin his entire estate came into the hands of his widow Smt. Amrit Kuer and after her death on August 1,1880, the three daughters of Lala Gurdin succeeded to the estate left by Smt. Amrit Kuer, as limited owners. They divided the property amongst themselves, each coming into possession of one third share. When Smt. Prago Kuer died on July 8, 1907 the estate remained with the two surviving daughters. When Smt. Hazaro Kuer died on January 24, 1914 the estate remained in possession of Smt. Mewa Kuer, the last surviving daughter. She also died on June 14,1923. During their life time the three daughters had been making various alienations of the property that fell to their exclusive share. Amongst a number of alienations in favour of different persons at different times, three sale deeds dated July 27,1901; July 17, 1914 and October 19,1915 are the subject matter of the appeals and the property covered by the 1901 and 1914 sale deeds are in possession of the appellants trust while the properties covered by the 1915 sale deeds are in the possession of Defendants 4 & 5 of Suit No. 25 of 1935. The 1914 and 1915 sale deeds were jointly executed by Smt. Mewa Kuer and her son Ram Dayal. After the death of Smt. Mewa Kuer in 1923, her surviving reversioners sought to challenge the various alienations made by the limited owners, some by Smt. Amrit Kuer and the others made by the daughters of Lala Gurdin by way of two Suits Nos. 25 of 1935 filed by the two sons of Smt. Hazaro Kuer and Suit No. 34 of 1935 filed by Madho Dayal son of Ram Dayal, on the 719 allegations (i) that there was no legal or pressing necessity for the transfers; (ii) that transfer by one of the daughters without the consent of the remaining daughters was void ab initio and no title passed on to the transferees; and (iii) transferees from the limited owners themselves had no valid title and so they could not pass a better title to others and thus those transfers were also bad. The suits were contested by the transferees in possession seeking protection of section 43 of the Transfer of Property Act on the equitable principle feeding the Grant by estoppel in as much as even if there was any defect in the of title Mewa Kuer, the same has ceased when her two other sisters died and she become the sale Survivor. The Additional Civil Judge found that, while sale deeds of 1914 and 1915 were for legal necessity as they had been executed by Smt. Mewa Kuer when her two sisters had died, the sale deed dated 27th July, 1901 was also for legal necessity but as it was executed without the consent of the other two daughters it was invalid and not binding on the plaintiffs respondent. Consequently the Trial Court dismissed Suit No. 25 of 1935 in respect of the sale deeds of 1914 and 1915, and partly decreed the suit pertaining to 1901 sale deed in view of the provisions of section 51 of the Transfer of Property Act in as much as these defendants appellants had made valuable constructions as bona fide purchasers and they were entitled to the market value of the constructions. Suit No 34 of 1935 was also partly decreed and partly dismissed. In the appeals filed by the present respondents plaintiffs and after perusing the cross objections filed by the present defendants appellants, the High Court reversed the finding of the trial court with regard to sale deeds of 1914 and 1915 held that they were not for legal and pressing need; and while confirming the finding of the trial court with regard to sale deeds dated July 27, 1901 further held that the present plaintiffs respondents should be given an opportunity to make an election under section 51 of the Transfer of Property Act, as to whether they would like to pay the compensation for the superstructures standing on the land in question or to sell their share in the land. Consequently, the High Court allowed the appeals of the plaintiffs respondents in part and remanded the case to the trial court to afford an opportunity to the plaintiff to make election under section 51 of the Transfer of Property Act. It was further held that the sale deeds of 1914 and 1915 being not for legal necessity the subsequent transfers made by the transferees of Mewa Kuer were bad. Hence the appeals by certificate. Allowing the appeals in part, the Court ^ HELD 1.1 If a Hindu dies leaving behind two widows they succeed as joint tenants with a right of survivorship. They are entitled to obtain partition of the separate portions of property so that each may enjoy her equal share of the income accruing therefrom. Each can deal as she pleases with her own life interest but she cannot alienate any part of the corpus of estate by gift or will so as to prejudice the right of survivorship or a future reversioner. If they act together they can burden the reversion with any debts owing to legal necessity but one of them acting without the authority of the other cannot prejudice the 720 right of servivorship by alienating any part of the estate. [728 G H] 1.2 The mere fact of partition between the two while it gives each a right to fruits of separate estate assigned to her, it does not imply a right to prejudice the claim of the survivor to enjoy full fruits of the property during her life time. What is applicable to co widows is equally applicable to the case of daughters. No distinction can be made on that account. [726 C D, 729 A B] Gauri Nath Kakaji vs Mt. Gaya Kuer, followed. Appalasuri vs Kannamma, approved. 2.1 The transfer made by one daughter without the consent of the other is only voidable at the instance of the other co limited owners or at the instance of the reversioners. [729 D E] 2.2 Here, the alienations made by the daughters separately to different persons was never challenged by the other daughters. Even the reversioners did not challenge those alienations during the life time of their mothers and they sought to challenge the alienations long after the death of the last limited owner Smt. Mewa Kuer in 1923 and therefore, even if the partition between the daughters had no effect on the reversion it can safely be presumed that the transfer made by one of the daughters of the property exclusively in her possession had the consent of the other. Further in any case Smt. Mewa Kuer after the death of her two sisters came into exclusive possession of the entire estate left by Smt. Amrit Kuer, widow of Lala Gurdin. Therefore, the transferees would be entitled to the protection of section 43 of the Transfer of Property Act which substantially amounts to satisfying the equitable principle of 'feeding the grant by estoppel '. [729 B C, D E] 2.3 In view of the fact that the trust has made valuable constructions involving a cost of 5 to 6 lakh rupees of the college building, the principal 's quarters, teacher 's quarters, hostel, library, dispensary etc. it will be inequitable in the circumstances of the case to ask the appellants to pay the present market value of the land. The acceptance of the amount by the plaintiffs respondents as determined by the trial court will itself amount to making a choice within the meaning of section 51 of the Transfer of Property Act. From the materials on record and the attending circumstances it is clear that the reversioners were neither in a position to pay for the improvements nor inclined to do so and this is why they accepted the amount determined by the trial court. Therefore, the High Court was not justified in remanding the case to the trial court to afford another opportunity to the plaintiffs to make a fresh choice. [930 B D] 3. What quantum of evidence will satisfy a particular court to come to a conclusion is entirely in the discretion of the Court, and therefore, the finding of the High Court with the regard to the two sale deeds of 1914 and 1915 cannot be interfered with. [930 E F] 721

The appellant No.1 Maharani was married to a Maharaja in 1960 and the daughter appellant no.2 was born of the wedlock in 1964. The relationship between the husband and the wife thereafter ceased to be cordial and the appellant started living in Bombay and the Maharaja within his estate in Madhya Pradesh. It is the case of the respondent No.1 that the Maharaja decided to remarry without legally separating from the appellant. The respondent who is a relation of the Maharaja 's mother, respondent No.2,was misled both by the Maharaja and his mother, respondent No.2 was misled both by the Maharaja and his mother in believing that the first marriage of the Maharaja had been dissolved and under that belief she married the Maharaja had been dissolved and under that belief she married the Maharaja and several issues were born of this wedlock. In 1974 when the Maharaja died, on application for grant of Letters of Administration was filed by the appellant Maharani, and the respondent No.1 applied for probate on the basis of an alleged will. This will was denied by the appellants. These proceedings are still pending. Respondent No.1 filed an application under Section 11 of the for declaring her marriage as nullity, and the Maharaja 's mother was impleaded as the sole respondent. The appellants intervened and were impleaded as parties. The maintainability of the aforesaid application was challenged by the appellants on the ground that the marriage could not be declared 194 a nullity after the death of the Maharaja but both the trial court and the High Court have rejected this plea. In the appeal to this Court it was contended on behalf of the appellants that having regard to the very special relationship between husband and wife,a marriage cannot be dissolved or declared to be a nullity unless both of them are parties thereto. The martial status of a person sands on a much higher footing than other positions one may hold in the society and cannot be allowed to be challenged lightly,and that the marriage of a person, therefore, cannot be declared as nullity after his death when he does no have an opportunity to contest. Reliance was placed upon the language of Section 11 of the . On behalf of the respondent, it was pointed out that having regard to the language of Section 16 of the as it it stood before its amendment in 1976,he children born of the respondent would not have been entitled to the benefit of the section in absence of a decree declaring the marriage of their parents as nullity, and this was precisely the reason that the respondent had to commence the present litigation On the question: whether a petition under Section 11 of the for declaring the marriage of the petitioner as a nullity is maintainable after the death of the petitioner 's spouse. Dismissing the appeal, this Court, HELD: 1 .An application under Section11 of the before its amendment in 1976, was maintainable at the instance of a party to the marriage even after the death of the other spouse.[201B]. In the instant case, the proceeding was started in 1974 that is, before the amendment was made in the Hindu Marriage Act,1955. Section II did not contain the words "against the other party". At that time all that was required was that the application had to be filed by a party to the marriage under challenge. On the plain language of the section as it stood then,it could not be claimed that in absence of the other spouse as a party to the proceedings, the same would not be maintainable.[197F] 3.Under the general law a child for being legitimate has to be 195 born in lawful wedlock and if the marriage is void or declared to be so by the Court, it will necessarily have the effect ofbastardising the child born of the parties to such a marriage.[199F] 4. By enacting Section 5(i) of the the legislature abolished polygamy, which had always remained permissible and prevalent among the Hindus in the past. The Act was bringing about a very significant departure in this regard; and taking into account the possibility of violation of the law in numerous cases at least for sometime to come special provisions were included under Section 16 of the Act with the object of protecting the legitimacy of the children.[199G] 5. The benefit of Section 16 was confined to only such cases where a decree of nullity was granted under Section 11 or section 12. It did not extend to other cases. in 1976 section 11 was amended by inserting the words "against the otherparty" and alongwith the same section 16 was amended.[200D] 6. By the amendment in section 11, in so far the cases where marriage can be declared as nullity, the application of the rule protectingthe legitimacy was widened. If that had notbeen,the children born of such marriages would have been deprived of the advantage on the death of either of the parents. By the simultaneous amendment of the two sections it can safely be deducted that the Parliament did not hold identical views as expressed by the law Commission in its59th Report.[200F G] 7. The intention of the legislature in enacting section 16 was to protect the legitimacy of the children who would have been legitimate if the Act had not been passed in 1955.[200H] 8. There is no reason to interpret section 11 in a manner which would narrow down its field. With respect to the nature of the proceedings, what the court has to do in an application under section 11 is not to bring about any change in the marital status of the parties. The effectof granting a decree of nullity is to discover the flow in the marriage at the time of its performance and accordingly to grant a decree declaring it tobe void. [201A B] Butterfield vs Butterfield; I.L.R.(Vol.50) Calcutta 153 and Stanhope vs Stanhope, , and Law Commission of India 59th Report Chapter 6, para 6.1A referred to. 196 9.It is not correct to suggest that one uniform rule shall apply for deciding the maintainability of all proceedings involving issues relating to marital status. The question will be dependent upon on the nature of the action and law governing the same. The provisions of the relevant statue relating to a question will be very material.[198H 199A] Rayden and Jackson 's Law and Practice in Divorce and Family Matters, (15th Edn.). p.650, referred to.

The appellant in a suit against respondents claimed recovery of possession of the properties in Schedules 1, 2 and 3 as the sole heir of her mother. She claimed these properties exclusively, under section 12(1) (i) of the Mysore Hindu Law Women 's Rights Act, 1933. On challenge to her title by respondents she relied on a sale deed created in favour of her mother for a consideration of Rs. 28,000. Respondents ,set up title in respect of the suit properties in the appellant 's father alleging that her father had executed a will under which respondent I had been appointed an executor and as such, he got possession of the properties and handed them over to Respondent 2, as directed under the will. Alternatively, they urged that even if the property belonged to the appellant 's mother, she would not be entitled to claim exclusive title to it, because by succession it would devolve upon the appellant and her brothers; and her failure. to join her brothers made the suit incompetent for non joinder of necessary parties. The trial court dismissed the suit. On appeal, the High Court confirmed the decree of the trial court, but held that the main property in Schedule 1 did not belong to the appellant 's mother, but to her father and the sale deed in respect of the property was taken by her father in the name of her mother benami. On appeal by special leave, the appellant mainly contended that the property in question would fall under section 10(2)(b) :of the Act, and not under section 10(2)(d) as respondents had contended and therefore, she would be exclusively entitled to it and the plea of ,non joinder of her brothers would fail. Held: (Per, P. B. Gajendragadkar, K. Subba Rao, K. N. Wanchoo and N. Rajagopala Ayyangar JJ.). It would be straining the language of section 10(2)(b) of the Act to hold that the property purchased in the name of the wife with the money gifted to her by her husband should 'be taken to amount to a property gifted under section 10(2)(b). The re quirement of section 10(2)(b) is that the property which is the subject matter of devolution must itself be a gift from the husband to the wife. In deciding under which class of properties specified by cls. (b) and (d) of section 10(2) the present property falls, it would not be possible to entertain the argument that the gift of the money and the purchase of the property must be treated as one transaction and held on that basis that the property itself has been gifted by the husband to his wife. 134 159 S.C. 1. 2 The gift that is contemplated by section 10(2)(b) must be a gift of the very property in specie made by the husband or other relations therein mentioned. The trial court therefore, was right in holding that even if the property belonged to the appellant 's mother, her failure to implied her brothers who would inherit the property alongwith her made the suit incompetent. In the present case, the estate could be represented only when all the three heirs were before the court. When the appellant persisted in proceeding with the suit on the basis that she was exclusively entitled to the suit property she took the risk and it was now too late to allow her to amend the plaint by adding her brothers at this late stage. Naba Kumar Hazra vs Radheshyam Mahish, A.I.R. 1931 P.C., 225 followed. Per Mudholkar J. (dissenting) Upon the pleadings there is no, scope for spliting up the transaction into two parts, ie., a gift of the money by the father to the mother in the first instance and the purchase by the mother of that property subsequently with that money. It was not even an alternative contention of the respondents that the transaction was in two parts and that what the father gifted was the money and not the property. It would be indeed an artificial way of looking at the transaction, as was done by the trial court, as being constituted of two parts. Thus the transaction was one indivisible whole and that is, the father provided the money for acquiring the property in the mother 's name. Therefore, in effect it was the father who purchased the property with the intention of conferring the beneficial interest solely upon the mother. Such a transaction must therefore amount to a gift. In that view the property would not fall under cl. (d) of section 10 of the Act but under cl. (b) of that section. Therefore, the appellant would be the sole heir of her mother and the non joinder of her brothers would not defeat the suit so far as she is concerned.

Under the Chanda Patent and the terms recorded in the Wajibul Arz the Dhanora Zamindari was impartible and on the death of the holder it devolved upon his eldest son and in the absence of a legitimate or an adopted son it devolved upon the nearest male relative. The succession to the Zamindari was subject to the power of the Governor to dispossess a person found unfit to observe the conditions of loyalty, good police administration and improvement of the estate. The respondent instituted an action for possession of certain immovable properties including the zamandari and for recovery of compensation, in respect of malguzari lands, paid to the appellants in consequence of the enactment of the Madhya Pradesh Abolition of Proprietary Rights (Estate, Mahals, Alienated Lands) Act, 1951. They claimed the Zamindari relying upon the rule of primogeniture and other estates as devisees under a Will. The trial court decreed the suit and the High Court affirmed the decree with slight modifications. in the appeal to this Court the appellants urged that (1) the Zamindari devolved on the death of the holder on the male relative who is senior most in age and not the eldest member in the senior line; (2) by the order of the Governor the Zamindari was conferred upon the first appellant as he was found suitable to hold the zamindari and since the Government had the power to determine inheritance and the right to remove a person, the holder of the zamindari had merely a life interest; and (3) the compensation officer had decided by his order under section 14 of the Act that compensation in respect of malqutari land was payable to the first appellant and since no suit was filed by the plaintiffs for setting aside that decision within the period specified, the order of the compensation officer became final and conclusive. HELD : (1) By the use of the expression "the nearest male relative" the test of propinquity alone may be applied and when there are two or more claimants equally removed from the common ancestor the eldest male member in the senior most line will be preferred. The contest between the parties had to be adjudged in the light of the rules of lineal primogeniture governing an impartible estate. In determining a single their according to the rules of primogeniture the class of heirs who would 325 be entitled to succeed the property if it were partible must be ascertained first, and then the single heir applying the special rule must be selected. By the expression "nearest male relative" it was not intended to confer be estate upon the eldest male relative of the Zamindar. The High Court was, therefore, right in holding that the Zamindari devolved upon the first respondent to ' the exclusion of the first appellant. [333 C F] (2) The power vested in the Governor to take extraordinary steps to protect the interest of the zamindari by the removal of the holder did not restrict the title of the zamindar to a mere life interest. The power had to be exercised in accordance with the custom of the family and an order by the Governor purporting to exercise powers under the Chanda Patent contemplated a quasi judicial inquiry. The order does not show that any inquiry was made for determining the rights of the contesting claimants. [334 G] (3) Section 14 of Act 1 of 1951 does not invest the compensation officer with jurisdiction to determine competing claims of persons claiming proprietary rights to the property vested in the Government by the operation of section 3 of the Act. Section 14 is intended to determine only the proprietary rights in the land qua the State. [339 D E]

On the strength of the permission granted by the Revenue Divisional Officer, as required under clause 6 of the Orissa Scheduled Areas Transfer of Immovable Property by Scheduled Tribes Regulation 3 of 1956 and Rule 4 made thereunder, to sell his private property to a non scheduled Tribe person for a sum of Rs. 4000/ , Respondent 3 sold his property on January 2, 1964 by a registered deed of sale to the appellant, despite an attachment order passed by the Executing Court on July 13, 1963 on an application dated June 28, 1963 made by Respondent 1 to recover the decretal amount as per the money decree obtained by him on August 18, 1962 against Respondent 3 and his mother Respondent 4. Later, Respondent No. 1 however, produced the copy of the order passed by the R.D.O. dated October 23, 1963, at the instance of appellant in the Executing Court and got the property put to sale on May 15, 1964. In the court auction respondent 2 son of respondent 1 purchased the property. On June 22, 1964, the appellant filed an application under order 21 Rules 89 and 90 and Section 47 and 151 C.P.C. for setting aside the auction sale on the ground that the attachment and the auction sale were void for want of permission from the competent authority under Orissa Regulation 2 of 1956 and also due to fraud committed by the decree holder. The application was allowed followed by confirmation by the appellate judge, in appeal. But the High Court in Second Appeal reversed it accepting the contention of res judicata. Allowing the appeal by special leave, the Court. ^ HELD: 1. Both clauses 6 of the "Orissa Scheduled Areas Transfer of Immovable Property by Scheduled Tribes Regulation 2 of 1956, and Rule 4 made thereunder, provide that no immovable property belonging to a member of the scheduled Tribe is liable to be attached or sold except in accordance with the permission granted by the competent authority. Prior to the sale to the private party, the property was undoubtedly attached in execution proceedings on July 13, 1963, but the order of attachment was void, being contrary to the express inhibition contained in clause 6 of Regulation 2 of 1956 read with Rule 4 made thereunder. [200E G] 2. The auction sale is bad and invalid: It is elementary that what can be brought to sale in a Court sale is the right, title and interest of the judgment debtor and therefore, the auction purchaser can get nothing more than that right, title and interest. In the instant case, the appellant having become an owner of the property on account of the 197 Private sale dated January 2, 1964 respondent 3 had no saleable interest left in the property which could be put to auction. The auction sale therefore cannot displace the title of the appellant which is the same thing as saying that as between the title of the appellant and the so called title of the auction purchaser the appellant 's title must prevail. [200G H, 201A] Moreover, as the condition imposed by the R.D.O. regarding the price was violated by the auction sale, the auction purchaser cannot get a valid title to the property under that sale. In the private sale, the appellant purchased the property for Rs. 4,000/ and therefore the condition of the permission was complied with. But the auction sale was held in satisfaction of the decretal dues which were far less than Rs. 4,000/ the decree itself being in the sum of Rs. 1,000/ and odd and the highest bid at the auction being of Rs. 3,000/ only.[201 B C] 3. (a) The basic issue being the validity of auction sale in favour of respondent 2, no question of res judicata can arise. the appellant claims through the judgment debtor and neither the latter nor the decree holder ever disputed that he, the judgment debtor, was a member of the Scheduled Tribe. On the other hand both of them were conscious of the situation that the property could not be sold without the sanction of the R.D.O., Nowrangpur. The decree holder himself apprised The Executing Court of that position. The permission which was granted by the R.D.O., Nowrangpur at the instance of the appellant was produced by respondent 1 in the execution proceedings as if the permission was granted in sis favour for the sale by respondent 3 of his property. The failure, therefore, of the judgment debtor to raise any particular contention cannot operate as res judicata actually or constructively, either against him or against the appellant. [201 D F] (b) Whether "Bhotras" fall within any of the sub groups of the Scheduled Tribes enumerated in Part IX of the Schedule to the Constitution (Scheduled Tribes) Order, 1950 is a question which could not have been permitted to be raised for the first time in the Second Appeal. Much less can it be allowed to be raised in this Court in an appeal under article 136 of the Constitution.[200C D]

G, a Digamber Jain of the, Porwal sect, died in 1934 leaving behind his widow Smt. K, his son G who died in 1939 and three grandsons M, P and R. In 1952 M 's son S filed a suit for partition of the joint family properties. Rajkumar, claiming to be a son of P adopted by his widow, claimed a 1/4th share in the joint family property. The adoption was challenged on the ground that no express authority had been given by P to his widow to adopt. The trial court held that no express authority was required by a sinless Jain widow to adopt a son and that the adoption was duly and properly made. Accordingly, a preliminary decree declaring the shares of Smt. K, the branch of M, the branch of R and of Rajkumar to be 1/4th each was passed. M and others pre ferred an appeal to the High Court mainly against the findings on the question of adoption. During the pendency of the appeal, the , came into force. Shortly thereafter Smt. K died. The High Court upheld '.he decision of the trial court on the question of the adoption of Rajkumar. With respect to the share of Smt. K the High Court held that her interest declared by the preliminary decree was inchoate, that she never became "possessed", 419 of any share within the meaning of s 14 of the Act and that it remained joint family property which became divisible amongst the parties proportionately to their shares. The appellants contended that the adoption of Rajkumar was invalid as no custom applicable to the Porwal sect of the jains had been established empowering a widow to adopt without the authority of her husband and that the 1/4th share of Smt. K declared by the preliminary decree had become her absolute property by virtue of section 14 of the Act and upon her death it descended to her grandsons M and R to the exclusion of other parties. Held, that the adoption of Rajkumar was valid. A sonless Jain widow could adopt a son without the express authority of her husband. Such a custom among the Jains not domiciled in the States of Madras and the Punjab) has been recognised by judicial decisions spread over a period longer than a century. Though none of these decisions related to the Porwal sect of Jabalpur to which the parties belonged. They laid down a general custom of the jains which were applicable to the parties. The decisions proceeded not upon. any custom peculiar to any locality or to any sect of the jains but. upon general custom which had by long acceptance become part of the law applicable to them. Where a custom is repeatedly brought to the notice of the Courts, the courts may held that custom introduced into the law without the necessity of proof in each individual case. Pemraj vs Mst. Chand Kanwar, (1947) L. R. 74 1. A. 224 and Mangibai Gulabchand vs Suganchand Bhikamchand, A.I.R. (1948) P. C. 177, relied on. Sheokuarbai vs Jeoraj, , Saraswathi Ammal vs ,Jagadambal, , Maharajah Govind nath Ray vs Gulal Chand, (1833) 5 Sel. Rep. 276, Bhagwandas Tejmal vs Rajmal Alias Hiralal Lachmindas, (1873) 10 Bom. H.C. Rep. 241, Sheo Singh Rai vs Mst. Dakho and Morari Lal (1878) L.R. 5 1. A. 87, Lakhmi Chand vs Gatto Bai, All. 319, Manik Cha nd Golecha vs Jagit Settani, Cal. 518, Harar nabh Parshad alias Rajajee vs Mangil Das, Cal. 379, ManoharLal vs Banarsi Das All. 495, Asharfi Kumar vs Rupchand, All. 197, Rup Chand vs Jambu, Prasad All, 2 47, Jiwaraj vs Mst. Sheokuwarbai, A.I.R. (1920) Nag. 162, Banarsi Das vs Sumat Prasad, All. 1019 and Rama Rao vs Raja of Pittapur, (1918) L. R. 43 1. A. 148, referred to. Held, further that the 1/4th share of Smt. K declared by the preliminury decree was "possessed" by her and on her 420 death it descended to her grandsons in accordance with provisions of sections 15 and 16 of the Act. The word "possessed" in section 14 was used in a broad sense meaning the state of owing or having in one 's power. The rule laid down by the Privy Council that till actual division of the share declared in her favour by a preliminary decree for partition of the,joint family prop" a Hindu wife or mother was not recognised as owner of that share cannot apply after the enactment of the . Section 4 of the Act made it clear that the Legislature intended to supersede the rules of Hindu law on all rs in respect of which there was an express provision made in the Act. Gumalapura Taggina Matada Kotturuswami vs Setra Veerayya, (1959) 1 Supp. S.C.R. 968 and Pratapmull Agarwalla vs Dhanabati Bibi, (1935) L.R. 63 I.A. 33, referred to.

Some villages made an application before the Assistant Commissioner of Endowments, Orissa, for appointment of non hereditary trustees under section 27 of the, Orissa Hindu Religious Endowments Act, 1951, for Shiva temple which is more than 100 years old and possesses about 24 acres of land. A new temple was constructed in place of the old dilapidated temple by the money contributed by the villagers. It was alleged that respondents Nos. 1 to 3 were mismanaging the affairs of the temple and were not regularly performing the puja or the duty. An enquiry was ordered pursuant to which the Inspector submitted his report stating that the temple was a public temple and that respondents Nos. 1 to 3 did not show accounts to the Inspector and that, therefore, names of 5 persons were suggested for appointment of non hereditary trustees. A proclamation inviting objections regarding the suitability of 5 persons was issued. After making a summary enquiry in the presence of the villagers including respondents Nos. 1 to 3 the Additional Assistant Commissioner passed an order holding that the institution was a public one and appointed 5 non hereditary trustees under section 27 of the Act. He, however, did not record any finding whether respondents Nos. 1 to 3 were hereditary trustees or not. A revision Application filed to the Commissioner of Hindu Religious Endowments failed. Respondent Nos. I to 3 filed a writ petition in the High Court contending that the order of appointment of non hereditary trustees under section 27 of the Act encroached upon the property rights of the respondents and were without jurisdiction and void having been passed without determining under section 41 of the Act as to whether the institution was a private or a public one and without further determining as to whether the respondent were hereditary trustees. The appellants contended before the High Court that the provisions of section 27 were independent and that it could be invoked without prior determination of the question under section 41. The High Court allowed the writ petition holding that section 27 should be applied only where in respect of the disputed institution there had been a Prior determination of the controversial rights mentioned in section 41 and that before the Assistant Endowments Commissioner could proceed under section 27 of the Act to assess non hereditary trustees it was necessary for him to come to a finding that the institution was a public one and there were no hereditary trustees thereof in existence and in order to come to such a finding he should have completed an enquiry under section 41 which coupled with section 44 provided for a judicial determination of these very questions. Under section 41 in case of a dispute the Assistant Commissioner has power to enquire into and decide whether an institution is a public religious institution and whether a trustee holds office as a hereditary trustee. Under section 27, the Assistant Commissioner has power to appoint non hereditary trustees in respect of each religious institution in cases where there are no hereditary trustees, Dismissing the appeal, ^ HELD: 1. The Assistant Commissioner can appoint non hereditary trustees under section 27 of the Act only where two conditions are satisfied : (i) that the religious institution is not an excepted one, and (ii) there are no hereditary trustees of the institution. 436 For the exercise of the powers under. section 27, therefore, either there should be no dispute about the two conditions or if there is a dispute a prior determination of such dispute under section 41 of the Act has to be made. Without such preliminary determination an appointment of non hereditary trustees under section 41 since there is no specific prohibition. [444D E] 2. Under section 27. the enquiry is of a summary character in which the affected person does not get a reasonable chance of presenting his entire case and evidence is not required to be recorded verbatim. It is otherwise in case of Proceedings under section 41 where the enquiry has to be judicial and elaborate. [442H. 443A] 3. It is also not correct that a duly verified application on a proper court fee is necessary for the determination of the questions enumerated in section 41 of the Act. An enquiry can be made suo moto by the Assistant Endowments. Commissioner for determination of any of the disputes enumerated in section 41 since there is no specific prohibition. [444D E]

Appeal No. 30 of 1957. Appeal by special leave from the judgment and order dated September 1, 1955, of the Bombay High Court in Income tax Reference No. 37 of 1952. N. A. Palkhivala and I. N. Shroff, for the appellant. K. N. Rajagopala Ayyangar and D. Gupta, for the respondent. December 7. The Judgment of the Court was delivered by HIDAYATULLAH, J. The Raghuvanshi Mills Ltd., Bombay (a public limited Company), has filed this appeal by special leave against the judgment and orders of.the High Court of Bombay dated March 10, 1953, and September 1, 1955. By the first order, the Bombay High Court directed the Income tax Tribunal to submit a supplementary statement in the case in the light of its judgment, giving the parties liberty to lead further evidence, if any. By the second order, the High Court re framed the question, and answered it against the assessee. The assessee Company 's issued and subscribed capital was, at the material time, Rs. 10,00,000 divided into 10,000 shares of Rs. 100 each. Prior to 980 November 14, 1941, one Maganlal Parbhudas, who was a Director of the Company, held 6,344 shares. On November 14, 1941, he made a gift of 1,000 shares to each of his five sons, Ravindra, Surendra, Bipinchandra, Hareshchandra and Krishnakumar. We are concerned with the account year of the Company, April 1, 1942, to March 31, 1943, the assessment year being 1943 44. In that year, the dividend which was declared at the Annual General Meeting held on December 17, 1943, was less than what was required under section 23A of the Indian Income tax Act. The question, therefore, arose whether the Company could be said to be one to which section 23A(1) of the Act was applicable, regard being had to the third proviso and the Explanation under it. During the accounting period, the Company had eight Directors, whose names along with the shares respectively held by them are given below: Shares (1) Shri Maganlal Parbhudas 1,344 (2) Ravindra Maganlal 1,168 (3) Surendra Maganlal. 1,100 (4) Amritlal Chunilal (jointly with Babulal Chunilal). 833 (5) Babulal Chunilal. 100 (6) Bhagwandas Harakchand. 50 (7) Haridas Purshottam. 50 (8) Sir Chunilal B. Mehta (jointly with Lady Tapibai Chunilal) 50 Total 4,695 Out of the balance of the shares, 4,754 shares were held by the relatives of some of the above named Directors, as stated below: Shares (1) Shrimati Kantabai Maganlal (wife of a Director) 771 (2) Shri Bipinchandra Maganlal 1,000 (3) Shri Hareshchandra Maganlal (son of a Director) 1,000 (4) Shri Krishnakumar Maganlal (do) 1,000 981 (5) Shrimati Dhanlaxmi Mohanlal (6) Srimati Prabhavati Nanalal Harilal (5 and 6 daughters of a Director) 50 (7) Shri Hirjibhai Purshottam and Haridas Purshottam (brothers of a Director) 25 (8) Shri Dhanjibhai Purshottam and Haridas Purshottam (brothers of a Director) 25 (9) Shri Chimanlal Vithaldas (cousin of a Director) 833 Total 4,754 The remaining 551 shares were held by the members of the public, who were not connected with the Directors of the Company in any way. Before March, 1942, Messrs. Ravindra Maganlal and Bros. were the Managing Agents of the Company. Maganlal Parbhudas was the sole proprietor of that firm. On March 7, 1942, the Company appointed Ravindra Maganlal & Co. Ltd. as the Managing Agents for. a period of 20 years. The Managing Company had a total issued and subscribed capital of Rs. 5,000 and the five sons of Maganlal Parbhudas who have been named before had subscribed that capital equally. During the account year, Maganlal Parbhudas and two of his sons, Ravindra Maganlal and Surendra Maganlal, were three of the Directors of the Company. Ravindra, Surendra and Bipinchandra were Directors of the Managing Company. On these facts, the Income tax Officer applied section 23A (as it stood prior to its amendment by the Finance Act, 1955) to the Company, holding that this was not a Company in which the public were substantially interested. The order of the Income tax Officer was confirmed on appeal, both by the Appellate Assistant Commissioner and the Tribunal. The Tribunal also refused to state a case under section 66(1) of the Incometax Act, but the High Court of Bombay acting under section 66(2) called for a statement of the case on the question: "Whether on the facts and circumstances of the 124 982 case the provisions of section 23A of the Indian Income tax Act (XI of 1922) are applicable to the petitioners?" In stating the cases the Tribunal pointed out that probably the question ought to have been: "Whether on the facts and circumstances of the case 1,000 shares each held by Bipinchandra, Haresh chandra and Krishnakumar in the capital of the assessee Company are held by members of the public within the meaning of the Explanation to the third proviso to section 23A?" The members of the Tribunal in deciding the appeal before them, gave slightly different reasons. According to the Accountant Member, the shares held by persons interested in the Managing Company were under the control of the Directors of the appellant Company, and those persons could not be considered to be members of the public. The Judicial Member held that the Directors were controlling the shareholders of the Company, that their relatives were mere nominees, whose voting power was controlled by the Directors, and that the public could not, therefore, be said to be substantially interested, as required by the Explanation to the third proviso to the section. When the High Court heard the case, the learned Judges addressed themselves to the question, what was the proper meaning of the expression "held by the public" in the Explanation. They came to the conclusion that the object of the third proviso and the Explanation was that the voting power to be exercised by the public should be independent of the control of the Directors, and that the word "Public" was used in contradistinction to the Directors. They apparently thought that a holding by a Director could not be described, in any event, as a holding by the public. The High Court came to the tentative opinion that both the tests stated by the Accountant Member and the Judicial Member were incorrect, and held that what the law required was de facto control, 4 c a control which is, in fact, exercised," and that no finding appeared to have been given on that point by the Tribunal. The case was accordingly remitted to 983 the Tribunal for submission of a fresh statement of the case whether the Directors were exercising de facto control. over any of the other shareholders, who belonged to the second category mentioned by us above. The Tribunal thereupon re stated the case, and after examining further evidence, gave the finding that the Directors, particularly the three sons of Maganlal Parbhudas who formed the Directors of the Managing Company were under the de facto control of their father. At no stage in the case did the Tribunal alter the finding reached by the Department that the shares of the Company were not, in fact, freely transferable by the holders to members of the public. The High Court then reheard the case, and came to the conclusion that there was evidence on which the Tribunal could hold that Maganlal Parbhudas exercised de facto control over his three sons. In view of this finding, the High Court held that the order made by the Tribunal was correct, and answered the question in the negative, re framing it as follows: "Whether on the facts and circumstances of the case the shares held by Bipinchandra, Harishchandra and Krishnakumar can be considered to be shares held by members of the public within the meaning of the explanation to the third proviso to Section 23A?" The High Court refused to grant a certificate; but the Company has obtained special leave from this Court, and has filed this appeal. It is first contended that the test that the shares held by the Directors of a company are not shares in which the public are substantially interested is incorrect. According to learned counsel, all the authorities, the Tribunal and the High Court have proceeded on this wrong assumption, and have failed to apply the proper test laid down by the Explanation to the third proviso. It may be pointed out that there is no dispute that 551 shares, were, in fact, held by the public. The total shares of the Company being 10,000, the Company can only avoid the application of section 23A, if the public hold shares carrying not less than 25 per cent. of the voting power, that is to say, 2,500 shares. The Directors between them hold 4,695 shares. These 984 have been held by the High Court to be shares, which cannot be said to be beneficially held by the public. Even so, if the rest of the shares can be said to be held by the public, then the minimum 25 per cent. would still be reached. It was in this context that the shares of the sons of Maganlal, Bipinchandra, Harishchandra and Krishnakumar, were considered. If those shares can be said to fall outside the category of shares beneficially held by the public, then those shares along with the shares held by the Directors reduced the number of shares held by the remaining shareholders to less than 25 per cent. It was on this view that the case was remitted to the Tribunal by the High Court to obtain a further statement whether Maganlal Parbhudas was de facto controlling these three shareholders. Two questions, therefore, arise in this appeal. The first is whether the shares held by the Directors must always be regarded as not held by the public. The second is what is the meaning of the provision: "a company shall be deemed to be a company in which the public are substantially interested, if its shares carrying not less than twenty five per cent. of the voting power have been allotted unconditionally to, or acquired unconditionally by, and are at the end of the previous year beneficially held by the public. " In this connection, we may point out that a ruling of the Privy Council appears to take a different view from that taken by the High Court, in regard to an Uganda Ordinance in pari materia with the proviso and the Explanation. We shall refer to that case as also to a case of the House of Lords, where also a different conclusion in law from that of the High Court has been reached. Section 23A (as it stood prior to its amendment in 1955), omitting the portions not material, read as follows: "23A. Power to assess individual members of certain companies. Where the Income tax Officer is satisfied that in respect of any previous year the profits and gains distributed as dividends by any company up to the end of the sixth month after its accounts for that 985 previous year are laid before the company in general meeting are less than sixty per cent. of the assessable income of the company of that previous year, as reduced by the amount of income tax and super tax payable by the company in respect thereof he shall, unless he is satisfied that having regard to losses incurred by the company in earlier years or to the smallness of the profit made, the payment of a divi dend or a larger dividend than that declared would be unreasonable, make with the previous approval of the Inspecting Assistant Commissioner an order in writing that the undistributed portion of the assessable income of the company of that previous year as computed for income tax purposes and reduced by the amount of income tax and super tax payable by the company in respect thereof shall be deemed to have been distributed as dividends amongst the shareholders as at the date of the general meeting aforesaid, and thereupon the proportionate share thereof of each shareholder shall be included in the total income of such shareholder for the purpose of assessing his total income: . . . . . . . Provided further that this sub section shall not apply to any company in which the public are substantially interested or to a subsidiary company of such a company if the whole of the share capital of such subsidiary company is held by the parent company or by the nominees thereof. Explanation. For the purpose of this sub section a company shall be deemed to be a company in which the public are substantially interested if shares of the company carrying not less than twentyfive per cent. of the voting power have been allotted unconditionally to, or acquired unconditionally by, and are at the end of the previous year beneficially held by the public. and if any such shares have in the course of such previous year been the subject of dealings in any stock exchange or are in fact freely transferable by the holders to other members of the public. " It is clear from the third proviso that the sub section 986 does not apply to a company in which the public are substantially interested. The Explanation lays down, among the tests, the minimum interest which can be called substantial ' by saying that shares of the company carrying not less than 25 per cent. of the voting power must be allotted unconditionally to, or acquired unconditionally by, the public and they must be beneficially held by the public. The essence of the Explanation lies not in the percentage which only shows the limit of the minimum holding by the public, but lies in the words "unconditionally" and "beneficially". These words underline the fact that no person who holds a share or shares not for his own benefit but for the benefit of another and who does not exercise freely his voting power, can be said to belong to that body, which is designated 'public '. The word 'Public ' is used in contradistinction to one or more persons who act in unison and among whom the voting power constitutes a block. If such a block exists and possesses more than seventy five per cent. of the voting power, then the company cannot be said to be one in which the public are substantially interested. In Sardar Baldev Singh vs The Commissioner of Income tax, Delhi and Ajmer (1), this Court took the following view: "The section thus applies to a company in which at least 75 per cent. of the voting power lies in the hands of persons other than the public, which can only mean, a group of persons allied together in the same interest. The company would thus have to be one which is controlled by a group. The group can do what it likes with the affairs of the company, of course, within the bounds of the Companies Act. It lies solely in its hands to decide whether a dividend shall be declared or not. " judged from the test we have indicated, it is clear that such a group may be formed by the Directors of a company acting in concert, or by some Directors acting in concert with others or even by some , shareholder or shareholders, none of whom may be a Director. Such a group which may, for convenience, be (1) ; 987 designated a block, must hold a controlling interest, and if the voting power of the block is 75 per cent. or more, then obviously it can do anything at a meeting, whether general or special. When a company starts, the promoters may subscribe a portion of its capital and release the other unconditionally to the public. This is a case of unconditional allotment of shares to the public. The public may also unconditionally acquire a portion of the shares which were previously held by the group which promoted the company. If at the end of the previous year 25 per cent. or more of the voting power is so held by the public, the company can take the benefit of the third proviso. But if more than 75 per cent. of shares have again passed into the hands of a group which acts as a block, the third proviso ceases to apply. In deciding if there is such a controlling interest, there is no formula applicable to all cases. Relationship and position as Director are not by themselves decisive. If relatives act, not freely, but with others, they cannot be said to belong to that body, which is described as 'public ' in the Explanation. But it would be otherwise if they were free. Similarly, if Directors or some of them do not act as a body or in concert with others, the fact that they are Di rectors is of no significance. The case of Tatem Steam Navigation Co., Ltd. vs Commissioners of Inland Revenue (2) illustrates the first proposition. There, the assessing Commissioners had made directions under section 21 of the Finance Act, 1922, against which the Company appealed on the ground that it was a Company in which the public were substantially interested, inasmuch as shares of the Company carrving not less than 25 percent. of the voting power had been allotted unconditionally to or acquired unconditionally by, and were, at the end of the relevant periods, beneficially held by the public and the decision of the Special Commissioners that 16,000 shares given by Lord Glanely to his niece were not allotted to or acquired by the public and that the Company was, therefore, not (1) 988 a Company in which the public were "substantially interested" was erroneous. It was held by Lawrence, J., that merely because she was a niece of Lord Glanely did not make her cease to be a member of the public. The Court of Appeal agreed with Lawrence, J. No doubt, there were other provisions which laid down the kind of relationship which would lead to the inference that the holder was controlled by another, and a niece was not such a relative. The Act we are considering did not lay down the kind of relationship which would show such a control, and the same principle will apply. Mere relationship thus is not of consequence, unless control of the voting power held by such a relative, by another relative, is proved. The other test adopted in the case by the Bombay High Court that Directors stand outside the 'public ' is also not decisive. In Commissioner of Income tax vs H. Bjordal (1), the Judicial Committee dealt with section 21(1) of the Income Tax Ordinance No. 8 of 1940 (Uganda), as amended by section 5 of the Income Tax (Amendment) Ordinance, 1943. That provision of law is completely in pari materia with section 23A. Two brothers, H. Bjordal and section Bjordal, held 73.96 and 25.09 per cent. of the voting power. Five others held 04 per cent. of the voting power. The shares held by section Bjordal were purchased for full value by him from his brother. There was no suggestion that he was a nominee of the respondent or that he was acting in concert with his brother. Both brothers were Directors of the Company. It was held by the Judicial Committee that shareholders in a company who are members of the 'public ' do not cease to be so, because they become Directors. In the Uganda Ordinance also, like our Act, there was no guidance as to the meaning of the word 'public ', as there was in the English statute considered in Tatem 's case (2). It is significant that in Jubliee Mills Ltd. vs Commissioner of Income tax (3), Chagla, C. J., and section T. Desai, J., speaking of the judgment under appeal and (1) (2) (3) , 41. 989 taking into consideration the Privy Council case, observed: "It may be that our view is erroneous; and it may be and very probably it is that the view taken by the Privy Council is the right one. " In our judgment, the test is first to find out whether there is an individual or a group which controls the voting power as a block. If there be such a block, the shares held by it cannot be said to be "unconditionally" and "beneficially" held by members of the public. In the category of shares held by the public, only those shares can be counted which are unconditionally and beneficially held by the public, or, in other words, which are uncontrolled by the group, which controls the affairs. The group itself may be composed of Directors or their nominees or relations in different combinations, but none can be said to be.long to that group, be he a director or a relative unless he does not hold the shares unconditionally and beneficially for himself. It is only such a person, who can fall properly outside the word 'public '. Judged from this point of view, the judgment and orders of the High Court cannot be upheld. Directors cannot, by reason of being Directors, be said not to be members of the public. To that extent, the judgment is erroneous. There is a finding by the Tribunal in the supplementary statement of the case that the shares held by Bipinchandra, Harishchandra and Krishnakumar were under the control of their father, Maganlal Parbhudas. Their holding was 3,000 and with Maganlal 's holding of 1,344 shares, makes up a total of 4,344 shares. Though the question as framed by the High Court appears to have been correctly answered in the negative, it does not dispose of the matter. The, question to be determined still is whether more than per cent. of the shares are not beneficially held by the public. We accordingly set aside the judgment and orders of the High Court, and direct the High Court to decide the question originally framed by it, viz.: "Whether on the facts and circumstances of the 125 990 case the provisions of section 23A of the Indian Income tax Act, XI of 1922, are applicable to the petitioners?" The High Court may call for a supplemental statement of the case from the Tribunal, if it finds it neces sary. The appeal is allowed. The respondents shall bear the costs of this appeal. The costs in the High Court shall abide the result. Appeal allowed.

One Maganlal Parbhudas who was a Director of the assessee company held 6,344 shares out of a total of 10,000 shares of the company and he made a gift of 1000 shares to each of his five sons. During the accounting period the company had eight Directors including the said Maganlal Parbhudas and two of his sons and they held 4695 shares as between themselves. Out of the balance of the shares 4754 shares were held by the relatives of some of the Directors. Three sons of Maganlal Parbhudas were Directors of the Managing Company. The Income tax Officer applied section 23A of the Income tax Act as it stood prior to its amendment by the Finance Act, 1955 to the company holding that this was not a company in which the public were substantially interested. The order of the Income Tax Officer was confirmed on appeal both by the Assistant Commissioner and the Tribunal. The High Court remitted the case to the Tribunal for a statement whether the Directors were exercising de facto control over any of the other shareholders. The Tribunal thereupon gave the finding that the Directors, particularly the three sons of Maganlal Parbhudas who formed the Directors of the Managing Company were under the de facto control of their father. The High Court agreed with the finding of the tribunal and held that on the facts and circumstances of the case the shares held by the three sons of Maganlal Parbhudas could not be considered to be shares held by the members of the public within the meaning of the Explanation to the third proviso to section 23A of the Income Tax Act. On appeal by the assessee company, Held, that in the Explanation the word "public" is used in contradistinction to one or more persons who act in unison and among whom the voting power constitutes a block. If such a block exists and possesses more than seventy five per cent of the voting power, then the company cannot be said to be one in which the public are substantially interested. Sardar Baldev Singh vs Commissioner of Income tax, Delhi and Ajmer, ; , considered. The test is first to find out whether there is an individual or a group which controls the voting power as a block. If there is such a block the shares held by it cannot be said to be held 979 "unconditionally" or "beneficially" by the public. Only those shares which are "unconditionally" and "beneficially" held by the public uncontrolled by the controlling group can be treated as shares held by the public under the Explanation. The group may be composed of Directors or their nominees or relations in different combinations, but none can be said to belong to that c group, be he a Director or a relative unless he does not hold the shares unconditionally and beneficially for himself. It is only such a person who can fall properly outside the word "public". The view that Directors merely by reason of their being Directors stand outside the "public" is erroneous. Commissioner of Income tax vs H. Bjordal, , followed. Mere relationship is of no consequence unless it is proved that the voting power of one relative is controlled by another relative. Tatem Steam Navigation Co. vs Commissioner of Inland Reve nue, , followed.

In respect of the assessment of the appellant to income tax the Income tax Officer excluded the amount of interest on arrears of rent received by him, in view of the decision of the Patna High Court in Kamakshya Narain Singh vs Commissioner of Income tax, [1946] 14 , that this amount was not liable to be taxed, though an appeal against the said decision to the Privy Council at the instance of the Income tax Department was then pending. Subsequently on July 6, 1948, the Privy Council allowed the appeal and held that interest on arrears of rent payable in respect of agricultural land was not agricultural income as it was neither rent nor revenue derived from land. As a result of this decision the Income tax Officer took proceedings under section 34 Of the Indian Income tax Act, 1922, as amended, and revised the assessment order by adding the aforesaid amount, on the footing that the subsequent decision of the Privy Council was information within the meaning of section 34(1)(b) of the Act and that the Income tax Officer had reason to believe that a part Of the assessee 's income, had escaped assessment. It was contended for the appellant that section 34(1)(b) was not applicable to the case because (1) the information referred to in the section means information as to facts and cannot include the decision of the Privy Council on a point of law, 11 and (2) where income has been duly returned for assessment and an assessment order has been passed by the Income tax Officer, it cannot be said that any income has escaped assessment within section 34(1)(b). Held, (1) that the word " information " in section 34(1)(b) of the Act includes information as to the true and correct state of the law and so would cover information as to relevant judicial decisions; and, (2) that the expression "has escaped assessment" in to cases where no return has been submitted by the assessee. The section is applicable not only where income has not been assessed owing to inadvertence or oversight or owing to the fact that no return has been submitted, but also where are turn has been submitted, but the Income tax Officer erroneously fails to tax a part of assessable income. Rajendra Nath Mukherjee vs Income tax Commissioner, (1933) L.R. 61 I. A. 10 and Messrs. Chatturam Horliram Ltd. vs Commissioner of Income tax, Bihar and Orissa, [1955] 2S.C.R. 290, distinguished. Raja Benoy Kumar Sahas Roy vs Commissioner of Income tax, West Bengal, , Madan Lal vs Commissioner of Income tax, Punjab, and The Commissioner of Income tax vs Raja of Parlakimedi, Mad. 22, approved. , Maharaja Bikram Kishore of Tripura vs Province of Assam, , disapproved.

A dispute regarding amendment of rules relating to privilege leave etc. arose between the Ahmedabad Millowners ' Association and the union of workmen employed in the textile industry. After conceliation proceedings were declared by the Conciliator to have failed, the union referred the dispute to the Industrial Court under section 73A of the Bombay Industrial Relations Act, 1946. The Industrial Court decided against the Millowners who filed a writ petition in the ' High Court and thereafter appealed to this Court. It was urged on behalf of the appellants that (i) section 73A was violative of article 14 of the Constitution since it gave a right to the workers union to make a reference but not to the employer (ii) the Act had not been made applicable to the cotton industry at Ahmedabad under section 2(4) and it was not applicable under section 2(3) because the Bombay Industrial Disputes Act, 1938 was repugnant to Central) and must be deemed to have been repealed. HELD:(i) Section 73A was not violative of article 14. Whenever any industrial dispute arises the employer can always ensure arbitration of that dispute by making an offer to the union under section 66 of the Act whereupon a registered and approved union is compelled to agree to submission of the dispute to arbitration. Clearly therefore there was no need to make any Provision empowering the employer to make a reference of the dispute for arbitration to the Industrial Court. On the other hand if a Union wants a dispute to be settled and even offers that the dispute be submitted to arbitration under section 66 of the Act, the employer can refuse, whereupon the union would be left without any remedy. It is obvious that section 73A was enacted to fill this gap and place the union on with the employer so as to enable the union to have any dispute = by arbitration even when the employer does not agree to arbitration. This section, in these circumstances did not at all require that the right granted to the union should also be granted to the employer. [441 G H] There was no difference in the procedure to be followed by the Industrial Court in a reference under section 73A and that to be followed when the reference is under section 66. In both the procedure under section 92 had to be followed. [443 E F] (ii)Chapter V of the Bombay Industrial Disputes Act 1938 was not repugnant to the Central Act of 1947 and therefore continued to be in force, and consequently under section 2(3) of the Bombay Industrial Relations Act 1947 the latter Act became applicable to the industry of the appellants and did not require a notification under section 2(4) to make it applicable [446 G H; 447 A B] 438 Ex Parte McLean, ; Victoria and Others vs The Commonwealth of Australia and Others, ; , Zaverbhai Amaidas vs The State of Bombay, [1955] 1 S.C.R. 799, Ch. Tika Ramji & Ors. vs The State of Uttar Pradesh & Ors., and Deep Chand vs The State of Uttar Pradesh and Others, [1959] Supp. 2 S.C.R. 8.

The appellant entered into contract with Government for the supply of goods, and in the assessment year 1942 43 Rs. 10,80,653 and in the assessment year 1943 44, Rs. 7,45,336 were assessed as its income by the Income tax Officer. The supplies to Government were made for. Jaipur by the appellant, and payment was by cheques which were received at Jaipur. The contention of the appellant was that this income was received at Jaipur outside the then taxable territories. This contention was not accepted by the Income tax Appellate Tribunal, Delhi. The appellant then applied for a reference to the High Court under section 66(1) of the Indian Income tax Act, and by its order dated December 10, 1952, the Tribunal referred the following question for the decision of the High Court. " Whether on the facts and circumstances of the case the profits and gains in respect of the sales made to the Government 211 of India were received by the assessee in the taxable terri tories ?" The High Court remanded the case to the Tribunal for a supplemental statement of case calling for a finding on the question " whether the cheques were sent to the assessee firm by post or by hand and what directions, if any, had the assessee firm given to the department in the matter ". The appellant questioned the order of the High Court relying on the decision in New Jehangir Vakil Mill 's case; , Held, that the enquiry in such cases must be to see whether the question decided by the Tribunal admits of the consideration of the new point as an integral or an incidental part thereof. The supplemental statement which the Tribunal is directed to submit must arise from the facts admitted and/or found by the Tribunal and should not open the door to fresh evidence. Held, further, that the question as framed in this case was wide enough to include an enquiry into whether there was any request, express or implied, that the amount of the bills be paid by cheques so as to bring the matter within the dicta of this Court in the Ogale Glass Works case, [1955] 1 S.C.R. 185 or Jagdish Mills case; , In the absence of anything expressly said in the Order of the High Court to the contrary, it cannot be held that the direction given would lead inevitably to the admitting of fresh evidence as that has been prohibited by the New Jehangir Vakil Mills case. The New Jehangir Vakil Mills Ltd. vs The Commissioner of Income tax, ; , distinguished. Jagdish Mills Ltd. vs Commissioner of Income tax, ; , Keshav Mills Co. Ltd., vs Commissioner of Income tax, , Sir Sobha Singh vs Commissioner of Income tax, , Kirloskar Bros. Ltd.v. Commissioner of Income tax, [1952] 21 I.T.R. 82, Commissioner of Income tax vs Ogale Glass Works Ltd. , Commissioner of Income tax vs Kirloskar Bros. Ltd., and Mrs. Kusumben D. Mahadevia, Bombay vs Commissioner of Income tax, Bombay, ; , referred to.

Messrs. Shivnarayan Surajmal Nomani were the managing agents of the New Swadeshi Mills of Ahmedabad Ltd. The Nemani group and the appellant company which is the assesses 811 held a substantial number of shares of the said mills. Sometime in 1944 some difference arose between them and it was decided that the Nemani group should sell its block of shares to the appellant company at an agreed price and then the appellant company would become the managing agents of the mills company on payment of Rs. 5,00,000 to the Nemani group and would be entitled to the emoluments of the managing agents as from April 1, 1944. The relevant portion of the Managing Agency Agreement ran thus: " (2) The remuneration of the agents as such agents of the company as aforesaid shall be as follows: A commission at the rate of three and a half per cent. on the gross proceeds of all sales of the yarn, cloth, waste and other articles manufactured by the company earned in any year or other period for which the accounts of the company are made up and laid before the General Meeting." " (3) The said commission shall become due to the Managing Agents at the end of each financial year or other period for which the accounts of the company are to be laid before the General Meeting and shall be payable and paid immediately after such accounts have been passed by the General Meeting. ,, The assessment year was 1946 47, and the year ending with Diwali, 1945 (October 18, 1944, to November 4, 1945) was the accounting year. The managing agency commission from April 1, 1944, to December 31, 1944, amounted to Rs. 2,20,433 and from January 1, 1945, to March 31, 1945, to Rs. 67,959. The case of the appellant company was that for the assessment year 1946 47 it was liable to pay tax only on the commission of Rs. 67,959 which it had earned by working as managing agent of the Mills company and it was not liable to pay tax on the sum of Rs. 2,20,433. On a difference of opinion having arisen between the departmental taxing authorities and the Tribunal the following question was referred to the High Court for decision : " Whether on the facts and circumstances of the case the managing agency commission of 3 1/2 on sales made by the New Swadeshi Mills of Ahmedabad Ltd., between April 1, 1944, and December 31, 1944, accrued to Shivnarayan Surajmal Nemani or to the assessee ? " The High Court following the decision of the Supreme Court in E. D. Sassoon and Company Ltd. V. Commissioner of Income tax, Bombay City, held that the appellant company was liable to pay tax on the whole of the commission as the commission accrued due on March 31, 1945, and they became entitled to receive it at the end of the year; it also held that no debt was created in favour of the agents when the goods were sold. On appeal by the assessee company on a certificate of the High Court: Held, that the view of the High Court was correct. The commission of the managing agents accrued and became due at the end of the financial year and that neither any debt nor any right to receive payment arose in favour of the agents when each 812 transaction of sale took place. No income arose or accrued on the sale proceeds at the time of each sale. E. D. Sassoon and Company Ltd. vs Commissioner of Income tax, Bombay; , , referred to. Lakshminarayan Ram Gopal and Sons vs The Government of Hyderabad, ; , followed. Commissioners of Inland Revenue vs Gardner Mountain & D 'Ambrumenil Ltd., and Turner Morrison & Co. Ltd. vs Commissioner of Income tax, West Bengal, , distinguished.

The National Syndicate, a Bombay firm, acquired on January 11, 1945, a tailoring business as a going concern for Rs. 89,321 which included the consideration paid for sewing machines and a motor lorry. Soon after the purchase the respondent found it difficult to continue the business, therefore closed its business in August, 1945. Between August 16, 1945, and February 14, 1946, sewing machines and the motor lorry were sold at a loss. The respondent closed its account books on February 28, 1946, showing the two losses and writing them off. For the assessment year 1946 47, the. respondent claimed a deduction under section 10(2)(Vii) of the Indian Income Tax Act. The Appellate Tribunal held that the sales of machines and the motor lorry were made in the course of the winding up of the assessee 's business after the business had been stopped and that, therefore, the deduction could not be claimed under section 10(2)(Vii). Respondent moved the High Court and obtained an order under section 66(2) of the Income Tax Act, and the following two questions were referred : " (1) Whether the Tribunal was justified in law in holding that the petitioner had carried on its business only till twenty eight day of August, One Thousand Nine Hundred and Forty Five ? (2) Whether on the facts and circumstances of the case, the Income Tax Appellate Tribunal was justified in law in not allowing the sum of Rs. 41,998 (Rupees forty one thousand nine hundred and ninety eight) on sale of machines and Rs. 3,700 (Rupees three thousand and seven hundred) on the sale of lorry as a deduction from the total income of the applicant ?" The High Court answered the first question in the affirma tive, and the second question in the negative. The Commissioner of Income tax questioned the finding of the High Court and came up in appeal by special leave and con tended that an allowance could only be claimed if sale of machines, etc. took place when the business was being continued and not if the business had come to a close. The respondent on the other hand submitted that section 10(2)(Vii) would be applicable 230 in a case where the business continued for a part of the account year, even though the sale of machinery, plant, etc. took place after the closure of the business during the course of the account year. Held, that if the profits or gains of a business for a particular year are to be taxed, they must be computed for the whole year taking into account losses incurred during the same year, provided that the business had been " carried on by the assessee " ; the building, machinery or plant had been " used for the purpose of the business "; the sale etc. had taken place during the year of account, and the loss had been brought into the books of the assessee and written off. There is no other condition to be found expressly in the section or in the Act. It is nowhere stated that the business of the assessee should have been carried on for the whole year, or that the machinery or plant should have been used for the whole of the accounting period. There are no words which would show that, if the assessee worked only for a part of the year and then sold out, the loss that he incurred was not a business loss, or that he must pay tax on the small profit that he might have made, and bear the loss in addition. The Liquidators of Pursa Limited vs Commissioner of Income Tax, Bihar, ; , Commissioner of Income tax vs Express Newspapers Ltd. , distinguished. Indian Iron & Steel Co., Ltd. vs Commissioner of Incometax, Bengal, , Commissioner of Income tax vs Shaw Wallace & Co., Ltd., (1932) L.R. 59 I.A. 206, referred to.

The assessee company carried on a business of manufacture and sale of textile goods. The manufacture was made at its mills in Indore which was an Indian State before integra tion and had its own law as to income tax known as the Indore Industrial Tax Rules, 1927. The sales of textile goods so manufactured were made at various places, some inside and some outside the taxable territories of the then British India. For and upto assessment year 1949 50 the assessee company was treated as a non resident. Indore became a part of the taxable territories within the meaning of the Indian 311 Income tax Act, 1922 in the two assessment years 1950 51 and 1951 52 and the asscssee company was held to be "resident and ordinarily resident" within the meaning of that Act. Upto the assessment year 1949 50 that part of its profits which was received by the assessee company in British India was subjected to tax together with it. ,; other income which accrued in British India. In making the calculation of business profits or loss received or arising in the taxable territories, a proportion was struck between the total turnover and its sales the proceeds whereof were received in the taxable territories. The assessee company raised two questions in the course of the assessment proceedings, one of which with regard to the entire loss of Rs. 5,19,590/ of the year 1948 49 which it claimed to set off against the profits made in its business in the two assessment years. The assessee company contended that the business was one and under section 24 it was entitled to set off the losses which it had sustained in 1948 49. The High Court decided this question against the assessee company, but gave a certificate under section 66A of the Act. Held, on appeal, that the High Court correctly answered the questions the provisions of section 24 of the Act read with the provisions in section 4(1) (a) and (c) and section 14(2)(c) make it clear that sub s(1) of s: 24 when it talks of profits or gains has reference to taxable profits or taxable gains ; it has no reference to income accruing or arising without the taxable territories which were not liable to be assessed in the case of non residents. In determining the nature of the losses under consideration in these appeals the relevant year was 1948 49, the year in which the losses occurred, and the High Court rightly took the view that for the application of sub s (2) of section 24, the losses must be such losses as could have been set off under sub s.(1) of section 24.

The firm consisting of the appellant and another, carrying on managing agency business, was on March 31, 1951, assessed to excess profits tax for the year 1942 and the broken period from January, 1943 to March 4, 1943. The prescribed notices were served not on the appellant but on the other partner who, under the terms of the partnership deed, was the managing partner. On March 4, 1943, the managing partner gave notice of dissolution of the firm and thereupon the appellant sued him for dissolution from such date as might be specified by the court. The trial Court upheld the dissolution as and from the date notified by the managing partner but on appeal the High Court by its judgment rendered in 1953 fixed March 10, 1949, as the date of the dissolution. An appeal taken to the Supreme Court from this decision of the High Court was still pending. The appellant challenged the validity of the order of assessment and the consequent proceedings for recovery of the tax assessed, under article 226 of the Constitution on the grounds, (a) that there was a dissolution of the firm on March 4, 1943, and that notices served thereafter on the managing partner would not bind him, (b) that there was no demand of the tax due from him under section 29 of the Indian Income tax Act and that, consequently, the tax could not be recovered from him under section 46(2) of the Act, but the High Court dismissed his application. Held, that the appellant could not be allowed to plead a prior dissolution and the assessment was binding on him. Even assuming that the partnership stood dissolved on the date of the assessment, his position would not be different. Under the Excess Profits Tax Act, 1940, the unit of assessment was not the firm but the business, and an order of assessment passed after notice to the managing partner would be valid and binding on the appellant under section 44 of the Indian Income tax Act, 1922, as modified by the Central Board of Revenue under section 21 of the Excess Profits Tax Act, 1940. A.G. Pandu Rao vs Collector of Madras, (1954) 26 I.T. R. 99 and Bose vs Manindra Lal Goswami, , approved. 789 No separate notice of demand under section 29 of the Indian Income tax Act, specifically addressed to the appellant, was necessary in order to recover the tax by the mode prescribed by section 46(2) of the Act. Under the proviso to section 21 of the Excess Profits Tax Act, 1940, the appellant was an assessee within the meaning of section 29 of the Indian Income tax Act, 1922, and the notice of demand served on the managing partner was notice to the appellant by virtue of section 63 of the latter Act made applicable by section 21 of the former.

Appeal No. 531 of 1959. Appeal by special leave from the Award dated October 21, 1957 of the Central Government Industrial Tribunal, Dhanbad, in Reference No. 6 of 1957. N. Dutta Mazumdar, G. N. Bhattacharjee and B. P. Maheshwari, for the appellants. M. C. Setalvad, Attorney General of India and R. Gopalakrishnan, for the respondent. December 7. The Judgment of the Court was delivered by GAJFNDRAGADKAR, J. The short question of law which falls to be decided in the present appeal is whether a dispute raised by the employees of a General Insurance Company against their employer for payment of bonus in any particular year can be referred for adjudication by an Industrial Tribunal under section 10(1) of the (XIV of 1947). This question arises in this way. The workmen of the Hercules Insurance Co. Ltd. are the appellants and the Insurance Company is the respondent before us. On April 11, 1957, the Central Government referred the appellants ' claim for bonus for the years 1954 and 1955 for adjudication to the Industrial Tribunal, Dhanbad, constituted under section 7A of the , and this reference has been made under section 10(1)(d) of the Act. Before the Tribunal the respondent urged a preliminary objection against the validity of the reference itself. Its case was that the payment of bonus by an Insurance Company is conditioned entirely by the relevant provisions of the (IV of 1938), and that the said provisions did not justify the reference of a dispute in that behalf for adjudication by any Industrial Tribunal. This preliminary objection was based on the provisions of section 31A(1) and proviso (vii) of the 997 . It was also urged by the respondent that having regard to the limitations imposed on the General Insurance Companies by section 40C of the the claim for bonus made by the appellants, could not be sustained. The Tribunal has upheld the preliminary objection thus raised by the respondent and held that the reference is invalid. Incidentally it has also considered the plea raised under section 40C and has observed that the said plea is also well founded In the result the Tribunal refused to entertain the reference and dismissed it accordingly. It is against this order of the Tribunal that the appellants have come to this Court by special leave. It is common ground that the respondent has paid the appellants bonus equivalent to two months ' basic wages for each of the two years 1954 and 1955. The appellants claim two months ' basic wages as additional bonus for each of the two years under reference. It is their case that if the trading profits made by the respondent are ascertained from the respondent 's balance sheet and the Full Bench formula is applied, it would appear that the respondent has in its hands a substantial amount of available surplus from which the additional bonus claimed by them can be awarded. Since the reference has been rejected on the preliminary ground the Tribunal has naturally not considered this aspect of the problem. The preliminary objection raised by the respondent is founded on the relevant provisions of section 31A of the (hereafter called the Act) and so we must now turn to the said provisions. Section 31A(1)(c) of the Act provides, inter alia, that notwithstanding anything to the contrary contained in the Indian Companies Act, 1913, or in the articles of association of the insurer, if a company, or in any contract or agreement, no insurer shall after the expiry of one year from the commencement of the Insurance (Amendment) Act, 1950, be directed or managed by, or employ as manager or officer or in any capacity, any person whose remuneration or any part thereof takes the form of commission or bonus in respect of the 126 998 general insurance business of the insurer. Thus looking section at 31A(1)(c) by itself without the proviso the position is absolutely at clear. The respondent cannot be directed to employ the appellants in any capacity so as to include in their remuneration a liability to pay bonus in respect of the general insurance business of the respondent. Bonus under the is not a part of wages, but the right to claim bonus which has been universally recognised by industrial adjudication in cases of employment falling under the said Act has now attained the status of a legal right. Bonus can be claimed as a matter of right provided of course by the application of the Full Bench formula it is shown that for the relevant year the employer has sufficient available surplus in hand. Therefore a claim for bonus made by the appellants in the present proceedings is a claim in respect of the general insurance business of the respondent, and if allowed it would add to the remuneration payable to them. In other words, bonus claimed by the appellants, if awarded, would, for the purpose of section 31A (1)(c), be a part of their remuneration, and that is precisely what is prohibited by the said provision. There are, however, certain exceptions to this general prohibition, and it is to one of these exceptions that we must now turn. Proviso (vii) to section 31A (1)(c) lays down that nothing in this subsection shall be deemed to prohibit "the payment of bonus in any year on a uniform basis to all salaried employees or any class of them by way of additional remuneration, such bonus, in the case of any employee, not exceeding in amount the equivalent of his salary for a period which, in the opinion of the Central Government, is reasonable having regard to the circumstances of the case. " This provision which constitutes an exception to the rule prescribed by section 31A(1)(c) allows the payment of bonus to the employees of Insurance Companies subject to the condition specified by it. Bonus intended to be paid to such employees must not exceed in amount the equivalent of their salary for a period which the Central Government regards as reasonable. 999 The result of this provision appears to be that the Central Government has to consider the circumstances of each insurer and then decide whether any bonus should be paid by the insurer to its employees. If the financial position of the insurer is sufficiently satisfactory, the Central Government may decide to allow the insurer to pay bonus to its employees, and in that context the Central Government would prescribe the maximum within which the payment should be made. In no case can payment exceed the maximum prescribed by the Central Government, and in all cases the matter has to be considered by the Central Government and no other authority. Having regard to the scheme of the Act which purports to supervise and regulate the working of Insurance Companies the legislature thought that the payment of bonus by the Insurance Companies to their employees should normally be prohibited and its payment should be permitted subject to the over riding control of the Central Government to prescribe the maximum in that behalf. If the Central Government decides that no bonus should be paid, no bonus can be paid by the insurer. If the Central Government decides that bonus should be paid but not beyond specified limit the insurer cannot exceed that limit. That, in our opinion, is the effect of proviso (vii) to section 31A(1). It is, however, urged that proviso (vii) merely enables the Central Government to prescribe the maximum. It does not take away the Central Government 's authority to refer an industrial dispute in respect of bonus for adjudication under section 10 of the . In this connection it is urged by Mr. Mazumdar that in some cases the Central Government may take the view that the financial position of the insurer justified the payment of bonus, but the quantum may be better left to the Industrial Tribunal. In such a case the Central Government should have authority to make the reference. Similarly it is urged that the Central Government may decide that within the maximum prescribed by it, bonus should be paid by an insurer, but the insurer 1000 may not comply with the Central Government 's decision and in that case the only way to make the Central Government 's decision effective is to refer the matter to adjudication and enable the employees to obtain an award which can be executed. That is why the appellants contend that the enabling provision contained in proviso (vii) should not be construed to constitute a bar against the Central Government 's power to act under section 10(1) of the . We are not impressed by this argument. In our opinion the policy of the relevant clause of the proviso is absolutely clear. Payment of bonus by insurers was intended by the legislature to be conditioned by the provisions contained in the said clause, and we feel no doubt or difficulty in reaching the conclusion that the intervention of the Industrial Tribunals was intended to be excluded and the matter was intended to be kept within the discretion of the Central Government so far as the payment of bonus by the insurers is concerned. Then, as to the argument that the Government directive issued under proviso (vii) may not be obeyed by any insurer, we do not think that such an event is likely to happen; but theoretically it is conceivable that an insurer may refuse to comply with the decision of the Government. In that case all we can say is that there is a lacuna left and the legislature may consider whether it is necessary to provide adequate remedy for making the Government decision binding and final. Having regard to the unqualified and absolute prohibition contained in section 31A(1)(c) it seems to us difficult to hold that the payment of bonus to the employees of Insurance Companies is not absolutely conditioned by proviso (vii). In the absence of the said provision no bonus could have been claimed by Insurance employees, and so the effect of the said provision must be to limit the said right to the conditions prescribed by it. That is why we think that the Tribunal was right in coming to the conclusion that the reference made by the Central Government is invalid. The fact that the Central Government took the view that it could make such a reference 1001 is hardly relevant in determining the scope and effect of the relevant provisions of the Act. This question must be considered on what we regard to be the fair construction of the relevant statutory provision, and as we have just indicated the construction of the relevant provision clearly supports the view taken by the Tribunal. Incidentally, it may be pointed out that in its award the Tribunal has referred to several other decisions of Industrial Tribunals which have taken the same view though there are one or two decisions which have upheld the validity of the reference without duly considering the effect of section 31A(1). In this connection we may refer to the decision of this court in The Central Bank of India vs Their Workmen (1), where a similar question has been considered. In that case the Court had to consider the effect of section 10 of the Banking Companies Act, 1949, prior to its amendment in 1956. The said section, according to that decision, prohibited the grant of industrial bonus to bank employees inasmuch as such bonus is remuneration which takes the form of a share in the profits of a banking company. In dealing with the character of bonus in relation to remuneration specified by section 10, section K. Das, J., who spoke for the Court, observed that "bonus in the industrial sense as understood in our country does come out of the available surplus gap, wholly or in the actual wage. id it fills the wage and age in that sense, whether it be called contingent or supplementary. None the less, it is labour 's share in the profits, and as it is a remuneration which takes the form of a share in profits, it comes within the mischief of section 10 of the Banking Companies Act". Section 10 of the Banking Companies Act is comparable to section 31A of the , and so this decision supports the view that we have taken about the effect of section 31A(1)(c). We have already held that the payment of bonus would be an additional remuneration to the employees of Insurance Companies and it would be (1) ; 1002 bonus in respect of the general insurance business of the insurer. In view of our conclusion that the Tribunal was right in upholding the preliminary objection, we do not propose to consider the other argument which had been urged by the respondent before the Tribunal under section 40C of the Act, and which the Tribunal has incidentally considered and accepted. The result is that the appeal fails and is dismissed. There will be no order as to costs. Appeal dismissed.

In view of the unqualified and absolute prohibition contain ed in section 31A(1)(c) of the , against payment of bonus to the employees in general insurance business, the exception made by proviso (vii) to that section must be strictly confined to the limits prescribed by the said proviso. The policy underlying the proviso clearly is to exclude the intervention of Industrial Tribunals and leave the question of payment of such bonus entirely to the discretion of the Central Government. Consequently, where the workmen in general insurance business claimed bonus and the Central Government referred the dispute for adjudication to the Industrial Tribunal under section 10(1) of the , and the Tribunal, on a preliminary objection under section 31A(1)(c) of the , read with proviso (vii) thereof, held that the reference was invalid, (1) ; 996 Held, the decision of the Tribunal was correct and must be upheld. The Central Bank of India vs Their Workmen, [1960] 1 S.C.R. 200, relied on.

A dispute arose between the appellant and his employees in the "Motor Garage department" in respect of the claim made by the employees for retrenchment and other compensation and leave facilities. The Government of the State of Rajasthan, 'on December 18, 1957, referred under section 10 of the , the above mentioned dispute to the Industrial Tribunal, Rajasthan. Two preliminary objections were raised before the Industrial Tribunal by the appellant against the maintainability of the reference: (1) That without the sanction of the Union Government under section 87B of the Code of Civil Procedure, the reference to the Industrial Tribunal was incompetent. (2) That on the date when the reference was made no Industrial Tribunal was constituted under section 7A of the as amended by Act 36 of 1956, and on reconstitution of the Tribunal, the reference became incompetent. The Tribunal rejected both the objections. The High Court also dismissed the writ petition filed by the appellant challenging the validity of the order of the Tribunal. Hence this appeal. Held, (i) Section 86 read with section 87 of the Code of Civil Procedure in terms protects a Ruler from being "sued" and not against the institution of any other proceeding which is not in the nature of a suit. A proceeding which does not commence with a plaint or petition in the nature of a plaint, or where the claim is not in respect of a dispute ordinarily triable in a civil court, would prima facie not be regarded as falling within section 86 Code of Civil Procedure. Section 86 of the Code excludes the jurisdiction of the civil courts and must be strictly construed. It does not debar the commencement of proceedings for adjudication of an 1/SCI New Delhi/64 1 2 industrial dispute for two reasons:neither party to the proceeding is saed by the initiation of the proceeding and the Tribunal is not a court. (ii) Article 362 of the Constitution declares that in the exercise of legislative and executive power by the Union and the State due regard shall be had to the guarantee or assurance given under any covenant or agreement with respect to the personal rights, privileges and dignities of the Ruler of an Indian State. These rights, privileges and dignities which are, for historical reasons, recommended to be respected, avail the Rulers of Indian States in their status as Indian citizens and not in recognition of any sovereign authority continuing to remain vested in them. In the present case, the appellant has also, since the Constitution, been a citizen of India, and his recognition as Ruler under article 366(22) of the Constitution has not altered that status, but as a citizen he is assured a privileged position. (iii) By sub section (2) of the Rajasthan Industrial Trjbunal (Constitution and Proceedings) Validating Act, 1959, the Tribunal originally constituted under section 7 of the , before the Act was amended by Act 36 of 1956, is to be deemed to have been duly constituted under section 7A, and the reference made on December 18, 1957 is to be deemed to have been made as if the Tribunal were constituted under section 7A of the amended Act. The Validating Act is, because of Item 22 List III of the Seventh Schedule to the Constitution, within the competence of the State Legislature. As the Act was reserved for the consideration of the President and has received his assent, by virtue of article 254(2) it must prevail in the State of Rajasthan. Mundra Metal Works Private Ltd. vs State of Rajasthan, W.P.No. 107/58, referred to.

The appellant Association was recognised under section 27 read with section 3(23) of the Bombay Industrial Relations Act, 1946 as the Association of employers in Silk and Art Silk Textile Industry within the local area of Greater Bombay. The respondent Sabha represented the workmen in the Industry. By a supplementary award dated October 15, 1971 the Industrial Court modified an existing award of the Industrial Court of Maharashtra, Bombay, dated April 25, 1962 by directing with retrospective effect from January 1, 1971 that the employees in Silk and Art Silk Industry who were concerned in the dispute shall be granted dearness, allowance at the rate of 99 per cent neutralization of the rise in the Bombay Consumer Price Index 106 (old series) on the basis of the minimum wage of Rs. 30/ 4 per month of 26 working days. The appellant Association and one of the Silk Mills appealed. HELD : The award did not suffer from any infirmity. (i) The Association represented 55 units of employers and out of these only 28 produced their balance sheets and profit and loss accounts. The other 27 units did not supply any materials with respect to their financial capacity but agreed to abide by the decision of the Industrial ' Court on the basis of the materials furnished by the 28 units. The award in so far as it concerned these 28 units proceeded on the basis of their financial capacity as judged from accounts produced by them and the materials in the case. There is no substance in the complaint that any adverse inference had been drawn against that 28 units on account of non production of materials by others. [283 H] (ii) The contention that the position of the industry was not stable and that its prospects were bleak could not be accepted. A broad and ' overall view of the financial position of the employer units was taken into account by the Industrial Court and it had tried to reconcile the natural and just claims of the employees for a higher rate of dearness allowance with the capacity of the employer to pay it and in that process it hadmade allowance for the legitimate desire of the employer to make reasonable profits. What is really material in assessing the financial capacity of the employer units in this context is the extent of gross profits made by them. On the basis of exhibit U.9, which was an analysis of the balance sheet, and profit and loss accounts of the 28 units, the Court found 'that the 28 mills had been making good profits and that, on an average, the profit would work out at 40 and odd per cent of the capital. There was some decline in the profits made during the years 1966, 1967 and 1968 but, the Court found that the industry was rallying round in 1970. [286 C] 278 Ahmedabad Mill Owners ' Association, etc. vs The Textile Labour Association; , at p. 426 and Unichem Laboratories Ltd. vs Their Workmen, Civil Appeals No. 1091 93 of 1971, decided on 24 2 1971, referred to. (iii) No evidence had been adduced to show what exactly had been the ,effect on the industry of the enhancement in excise duty. Without further evidence it was not possible to draw an inference that the sale of the products had been adversely affected. Moreover the economic incidence on the excise duty had been passed on to the consumer and the em ployer unit did not have to bear any additional burden on account of the levy. [286 H] (iv) Exhibit U.8 is a comparative Table showing the minimum basic wages and dearness allowance paid in other industries in the region like the engineering, pharmaceuticals, etc. The Court relied upon it only to show the trend in the region. The Court also relied upon the report of the Norms Committee which stated that the trend for the last decade in industrial adjudication as well as in settlements and awards, was to allow 100 per cent neutralization in the case of lowest paid employees. The Court was of the view that if 80 per cent neutralization could be allowed in the industry under the settlement arrived at in 1957, there was no reason why 100 per cent neutralization should not be granted in view of the steep rise in the cost of living from 1957, to the lowest paid employees. It is not possible to agree with the contention of the appellant that the Industrial Court went wrong in relying upon exhibit U.8 or the report of the Norms Committee to find out the trend in the region as to the extent of neutralization to be allowed to the employees concerned. [287 F] Bengal Chemical and Pharmaceutical Works Ltd. vs Its Workmen, referred to. (v) The Association never wanted the Court to make any comparison with any other units in the same industry in the region. In the written statement of the Association there was no averment that there were other comparable units in the same industry in the region. No did the Association, at the time of argument before the Industrial Court, put forward the contention that there were comparable concerns in the same industry in the region and that the Court should make a comparison of the employer units in question with those concerns to find out the extent of neutralization which could be granted. The Association was certainly in a position to tell the Court whether there were any other comparable units in the same industry in the region and the only inference from its conduct was that there were no comparable units in the industry in the region. [290 A] French Motor Car Co. Limited vs Workmen, [1963] Supp. at pp. 20 21. Williamsons (India) Private Ltd., vs The Workmen, [1962] I L.L.J. 302 and Greaves Cotton and Co. and others vs Their Workmen, ; at pp. 367 369, referred to.

The workmen demanded bonus for the year 1950 5, on the allegation that the employers had made profits during the relevant year. The employers resisted the demand on the ground that 879 there was a trading loss in the year and as such no bonus was payable. To determine the available surplus out of which bonus was to be paid, the employers deducted out of their gross profits an amount for depreciation admissible under the Income tax Act. The industrial tribunal disallowed a portion of the depreciation and found that there were profits in the relevant year and awarded three months bonus to the workmen. The employers preferred appeals to the Labour Appellate Tribunal but they were dismissed. The employers then applied to the Appellate Tribunal for a review and the Tribunal dismissed the application holding that it had no power to review its own decision and that even if it had the power it would not grant the review as no case for review had been made out. Held, that the whole of the depreciation admissible under the Income tax Act is not allowable in determining the available surplus. The initial depreciation and the additional depreciation are abnormal additions to the income tax depreciation and it would not be fair to the workmen if these depreciations are rated as prior charges before the available surplus is ascertained. Considerations on which the grant of additional depreciation may be justified under the Income tax Act are different from considerations of social justice and fair apportionment on which the original Full Bench formila in regard to the payment of bonus to the workmen is based. That is why only normal depreciation including multiple shift depreciation should rank as prior charges. U.P. Electric Supply Co. Ltd. vs Their Workmen, , approved. The Labour Appellate Tribunal had the power to review its own orders. M/s. Martin Burn Ltd. vs R. N. Banerjee, [1958] S.C.R .5I4, followed. The method adopted by the industrial tribunals in deter mining the trading profits of the employer is an industrial dispute, does not conform to the requirements and provisions of the Income tax Act, and it would, therefore, be fallacious to assume that gross profits determined by the industrial tribunal can be taken to be gross profits that would necessarily be taxable under the Income tax Act. In determining the available surplus for payment of bonus provision for a higher amount of incometax cannot be made merely because the claim to initial and additional depreciation has been disallowed which increase the amount of gross profits.

The respondent was employed by the appellant company, but later on his work and conduct became very unsatisfactory and repeated warnings, both oral and written, did not show any improvement. A thorough inquiry into his record of service was made and a report was submitted which showed that he was unsuitable to be retained in its service. No formal enquiry, however, was held by submitting a charge sheet to the respondent and giving him an opportunity to rebut those chares. The appellant gave him a choice either to terminate his services on payment of full retrenchment compensation, or if he refused to accept the same, to make an application for permission to terminate his services. Eventually, the appellant filed an application before the Labour Appellate Tribunal under section 22 Of the Industrial Disputes (Appellate Tribunal) Act, 1950, for permission to discharge the respondent from its service. The application was originally heard ex parte, the respondent not appearing, and the Tribunal, by order dated October 14, 1955, allowed the application. Subsequently the respondent made an appli cation for a review of the order under Or. 47, R. I, for setting it aside under Or. 9, R. 13 and for restoration of the application under Or. 41, R. 21, Of the Code of Civil Procedure. The Tribunal found that there was sufficient cause for the respondent not appearing when the application was called on for hearing, and set aside the ex parte order and restored the appellant 's application. On a further hearing of the application, the parties adduced evidence and the Tribunal, after hearing them, rejected the application on the, ground that a prima facie case had not been made out for permission to discharge the respondent. On appeal to the Supreme Court it was contended for the appellant (1) that the Labour Appellate Tribunal had no jurisdiction to review its own order and (2) that it exceeded its jurisdic tion under section 22 Of the Act, in discussing the evidence led before it in meticulous detail and coming to the conclu sion that the appellant failed to make out a prima facie case to discharge the respondent from its service. Held: (1) that under section 9, sub sections (1) and (10) of the Act the Labour Appellate Tribunal had jurisdiction to set aside the 515 ex parte order dated October 14, 1955, and restore the application to its file. (2) that under section 22 of the Act, the jurisdiction of the Labour Appellate Tribunal in considering whether a prima facie case has been made out by the employer, is to see whether the employer is acting mala fide or is resorting to any unfair labour practice or victimisation, and whether on the evidence led it is possible to arrive at the conclusion in question. Though the Tribunal may itself have arrived at a different conclusion it has not to substitute its own judgment for the judgment in question. Atherton West & Co. Ltd. vs Suti Mill Mazdoor Union and Others, , The Automobile Products of India Ltd. vs Rukmaji Bala & others; , and Laksh mi Devi Sugar Mills Limited vs Pt. Ram Sarup, (1956) S.C.R. 916, relied on. In the instant case, though the appellant was justified in making the application for permission to discharge the respondent on account of his work and conduct being demon strably unsatisfactory, and the standard of proof which the Tribunal ];ad applied for finding whether there was a Prima facie case was not strictly justifiable, in view of the fact that no formal inquiry into the charges against the respond ent was held and the evidence on behalf of the appellant did not show that the respondent was given an opportunity to controvert the allegations made against him, the decision of the Tribunal was upheld.

The appellant company carried on the work of transforming And transmitting electrical energy. There was dispute between the company and the respondent whether certain employees of the company like engineers, draughtsmen, clerks, accountants etc. mentioned in Appendices III, IV and V of the company 's petition before the Employees ' Insurance Court, were 'Employees ' or not within the meaning of section 2(9) of the Employees Insurance Act, 1948. The Employees Insurance Court held the said workers to be employees under section 2(9) and this finding was confirmed by the Single Judge as well as the Division Bench of the High Court. The company appealed to this Court by special leave. HELD : (i) The premises of the company were a factory within the meaning of the Employees State Insurance Act but the High Court was wrong in laying down the proposition that every inch of the area over which the transmission lines were spread was a factory within the meaning of section 2(12). The company 's factory had a fixed site and was located within the compound wall of its premises. [96 E, H] (ii)All the employees of the disputed categories clerks or otherwise were employed in connection with the work of the factory, that is to say, in connection with the work of transforming and transmitting electrical power. Some of the employees were not engaged in manual labour. But a person doing non manual work can be an employee within the meaning of section 2(9) (i) if he is employed in connection with the work of the factory. The duties of the administrative staff are directly connected within the work of the factory. [99 C, G] Even those employees who worked outside the factory but whose duties were connected with the work of the factory were employees within the meaning of section 2(9)(i). Among such employees were to be included those attending to sub stations of the factory. [100 A] Ardeshir H. Bhiwaniwala vs The State of Bombay, [1961] 3 S.C.R.542, State of Uttar Pradesh vs M. P. Singh, ; and Employees ' State Insurance Corporation, Bombay vs Raman, referred to.

The question was whether the expression 'wages ' as defined in section 2 (22) of the includes 'House ' Rent Allowance ', Night Shift Allowance ' 'Heat, Gas and Dust Allowance ' and 'Incentive Allowance ' paid by an employer to his employees, ^ HELD: By the Court 1. is a piece of social welfare legislation. The definition of 'wages ' is designedly wide. The definition on its plain reading is clear and unambiguous. Even if there is any ambiguity, the expression has to be given a liberal interpretation and receive beneficent construction.[714C] 2. 'Wages ' as defined in section 2 (22) of the must necessarily include 'House Rent Allowance ', 'Night Shift Allowance ', 'Heat, Gas and Dust Allowance ' and 'Incentive Allowance '. [715C] Braithwaite & Co. (India) Ltd. vs The Employees ' State Insurance Corporation, [1968]1 S.C.R. 771, referred to N.G.E.F. Ltd. vs Deputy Regional Director, E.S.I.C., Bangalore, and Employees ' State Insurance Corporation, Hyderabad vs Andhra Pradesh Paper Mills Ltd., Rajahamundry, , approved. Bengal Potteries Ltd. vs Regional Director, W. Bengal Region, Employees 713 State Insurance Corporation and others, [1973] LAB. I.C. 1328 (V , over ruled. Per Chinnappa Reddy, J. Wages as defined in section 2 (22) of the Act includes not only remuneration paid or payable under the terms of the contract of employment, express or implied but further extends to other additional remuneration, if any paid at intervals not exceeding two months, though outside the terms of employment. [714G] 'Remuneration ' under the first clause has to be under a contract of employment, express or implied while 'remuneration ' under the third clause need not be under the contract of employment but may be any 'additional remuneration ' outside the contract of employment, [715B] Per Amarendra Nath Sen, J. The inclusive part and the exclusive portion in the definition of 'wages ' in section 2 (22) clearly indicate that the expression 'wages ' has been given a very wide meaning. The inclusive part of the definition read with the exclusive part in the definition clearly shows that the inclusive portion is not intended to be limited only to the items mentioned therein. Taking into consideration the excluding part in the definition and reading the definition as a whole the inclusive part, is only illustrative and tends to express the wide meaning and import of the word 'wages '. [717H; 718A B]

In the former appeal, the appellant is a nationalised Bank. In 1977, some demands for wage revision made by the employees of all Banks were pending and in support of their demands, a call for a country wide strike was given. The appellant Bank issued a Circular on September 23, 1977 to its managers and agents directing them to deduct wages of the employees for the days they go on strike. The respondent Unions gave a car for a four hour strike on December 29, 1977. Two days before the strike, the appellant Bank issued an Administrative Circular warning the employees that if they participate in the strike, they would be committing a breach of their contract of service and they would not be entitled to salary for the full day and they need not report for work for the rest of the working hours on that day. However, the employees went on strike as scheduled, for four hours which included banking hours of the public, and re sumed duty thereafter. The appellant Bank did not prevent them from doing so. The appellant Bank by its circular di rected the managers and agents to deduct the full day 's salary of those employees who participated in the strike. On a writ petition filed by the respondents, the High Court quashed the said Circular. The Letters Patent Appeal filed by the appellant was dismissed. Hence, the appeal by the Bank. In the latter appeal, the appellant is a company whose workers had indulged in "go slow" in July 1984, thereby bringing down production. The workers did not attend to their work and were loitering in the premises and were indulging in go slow tactics to pressurise the 215 company to concede their demands. The company suspended its operation by giving a notice of lock out. It did not pay wages to the workers for July , 1984 on the ground that they did not work during all the working hours and had not their wags. The workers ' union filed a complaint before the Indus trial Court complaining that the appellant company had indulged in unfair labour practice and that the lock out declared was illegal The Industrial Court held that the deduction of wages for July, 1984 on account of the go slow was not justified It also declared that the company had committed an unfair labour practice by not paying full monthly wages to the workers and directed the company to pay the said wages for the month of July, 1984. Aggrieved, the appellant company has preferred the appeal. Allowing the appeals, this Court, HELD: 1.1 There is no doubt that whenever a worker indulges in a misconduct such as a deliberate refusal to work, the employer can take disciplinary action against him and impose on him the penalty prescribed for it which may include some deduction from his wages. However, when miscon duct is not disputed but is, on the other band, ' admitted and is resorted to on a mass scale such as when the employ ees go on strike, legal or illegal, there is no need to hold an inquiry. To insist on an inquiry even in such cases is to pervert the very object of the inquiry. In a mass action such as strike it is not possible to hold an inquiry against every employee nor is it necessary to do so unless, of course, an employee contends that although he did not want to go on strike and wanted to resume his duty, he was pre vented from doing so by the other employees or that the employer did not give him proper assistance to resume his duty though he had asked for it. That was certainly not the situation in the present case in respect of any of the employees and that is not the contention of the employees either. It is true that in the present case when the employ ees came back to work after their four hours strike, they were not prevented from entering the Bank premises. But admittedly, their attendance after the four hours strike was useless because there was no work to do during the rest of the hours. It is for this reason that the Bank had made it clear, in advance, that if they went on strike for the four hours as threatened, they would not be entitled to the wages for the whole day and hence they need not report for work thereafter Short of physically preventing the employ ees from resuming the work which it was unnecessary to do, the Bank had done all hi its power to warn the employees of the consequences of their action and if the employees, in spite of it, chose to enter the Bank 's premises where they had no work to do, and in fact did not 216 do any, they did so of their own choice and not according to the requirement of the service or at the direction of the Bank. In fact, the direction was to the contrary. Hence, the later resumption of work by the employees was not in fulfil ment of the contract of service or any obligation under it. The Bank was therefore not liable to pay either full day 's salary or even the pro rata salary for the hours or work that the employees remained in the Bank premises without doing any work. It is not a mere presence of the workmen at the place of work but the work that they do according to the terms of the contract which constitutes the fulfilment of the contract of employment and for which they were entitled to be paid. [222E H; 223A F] 1.2 Although the service regulations do not provide for a situation where employees on a mass scale resort to ab sence from duty for whole day or a part of the day whether during crucial hours or otherwise they do provide for treat ing an absence from duty of an individual employee as a misconduct and for taking appropriate action against him for such absence. [224D E] 2.1. When the contract, Standing Orders, or the service rules/ regulations are silent, but enactment such as the payment of Wages Act providing for wage cuts for the absence from duty is applicable to the establishment concerned, the wages can be deducted even under the provisions of such enactment. [231F] 2.2. The working class has indisputably earned the right to strike as an industrial action after a long struggle, so much so that the relevant industrial legislation recognises it as their implied right. However, the legislation also circumscribes this right by prescribing conditions under which alone its exercise may become legal. Whereas, there fore, a legal strike may not invite disciplinary proceed ings, an illegal strike may do so, it being a misconduct. However, whether the strike is legal or illegal, the workers are liable to lose wages for the period of strike. The liability to lose wages does not either make the strike illegal as a weapon or deprive the workers of it. When workers resort to it, they do so knowing full well its consequences. During the period of strike the contract of employment continues but the workers withhold their labour. Consequently, they cannot expect to be paid. [232C E] 2.3. The contract, which is this case is monthly, cannot be subdivided into days and hours. If the contract comes to an end amidst a month by death, resignation or retirement of the employee, he would not be entitled to the proportionate payment for the part of the month 217 he served. If the employment contract is held indivisible, it will be so for both the parties. There is no difficulty, inequity or impracticability in construing the contract as divisible into different periods such as days and hours for proportionate reimbursement or deduction of wages, which is normally done in practice. [232G H; 233A] 2.4. The contract of employment, Standing Orders or the service rules provide for disciplinary proceedings for the lapse on the part of a particular individual or individuals when the misconduct is disputed. As things stand today, they do not provide a remedy for mass misconduct which is admit ted or cannot be disputed. Hence, to drive the management to hold disciplinary proceedings even in such cases is neither necessary nor proper. The service conditions are not expect ed to visualise and provide for all situations. When they are silent on unexpected eventualities, the management should be deemed to have the requisite power to deal with them consistent with law and the other service conditions and to the extent it is reasonably necessary to do so. The pro rata deduction of wages is not an unreasonable exercise of power on such occasions. Whether on such occasions, the wages are deductable at all and to what extent will, howev er, depend on the facts of each case. Although the employees may strike only for some hours but there is no work for the rest of the day as in the present case, the employer may be justified in deducting salary for the whole day. On the other hand, the employees may put in work after the strike hours and the employer may accept it or acquiense in it. In that case the employer may not be entitled to deduct wages at all or be entitled to deduct only for the hours of strike. If statutes such as the or the State enactments like the Shops and Establishments Act apply, the employer ,may be justified in deducting wages under their provisions. Even if they do not apply, nothing prevents the employer from taking guidance from the legisla tive wisdom contained in it to adopt measures on the lines outlined therein, when the contract of employment is silent on the subject. [233B F] V.T. Khanzode & Ors. vs Reserve Bank of India & Anr., ; ; Paluru Ramkrishnaiah & Ors. etc. vs Union of India & Anr. ; , and Senior Superin tendent of Post Office & Ors. vs lzhar Hussain; , , relied on. Buckingham and Carnatic Co. Ltd. vs Workers of the Buckingham and Carnatic Co. Ltd., ; ; V. Ganesan vs The State Bank of India & Ors., ; State Bank of India, Canara Bank, Central Bank etc. & Ors. vs Ganesan, Jambunathan, Venkatara 218 man, B.V. Kamath, V.K. Krishnamurthy, etc. & Ors. , ; Sukumar Bandyopadhyyay & Ors. vs State of West Bengal & Ors., [1976] IX LIC 1689; Algemene Bank Nederland, N.V. vs Central Government Labour Court, Calcutta & Ors., [1978] II LLJ, 117; V. Ramachandran vs Indian Bank, [1979] I LLJ 122; Dharam Singh Rajput & Ors. vs Bank of India, Bombay & Ors. , ; R. Rajamanickam, for himself and on behalf of other Award Staff vs Indian Bank, [1981] II LLJ 367; R.N. Shenoy & Anr. etc. vs Central Bank of India & Ors. , [1984] XVII LIC 1493; Prakash Chandra Johari vs Indian Overseas Bank & Anr., [1986] II LLJ 496; Workmen of M/s. Firestone Tyre & Rubber Co. of India (P) Ltd. vs Firestone Tyre & Rubber Co., ; ; Krishnatosh Das Gupta vs Union of India & Ors., ; Sant Ram Sharma vs State of Rajasthan & Anr., ; ; Roshan Lal Tandon vs Union of India, ; ; Secretary of State for Employment vs Associated Society of Locomotive Engineers and Firemen and Ors. (No. 2), ; Miles vs Wakefield Metropolitan District Council, [1989] I LLJ 335 and Cutter vs Pwell, [1795] 6 TR 320, referred to. There cannot be two opinions that go slow is a serious misconduct being a covert and a more damaging breach of the contract of employment. It is an insidious method of undermining discipline and at the same time a crude device to defy the norms of work. It has been roundly condemned as an industrial action and has not been recognised as a legit imate weapon of the workmen to redress their grievances. In fact the model standing orders as well as the certified standing orders of most of the industrial establishments define it as a misconduct and provide for disciplinary action for it. Hence, once it is proved. those guilty of it have to face the consequences which may include deduction of wages and even dismissal from service. [237G H; 238A] 3.2. The proof of go slow, particularly when it is disputed, involves investigation into various aspects such as the nature of the process of production, the stages of production and their relative importance, the role of the workers engaged at each stage of production, the pre produc tion activities and the facilities for production and the activities of the workmen connected therewith and their effect on production, the factors hearing on the average production etc. The go slow further may be indulged in by an individual workman or only some workmen either in one sec tion or different sections or in one shift or both shifts affecting the output in varying degrees and to different extent depending upon the nature of product and the produc tive process. Even where it is admitted, go slow may in some case present 219 difficulties in determining the actual or approximate loss, for it may have repercussions on production after the go slow ceases which may be difficult to estimate. The deduc tion of wages for go slow may, therefore, present difficul ties which may not be easily resoluble. When, therefore, wages are sought to be deducted for breach of contract on account of go slow, the quantum of deduction may become a bone of contention in most of the cases inevitably leading to an industrial dispute to he adjudicated by an independent machinery statutory or otherwise as the parties may resort to. The simplistic method of deducting uniform percentage of wages from the wages of all workmen calculated on the basis of the percentage fail in production compared to the normal or average production may not always be equitable. It is, therefore, necessary that in all cases where the factum of go slow and/or the extent of the loss of production on account of it, is disputed, there should he a proper inquiry on charges which furnish particulars of the go slow and the loss of production on that account. The rules of natural justice require it, and whether they have been followed or not will depend on the facts of each case. [238B G] 3.3. In the instant case, there is a finding recorded by the Industrial Court that there was a go slow resorted to by the workmen resulting in loss of production during the said period. Since the said finding is not challenged, it is not possible to interfere with it in this appeal. Though the appellant is justified in deducting wages for the said period, in the facts and circumstances of the case it is directed that it will not deduct more than 5 per cent of the wages of the workmen for the month of July, 1984 when they indulged in go slow tactics. [239D F] M/s. Bharat Sugar Mills Ltd. vs Shri Jai Singh & Ors., ; T.S. Kelwala & Ors. vs Bank of India & Ors., and Apar (Pvt) Ltd. vs S.R. Samant & Ors., [1980] II LLJ 344, referred to.

minal Appeal No. 169 of 1959. Appeal by special leave from the judgment and order dated March 27, 1958, of the Allahabad High Court in Criminal Appeal No. 785 of 1955. 972 Nuruddin Ahmad and Naunit Lal, for the appellant. G. C. Mathur and C. P. Lal, for the respondent. December 7. The Judgment of the Court was delivered by S.K. DAS, J. This is an appeal by special leave from the judgment and order of the High Court of Judicature at Allahabad dated March 27, 1958, whereby the said High Court maintained the conviction of the appellant under section 5(2) of the Prevention of Corruption Act, 1947 (2 of 1947) but reduced the sentence of four years ' rigorous imprisonment passed on the appellant by the Special Judge, Kanpur, to two years ' rigorous imprisonment. The short facts are these. The appellant Surajpal Singh was employed in the Police Department of the Uttar Pradesh Government. He started his service as a constable on a salary of Rs. 13 per month from August 1, 1930. In 1946 his pay was increased to Rs. 46 per month. He was appointed a Head constable on a salary of Rs. 50 per month in 1947. He officiated as a Sub Inspector of Police sometime in 1948 and 1949 on a salary of Rs. 150 per month. On March 1, 1949, he was reverted to his post of Head constable. Between the dates February 27, 1951, and September 9, 1952, he was posted as a Head constable attached to the Sadar Malkhana, Kanpur. The charge against him was that in that capacity he dishonestly or fraudulently misappropriated or otherwise converted to his own use many articles, principally those seized in connection with excise offences kept in deposit in the said Malkhana. These articles included opium, bottles of liquor etc. The charge further stated that a sum of Rs. 9,284 1 0 was recovered on a search of his house on September 9 and 10, 1952 and this amount was disproportionate to the known sources of income of the appellant. There was an allegation by the prosecution that the acts of dishonest misappropriation etc. were committed by the appellant in conspiracy with two other persons called Bhagawat Singh and Gulab Singh. Therefore, the charges against the 973 appellant were (1) for the offence of conspiracy under section 120B of the Indian Penal Code; (2) for the offence under section 5(1)(c) of the Prevention of Corruption Act, 1947, for the acts of dishonest misappropriation or user, read with section 5(2) of the said Act; and (3) for an offence under section 465 of the Indian Penal Code in respect of a particular entry said to have been forged in the Register of Properties kept in the Sadar Malkhana. The learned Special Judge who tried the appellant Bhagawat Singh and Gulab Singh recorded an order of acquittal in respect of the latter two persons. As to the appellant, he was also acquitted of all the charges except the charge under section 5(2) of the Prevention of Corruption Act. On this charge the learned Special Judge recorded an order of conviction, but this was based on the sole ground that the appellant had failed to account satisfactorily for the possession of Rs. 9,284 1 0 which, according to the finding of the learned Special Judge, was disproportionate to the known sources of income of the appellant. It should be noted here that the learned Special Judge held the appellant not guilty of the various acts of dishonest misappropriation or user alleged against him in respect of the properties kept in the Sadar Malkhana. In his appeal to the High Court the appellant urged various grounds, one of which was that he could not be convicted on the rule of presumption laid down in sub section (3) of section 5 of the Prevention of Corruption Act, 1947, when on the only charge of criminal misconduct alleged under section 5(1)(c) of the said Act he had been found not guilty. The High Court repelled this contention and upheld the conviction of the appellant but reduced the sentence. The principal question before us is whether in the circumstances of this case, the conviction of the appellant on the charge under sub section (2) of section 5 of the Prevention of Corruption Act, 1947, by invoking the rule of presumption as laid down in sub section (3) of that section, is correct. It is convenient to read here section 5 of the Prevention 123 974 of Corruption Act, 1947, in so far as it is relevant for our purpose. "section 5(1) A public servant is said to commit the offence of criminal misconduct in the discharge of his duty (a)if he habitually accepts or obtains or agrees to accept or attempts to obtain from any person for himself or for any other person any gratification (other than legal remuneration) as a motive or reward such as is mentioned in section 161 of the Indian Penal Code, or (b)if he habitually accepts or obtains or agrees to accept or attempts to obtain for himself or for any other person, any valuable thing without consideration or for a consideration which he knows to be inadequate, from any person whom he knows to have been, or to be, or to be likely to be concerned in any proceeding or business transacted or about to be transacted by him, or having any connection with the official functions of himself or of any public servant to whom he is subordinate, or from any person whom he knows to be interested in or related to the person so concerned, or (c)if he dishonestly or fraudulently misappropriated or otherwise converts for his own use any property entrusted to him or under his control as a public servant or allows any other person so to do, or (d)if he, by corrupt or illegal means or by otherwise abusing his position as public servant, obtains for himself or for any other person any valuable thing or pecuniary advantage. (2)Any public servant who commits criminal misconduct in the discharge of his duty shall be punishable with imprisonment for a term which shall not be less than one year but which may extend to seven years and shall also be liable to fine: Provided that the Court may, for any special reasons recorded in writing ' impose a sentence of imprisonment of less than one year. (2A). . . . . . . . . . (3) In any trial of an offence punishable under sub section (2) the fact that the accused person or any 975 other person on his behalf is in possession, for which the accused person cannot satisfactorily account, of pecuniary resources or property disproportionate to his known sources of income may be proved, and on such proof the court shall presume, unless the contrary is proved, that the accused person is guilty of criminal misconduct in the discharge of his official duty and his conviction therefor shall not be invalid by reason only that it is based solely on such pre sumption. " Now, learned Counsel for the appellant has put his argument on the principal question in the following way: he has submitted that the is not in a position in an appeal by special leave to go behind the finding of fact arrived at by the courts below. The appellant, it appears, gave some explanation with regard to the possession of Rs. 9,284 1 0. That explanation was not, however, accepted by the courts below. Learned Counsel has submitted that he does not wish to go behind that finding of fact. He has submitted, how ever, that the scheme of section 5 of the Prevention of Corruption Act, 1947 is this: sub section (1) defines the offence of criminal misconduct in the discharge of his duties by a public servant; the offence can be one or more of four categories mentioned in cls. (a), (b), (c) and (d): sub section (2) is the penal section which states the punishment for the offence of criminal misconduct; and sub section (3) lays down a rule of presumption and states that no conviction for the offence shall be invalid by reason only that it is based solely on such presumption. Learned Counsel has pointed out, rightly in our opinion, that the charge against the appellant in the present case referred only to criminal misconduct in the discharge of his duty by a public servant of the nature mentioned in cl. (c) of sub section In other words, the charge against the appellant was that he had dishonestly or fraudulently misappropriated or otherwise converted for his own use property entrusted to him etc. It was open to the learned Special Judge to have convicted the appellant of that offence by invoking the rule of presumption laid down in sub section He did not, however, do so. On the 976 contrary, he acquitted the appellant on that charge. Therefore, learned Counsel has submitted that by calling in aid the rule of presumption laid down in sub section (3), the appellant could not be found guilty of any other type of criminal misconduct referred to in cls. (a), (b) or (d) of sub section (1) in respect of which there was no charge against the appellant. We consider that the above argument of learned Counsel for the appellant is correct and must be, accepted. This Court pointed out in C. section D. Swamy vs The State (1) that sub section (3) of section 5 of the Prevention of Corruption Act, 1947 does not create a new offence but only lays down a rule of evidence which empowers the Court to presume the guilt of the accused in certain circumstances, contrary to the well known principle of Criminal law that the burden of proof is always on the prosecution and never shifts on to the accused person. In Swamy 's case there were charges for the offence of criminal misconduct under two heads, cl. (a) and cl. The trial court held the accused person ' in that case not guilty of the offence under cl. (a) but guilty of the offence under cl. (d) by invoking the rule of presumption laid down in sub section (3) of section 5. The distinction between that case and the case under our consideration is this: in Swamy 's case there were two charges either of which could be founded on the rule of presumption laid down in sub section (3); but in our case there is only one charge of criminal misconduct of which the appellant has been acquitted; therefore, there is no other charge which can be founded on the rule of presumption referred to in sub section This is the difficulty with which the respondent is faced in the present case. It appears to us that the learned Special Judge and the High Court proceeded wrongly on the footing as though sub section (2) or sub section (3) of section 5 of the Act creates an offence. The offence which is punished under sub section (2) or can be founded on the rule of presumption laid down in sub section (3) must be the offence of criminal misconduct of one or more of the categories mentioned in cls. (a) to (d) of sub section In the case before us the only category which was alleged against the appellant was that of category (c), (1) ; 977 namely, dishonest or fraudulent misappropriation etc. That charge having failed, there was no other charge which could be founded on the rule of presumption laid down in sub section Learned Counsel for the respondent State has contended before us that it was open to the appellate Court to affirm the conviction of the appellant under sub section (2) of section 5 by holding him guilty of the offence of criminal misconduct of the category mentioned in cl. (a) or cl. (d) of sub section We are unable to accept this contention as correct. The prosecution never alleged that the sum of Rs. 9,284 1 0 was the result of the appellant habitually accepting or obtaining illegal gratification etc. The prosecution case was that the sum of Rs. 9,284 1 0 was the result of the dishonest user of property which was entrusted with the appellant. It is not open to the appellate Court to affirm the conviction of the Appellant on an entirely new case never suggested against the appellant at any earlier stage. It is unfortunate that in this case the courts below did not choose to rely on the rule of presumption laid down in sub section (3) with reference to the charge under cl. (c) of sub section (1) of section 5. But that misfortune cannot now be repaired by evolving out of a vacuum as it were a new case against the appellant based on cl. (a) or cl. (d) of sub section (1) of section 5 in support of which no facts were ever alleged or suggested. For the reasons given above, we allow this appeal and set aside the conviction and sentence passed against the appellant. Appeal allowed.

The appellant was a Head Constable attached to a malkhana where articles seized in connection with excise offences were kept in deposit. The appellant was charged under section 5(1)(c) read with section 5(2), Prevention of Corruption Act, 1947, in that he had dishonestly or fraudulently misappropriated or otherwise converted to his use these articles; the charge further stated that a sum of Rs. 9,284 1 0 was recovered from him which was disproportionate to his known sources of income. He was acquitted of the charge under section 5(1)(c) but was convicted under section 5(2) on the ground that he had failed to account satisfactorily for the possession of Rs. 9,284 1 0 which was disproportionate to his known sources of income. Held, that the conviction of the appellant under section 5(2) of the Prevention of Corruption Act, 1947, was illegal. The only charge against the appellant was of criminal misconduct under section 5(1)(c) of the Act for dishonestly or fraudulently misappropriating property entrusted to him and of this charge he could have been convicted by invoking the rule of presumption under section 5(3). But since this was not done and he was acquitted of that charge, he could not be convicted of criminal misconduct referred to in cls. (a), (b) or (d) of section 5(1) for which he had not been charged. The Courts below had proceeded wrongly on the footing as though sub section (2) or sub section (3) of section 5 created an offence; the offence which was punishable under section 5 (2) or which could be founded on the rule of presumption under section 5(3) was the offence of criminal misconduct of one or more of the cate gories mentioned in cls. (a) to (d) of sub section (1) of S 5. C.S. D. Swamy vs The State; , , refer red to.

During consolidation proceedings in a village, under the Uttar Pradesh Consolidation of Holdings Act, 1954, a question of title arose, and the Consolidation Officer referred the question to the Civil Judge who referred it to an arbitrator appointed under section 37 of the Act. The Arbitrator submitted his award to the Court. The appellants filed objections under section 15 of the , and the Civil Judge modified the award. On appeal by the respondents, the District Court held that the appeal was maintainable and that the Civil Judge was not justified in modifying the award. A revision petition to the High Court filed by the appellants was dismissed. In appeal to this Court, it was contended that section 39 of the , which provides for appeals does not apply to arbitrations under section 37 of the U.P. Act. HELD:The decision of the Civil Judge modifying, the award was appealable under section 39 of the . [67 A]. The effect of section 37 of the U.P. Act read with sections 46 and 47 of the is, to apply sections 15 and 39 of the to the proceedings under the U.P. Act; and under section 12(5) of the U.P. Act what is made final is the decision of the arbitrator as it emerges after appropriate proceedings, under the provisions of the . [65 G H; 66 H]. Carju Prasad vs Civil Judge, Farrukhabad, I.L.R. [1959]. 1 All354 and Sayed Ulla Khan vs The Temporary Civil Judge, Sultanpur, , approved. Attar Singh vs State of u.p. [1959] Supp. 1 S.C.R. 928, explained.

The respondents who were working in different capacities in the factory of India Security Press at Nasik, an establishment of the appellant, filed an application before the Central Government Labour Court, Bombay under section 33 C(2) of the claiming overtime wages at double the ordinary rate of wages under section 59 of the Factories Act read with section 70 of the Bombay Shops and Establishments Act, 1948. The Labour Court dismissed the contentions of the appellant and granted relief. Hence this appeal. Dismissing the Appeal ^ HELD: The contention that the respondents were not workers within the meaning of section 2(1) of the Factories Act and therefore not entitled to the benefit of section 59 of that Act read with section 70 of the Bombay Shops and Establishments Act 1948 must fail on the plain language of section 70. The main provision of section 70 which is relevant consists of two parts; the first part states that if there be a factory the Shops and Establishment Act will not apply and the second part states that to such a factory 'the provisions of the Factories Act shall, notwithstanding anything contained in that Act, apply to all persons employed in or in connection with the factory". Clearly, the underlined portion (the non obstante clause and the phrase 'all persons employed ') has the effect of enlarging the scope of Factories Act by making it applicable to all persons employed in such factory irrespective of whether employed as workers or otherwise. Therefore although the respondents have not been 'workers ' within the meaning of section 2(1) they will get the benefit of section 59. [298 C F] B.P. Hira, Works Manager, Central Railway, Parel, Bombay, etc. vs C.M. Pradhan etc ; referred to. The contention that by reason of rule 100 made by the State Govern 293 ment under section 64 of the Factories Act the benefit under section 59 was not available to the respondents falling within the exempted category by reason of their holding posts of supervision, has no force. [300F and 295E] It is well known that a non obstante clause is a legislative device which is usually employed to give over riding effect to certain provision over some contrary provision that may be found either in the same enactment or some other enactment, that is to say, to avoid the operation and effect of all contrary provisions. Thus the non obstante clause in section 70, namely, "notwithstanding anything to the contrary contained in that Act and as such it must refer to the exempting provisions which would be contrary to the general applicability of the Act. Just as because of the non obstante clause the Act is applicable even to employees in the factory who might not be workers ' under section 2(1), the same non obstante clause will keep away the applicability of exemption provisions quarrel those working in the factory The Labour Court was therefore right in taking the view that because of the non obstante clause s 64 read with Rule 100 itself would not apply to the respondents and they would be entitled to claim overtime wages under section 59 of that Act read with section 70 of the Bombay Shops and Establishments Act, 1948. [300 C G] The contention that the respondents were not workmen under the and as such their application was not maintainable, must be rejected. The contention depends upon the appreciation of evidence led by the parties on the nature of duties and functions performed by the concerned respondents and it was on an appreciation of the entire material that the Labour Court recorded a finding that having regard to the nature of their duties and functions all respondents, other than those who were holding the posts of Senior Supervisors and supervisors, were industrial employees, i. e. workman under the and it is not possible for this Court to interfere with such a finding of fact recorded by the Labour Court. Even otherwise after considering some of the important material on record the court is satisfied that the Labour. Court 's finding is correct. [301 C F]

The appellant was appointed to the Indian Police Service in 1935. in November 1956 he was posted in Andhra Pradesh as Inspector General of Police and in August 1967 he was posted as Special Inspector General of Police for revision of Police Standing Orders. In that year the Chief Minister of Andhra Pradesh ordered the Chief Secretary to make an enquiry with regard to certain allegations against the appellant. The Chief Secretary recommended that the matter be referred to the Vigilance Commissioner who advised that the matter be investigated by the Central Bureau of Investigation. Thereafter the said Bureau made an enquiry, considered the appellant 's explanations and made a report. In July 1968 the Government of India, Ministry of Home Affairs placed the appellant under suspension. The appellant filed a writ petition in the High Court at Delhi and failing there filed an appeal in this Court. The appellant 's contentions that fell for consideration were (i) that under sub r. (1) of R. 7 of the All India Service (Appeal and Discipline) Rules, 1955 the order of suspension could be made only if disciplinary proceeding was initiated and the Government was satisfied that there should be an order; in the present case the order did not satisfy this condition and was therefore bad; (ii) that the Chief Minister of Andhra Pradesh was hostile to him and the investigation by the Central Bureau of Investigation was conducted by persons hostile to him; the Ministry of Home Affairs should not have relied on the report since the enquiry was initiated and conducted mala fide. HELD, : (i) The order in question had no reference to sub r. (1) of R. 7, but was an order under R. 7(3) which states that a member of the service in respect of or against whom an investigation inquiry or trial is pending may, at the discretion of the Government under which he is serving be placed under suspension until the termination of all proceedings relating to the charge. The appellant, as appeared from the First Information Report against him stood charged with offences, under the Prevention of Corruption Act and the time of occurrence was the period 1960 to 967. There was an investigation and the trial was awaiting relating to the criminal charge against the appellant. The order of suspension had to be read in the context of the entire case and the combination of circumstances. This order indicated that the Government applied its mind to the allegations, the enquiries and the circumstances of the case. The appellant had failed to establish that the Government acted mala fide. There was no allegation against any particular officer of the Government of India about being mala fide. The order of suspension, thus made under sub r. (3) did not suffer from any vice of infringement of R. 7(1). [124 D 125 B] (ii)The affidavits of the parties in the present case suffered from the mischief of lack of verification with the result that the affidavits should C.I./70 9 122 not be admissible in evidence. The importance of verification is to test the genuineness and authenticity of allegations and also to make the deponent responsible for allegations. in essence verification is required to enable the court to find out as to whether it will be safe to act on such affidavit evidence. [125 C E] The affidavit evidence assumed importance in the present case because of allegations of mala fide acts on the part of the respondents. The appellant did not name any person of the Union of India who acted in that manner and did not implied the Chief Minister as a party. In order to succeed on the proof of mala fides in relation to the order of suspension, the appellant had to prove either that the order of suspension was made mala fide or that the order was made for collateral purposes. The appellant had neither alleged nor established either of these features. [125 F G] The allegation of mala fide against the Central Bureau of Investigation did not arise for consideration because what was in question was not its report but the order of suspension which satisfied R. 7(3) and was in honest exercise of powers. [125 H]

The Industrial Tribunal, Ahmedabad, on a dispute referred to it under section 10(2) of the took up for consideration four demands for basic wages and adjustment, dearness allowance, gratuity and retrospectivity of the demands of the workmen. The Tribunal gave its award on 30th of November 1971 which was published on 20th January, 1972 in the Maharashtra Government Gazette. The appellant company, feeling aggrieved by the award, filed in the Supreme Court a petition for special leave to appeal under Article 136 of the Constitution. Pursuant to a notice, the respondent workmen put in appearance and filed a counter affidavit. After some arguments the appellant Company at its request was permitted to withdraw the leave petition as per the order of the Court dated 21st of August, 1972 which reads: "Upon hearing counsel the Court allowed the special leave petition to be withdrawn". Four days thereafter the company filed a petition under Article 226 of the Constitution before the High Court challenging the award. The petition was virtually based on the same facts and grounds as were taken in the special leave petition before the Supreme Court. The learned single Judge who heard the petition determined the circumstances on the basis of the respective affidavits filed by the parties in which the company unconditionally withdrew its special leave petition and in view of those circumstances equated the withdrawal of the leave petition with the dismissal of the same. Relying on Vasant Vithal Palse and Ors. vs The Indian Hume Pipe Co. Ltd. and Anr. , a decision of that court, the learned Judge dismissed the writ petition in limine. A Letters Patent Appeal against the said order of dismissal also met the same fate. However, a petition under Article 133 of the Constitution for a certificate of fitness to appeal to the Supreme Court was accepted by the said Division Bench and a certificate was granted and hence the appeal. Allowing the appeal, the Court ^ HELD: 1. Permission to withdraw a special leave petition cannot be equated with an order of dismissal. If a non speaking order of dismissal cannot operate as res judicata for entertaining a fresh writ petition on the same facts and grounds taken in the special leave petition, an order permitting the withdrawal of the writ petition for the same reason cannot so operate. [219B,222C D] 214 Workmen of Cochin Port Trust vs Board of Trustees of Cochin Port Trust and Anr., ; , followed. Punjab Beverages Pvt. Ltd. vs Suresh Chand and Anr. , ; ; Hoshnak Singh vs Union of India and Ors., ; ; Daryao and Ors. vs The State of U.P. and Ors., ; , discussed. Vasant Vithal Palse and Ors, v The Indian Hume Pipe Co. Ltd. and Anr. , ; Management of Western India Match Co. Ltd., Madras vs The Industrial Tribunul, Madras and Anr. A.I.R. 1958 Mad. 398, distinguished. The order of a court has to be read as it is. If the Supreme Court intended to dismiss the petition at the threshold. it could have said so explicitly. In the absence of any indication in the order itself, it will not be proper to enter into the arena of conjecture and to come to a conclusion on the basis of extraneous evidence that the Supreme Court intended to reject the leave petition. If the Order of the Supreme Court is read as it is there is not the slightest doubt that the Supreme Court had allowed the company to withdraw the leave petition, in the instant case. The approach of the High Court in having perused the affidavits filed by the parties to know the circumstances under which the leave petition was withdrawn is not correct. [217 C D]

One S sent a complaint against the first petitioner to the Chief Minister who sent it to the Additional Inspector General of Police who in his turn sent it to the Deputy Superintendent of Police C.I.D., with the endorsement " Register a case and investigate personally ". The Deputy Superintendent of Police drew up a first information report. There were also three other cases instituted against the petitioners or some of them, which were being investigated into by the C.I.D. Police officers. The petitioners contended that the respondents had violated the provisions of sections 154, 156 and 157 of the Code of Criminal Procedure and had adopted a procedure unknown to law and had thus singled out the petitioners for unequal treatment in viola tion of article 14 of the Constitution. Held, that the procedure adopted was authorised by section 551 of the Code and in the first case the Inspector General had power to deal with the complaint and to direct investigation of the same by the Deputy Superintendent of Police. Even if the reason given for the Inspector General making over the investigation to the Deputy Superintendent of Police that the case was of a technical nature was not correct, it was open to him to make over the investigation to the Deputy Superintendent of Police in view of the status of the petitioners. The procedure adopted in the other three cases was also not illegal, and there was no unequal treatment of the petitioners in the matter of the institution or investigation of the cases so as to entitle them to invoke in aid article 14 of the Constitution. H. N. Rishbud and Inder Singh vs The State of Delhi, ; , King Emperor vs Nilkantha, I.L.R. , Pulin Bihari Ghosh vs The King, I.L.R. and Textile Traders Syndicate Ltd. vs The State of U. P., A.I.R. 1959 All. 337, referred to. Since allegations were made against the Chief Minister by the petitioners, he owed a duty to the Court to file an affidavit stating what the correct position was so far as he remembered it. 144

The respondent was appointed a Sub Inspector on probation in the Orissa Police Force. A notice was served on him to show cause why he should not be discharged from service " for gross neglect of duties and unsatisfactory work ". He submitted his explanation and asked for opportunity to cross examine certain witnesses. The Deputy Inspector General of Police considered the explanation unsatisfactory and passed an order discharging the respondent from service " for unsatisfactory work and conduct ". The respondent contended that the order was invalid on two grounds: (i) that he was not given a reasonable opportunity to show cause against the proposed action within the meaning of article 311(2), and (ii) that he was not afforded an opportunity to be heard nor was any evidence taken on the charges. Held, that the order of discharge did not amount to dismis sal and did not attract the protection of article 311(2) of the Constitution and was a valid order. The services of the respondent, ' who was a probationer, were terminated in accordance with the rules and not by way of punishment. He had no right to the post held by him and under the terms of his appointment he was liable to be discharged at any time during the period of his probation. The notice given to the respondent was under Rule 55 B of the Civil Services (Classification, Control and Appeal) Rules which made it obligatory to give such notice before terminating the services of a probationer. The enquiry was merely for ascertaining whether he was fit to be confirmed. Shyam Lal vs The State of U. P., ; and Purshottam Lal Dhingra vs Union of India, ; , referred to. State of Bihar vs Gopi Kishore Prasad, A.I.R. 1960 S.C. 689, distinguished.

The respondent was a Government servant in one of the departments of the Bombay Government. He was sent on deputation to another department and after serving there for a long period and getting a number of promotions he was re verted back to his parent department and ordered to be posted at a considerably lower grade, while another Government servant who was below his rank was promoted as Assistant Secretary. Thereupon the respondent filed a petition under article 226 of the Constitution challenging the order of his posting. A preliminary objection was raised by the appellant that the petition was not maintainable. But the High Court held that the respondent was entitled to invoke the jurisdiction of the Court when there is a violation of a statutory rule and on merits it held that the respondent was entitled to the relief claimed. The present appeal was filed on a certificate granted by the High Court under article 133 of the Constitution. Before this Court in view of the decision State of U.P. vs Babu Ram Upadhya. ; it was not disputed that if there was a breach of a statutory rule framed under article 309 or continued under article 313 in relation to the condition of service the aggrieved Government servant could have recourse to the Court. The main contention on behalf of the appellant was that the respondent was not entitled to be appointed to any higher post than as a Senior Assistant or to receive a salary higher than that which had been granted to him by the im pugned order. Held: (i) Assuming that this was a case where the respon ,dent had a lien and his lien had not been suspended it was not possible to interpret Rule 50(b) of the Bombay Civil Service Rules as providing different criteria to cases where a Government servant had a lien and where his lien has been suspended. The Rule and the circular make it abundantly clear that an officer on deputation in another department shall be re stored to the position he would have occupied in his parent department had he not been deputed. (ii) Where promotions are based on seniority cum merit basis an officer on deputation has a legal right to claim pro motion to a higher post in his parent department provided his service in the department to which he is lent is satisfactory. This may not be the case in regard to selection posts.

Appeal No. 147 of 1951. Appeal from the Judgment and Decree dated September 4, 1946, of the late Chief Court of Oudh (now the High Court of Judicature at Allahabad, Lucknow Bench) (Misra and Wallford JJ.) in First Civil Appeal No. 139 of 1941, arising out of the Judgment,and Decree dated October 23, 1941, of the Court of the Civil Judge, Bahraich, in Regular Suit No. I of 1941. 234 Onkar Nath Srivastava for the appellant. Bishan Singh for the respondent. November 7. The Judgment of the Court was delivered by MUKHERJEA J. This appeal is on behalf of the plaintiff and is directed against a judgment and decree of the Chief Court of Avadh dated September 4, 1946, affirming, on appeal, those of the Civil Judge, Bahraich, passed in Regular Suit No. 1 of 1941. To appreciate the controversy between the parties to this appeal it would be necessary to state a few facts. One Raja Bisheshwar Bux Singh, the father of the plaintiff and of the defendant 's husband, was a taluqdar of Oudh, and the estate known as Gangwat Estate, to which he succeeded in 1925 on the death of the widow of the last holder, is one to which the Oudh Estates Act (I of,1869) applies. Raja Bisheshwar died on 16th October, 1930, leaving behind him two sons, the elder of whom, Bajrang Bahadur, is the plaintiff in the present litigation, while the younger, whose name was Dhuj Singh, has died since then, being survived by his widow Bakhtraj Kuer. who is the defendant in the suit. Shortly before his death Raja Bisheshwar executed a will dated 11th September, 1929, by which five properties, described in lists A and B attached to the plaint, were bequeathed to Dhuj Singh, the younger son, by way of making provisions for the maintenance of the said son and his heirs. On the death of Raja Bisheshwar,the estatement to the plaintiff as his eldest son under the provisions of the Oudh Estates Act and Dhuj Singh got only he five properties mentioned above under the terms of his father 's will. Dhuj Singh had no issue of his own and on his death in 1940 disputes arose in respect of these properties between the plaintiff on the one land and Dhuj Singh 's widow on the other. The plaintiff succeeded at first in having his name mutated as owner of these properties in the revenue records in place of his deceased brother, but the appellate 235 revenue authority ultimately set aside this order and directed mutation to be made in the name of the defendant. The plaintiff thereupon commenced the suit out of which this appeal arises, praying for declaration of his title to the five properties mentioned above on the allegation that they vested in him on the death of Dhuj Singh and that the defendant could not) in law, assert any right to, the same. It may be stated here that four out of these five properties have been described in list A to the plaint and there is no dispute that they are taluqdari properties. The fifth item is set out in list B and admittedly this property is not taluqdari in its character. Besides lists A and B there is a third list, viz., Catached to the plaint, which mentions two other properties as being in possession of the defendant and in the plaint a claim was made on behalf of the plaintiff in respect to these properties as well, although they were not covered by the will of Bisheshwar. This claim, however, was abandoned in course of the trial and we are not concerned with it in the present appeal. The plaintiff really rested his case on a two fold ground. It was averred in the first place that Dhuj Singh hadonly a life interest in the properties bequeathed to him by Bisheshwar and on the termination of his life interest, the property vested in the plaintiff as the heir of the late Raja. In the alternative the case put forward was that even if Dhuj Singh had an absolute interest created in his favour under the terms of his father 's will, the plaintiff was entitled to succeed to the taluqdari properties at any rate, under the provision of section 14(b) read with section 22 (5) of the Oudh Estates Act. The defendant in her written statement resisted the plaintiff 's claim primarily on the ground that Bisheshwar Bux Singh, as the full owner of the properties, was competent to dispose of them in any way he liked and under his will it was the defendant and not the plaintiff in whom the properties vested after the death of Dhuj Singh. The contention, in . substance, was that the will created a life estate for Dhuj 236 Singh followed by a devise in favour of the widow as his personal heir. The decision of the point in dispute between the parties thus hinges on the proper construction of the will left by Bisheshwar. The trial court after an elaborate consideration of the different portions of the will, viewed in the light of surrounding circumstances, came to the conclusion that Dhuj Singh got a life interest in the devised properties but there were similar life estates created in favour of his personal heirs in succession, the ultimate remainder being given to the holder of the estate when the line of personal heirs would become extinct. The defendant, therefore, was held entitled to the suit properties so long as she was alive and in that view the plaintiff 's suit was dismissed. Against this decision, the plaintiff took an appeal to the Chief Court of Avadh and the Chief Court affirmed the decision of the trial judge and dismissed the appeal. The plaintiff has now come, up to this court on the strength of a certificate granted by the High Court of Allahabad with which the Chief Court of Avadh was amalgamated sometime after the disposal of this case. The learned counsel appearing for the appellant first of all drew our attention to the provisions contained in certain sections of the Oudh Estates Act and it was urged by him on the basis of these provisions that as Dhuj Singh, who got the suit properties under the will of his father, the late. Taluqdar, came within the category of persons enumerated in clause (1) of section 13 A, Oudh Estates Act, he could, under section 14 of the Act, hold the properties subject to the same conditions and the same rules of succession as were applicable to the, taluqdari himself. In these circumstances, it is said that the provisions of section 22 (5) of the Act would be attracted to the facts of this case and the plaintiff, as the brother of Dhuj Siugh, would be entitled to succeed to the properties of the latter in preference to his widow. The argument formulated in this way does not I appear to us to be helpful to the appellant. Section. 11 237 of the Oudh Estates Act confers very wide powers of disposition upon a taluqdar and he is competent under the section "to transfer the whole or any portion of his estate, or of his right and interest therein, during his lifetime, by sale, exchange, mortgage, lease or gift, and to bequeath by his will to any person the whole or any portion of such estate, and interest. " Sections 13 and 13 A make certain special provisions in cases of transfers by way of gift and bequest in favour of certain specified persons and lay down the formalities which are to be complied with in such cases. Section 14 then provides that "if any taluqdar or grantee, or his heir or legatee, shall heretofore have transferred or bequeathed, or if any taluqdar:or grantee, or his heir or legatee shall hereafter transfer or bequeath the whole or any portion of his estate (a) . . . (b) to any of the persons mentioned in clauses (1) and (2) of section. 13 A, the transferee or legatee and his heirs and legatees shall have same rights and powers in regard to the property to which he or they may have become entitled under or by virtue of such transfer or bequest, and shall hold the same subject to the same conditions and to the same rules of succession as the transferor or testator. " It is true that Dhuj Singh being a younger son of the testator came within the purview of clause (1) of section 13 A of the Oudh Estates Act and if he became full owner of the properties under the will of his father, succession to such properties after his death would certainly be regulated by the special rules of succession laid down in the Oudh Estates Act, and not by the ordinary law of inheritance. But section 14 would have no application if the disposition by the will did not make Dhuj Singh an absolute owner of the properties and he was given only an interest for life which was followed by subsequent interests created in favour of 31 238 It cannot also be contended that a taluqdar governed by the Oudh Estates Act cannot convey anything less than his absolute proprietary right in a property by transfer inter vivos or by will, or that 'it is not competent for him to create any limited interest or future estate. Apart from the plenary provision contained in section 11, section 12 of the Act which makes the rule against perpetuity applicable to transfers made by a taluqdar, furnishes a clear indication that the Act does not interdict the creation of future; estates and limitations provided they do not trans gress the perpetuity rule. The questions, therefore, which require consideration in this case are really two in number. The first is whether Dhuj Singh got an absolute estate or an estate for life in the properties given to, him by the will of Raja Bisheshwar? If he got an absolute estate, the contention of the appellant should undoubtedly prevail with regard to the taluqdari properties specified in list A of the plaint. If, on the other hand,, the interest was one which was to inure only for the period of his life, the further question would arise as to whether any subsequent interest was validly created by the will in favour of the widow on the strength of which she can resist the plaintiff 's claim. If the life estate was created in favour of Dhuj Singh alone, obviously the plaintiff as the heir of the grantor would be entitled to come in as reversioner after his death . The answers to both the questions would have to be given on a proper construction of the will left by Raja Bisheshwar. The will has been rightly described by the trial judge as a most inartistic document with no pretension to any precision of language, and apparently it was drawn up by a man who was not acquainted with legal phraseology. The Civil Judge himself made a translation of the document, dividing its contents into several paragraphs and this was found useful and convenient by the learned Judges of the Chief Court. The material portions of the will, as translated by the trial judge, may be set out as follows: 239 "As I have become sufficiently old and no reliance can be placed on life, by God 's grace I have got two sons namely, Bajrang Bahadur Singh, the elder, and Dhuj Singh the younger. After my death the elder son would according to rule, become the Raja, the younger one is simply entitled to maintenance. Consequently with a view that after my death the younger son and his heirs and successors, generation after generation, may not feel any trouble and that there may not be any quarrel between them. I have decided after a full consideration that I should execute a will in favour of Dhuj Singh with respect to the villages detailed below. So that after my death Dhuj Singh may remain in possession of those villages as an absolute owner with the reservation that he will have no right of transfer. If God forbid, Dhuj Singh may not be living a the time of my death, his son or whoever may be his male heir or widow may remain in possession of the said villages on payment of the Government revenue as an absolute owner. The liability for the land revenue of the said villages will be with Dhuj Singh and his heirs and successors; the estate will have no concern with it. Although Dhuj Singh and his heirs are not given: the power of transfer, they will exercise all other rights of absolute ownership that is to say, the result is that the proprietor of the estate or my other heirs and successors will not eject Dhuj Singh or his heirs or successors in any way. Of course if Dhuj Singh or his heirs become ever heirless then the said villages will not escheat to the Government but will revert and form part of the estate. Hence with the soundness of my mind without any force or pressure and after having fully under , stood and also having thought it proper I execute this will in favour of Dhuj Singh, my own ;on, with the above mentioned terms. " 240 The learned counsel for the appellant naturally lays stress upon the words "absolute owner " (Malik kamil) and " 'generation after generation? ' (naslan bad naslan) used in reference to the interest which Dhuj Singh was to, take under the will. These words, it cannot be, disputed, are descriptive of a heritable and alienable estate in the donee, and they connote full proprietary rights unless there is something in the context or in the surrounding circumstances which indicate that absolute rights were not intended to, be conferred. In all such cases the true intention of the testor has to be gathered not by attaching importance to isolated expressions but by reading the will as a whole with all its provisions and ignoring none of them as redundant or contradictory. "The object of the testator in executing the will clearly set out in the preamble to the document and in spite of the somewhat clumsy drafting that object to have been kept in view by the testator throughout, in making the provisions. The language and tenor of the document leave no doubt in OUT minds that the dominant intention of the testator was to make provision not for Dhuj Singh alone but for the benefit of his heirs and successors, " generation after generation " as the expression has been used. The expression " heirs" in this context obviously means and refers to the personal heirs of Dhuj Singh determined according to the, general law of inheritance and not the successors to the estate under the special provisions of the Oudh Estates Act, for paragraph 6 of the will mentioned above is expressly intended to protect the personal heirs of Dhuj Singh from eviction from the properties in question by the future holders of the estate. Thus the beneficiaries under the will are Dhuj Singh himself and his heirs in succession and to each such heir or set of heirs the rights of malik are given but without any power of alienation. On the total, extinction of this line of heirs the properties affected by the will are to revert to the estate. As it was the intention of the testator that the properties should 241 remain intact till the line of Dhuj Singh was exhausted and each successor was to enjoy and hold the properties without any power of alienation, obviously what the testator wanted was to create a series of life estates one after another, the ultimate reversion being given to the parent estate when there was a complete failure of heirs. To what extent such intention could be, given effect to by law is another matter and that we shall consider presently. But it can be said without hesitation that it was not the intention of the testator to confer anything but a life estate upon Dhuj Singh in respect of the properties covered by the will. The clause in the will imposing total restraint on alienation is also a pointer in the same direction. In cases where the intention of the testator is to grant an absolute estate, an attempt to reduce the powers of the owner by imposing restraint on alienation would certainly be repelled on the ground 'of repugnancy; but where the restrictions are the primary things which the testator desires and they are consistent with the whole tenor of the Will, it is a material circumstance to be relied upon for displacing the presumption of absolute ownership implied in the use of the word "malik". We hold, therefore, that the courts below were right in holding that Dhuj Singh had only a life interest in the properties under the terms of his father 's will. Of course this by itself gives no comfort to the defendant; she has to establish, in order that she may be able to resist the plaintiff 's claim, that the will created an independent interest in her favour following the death of Dhuj Singh. As we have said already, the testator did intend to create successive life estates in favour of the successive heirs of Dhuj Singh. This, it is contended by the Appellant is not permissible in law and he relies on the case of Tagore vs Tagore(1). It is quite true that no interest could be created in favour of an unborn person but when the gift is made to a class or series of persons, some of (1) 18 Weekly Report 359. 242 whom are in existence and some are not, it does not fail in its entirety; it is valid with regard to the persons who are in existence at the time of the testator 's death and is invalid as to the rest. The Widow, who is the next heir of Dhuj Singh, was in existence when the testator died and the life interest created in her favour should certainly take effect. She thus acquired under the will an interest in the suit properties after the death of her husband, commensurate with the period of her own natural life and the plaintiff consequently has no present right to, possession. The result, therefore, is that the appeal fails and is dismissed with costs. Appeal dismissed. Agent for the appellant Rajinder Narain.

The Oudh Estates Act (Act I of 1869) does not interdict the creation of future estates and limitations provided they do not transgress the rule of perpetuities and where a disposition by a will made by a taluqdar does not make the legatee an absolute owner but gives him only an interest for life which is followed by subsequent interests created in favour of other persons the rule of succession laid down in section 14 of the Act will not apply on the death of the donee and the property bequeathed to him will pass according to the will to the next person entitled to it under the will, 233 The words malik kamil (absolute owner) and naslan bad naslan (generation after generation) are descriptive of a heritable and alienable estate in the donee and they connote full proprietary rights unless there is something in the context or in the surrounding circumstances which indicate that absolute rights were not intended to be conferred. In all such cases the true intention of the testator has to be gathered not by attaching importance to isolated expressions but by reading the will as a whole with all its provisions and ignoring none of them as redundant or contradictory. In cases where the intention of the testator is to grant an absolute estate, an attempt to reduce the powers of the owner by imposing restraint on alienation would be repelled on the ground of repugnancy; but where the restrictions are the primary things which the testator desires and they are consistent with the whole tenor of the will, it is a material circumstance to be relied on for displacing the presumption of absolute ownership implied in the use of the word malik. Though under the rule laid down in Tagore vs Tagore no interest could be created in favour of unborn persons, yet when a gift is made to a class or series of persons, some of whom are in existence at the time of the testator 's death and some are not, it does not fail in its entirety ; it will be valid with regard to the persons who are in existence at the time of the testator 's death and invalid as to the rest. A will made by a taluqdar of Oudh recited that with a view that after his death his younger son D and his heirs and successors, generation after generation, may not feel any trouble or create any quarrel, D shall after the testator 's death remain in possession of certain villages as absolute owner, with the reservation that he will have no right to transfer, that if D may not be living at the time of his death D 's son or whoever may be his male heir or widow may remain in possession and that although D and his heirs are not given the power of transfer they will exercise all other rights of absolute ownership: Held, that the will did not confer an absolute estate on D and on D 's death the succession was not governed by section 14 of the Oudh Estates Act and D 's widow was entitled to succeed in preference to D 's elder brother.

Raja Rajendra Mullick Bahadur of Calcutta executed his last will on 21 2 1887. The author of the Will was a religious minded Indian, the draftsman of the document was John Hart, an English Solicitor. The Will open with the words 'I hereby dedicate and make debutter my Thakurbaree '.The Income Tax Officer issued notices requiring filing of the returns against the Deity Thakurbaree. On b:half of Deity, a nil income return was filed under section 22(2) of the Indian Income Tax Act, 1922 for the assessment years 1956 57 and 1957 58. In connection with the writ petition filed in the High Court for the proceedings in respect of assessment years 1955 56 it was conceded by the Revenue that a part of the income of the assessee which would be proved before the Income Tax authorities to have been applied in connection with feeding of the poor, sub scription to other charities enuring for the benefit of the public would be exempted under section 4(3)(i) of the Income Tax Act, 1922. The Revenue contended that on a true construction of the said will there was a complete dedication of the property to the Deity and, therefore, the income arising from the said property was taxable in the hands of Deity. It was, however, contended by the assessee that the remuneration of the trustees and the allowances to the widows of the de ceased trustees as provided in the Will created a charge on the income of the trust estate and should therefore be treated as diversion of the income of the trust before it accrued in the hand of the trustees. The Income Tax Officer taxed the income of the Deity deducting therefrom such amounts as were conceded before the High Court in respect of the prior year. The appeal preferred by the assessee was dismissed by the Appellate Assistant Commissioner. Before the Tribunal, the Revenue substantially succeeded. Thereafter, the Tribunal referred 4 questions of .law to the High Court, two at the instance of the assessee and. two at the instance. of the Revenue. , The High Court on a metic ulous consideration of the entire Will decided against the Revenue and took the view that reading the Will as a whole the entire beneficial interest in the properties did not vest in the assessee Deity. Assessee Deity was not the owner of the properties and, therefore. the only income which could be subjected to income tax in the hands of the asses see would be the beneficial interest of the said Deity under the Will which would be the expenses incurred for Seva Puja of the Deity and for the various religious ceremonies con nected with the said Deity and the value of the residence of the Deity in the temple. Allowing the appeal, HELD: 1. The Will represents pious Bengali Wishes and disposition but drafted in the hands of an English Solici tor. The court 's function in such an 484 ambiguous situations to steer clear of the confusion impart ed by the diction and to read the real intention of the testator. The courts discerning loyalty is not to the formalitistic language used in drawing up the deeds but to the intentions which the disponer desired should take effect in the manner he designed. The real question is whether the testator created an absolute or partial debutter or was there no dedication to the idol but a vesting of the legal estate in the trustees. The use of the words like trust, trustees and Shebaits can lend support to the conten tion that the legal estate vested in the trustees. However, the court has to push aside the English hand to reach at the Indian heart. We are construing the Will of a pious Hindu aristocrat whose faith in ritual performances was more than matched by his ecumenical perspective. Secondly, the sacred sentiment writ large in the Will is his total devotion and surrender to the family Deity Shri Jagannathjee. It looks like doing Violence to the heart of the Will if one side steps the Deity to the status of but one of the benefici aries. The Will in the forefront declares the dedication to the Deity. The expression trust, trustees and shebaits were indiscriminately used. The expressions are uncertain of the precise import of these English legal terms in the Indian context. The idol was, therefore, the legal owner of the whole and liable to be assessed as such. , 491B, C D, 497D, 499E] 2. The court negatived the contention that even if the property vested in the Deity, all the amounts to be spent on the Shebaits and the members of their family on the upkeep of horses and carriages and repair of buildings etc. were charge on the income and, therefore, the same did not and could not come into the hands of the Deity as his income and could not be taxed as such. If the Shebaits received rent and interest to the extent of these other disbursements they received the amounts merely as collectors of rents etc. and not as receivers of income. The terms in which the direc tions are couched do not divest the income at the source but merely direct a Shebait to apply the income received from the debutter properties for specified purposes. [499E H, 501F G]

One Ramjidas built a dharmasala, a temple and shops appurtenant thereto with the joint family funds on Government land with the permission of the Government. After his death the other members who were in management and possession of those properties were dispossessed by the State, its officers and the local Municipality which was put in possession. The petitioners applied to the Punjab High Court for the issue of appropriate writs under article 226 of the Constitution, but the petition was dismissed on the, preliminary, ground that the matter involved disputed questions of fact. An appeal against that order was also dismissed on the same ground. The petitioners then moved this court under article 32 of the Constitution. Their case was that they had been evicted without authority of law and in violation of the Constitution. It was urged on behalf of the State that the property being trust property built on Government land, the petitioners were mere trespassers liable to be ejected with the minimum amount of force and relying on the decision of this Court in Sohal Lal vs The Union of India, it was further urged that redress by way of writs was wholly inappropriate in disputes on questions of fact and title. Held, that on the admitted facts of the case the petitioners could not be trespassers in respect of the dharmasala, temple and shops, nor the State the owner of the property, irrespective of whether it was a trust, public or private. The maxim, that what is annexed to the soil goes with the soil, is not an absolute rule of law in this country, and if the State wanted to remove the constructions or resume the land, it should have taken appropriate legal action for the purpose. Thakoor Chunder Parmanick vs Ramdhone Bhuttacharjee, , Lala Beni Ram vs Kundan Lall, (1899) L.R. 26 I.A. 58, and Narayan Das Khettry vs jatindranath, (1927) L.R. 45 I.A. 218, referred to. Even if Ramjidas was no more than a trustee, that would not give the State or its officers the right to take the law into their 70 own hands and the argument that the petitioners were tres passers and could be removed by an executive order must be rejected not merely as specious but highly dangerous in its implication. It was not necessary in this case to determine disputed questions of fact, nor as regards the precise rights of the petitioners. It was enough that they were bona fide in possession of the property and could not be removed except by authority of law. The executive action taken in the present case must be deprecated as being destructive of the basic principles of the rule of law; it was a highly discriminatory and autocratic act which deprived a person of the possession of property without reference to any law or legal authority.

Nanak Chand, father of the appellant, a displaced person from West Pakistan and having a verified claim in his name for some land, disappeared some time in December 1954. A report about his disappearance was lodged by the appellants brother, Dewan Chand, Respondent No. 2, with the local police in Punjab. The police made an enquiry in the matter and ultimately gave out that Nanak Chand could not be traced. In response to a notice issued in the year 1956 in suo moto revision in regard to the verified claim, in the absence of Nanak Chand, Dewan Chand appeared and alleged bat Nanak Chand had died leaving behind three sons including him as the only legal heirs. Dewan Chand produced a certificate to the effect that Nanak Chand had died one year and 10 months prior to 25th October, 1956. The certificate Was issued on his request by some respectable persons of the place where the family once resided. The Additional Settlement Commissioner, Delhi, by his order dated 27th October, 1956 allowed the application for substitution and directed the three sons to be brought on record as legal representatives of the deceased Nanak Chand although Nanak Chand had left behind three sons, three daughters including the appellant and his widow. The appellant, in an attempt to have her name substituted, filed a revision application against the order of the Additional Settlement Commissioner before the Chief Settlement Commissioner under s 5 of the . By his order dated 25th September 1965, the Chief Settlement Commissioner confirmed the order of the Additional Settlement Commissioner dated 27th October, 1956 and dismissed the revision application of the appellant without affording an opportunity of being heard to the appellant. The High Court dismissed the appellant 's writ petition and Letters Patent Appeal against the order of the Chief Settlement Commissioner. The High Court observed that the Additional Settlement Commissioner acted rightly in relying upon the death certificate produced by Dewan Chand and substituting the sons of Nanak Chand as heirs of the deceased of his certified claim. Hence this appeal, Allowing the appeal, 764 ^ HELD: A certificate given by respectable persons of the place where the deceased once resided, to say the least, is not admissible in evidence, Sec. 35 of the evidence Act provides that an entry in any public or other official book, register, or record, stating a fact in issue or relevant fact, and made by a public servant in the discharge of his official duty, or by any other person in performance of a duty, specially enjoined by the law of the country in which such book, register or record is kept, is itself a relevant fact. [769B C] In the instant case a certificate by certain respectable person of the place where the family once resided does not satisfy the requirements of section 35 of the evidence Act. There is no proof that any statutory duty was cast upon the person issuing the certificate to keep a record of birth and death and therefore, the certificate of death has no evidentiary value. It is very easy for a person to obtain a death certificate from the so called respectable persons in order to grab the property. If according to Dewan Chand, Nanak Chand had died he must also indicate where did he die and it is the place of his death which will be relevant and not the place of his birth or residence. The certificate obviously is not of the place where Nanak Chand died. The authorities have gravely erred in relying upon the certificate of death which was inadmissible in evidence. [769D E] To see whether daughters would be entitled to interest in the property left by Nanak Chand will depend upon the death of Nanak Chand before or after the enforcement of Hindu Succession Act and to decide as to when Nanak Chand died it was absolutely essential that an opportunity should have been offered to the appellant in accordance with the principles of natural justice. [769H; 770A]

% The suit premises consisting of lands and buildings were originally owned by Dewan Bishen Dass a former Prime Minister of the State of Jammu and Kashmir. The appellants purchased the same from his successor in interest, Purnish Chandra by two sale deeds dated 12.7.1967 and 8.12.1967. The State Government tried to resume the land for setting up a tonga and lorry stand, and for the purpose of development of the city, and eviction of the appellants was ordered by the Estate Officer under the provision of the Jammu and Kashmir (Public Premises Eviction of Unauthorised Occupants) Act, 1959 on January 5, 1968. The Municipality took forcible possession of the land and demolished the buildings thereon on January 11, 1968. The appellants filed a Writ Petition in the High Court assailing the action of the Municipality. The High Court on 19.7.1969 allowed the writ petition and held that the appellants were not unauthorised occupants, possession can be taken only on payment of compensation and that Section 5 of the Jammu and Kashmir (Public Premises Eviction of Unauthorised Occupants) Act was ultra vires. The State appealed to this Court and the judgment of the High Court was confirmed on the sole ground that as the Administrator of the Municipality had not complied with the provisions of section 238 and 239 of the Municipal Act the action taken by the Municipality in the matter of demolishing must be held to be entirely illegal and contrary to law, [State of Jammu and Kashmir vs 854 Haji Wali Mohammad & Ors., ; The Estate Officer thereafter issued a fresh notice under section 4(1) of the amended Jammu and Kashmir (Public Premises Eviction of Unauthorised Occupants) Act, 1959 intimating that the appellants were in unauthorised occupation of the public premises mentioned in the Schedule to the notice. The appellants filed objections stating that they were not in unauthorised occupation of the said land nor have they encroached upon the same, and that the notice was wholly misconceived and illegal. It was further contended that the land was purchased by the appellants from the legal heirs of Dewan Bishen Dass, that they had been in continuous possession, made various improvements on the land and built houses, and that the Estate Officer could not declare the person in possession as an unauthorised occupants after lapse of more than 80 years. The Estate Officer rejected the objections and directed the appellants to handover possession of the premises including structures to the Administrator of the Minicipality. The appellants preferred an appeal to the District Judge but the same was dismissed. The order of the Estate Officer was also challenged in a writ petition by the appellants, but the same was dismissed by the High Court holding that the land being transferred by the legal heirs of Dewan Bishen Dass without obtaining prior permission of the Government or the competent authority in that behalf, the lease stood determined and that the notice under the Jammu and Kashmir (Public Premises Eviction of Unauthorised Occupants) Act, 1959 was in accordance with law. In the appeal to this Court by Special Leave it was contended on behalf of the appellants: that the lands taken on lease by Dewan Bishen Dass cannot be deemed to have been taken under the provisions of Ailan No. 10 dated 7 Bhadon 1976 and as such section 12(A) and section 6 of the Land Grants Act 1960 are not applicable, that the lands could not be acquired without providing for adequate compensation to be paid to the Wasidar for the buildings, appurtenances and other improvements effected by him, that no compensation in fact was awarded and that the notice under section 4 of the Act was liable to be cancelled and quashed as being not in accordance with law. 855 The appeal was resisted by the State respondents, contending: that the appellants predecessor that is the original lessee was a Wasidar and that the lease was granted under Ailan No. 10 dated 7 Bhadon 1976, that section 12 A of the Jammu and Kashmir Lands Grants Act is applicable, that the transfer of the land had been made by the legal heirs of the original lessee Dewan Bishen Dass without the prior permission of the Government or any authority in that behalf, that the lease stood determined from the date of the transfer, the Government had the right of re entry on the land in accordance with the provisions of section 6 of the Land Grants Act, that the appellants are unauthorised occupants and consequently the notice under section 4(1) of the Jammu and Kashmir (Public Premises Eviction of Unauthorised Occupants) Act, 1959 is not illegal but is in accordance with the provisions of the said Act. Allowing the Appeal, ^ HELD: 1. Dewan Bishen Dass predecessor of the appellants was a Wasidar and the lands were wasidari lands leased out to him for the purpose of constructing buildings. This lease was governed by Ailan No. 10 as well as by the Lands Grants Act, 1960. [860F] 2. The land was transferred by Purnish Chandra and others, legal representatives of the original lessee Dewan Bishen Dass, in favour of the appellants in contravention of the provisions of Section 12(A) of the Jammu and Kashmir Land Grants Act, 1960. [860G] 3. The notice under section 4(1) of the Jammu and Kashmir (Public Premises Eviction of Unauthorised Occupants) Act is in accordance with law and as such it is valid. Under the Act as well as the rule the appellants are entitled to get compensation for the buildings and structures as well as of the improvements made on the land even though they are not entitled to get compensation in respect of the value of the land. [860G H] 4. The compensation in the instant case, has not been determined nor the same has been paid. Appeal allowed. Judgment and Order of High Court, set aside. Matter remitted to the District Judge, who would expedite the determination of the compensation after determining the market value of the buildings, structures and all the improvements effected on the land. [861A B]

After a preliminary decree was obtained by the appellants (mortgagees of an Estate including both Bakasht lands and other lands), the Bihar Land Reforms Act, 1950 came into force. The appellant filed petition for passing final decree. The Estate mortgaged vested in the State as a result of a notification issued under section 3(1) of the Act, and later a final decree was passed in the mortgage suit. Thereafter the appellants applied under section 14 of the Act and got determined the compensation to which they were entitled under the Act. But yet they filed an execution petition to execute the mortgage decree against the Bakasht land. The respondents resisted that execution by filing an application under section 47, Civil Procedure Code contending that the execution was barred under section 4(d) of the Act. That application was dismissed for default of the respondents. A second application raising, the same ground was filed by the respondents but this, too, was dismissed for their default. A third application raising the same ground was filed by the respondents and in this, the execution court overruled the objection raised by the respondents on the grounds (i) that the objection was barred by the principles of res judicata and (ii) that the bar of section 4(d) pleaded was not tenable. This decision was affirmed in appeal, but reversed in second appeal by the High Court. Dismissing the appeal this Court; HELD : (i) The objection was not barred by the principles of res judicata. Before a plea can be held to be barred by res judicata that plea must have been heard and determined by the court. Only a decision by a court could be res judicata, whether it be statutory under section 11, Civil Procedure Code or constructive as a matter of public policy on which the entire doctrine rests. An execution petition having been dismissed for the default of the decree holder through by the time petition came to be dismissed, the judgment debtor had resisted the execution on one or more grounds, does not bar the further execution of the decree in pursuance of fresh execution petitions filed in accordance with law. Even the dismissal for default of objections raised under section 47, Civil Procedure Code does not operate as res judicata when the same objections are raised again in the course of the execution. [911 B H] Maharaja Radha Parshad Singh vs Lal Sahab Rai & Ors. L.R. 17 I.A. 150, Pulvarthi Venkata Subba Rao vs Velluri Jagannadha Rao & Ors. ; , Lakshmibai Anant Kondkar vs Ravi Bhikaji Kondkar, XXXI B.L.R. 400, Bahir Das Pal & Anr. v, Girish Chandra Pal, A.I.R. 1923 Cal. 287, Bhagwati Prasad Sah vs Radha Kishun Sah & Ors. A.I.R. 1950 Pat. 354, Jethmal & Ors. vs Mst. Sakina, A.I.R. 1961 Rai. 1959 Bishwanath Kundu vs Smt. Subala Dassi, A.I.R. 1962 Cal. 272, referred to. 909 Ramnarain vs Basudeo, I.L.R. XXV Pat. 595, disapproved. (ii)Proceedings under section 4(d). of the Bihar Land Reforms Act, 1950 included execution proceedings and the execution could not be proceeded with. The only remedy open to the appellants was to get compensation under Chapter IV of the Act. [913 G, H] Reading sections 3, 4 and 6 together, it followed that all Estates notified under section 3 vested in the State free of all encumbrances. The quondum proprietors and tenure holders of those Estates lost all interests in those Estates. As proprietors they retained no interest in respect of them whatsoever. But in respect of the lands enumerated in section 6 the State settled on them the rights of raiyats. Though in fact the vesting of the Estates and the deemed settlements of raiyat rights in respect of certain classes of lands included in the Estates took place simultaneously, in law the two must be treated as different transactions; first there was a vesting of the Estates in the State absolutely, free of all encumbrances. 'Men followed the deemed settlement by the State of raiyat 's rights on the quondum proprietors. Therefore in law it would not be correct to say that what vested in the State were only those interests not coming within section 6. [913 C E] Section 4(d) provided that "no suit shall lie in any civil court for the recovery of any money due from such proprietor (proprietor whose estate has vested in the State) or tenure holder the payment of which is secured by a mortgage of, or is a charge on, such estate or tenure and all suits and proceedings for the recovery of any such money which may be pending on the date of vesting shall be dropped". Proceedings in this section undoubtedly included execution proceedings. [1913 F] Ramnarain vs Basudeo I.L.R. XXV Pat. 595, Raj Kishore vs Ram Pratap, ; ; , Rana Sheo Ambar Singh vs Allahabad Bank Ltd., Allahabad, ; and Krishna Prasad & Ors. vs Gauri Kumari Devi, (1962] Supp. 3 S.C.R. 564, referred to. Sidheshwar Prasad Singh vs Ram Saroop Singh, 1963 B.L.J.R. 802, majority view disapproved.

The appellants and others were the Zamindars of a village in which certain lands were given on Theka to the Respondent and others on 6th March, 1948, the Zamindari having vested on 30th June, 1952. Disputes arose between the appellants and the respondents during the pendency of proceedings under the U.P. Consolidation of Holdings Act. The appellants and others claimed the plots in dispute being in their exclusive Sir and Khudkast would be deemed to have been settled with them by the State on the Abolition of Zamindari and their name should be recorded as Bhoomidars thereof. Respondent and others on the other hand claimed they had become the Sirdars of the plots in dispute and resisted the claims of the Zamindars. The dispute gave rise to the question of title. The Civil Judge sent the matter for decision to an Arbitrator appointed under the Act. The Arbitrator held the respondents to be the Sirdars of the plots in question. The appellants filed objections against the award before the Civil Judge who allowed the objections, set aside the award and remitted back the award for reconsideration. Appeals were taken to the Additional District Judge who disagreed with the Civil Judge but affirmed the order of remand. Both sides filed separate revisions before the High Court, the revision of Respondents was allowed and dismissed those of the appellants. The only point argued was whether Respondent and others have been rightly held to be the Sirdars of the plots in question or whether the ex landlords had become the Bhoomidars. Dismissing the appeal. ^ HELD: That a Thekedar of an Estate ceases to have any right to hold or possess any land in such Estate with effect from the date of its vesting. This is what has been provided in sub section (1) of section 13. But it is subject to the exceptions viz. , one the provisions contained in section 12 and the other engrafted in sub section (2) of section 13. There is no dispute between the parties that the land in possession of the Thekedars on the date of vesting was either covered by section 12(1) or section 13(2)(a). The land admittedly was the Sir or Khudkasht of the lessor namely the Zamindars. If such a land was in the personal cultivation of a person on the Ist May, 1950 as a Thekedar thereof and if the Theka was made with a view to the cultivation of the land by such Thekedars personally then because of the non obstante clause occurring in sub section (1) of section 12 of the Act the Thekedar would be deemed to be a hereditary tenants of the land entitled to hold as such and liable to pay rent at hereditary rates. If, however, the land was in personal cultivation of the Thekedar merely as a Thekedar appointed to collect rent from other tenants and incidentally allowed to cultivate the Sir or Khudkasht land of the lessor then he will be a mere asami in accordance with section 13(2)(a) of the Act. The Arbitrator on a consideration of the theka document found that the theka 978 was made with a view to cultivation of the land by the Thekedar personally. The interpretation of the Arbitrator was not such that it could enable the Civil Judge to take the view that there was an error of law apparent on the face by the record. On the other hand it appears to us that the interpretation put by the Arbitrator was correct. There is a subtle but clear dividing line between the two types of cases one falling under section 12(1) of the Act and the other coming within the ambit of section 13(2) (a). The High Court was right in its that the Award of the Arbitrator was not fit to be interfered with. [980 G H. 981 A D]

The father of the appellant owned considerable agricultural property in Pakistan and he with the members of his family moved over to India on partition. The appellant 's father had some unsatisfied claim for allotment and on December 29. 1955 he was allotted some plots in Urban area within a certain municipality. The appellant 's father died in 1952 and the allotment made was actually to the appellant in lieu of the claim of his father. On the allotment being made, a sanad was issued to the appellant by the Managing Officer. When the appellant tried to take possession of these lands, disputes were raised by respondents Nos. 4 and 5. These respondents moved the Assistant Settlement Commissioner for cancellation of the allotment on the ground that these disputed plots were within an "urban area" within the meaning of r. 2(h) of the Displaced Persons, Compensation and Rehabilitation Rules, 1955 and, therefore, the allotment to the appellant was contrary to law. The Assistant Settlement Commissioner accepted the contention of the res pondents and allowed the appeal and cancelled the allotment. The appellant then applied to the Chief Settlement Com missioner in revision. He rejected the petition. Then the appellant moved a petition under articles 226 and 227 of the Constitution before the High Court. This petition was also dismissed. the High Court granted certificate of fitness under article 133 of the Constitution and hence the appeal. Held:(i) Where an order making an allotment was set aside by the Assistant Commissioner or Settlement Commissioner the title which was obtained on the basis of the continuance of that sanad or order also fell with it. Shri Mithoo Shahani vs Union of India, ; , relied on. (ii)The contention of the appellant that r. 2(h) of the Displaced Persons Compensation and Rehabilitation Rules, 1955, was unconstitutional as contravening article 14 of the Constitution must fail. This contention is based on the basis of the proviso to Rule 2(h). Rule 2(h) was framed under section 40 of the Act. This rule along with other rules came into force on May 21, 1955. The allotment was made to the appellant on December 29, 1955 and the Sanad was issued two days later. In other words the allotment in favour of the appellant was after the rule came into force and was not one "already made" as stated in the proviso to r. 2(h). Therefore, if on the date of the allotment the land was in an urban area, the allotment would be governed by the main para of the definition and the proviso, had no application. 193 The discrimination is said to consist in the rule having drawn a dividing line at the date when it came into force, for determining whether the allotment was valid or not. Such a contention is patently self contradictory. Every law must have a beginning or time from which it operates, and no rule which seeks to change the law can be held invalid for the mere reason that it effects an alternation in the law. It is sometimes possible to plead injustice in a rule which is made to operate with retrospective effect, but to say that a rule which operates prospectively is invalid because thereby a difference is made between the past and the future, is one which cannot be accepted.

Appeal No. 88 of 1957. Appeal from the judgment and order dated January 18, 1956, of the Rajasthan High Court (Jaipur Bench) in D.B.C. Writ Petition No. 262 of 1954. section K. Kapur and Ganpat Rai, for the appellants. N. section Bindra and D. Gupta, for the respondents. December 7. The Judgment of the Court was delivered by SARKAR, J. The appellants are traders of Jhalawar. Respondent No. 1, the Collector of Jhalawar, ,served on the appellants a notice under section 6 of the ,Rajasthan Public Demands Recovery Act, 1952, hereafter called the Act, for the recovery from them as a public demand, of Rs. 2,24,607/6/6 said to be due on account of loans taken by them from the Jhalawar State Bank. The appellants filed a petition under section 8 of the Act contending, among other things, that 964 the amount sought to be recovered from them was not a public demand. Respondent No. 1 appears to have called upon the appellants to prove that it was not a public demand. The appellants without proceeding further before respondent No. 1, filed a petition in the High Court of Rajasthan for the issue of a writ quashing the proceedings under the Public Demands Recovery Act. The High Court dismissed the petition but granted a certificate that the case was fit for an appeal to this Court. Hence the present appeal. The only question raised in this appeal is whether any loan due to the Jhalawar State Bank could be recovered as a public demand. A "public demand" within the meaning of the Act is "any money payable to the Government or to a department or an officer of Government under or in pursuance of a written instrument or agreement". The Government here means the Government of Rajasthan for the Act was passed in 1952 by the Rajasthan State Legislature. The question then is whether money due to the Jhalawar State Bank, is money payable to the Government of Rajasthan. Now, the Jhalawar State Bank was started in 1932. At that time Jhalawar was a ruling State. Sometime in or about April, 1948, the State of Jhalawar, along with nine other ruling States of Rajputana, integrated and formed the United State of Rajasthan under a covenant executed by the Rulers of these States. One of the articles of this covenant provided, "All the assets and liabilities of the covenanting States shall be the assets and liabilities of the United State." Subsequently, on March 30, 1949, the States of Bikaner, Jaipur, Jaisalmer and Jodhpur joined the United State of Rajasthan. On the promulgation of the Constitution of India, the United State of Rajasthan became a Part B State in the Indian Union. The assets of the previous ruling State of Jhalawar, which had earlier vested in the United State of Rajasthan, thereupon passed to and devolved upon the State of Rajasthan in the Indian Union. 965 The proceedings under the Act against the appellants were started by the filing of a requisition with respondent No. 1 by respondents Nos. 2 and 3, being respectively the Treasury Officer, Jhalawar, and the Recovery Officer, Jhalawar State Bank, under section 3 of the Act stating that the amount earlier mentioned was due from the appellants to the Government of Rajasthan in respect of the claims of the Jhalawar State Bank against them. This was done presumably shortly prior to June 16, 1953, on which date respondent No. 1 signed a certificate specifying the amount of the demand and certain other particulars and filed it in his own office under section 4 of the Act. A notice of the signing and filing of the certificate was served upon the appellants under section 6 of the Act. This notice and the subsequent proceedings have been referred to in the beginning of this judgment. The claim thus is in respect of moneys due to the Jhalawar State Bank. If that Bank was not the property of the Jhalawar State, then its dues cannot of course be said to have merged in the present State of Rajasthan. The appellants first contended that the Jhalawar State Bank was not the property of the State of Jhalawar. The only material to which we have been referred by the appellants in support of this contention is certain rules framed by the Ruler of Jhalawar in respect of the Bank. It was pointed out that the rules showed that the Bank was like any other commercial enterprise. We are unable to agree that for this reason it could not be an institution belonging to the State. There was nothing to prevent the Jhalawar State carrying on a commercial undertaking. If it did so, the assets of that undertaking would be those of the State and, in the circumstances earlier mentioned, must now be held to be vested in the State of Rajasthan. It was also said that the rules showed that the management of the Bank was in the hands of a board of which certain non officials were members. It was contended that this showed that the Bank was not the property of the State. It is clear, however, from the 122 966 rules that the Bank was not the property of the board. Again, the board was constituted from time to time by the Ruler and the majority of its members were officers of the State. This would show that the Ruler was in full control of the management of the Bank as a State undertaking. It is true that the rules indicate that the Bank might sue or be sued in respect of transactions made by or with it. That, however, would not indicate that the Bank had a separate identity. The rules in this connection only indicate in what name suits could be brought by or against the State 's banking business. On the other hand, it is perfectly clear that the capital of the Bank was derived solely from the funds of the Jhalawar State. No part of it was contributed by anyone else. One of the objects of the Bank was to invest the surplus funds of the State. The entire transaction of the business of the Bank was in the ultimate control of the Ruler. The Jhalawar State guaranteed the financial liabilities of the Bank. The name "Jhalawar State Bank" also indicates that the institution belonged to the State of Jhalawar. About the time of the formation of the United State of Rajasthan in 1948, the Chief Executive Officer, Jhalawar, issued a public notification in which, after referring to the article in the Covenant which provided that the assets and liabilities of the covenanting States would be the assets and liabilities of the United State, he proceeded to state that by virtue of this article, on the formation of the new State, the responsibility and guarantee of the existing transactions with the different departments of Jhalawar State or the Jhalawar State Bank, would be of the newly formed United State of Rajasthan. This would show that the assets of the Jhalawar State Bank were being treated by all concerned as assets of the former Jhalawar State, which, upon the formation of the United State of Rajasthan, had vested in the latter State. Further, no one else has at any time made any claim to the assets of the Jhalawar State Bank. It is, therefore, clear beyond all doubt, that the Jhalawar State Bank was one of the assets of Jhalawar State and is now vested in the State of Rajasthan. 967 The second point argued for the appellants is that the dues of the Jhalawar State Bank have in any case been transferred by the Government of Rajasthan to the Bank of Rajasthan Ltd. under certain Notifications to which we shall presently refer. It is said that the Bank of Rajasthan Ltd. is, as its name shows, obviously a limited company having an inde pendent existence and is not a department of the Government of Rajasthan State. It is also contended that this vesting took place before the proceedings under the Act had started. Therefore, it is said that at the commencement of those proceedings, the amount claimed from the appellants as due to the Jhalawar State Bank, was not a public demand within the meaning of the Act. This contention which is based on the Notifications, earlier mentioned, does not seem to us to be well founded. We will assume for the present purpose that the Bank of Rajasthan Ltd. is not a department of the Government of Rajasthan State. The question is whether the effect of these Notifications, which were two in number, was to vest the dues of the Jhalawar State Bank in the Bank of Rajasthan Ltd. The first Notification is dated February 15, 1951. It, stated that the Government of the State of Rajasthan had decided to transfer, among others, the Jhalawar State Bank, to the Bank of Rajasthan Ltd. It was contended that by this Notification the assets of the Jhalwar State Bank were transferred to the Bank of Rajasthan Ltd. We do not think that that was the effect of this Notification. It contained two very significant provisions which we set out below: "All debtors of the State Banks irrespective of the class, category and nature of the debt are hereby informed that within one month from the date of publication of this notice they should clear accounts with the aforesaid State Banks which will continue to function only to clear the old accounts, and thereafter their accounts with the securities pledged will automatically be transferred to the Bank of Rajasthan Ltd., who will be authorised on behalf of the State, to effect necessary recoveries and settle accounts. 968 The transfer of these debts to the Bank of Rajasthan Ltd. will not, on any account, take away the inherent right which the Rajasthan Govt. possess in these various transactions made on the guarantee of the respective convenanting States to make recoveries and settle accounts in accordance with the existing rules or laws that may hereafter be made to effect recovery of State dues or State debts. " It is clear from these provisions that the Bank of Rajasthan Ltd. was being authorised "on behalf of the State", that is, the Government of the State of Rajasthan, to recover the amounts due to the Jhalawar State Bank. The transfer of the latter Bank to the Bank of Rajasthan Ltd. was to be subject to this qualification that its dues would remain the dues of the Government of the State of Rajasthan and would only be recovered by the Bank of Rajasthan Ltd. as the agent of that Government. The last paragraph set out above emphasises this Position. It preserves the right of the Government of the State of Rajasthan to recover the amounts due to the Jhalawar State Bank in accordance with any law that might be made after the date of the Notification. The position then is that under this Notification the debts due to the Jhalawar Bank were not transferred to the Bank of Rajasthan Ltd. and remained payable to the Government of Rajasthan. The other Notification is dated April 16, 1952, and it repeats that the banks mentioned in the earlier Notification, including the Jhalawar State Bank, "will be merged in the Bank of Rajasthan Limited". It is said that the effect of this Notification was in any event to cancel the earlier Notification, in so far as the latter preserved the power of the State to collect the debts of the Jhalawar State Bank. We are wholly unable to agree. This Notifi cation only reiterates the intention of the Government of the State of Rajasthan to merge the banks named, in the Bank of Rajasthan Ltd. It says nothing specifically about the dues of these banks or as to their recoveries, with regard to which, therefore, the provisions of the previous Notification must have effect. Furthermore, there is nothing to show that the debts 969 due to the Jhalawar State Bank were by any document specifically transferred to or vested in the Bank of Rajasthan Ltd. and thereupon became its property. That being so, there is no basis for the contention that the debts due from the appellants are now due to the Bank of Rajasthan Ltd. in its own right. It would follow that such debts remained debts due to the Government of the State of Rajasthan. The third point argued was that the moneys claimed from the appellants were not payable under a written instrument or agreement. This contention is wholly unfounded. It appears that the loans were granted by the Jhalawar State Bank to the appellants on their own applications. In each application the appellants stated that they wanted a loan from the Jhalawar State Bank and promised to repay it with interest at the rate mentioned in it. By these applications the appellants also proposed to hypothecate various properties belonging to them as security for the due repayment of the loans taken. They signed the applications and the receipts, which latter also bore the signatures of the officers of the Bank in token of the sanction of the loan. In our view, the money payable by the appellants was payable under these applications and receipts and was, therefore, payable under written instruments or agreements. A point was sought to be made that in each case there were two documents, namely, the application by the appellants and the receipt for the moneys advanced signed by them, whereas a public demand as defined in the Act, required one instrument. It is enough to say in regard to this contention that the Act does not say that the moneys shall be due under a single instrument. It is well known that in a statute a singular includes the plural. In any case, the two documents constituted the written agreement between the parties and that is enough to satisfy the requirement of the Act, even if read in the way suggested by the appellants. The fourth point advanced was that the certificate under the Act was defective and therefore the proceedings were a nullity. Section 4 of the Act requires that the certificate shall be in the prescribed form. 970 One of the particulars to be stated in the form, requires that the period for which the demand was due should be specified. That period was not specified in the certificate in the present case. It seems to us however that this is no defect. In the case of loans due, there is no question of any period for which the demand is due. Obviously, the requirement as to, the specification of the period was meant to apply where the demand consisted of a claim for revenue or rent or the like, which could be due for a period. It is clear to us that the requirement as to stating the period for which the demand is due, as appears from the prescribed form, does not arise in the case of a loan due to the Government which is a public demand within the Act and in such a case no question of stating the period arises. The certificate was not, therefore, defective. The last point argued was that in so far as the Act enables moneys due to the Government in respect of its trading activities to be recovered by way of public demand, it offends article 14 of the Constitution. It is said that the Act makes a distinction between other bankers and the Government as a banker, in respect of the recovery of moneys due. It seems to us that the Government, even as a banker, can be legitimately put in a separate class. The dues of the Government of a State are the dues of the entire people of the State. This being the position, a law giving special facility for the recovery of such dues cannot, in any event, be said to offend article 14 of the Constitution. We have now discussed all the points raised in this appeal and are unable, for the reasons earlier mentioned, to find merit in any of them. In the result we come to the conclusion that the amount claimed from the appellants was a public demand within the meaning of the Act and was legally recoverable by the impugned proceedings. This appeal therefore must be dismissed with costs and we order accordingly Appeal dismissed.

The jhalawar State Bank was originally a Bank belonging to the ruling State of jhalawar and its assets, including moneys 963 due to it, became vested in the United State of Rajasthan under the covenant executed by the Ruler of Jhalawar along with other Rulers by which the United State of Rajasthan was formed. On the promulgation of the Constitution of India, the United State of Rajasthan became the State of Rajasthan in the Indian Union and all its assets, including the jhalawar State Bank and its dues, vested in the State of Rajasthan. Moneys due from the appellants in respect of advances made to them by the jhalawar State Bank at a time when it belonged to the ruling State of jhalawar, could be recovered by the State of Rajasthan after the Bank had become vested in it, as a public demand under the Rajasthan Public Demands Recovery Act, 1952. The form prescribed in the Rajasthan Public Demands Recovery Act, in which a certificate has to be drawn up and filed under section 4 of the Act for commencing proceedings for recovery of public demands under the Act in so far as it required a statement as to the period for which a public demand is due, was not applicable to a public demand like a loan due to the Government in respect of which there is no question of any period for which it is due. The Rajasthan Public Demands Recovery Act did not off end article 14 of the Constitution as giving special facility to the Government as a banker for the recovery of the bank 's dues for, the Government can legitimately be put in a separate class for this purpose.

The expression "systematic" has been deleted from sub section (3) of section 123 of the Representation of the People Act 1951 by the Amending Act by a candidate or his agent or by any other person with the consent of the candidate or his election agent or by any other person on the ground of his religion, race, caste, community or language etc. would be a corrupt practice. 160 The appellant challenged the election of respondent No. 3 to the Punjab Legislative Assembly on the allegations of corrupt practice. It was contended that section 123(3) of the Representation of the People Act had been violated for three reasons, namely, (a) Sponsorship of respondent No. 3 and distribution of election ticket to him for the Assembly elections by the Akal Takht, "the supreme religious authority of the Sikhs", (b) Issue of Hukumnama (Ex.p 4) by the Jathedar of the Akal Takht in the matter of Assembly elections having regard to the circumstances in which it was issued, indicated that the approval of the Akal Takhat was obtained in order to give his decision a colour of religious authority and (c) Appeal to the voters at election meetings by referring to the Hukamnama, to the writings in the Akali Times and exhorting them to vote for respondent No. 3 by applying to the religious sentiments and warning them of the consequences of not doing so. It was further alleged that an ex Chief Minister of the State as well as the respondent No. 3 himself had represented to the voters at different election meetings that respondent No. 3 had been sponsored by the Akal Takht. Respondent No.3 denied the aforesaid allegations and contended that the alleged Hukamnamas were not Hukamnamas of Akal Takht. The High Court held that Akal Takht was a symbol of political and religious powers and the documents alleged to be the Hukumnamas of Akal Takhat, but contained decision of the leaders of the Akali Party written on the letter head of the Akal Takhat and announced by a Jathedar, and the appellant had not succeeded in proving the charges of corrupt practice. The election petition was accordingly dismissed. The contentions raised in the High Court were reiterated by the appellant before this Court. In addition, it was contended (i) The documents shown at the meetings were Hukumnamas and having regard to the background it cannot be said that it did not have the effect of Hukumnama on the community at large of inducing them to believe 158 ignoring the claim of the candidate nominated by Shri Akal Takht and represented to be supported by Hukamnama would be an act of sacrilege on the part of a good Sikh; and (ii) Respondent No. 3 being a Sikh and a member of the Akali Dal and having known of the conditions precedent which were required to be fulfilled before a proper Hukumnama could be issued had not chosen to raise these contentions in his written statement. It was also urged that the concept of secular democracy is the basis of the Indian Constitution and that the paramount and basic purpose under lying section 123 (3) of the Act is the concept of secular democracy. Section 123 (3) was enacted to eliminate from the electoral process, appeals to divisive factors such as religion, caste, etc. which give vent to irrational passions. It is essential that powerful emotions generated by religion should not be permitted to be exhibited during election and that decision and choice of the people are not coloured in any way. Condemnation of electoral campaigns on lines of religion. caste, etc. is necessarily implicit in the language of section 123 (3) of the Act. Consequently the section must be so construed as to suppress the mischief and advance the remedy. 161 Respondent No. 3 contested the appeal, and it was urged: (i) in order to constitute a Hukumnama proper there were certain conditions precedent, A which were required to be fulfilled, namely, there should be a meeting of Sarbat Khalsa, that is, a meeting of all the Sikhs and secondly anunanimous decision must be arrived at which should be followed by the approval of Shiromani Gurdwara Prabandhak Committee and the decision should be announced from Shri A kal Takht and that in the instant case no such Hukamnama held been issued; (ii) the constituency was a mixed constituency equally B divided into Hindu votes and Sikh votes and an appeal in the name of the Sikh religion in such a situation was unlikely; and (iii) the Akali Party was in alliance with CPI (M) and it was most improbable that when one of the allied parties was a Marxist Party, a candidate of Akali Dal would appeal in the name of religion. Allowing the appeal, C ^ HELD :1. Respondent No. 3 was guilty of corrupt practice under section 123 (3) of the Representation of the People Act, 1951. [189D] 2. As a result of amendment of sub section (3) of section 123 of the Act even a single appeal by a candidate or his agent or by any other person with the consent of the candidate or his election agent to vote or refrain from voting for any person on the ground of his religion, race, caste, community or language would be corrupt practice. [1656] 3. Section 123 (2), (3) and (3A) of the Act were enacted to eliminate from the electoral process appeals to those divisive factors which arouse irrational passions that run counter to the basic tenets of the Constitution. Due respect for the religious beliefs and practices, race, creed, culture and language of other citizens is one of the basic postulates of our democratic system. The line has to be drawn by the court between what is permissible and what is prohibited after taking into account the facts and circumstances of each case interpreted in the context in which the statements or acts complained of might have been made. The court has to examine the effect of statements made by the candidate upon the minds and feelings of the ordinary average voter. [171B D] F Ambika Sharan Singh vs Mahant Mahadev and Giri and others, and Ziyauddin Burhanuddin Bukhari vs Brijmohan Ramdas Mehra and Ors. [1975] Suppl. S.C.R. 281, relied upon. With a view to curb communal and separatist tendencies, section 123 (3) of the Act has been amended in 1961. In order to determine whether certain activities come within the mischief of section 123 (3), regard must be had to the substance of the matter rather than to the mere form or phraseology. The inhibition of section 123 (3) should not be permitted to be circumvented indirectly or by circuitous or subtle devices. The court should attach importance to the effect and impact of the acts complained of and always keep in mind the paramount purpose, namely, to prevent religious influence from entering the electoral field. The nature and consequence of an act may not appear n its very face but the same can be implied having regard to the language, H 162 the context, the status and position of the person issuing the statement, the appearance and known religion of the candidate, the class of persons to whom the statement of act is directed, etc. [176C F] 5. It would not be an appeal to religion if a candidate is put up be saying vote for him because he is a good Sikh or he is a good Christian or he is a good Muslim, but it would be an appeal to religion if it is publicised that not to vote for him would be against Sikh religion or against Christian religion or against Hindu religion or to vote for the other candidate would be an act against a particular religion. It is the total effect of such an appeal that has to be borne in mind in deciding whether there was all appeal to religion as such or not. In each case, therefore, the substance of the matter has to be judged. [182E G] This question, however, has to be kept in view within proper limit and religious leaders have right freely to express their opinion on the comparative merits of the contesting candidates and to canvass for such of them as he considered worthy of the confidence of the electorates. [183B] Shubnath Deograrm vs Ram Narain Prasnd an(l others, , Ram Dial vs Sant Lal and others, [1959] Supp. 2 S.C.R., 748 and Kultar Shingh vs Mukhtiyar Singh; , , followed. Whether the documents said to be Hukamnamas were actually Hunkamnamas or not should not be decided in a technical manner. in these matter the Court has to examine the effect or the statements made by the candidate on his behalf upon the minds and the feelings of the ordinary voters of the country. It is undisputed that Shri Akal Takht enjoys a unique position amongst the Sikhs. It is indubitable that any communication from Shri Akal Takht which is represented by eminent members of the Sikh community as Hukamnama would have great religious persuasive value even though strictly speaking it might or might not be a Hukamnama. [182A D] Zyauddin Burhanuddin Bukhari vs Brijmohan Ramdas Mehra Glory of the Akal Takht, p. 97 by Harjinder Singh Dilgeer, Singh The Sikh Religion Vol. IV, p. 3 by M. A. Macauliff and a A History of the Sikhs by Khuswant Singh Vo. 1: 1469 1839, p. 63, referred to. From the evidence on record, in the background of the fact that some communications from Akal Takht call it Hukamnama or any other name were issued and the issues of editorials of Akali Times were pointed out by the ex Chief Minister at the meetings, and the same had not been denied by him, it is apparant that appeal in the name of religion was made on behalf of the respondent No. 3. Though some facts stated in the oral evidence about the meetings had not been stated in the petition, but when evidence was tendered and was not shaken in cross examination and the versions have a ring of truth in the background of other facts, the factum of appeal to religion by the respondent No. 3 has been proved. This conclusion becomes irresistible in view of absence of any express denial by the ex Chief minister and in the absence of any explanation for not calling him as a witness on this point, [188 E to 189A] 163 8. It is not a question of merely proving a fact by adverse presumption. A In cases where there is positive evidence to prove a fact and there is no denial by the person who is most competent to deny that fact and no reason was given for his not giving evidence the conclusion is that the evidence advanced must be accepted. In the instant case, in the background of his eminence and his position, as the ex Chief Minister, his relationship with respondent No. 3 and especially in view of the fact that respondent No. 3 had in fact been nominated by the same group on behalf of the Sikh community with which the ex. Chief Minister was so intimately connected leads to the conclusion that the evidence advanced on behalf of the appellant must be accepted. It is clear that the ex Chief Minister as well as the elected candidate himself represented to the electorate that respondent No. 3 was a nominee of the Akal Takht and that an appeal to vote for respondent No. 3 in the name of Akal Takht with all the consequences of Hukamnama of Akal Takht was highlighted before the electorate [185H; 186A D1 C 9. In matters of this nature, the evidence naturally is mostly oral. Especially where the charge is a grave one, namely, corrupt practice which if proved would disentitle the candidate to contest the election for sometime to come, the Court must proceed with caution. [188C] Rahim Khan vs Khurshid Ahmed & ors., [1975] I S.C.R. 643 and Ch. Razik Ram vs Ch. I.S. Chauhan & ors., A.I R. 1975 S.C. 667, relied upon. Kanhaiyalal vs Mannalal & ors. ; , and M. Narayama Rao vs G. Venkata Reddy & ors., [1977]1 S.C.R. 493, referred to, 10 While insisting on standard of strict proof, the Court should not extend or stretch this doctrine to such an extreme extent as to make it well nigh impossible to prove an allegation of corrupt practice. Such an approach would defeat and frustrate the very laudable and sacrosanct object of the Act in maintaining Purity of the electoral process. [189B] Ram Saran Yadav vs Thakur MIJneshawar Nath Singh & ors. (Civil Appeal No. 892 (NCE) of 1980), relied upon. The contentions of the respondent No. 3 that since it was a mixed constituency and his party was in alliance with CPI (M), it was unlikely and improbable to make an appeal in the name of religion, are rejected for the reason that if there is conclusive evidence to that effect then such a theory would not outweigh the facts proved. These are only probabilities of a situation but if there is direct evidence of propaganda or campaign by candidate in the election in the name of religion, the probabilities of such a campaign not being made in view of other surrounding circumstances, cannot outweigh the direct evidence if the Court is otherwise inclined to accept such direct evidence. [170B.C] Ambika Sharan Singh vs Mahant Mahadev and Giri and others, , followed. For a proper verification of an affidavit or a petition based on certain informations, the source should be indicated. But in the instant case? 164 this question was not examined further because no objection at any stage was taken. [189 Ziyauddin Burhanuddin Bukhari vs Brijmohan Ramdas Mehra & ors Padmabati Dasi vs Rasik Lal Dhar. I.L.R. XXXVII Calcutta 259 at 260 and Hardwari Lal vs Kanwal Singh, followed.

The respondent State granted a mining lease to the appellant. The 5th respondent, whose application was rejected moved the Central Government under rule 54 of the, Mineral Concession Rules, 1960, praying (i) for setting aside the grant in favour of the appellant, and (ii) for grant of the area on lease to him. The Central Government asked for the comments of the appellant and the State Government and after receipt of these comments, they were passed to the parties for further comments. The Central Government by an order passed on Sept. 30, 1964 rejected the application of 5th respondent as time barred. Thereafter, the Central Government on Nov. 5, 1964, under the revisionary powers conferred by r, 55, of the Rules and "all the powers enabling in this behalf," set aside the order granting the lease to the appellant, and further directed regrant after issuing fresh notification. The appellant, moved the High Court under article 226 of the Constitution for quashing the order of November, 1964, The High Court dismissed the petition. HELD : The appeal as well as the Writ Petition must be allowed and the order of the Central Government Nov. 5, 1964 must be set aside. The High Court erred in its approach that the two prayers in the application of the 5th respondent were independent, and that the Central Government by its order of Sept. 30, 1964 had disposed of only the prayer of 5th respondent to grant the area on lease to him, but it had not disposed of his other prayer to cancel the grant in favour of the appellant. The two reliefs asked for by the 5th respondent were inter connected reliefs. In the context in which they were mad, they could not be considered as independent prayers. Further by its order dated September 30, 1964, the Central Government dismissed the entire application of the 5th res pondent on the ground that the same was time barred. If his application in respect of one part of his prayer was time barred, it was equally, time barred in respect of the other part. [527 B D] The order of Nov. 5, 1964 of the Central Government does not show that it was made in the exercise of its suo motu powers. It is purported to have been made on the basis of the application made by the 5th respondent. [527 E] If the Central Government wanted to exercise its suo motu power it should have intimated that fact as well as the grounds on which it proposed to exercise that power to the appellant and given him an opportunity to show cause against the exercise of suo motu power as well as 5 2 3 against the grounds on which it wanted to exercise its power. The Central Government had not given him that opportunity. Failure of the Central Government to do so, vitiates the impugned order. [527 H]

In a suit for partition of the joint family properties filed by the respondent against his brother and his sons, appellants 1 to 5 respectively, the latter while admitting the relationship of the respondent and his half share to the family properties, pleaded, inter alia, that the court had no jurisdiction to divide the immoveable properties situated in Burma and in the Indian State of Pudukottai. The trial court passed a preliminary decree excluding from its operation the aforesaid immoveable properties. Against the preliminary decree appeals were preferred before the High Court by the several parties on various grounds, but in his appeal the respondent did not challenge the finding of the trial court that it had no jurisdiction to deal with foreign immoveable properties. During the pendency of the appeals, on the joint application made by the parties, the trial court made an order referring for determination by the two arbitrators named by them " all the matters in dispute in the suit and all matters and proceedings connected therewith ". In due course the arbitrators gave an award which was then filed in the trial court. As regards immoveable properties in Pudukottai the award recited that since the parties had separated and the properties in suit before the arbitrators had been actually divided by metes and bounds, the two branches shall enjoy the Pudukottai properties in equal halves; while with reference to the properties in Burma the arbitrators asked the parties to hold the documents of title half and half for safe custody and added that when the parties decided to divide the properties all the documents would have to be 27 210 brought together and a partition made according to law. The appellant challenged the validity of the award on the grounds inter alia (1) that the reference and the award dealt with immoveable properties in Burma and Pudukottai and so they were invalid, and (2) that the trial court was not competent to make the order of reference under section 21 of the Indian . Held: (1) that the reference and the award could not be challenged on the ground that they purported to deal with foreign immoveable properties because (a) at the time when the matters in dispute were referred to arbitration it was on the basis of the finding of the trial court that the court had no jurisdiction to deal with foreign immoveable properties, and (b) the award did not divide the said properties or declare their shares in them, but merely recited the fact that the parties having become divided and accepted a half share in each of the branches they would hold and enjoy the properties half and half. There is a distinction between a mere recital of a fact and something which in itself creates a title. Bageshwari Charan Singh vs Jagarnath Kuari, (1932) L.R. 53 I.A. 130, relied on. (2) that the words " suit " and " court " in section 20 of the Indian , include appellate court proceedings and appellate court, respectively. Abani Bhusan Chakravarthy and Others vs Hem Chandra Chakravarthy and Others, , disapproved. Thakur Prasad vs Baleshwar Ahir and Others, A.I.R. 1954 Pat. 106, Moradhwaj vs Bhudar Das A.I.R. 1955 All. 353 and Subramannaya Bhatta vs Devadas Nayak and Others, A.I.R. 1955 Mad. 693, approved. (3)that the word " judgment " in section 21 of the Act means a judgmentwhich finally decides all matters in controversy in the suit and does not refer to the various interlocutory orders and judgments that may be passed during the hearing of the suit. (4) that a judgment delivered by a court in a partition suit which is followed by a preliminary decree is not a final judgment in the suit and that a court after a preliminary decree has been passed has jurisdiction to make an order of reference under section 21 of the Act. Jadu Nath Roy and Others vs Paramesway Mullick and Others, (1939) L.R. 67 I.A. 11, relied on. (5) that where a preliminary decree has been drawn up and an appeal has been filed against it, both the trial court and the appellate court are possessed of the matters in dispute in part and it would be open to either court to make an order of reference in respect of all the matters in dispute between the 211 parties; that as in the present case proceedings subsequent to the preliminary decree were pending before the trial court, the latter was competent to act under section 21 of the Act.

% The respondent, Pollonji Darabshaw Daruwalla, was an appraiser in the Customs Department. The police searched his residential premises on a suspicion of his complicity in certain offences concerning the export of the Stainless Steel Ware, in the course of the investigation of that case. Though nothing incriminatory for the purpose of that investigation was discovered, the search revealed that the respondent was in possession of property and pecuniary resources, disproportionate to his known sources of income between 1.4.1958 and 31.12.1968, for which he could not satisfactorily account for. This led to the suspicion of the commission by the respondent of an offence under the Prevention of Corruption Act, 1947, and the respondent was charge sheeted for an offence under section 5(1)(e), read with section S(2) of the Act. In support of the charge, a number of documents pertaining to the respondent 's investments in the banks, in the company deposits and on shares, both in his own name and jointly with his wife, as also the documents pertaining to the salary and emoluments of the respondent between 1.4.1958 and 31.12.1968 were brought on record in evidence. The defence was that the respondent was in possession of substantial assets even anterior to 1.4.1958. The Special Judge held the respondent guilty and sentenced him to rigorous imprisonment and fine. The respondent filed an appeal before the High Court against the Judgment and order of the Special Judge. The High Court allowed the appeal and acquitted the respondent. The State appealed to this Court by special leave against the decision of the High Court. Dismissing the appeal, the Court, ^ HELD: In order to establish that a public servant is in possession of pecuniary resources and property disproportionate to his known 907 sources of income, it is not imperative that the period of reckoning be spread out for the entire stretch of anterior service of the public servant. There can be no general rule or criterion, valid for all cases, in regard to the choice of the period for which accounts are taken to establish criminal misconduct under section S(1)(e) of the Act. The choice of the period must necessarily be determined by the allegations of fact on which the prosecution is founded and rests. However, the period must be such as to enable a true and comprehensive picture of the known sources of the income and the pecuniary resources and property in possession of the public servant either by himself or through any other person on his behalf which are alleged to be so disproportionate. A ten year period cannot be said to be incapable of yielding such a true and comprehensive picture. The assets spilling over from the anterior period, if their existence is probablised, would, of course, have to be given credit to on the income side and would go to reduce the extent and quantum of the disproportion. It is for the prosecution to choose what is the period, having regard to the acquisitive activities of the public servant, and characterise and isolate that period for special scrutiny. In this case, the selection of a ten year period between 1.4.1958 and 31.12.1968, cannot, by reason alone of the choice of the period, be said to detract from the maintainability of the prosecution, and the view of the High Court on these points is erroneous. [913C F; 914E; 915C D] Once the prosecution establishes the essential ingredients of the offence of criminal misconduct by proving, that the public servant is, or was, at any time during the period of his offence, in possession of pecuniary resources or property disproportionate to his sources of income known to the prosecution, the prosecution has discharged its burden of proof and the burden of proof is lifted from the shoulders of the prosecution and descends upon the shoulders of the defence. It then becomes necessary for the public servant to satisfactorily account for the possession of such properties and pecuniary resources. It is erroneous to predicate that the prosecution should also disprove the existence of the possible source of the public servant. [914G H; 915A B] Equally erroneous and unsustainable is the view of the High Court on the proposition that the respondent was not the beneficial owner in the joint bank investments where the respondent 's name was not the first name but his wife 's name occurred first. The assumption that in all the joint deposits, the depositor first named alone is the beneficial owner and the depositor named second has no such beneficial interest, is erroneous. The matter is principally guided by the terms of the agreement, inter se between the joint depositors. If, however, the 908 terms of the acceptance of the deposit by the depositee stipulate that the name of the beneficial owner shall alone be entered first, then the presumptive beneficial interest in favour of the first depositor might be assumed. There was no such material before the Court in the case. The respondent virtually acknowledged his beneficial interest in the deposits in the course of his examination under section 342, Cr. P.C. [915D G] However, though there are errors of approach and of assumption and inference in the judgment under appeal, they did not by themselves detract from the conclusion reached by the High Court that in the ultimate analysis, the prosecution had not established the case against the respondent beyond reasonable doubt. The conclusion reached by the High Court tends to show that the disproportion of the assets in relation to the known sources of income was such as to entitle the respondent to be given the benefit of doubt, though, however, on a consideration of the matter, it could not be said that there was no disproportion or even a sizeable disproportion; for instance, the acceptance by the High Court of the case of receipt by the respondent of the alleged gift from his mother, was wholly unsupported by the evidence. There were also other possible errors in the calculations in regard to the carried forward assets, etc. The finding became inescapable that the assets were in excess of the known sources of income. But on the question whether the extent of the disproportion was such as to justify a conviction for criminal misconduct under section 5(l)(e) read with section 5(2), the Court thought it should not, in the circumstances of the case, interfere with the verdict of the High Court, as, in the Court 's view, the difference would be considerably reduced in the light of the factors pointed out by the High Court. A somewhat liberal view was required to be taken of what proportion of assets in excess of the known sources of income constitutes "disproportion" for the purposes of section 5(1)(e) of the Act. [915G H; 916A D] The respondent should have the benefit of doubt. State of Maharashtra vs Wasudeo Ramachandra, A.I.R. 1989 S.C 1189, referred to. [916E]

Under Section 56(1)(c) of the Andhra Pradesh (Andhra Area) Estates (Abolition and conversion into Ryotwari) Act, 1948, "where, after an estate is notified, a dispute arises as to (a) whether any rent due from a ryot for any fasli year is in arrear or (b) what amount of rent is in arrear or (c) who the lawful ryot in respect of any holding is, the dispute shall be decided by the Settlement Officer". Section 56(2) of the Act provides for an appeal to the Estates Abolition Tribunal against the decision of the Settlement Officer whose decision was final and not to be questioned in any court of law. The petition filed before the Tahsildar, Pathapatnam under section 13 of the Andhra Tenancy Act by the appellant, for the eviction of the respondents on the ground of default in payment of rent was dismissed on the ground, among others that the respondents had occupancy rights in the land. The appeal before the Revenue Divisional Officer Tekkali was dismissed on the ground that the petition for eviction was not maintainable since the question as to who was the lawful ryot in respect of any holding in an estate had to be decided by the Settlement Officer under Section 56(1)(c) of the Andhra Pradesh (Andhra Area) Estates (Abolition and Conversion into Ryotwari) Act and that the decision of such question was within the exclusive competence of the Settlement Officer. In the revision petition filed before it under article 227 of the Constitution, the High Court of Andhra Pradesh agreed with the appellate order. Dismissing the appeal by special leave the Court, ^ HELD: 1. Interpretation of a statute contextual or otherwise must further and not frustrate the object of the statute. [207 D] The object of the Andhra Pradesh (Andhra Area) Estates (Abolition and Conversion into Ryotwari) Act, 1948 is to protect ryots and not to leave them in wilderness. When the Act provides a machinery in Section 56(1)(c) to discover who the lawful ryot of a holding was, it is not for the Court to denude the Act of all meaning by confining the provisions to the bounds of Section 55 and 56(1) (a) and (b) on the ground of "contextual interpretation". [207 C D] 202 2. The scope of section 56(1)(c) cannot be restricted to mean that it was controlled by Section 55 and 56(1)(a) and (b) and that an enquiry into the question as to who was the lawful ryot of a holding under that section was permissible only for the purpose of identifying the person liable to pay the arrear of rent which had accrued in respect of the holding before the taking over of the estate.[204 E G] It would indeed be anomalous and ludicrous and reduce the Act to an oddity, if the Act avowedly aimed at reform by the conferment of ryotwary pattas on ryots and the abolition of intermediaries is to be held not to contain any provision for the determination of the vital question as to who was the lawful ryot of a holding. Section 56(1)(c) is indeed such a provision. A contextual interpretation may not be quite appropriate in view of the fact that Sections 55 and 56(1)(a) and (b) occur under the heading 'Miscellaneous '. Any other interpretation would lead to conflict of jurisdiction and the implementation of the Act would be thrown into disarray. A, B C] Munuswami Naidu (died) & Ors., vs R. Venkata Reddy and Ors., A.I.R. 1978 A.P. 200 (F.B.); approved. The Andhra Pradesh Estates Abolition Act is a self contained Code in which a provision is also made for the adjudication of various types of disputes arising after an estate is notified by specially constituted Tribunals. On general principles, the special Tribunals constituted by the Act must necessarily be held to have exclusive jurisdiction to decide disputes entrusted by the statute to them for their adjudication. [204 D E] Appanna vs Sriramamurthy, ; approved.

The land in question was granted by the Ruler of erst while State of Ratlam in favour of ancestors of respondents (Pitaliyas) for installation of a ginning factory. Ancestors of appellants (Jhalanis) entered into a partnership with Pitaliyas and started a ginning factory on a portion of the said land. In the revenue records, in respect of the entire land the names of Jhalanis and Pitaliyas were entered. According to the Jhalanis in execution of a decree against Pitaliyas the above land was sold and Jhalanis purchased the said land in an auction. On an application moved by the Jhalanis, the Tehsildar passed an order mutat ing the names of Jhalanis in respect of the entire land. The said mutation was allowed on the basis of compromise between the parties and on the basis of a sale certificate issued by the Civil Court. The Town Improvement Trust started acquisition proceed ings for a housing scheme and acquired certain lands includ ing the land in question. The Collector started suo motu proceedings, issued notice to the Jhalanis and set aside the order of mutation passed by the Tehsildar. An appeal pre ferred by the Jhalanis before the Addi 258 tional Commissioner was dismissed. The Board of Revenue allowed the further appeal and held that pending mutation proceedings, there was compromise between the parties, objections were withdrawn by the Pitaliyas and no appeal or revision was filed against the mutation order nor any suit was filed challenging the order of the Tehsildar. The Pita liyas then filed a writ petition before the High Court, which was allowed and the order of the Board of Revenue was set aside. Against the said judgment of the High Court, the Jhalanis have preferred an appeal before this Court. In the acquisition proceedings the Tribunal gave a finding that Pitaliyas had no right to claim compensation and Jhalanis alone were entitled to the entire amount of compensation. The order of the Tribunal was challenged by the parties by filing separate appeals before the High Court. The High Court allowed the appeal filed by Pitaliyas and held that they were entitled to claim compensation in equal proportion with Jhalanis; it dismissed the appeal filed on behalf of the Trust for reducing compensation and allowed the appeal filed by Jhalanis in part and increased the rate of compensation from 65 paise per sq.ft to 75 paise per sq.ft. Aggrieved against the aforesaid judgment of the High Court in acquisition proceedings, the Jhalanis and the Trust have filed the other two appeals before this Court. Allowing the appeals on the questions of validity of the mutation made and entitlement to receive compensation, and partly allowing the appeal on the question whether enhance ment of compensation was justified, this Court, HELD: 1.1. There was a decree of a Civil Court and in execution of the same the properties were auctioned. Even if there was any dispute as to whether any share of Pitaliyas in the land was sold or not in the auction proceedings the same does not survive after the compromise between the parties. In the order of the Tehsildar passed as back as 20th February, 1953 the Jhalanis alone were recorded as full owners of the properties and they continued to remain in possession. The Trust took possession from Jhalanis on 21st March, 1968 in the land acquisition proceedings. There is nothing on record to show that Pitaliyas ever remained in possession of the land in question after 20th February, 1953 till the time they made a claim of half share in the compen sation before the Tribunal. [264 D, E] 1.2. The Collector had no justification at all to have initiated the proceedings suo motu in 1970 after 17 years of the order passed 259 by the Tehsildar. Even under the law of limitation no suit for possession could have been maintained after 12 years by Pitaliyas and they were not entitled to any share in the amount of compensation. There was also no justification for entering the names of Pitaliyas in the revenue records and to set aside the order of the Tehsildar dated 20th February, 1953, after 17 years. The Tehsildar was perfectly justified in passing the order dated 20.2.1953 on the basis of the sale certificate, as well as compromise application and the statement made before him on 16.10.1952. [264 F, G] 2. One bigha is equivalent to 22500 sq. and no contention was raised before the Tribunal that one bigha was equivalent to 21511 sq. ft. prevalent in the erstwhile State of Ratlam. For the first time, this point was raised before the High Court. This being a controversial question of fact and the other side did not have the chance to lead any evidence on this point, the High Court rightly negatived it and held that the compensation for one bigha of land would be calculated as equivalent to 22500 sq. [265 A C] 3. The District Judge after consideriug large number of documentary evidence placed on record by both the parties arrived at the conclusion based on good and valid reasons that the fair market price of the acquired land on 22nd August, 1964 was 65 paise per sq. The High Court went wrong in increasing the rate from 65 paise to 75 paise without any valid reasons whatsoever. In the circumstances, enhancement ordered by the High Court is set aside and the compensation determined by the District Judge at the rate of 65 paise per sq. ft. is maintained. [266 C E]

The respondent landlord sought eviction of the appellants tenants under section 12 (1) of the Madhya Pradesh Accommodation Control Act, 1961 on the main ground that the landlord bonafide required the premises for locating his gold and silver ornaments factory after demolishing and reconstructing the building. The courts below found that the requirement of the landlord was bonafide and ordered eviction of the tenants under section 12 (l) (f) and (h) of the Act. In these appeals the tenants contended that since the eviction ordered was under section 12 (l) (h), section 18 of the Act was attracted and it was obligatory on the part of the landlord to provide accommodation of equal extent to the tenants in the new building to be constructed by him. Dismissing the appeals, ^ HELD: In Ramnilal P. Mehta vs Indradaman Amritlal this Court observed that once the landlord establishes that he bonafide requires the premises for his occupation, he is entitled to recover possession of it from the tenant under the provisions of sub clause (g) of section 13 (1) of the Bombay Rents, Hotel and Lodging House. Rates Control Act, 1947 irrespective of the fact whether he would occupy the premises without making any alterations or after making tho necessary alterations. [948B C] Ramnilal P. Mehta vs Indradaman Amritlal Sheth, ; , referred to. Section 13 (1) (g) of the Bombay Rents, Hotel and Lodging House, Rates Control Act, 1947 corresponds to section 12 (1) (f) of tho Madhya Pradesh Accommodation Control Act. [948A] Applying the above principle to the facts of the instant case, though the Courts below have passed the order of eviction under section 12 (1) (f) and (h) the Court is of the opinion that the order of eviction is based really and substan 946 tially only under section 12 (1) (f) of the Act. The fact that section 12 (1) (h) is also mentioned in the order of the Court below does not make the order of eviction purely one under that section, for the main ground of requirement of the landlord is bonafide personal requirement for locating his proposed factory for the manufacture of gold or silver ornaments. Therefore there is no case for the application of section 18 to the facts of the present case. [947F G]

Appeal No. 366 of 1959. 38 Appeal from the judgment and order dated September 18, 1958, of the Calcutta High Court in Income Tax Reference No. 9 of 1955. section Mitra and section N. Mukherjee, for the appellant. K. N. Rajagopal Sastri and D. Gupta, for the respondent. December 8. section K. DAS, J. This is an appeal on a certificate of fitness granted by the High Court of Calcutta under section 66A(2) of the Indian Income tax Act, 1922. The assessee, Provat Kumar Mitter, is the appellant before us. He was a registered holder of 500 Ordinary shares. of the Calcutta Agency Ltd. By a written instrument, dated January 19, 1953, he assigned to his wife, Ena Mitter, the right, title and interest to all dividends and sums of money which might be declared or might become due on account or in respect of those shares for the term of her natural life. We may read here the material portion of the instrument: "This Deed Witnesseth that for effecting the said desire and in consideration of the natural love and affection of the Settlor for the Beneficiary the Settlor as the beneficial owner assigns unto the Beneficiary the right, title and interest to every dividend and sum of money which may be declared or become due and payable on account of or in respect of the said shares (not being the price or value thereof) and further hereby covenants with the Beneficiary to hand over and/or endorse over to the Beneficiary any dividend Warrant or any other document of title to such dividend or sum of money as aforesaid and to instruct the said Company to pay any such dividend or such sum of money to the Beneficiary To Hold the same unto the Beneficiary absolutely during the term of her natural life. And It Is Hereby Agreed And Declared that the Beneficiary shall remain entitled to and shall receive and stand possessed absolutely of every dividend and sum of money which she may receive on 39 account of the said shares during the term of her natural life and that the Settlor shall have no right, title or interest therein or derive any benefit therefrom during the said period. " It is to be noticed that under the terms quoted above the shares themselves remained the property of the assessee, and it was only the income arising therefrom which was sought to be settled or assigned to his wife. During the accounting year which ended on March 31, 1953, the dividend declared on the shares amounted to Rs. 12,000. In assessing the as sessee for the assessment year 1953 54 the Income tax Officer included the said sum of Rs. 12,000 in his income under the provisions of section 16(1)(c) and section 16(3) of the Act, as he said in his assessment order. The contention of the assessee was that since the settlement was for the lifetime of his wife, the third proviso to section 16(1)(c) applied and the dividend which his wife received could not be deemed to be his income under section 16(1)(c); as to section 16(3) of the Act the assessee contended that it did not apply, because there was no transfer of the shares to his wife. The assessee, accordingly, appealed to the Appellate Assistant Com missioner. Before that authority a somewhat unusual contention was put forward on behalf of the Department, viz., that the third proviso to section 16(1)(c) should be ignored inasmuch as it was repugnant to the main provisions contained in section 16(1)(c) and the general scheme of the Act. A further contention urged on behalf of the Department was that since the shares continued to stand in the name of the assessee and the dividends had been declared in his name, the transfer of the dividend to the beneficiary was only an application of the dividend income and, therefore,, the assessee could not claim exemption from being taxed on it as a part of his own income. The Appellate Assistant Commissioner accepted both the aforesaid contentions and dismissed the appeal. In a further appeal to the Income tax Appellate Tribunal, the assessee again relied on the third proviso to section 16(1)(c) of the Act and the Departmental Representative urged the same two contentions plus 40 a new one to the effect that the deed by which the dividend had been transferred was altogether invalid inasmuch as it was an unregistered instrument and, therefore, no valid transfer of the dividend income had been effected by it. The Tribunal rejected the Department 's contention that the third proviso was in conflict with the main provisions of section 16(1)(c) or the scheme of the Act. As to the second contention that the transfer of the dividend income was a mere application of it by the assessee after it had accrued to him, the Tribunal apparently expressed no opinion. It gave effect, however, to the third contention of the Department, namely, that the deed being an unregistered instrument did not operate as a valid transfer of the dividend income in favour of the assessee 's wife. Both the assessee and the Commissioner then moved the Tribunal to refer to the High Court the questions which had respectively been decided adversely to them. The Tribunal acceded to the request and referred three questions to the High Court, two at the instance of the Commissioner and one at the instance of the assessee. The questions referred were as follows : "(1) Whether the deed dated January 19, 1953, assigning the dividends to accrue, merely on account of natural love and affection, is void as it is not registered? (2) Whether the third proviso to section 16(1)(c) is repugnant to the main clause 16(1)(c) and the general scheme of the Act, and should not be given effect to? (3) Whether, on the facts and in the circum stances of the case, the payment of dividend income to the assessee 's wife, Ena Mitter, under the covenant in the deed of assignment dated January 19, 1953, was merely a case of application of the assessee 's income?" The High Court answered the first two questions in favour of the assessee. It answered the third question, however, against the assessee and in favour of the Department. The High Court expressed its conclusion on the third question in the following words: 41 ". . . the conclusion must be that there being only a voluntary covenant entere d into by the settlor to pay over the dividends received by him to the wife or to instruct the company to pay them to her and the income not having been made the wife 's income from the beginning, what the settlement provides for is only an application of the income and therefore the income is assessable in the hands of the settlor, irrespective of whether the wife is also assessable on her receipts. The case is outside the main clause of section 16(1)(c) and, therefore, the third proviso to the section is also not relevant. " The appeal before us is limited to the question of the correctness or otherwise of the answer given by the High Court to the third question. The first two questions having been answered in favour of the assessee and the Department not having filed any appeal with regard to them, we are not concerned with the correctness or otherwise of the answers given by the High Court to those questions and we express no opinion as respects those answers. On behalf of the appellant it has been argued that the High Court should not have answered the third question, because it did not arise out of the order of the Tribunal. The argument is that under section 66 of the Income tax Act, the Tribunal could refer to the High Court any question of law which arose out of its order, but it was not open to the Tribunal to refer a question which did not so arise. We are unable to accept the contention that the question did not arise out of the Tribunal 's order. Indeed, it is true as we have stated earlier, that the Tribunal did not state its specific finding on this question; but in the statement of the case drawn up by the Tribunal under section 66 it has stated that though no specific finding was given the question was raised by the Department and by implication was decided against the respondent. In its application to the Tribunal for a reference, the present respondent specifically mentioned the question as one decided adversely to it and though the appellant 42 submitted that the question did not arise, the Tribunal held that the question did arise out of its order. No objection appears to have been taken in the High Court to the reference made by the Tribunal on the three questions including the one now under consideration before us. In these circumstances it is not open to the appellant to contend now that the question did not arise out of the Tribunal 's order. We must, therefore, overrule this contention. Now, as to the correctness of the answer given by the High Court. Learned counsel for the appellant has contended that the High Court did not correctly construe the instrument of January 19, 1953, and on a proper construction, the High Court should have held that a right of property in present was assigned in favour of the wife. Learned counsel has submitted that the assessee as a registered holder of 500 Ordinary shares of the Calcutta Agency Ltd., had a bundle of rights in the Company: (1) a right to vote; (2) a right to participate in the distribution of assets on dissolution or liquidation of the Company; and (3) a right to participate in the profits, e.g., dividends which might be declared. It is contended that the aforesaid third right was assigned to the wife by the assessee, and that the High Court ignored the said assignment while it emphasised the other covenants for endorsing or handing over the dividend warrants, etc. In support of his contention learned counsel has relied on certain observations made by this Court in Bacha F. Guzdar vs Commissioner of Income tax, Bombay (1) at p. 883. , That was a case in which the question that arose for decision was whether dividend declared by a, company growing and manufacturing tea was agricultural income within the meaning of section 2(1) of the Income tax Act and hence exempt from income tax under section 4(3)(viii) of the said Act. It was held that the dividend of a shareholder was the outcome of his right to participate in the profits of the company arising out of the contractual relation between the company and the shareholder, and the observations on which learned counsel has relied were to the effect (1) ; 43 that "the right to participate in the profits exists independently of any declaration by the company with the only difference that the enjoyment of profits is postponed until dividends are declared. " We do not think that those observations are of any assistance to the appellant in the solution of the question before us, which is really one of construction of the instrument of January 19, 1953. A transfer of property may take place not only in the present, but also in future; but the property must be in existence. It is clear to us that the instrument of January 19, 1953, was not a transfer of any existing property of the assessee. It was in its true nature a contract to transfer or make over in future every dividend and sum of money which may be declared or become due and payable on account or in respect of the shares held by the assessee, to his wife during her lifetime; the other covenants are ancillary in nature and subserve this main object of the contract. The assessee did not assign the shares and, therefore, retained the right to participate in the profits of the company; he did not part with that right. What the contract provided for was merely this: the beneficiary was given the right to receive from the assessee every dividend and other sum of money which may be declared or become due and payable in respect of the shares. If this is the true construction of the document, then it is clear to us that the answer given by the High Court to the question referred to it is correct. The High Court rightly pointed out that the Company paying the dividend can pay. it only to the registered shareholder or under his orders (see Howrah Trading Co. Ltd. vs Commissioner of Income tax, Central, Calcutta) (1); therefore, section 16(1)(c) of the Income tax Act was not attracted nor the third proviso thereto, and the income continued to accrue to the assessee but was thereafter paid over to his wife under the terms of the contract. The income was, therefore, assessable in the hands of the assessee, because it was part of his income though applied subsequently towards payment to the wife under the terms of the contract. (1) [1959] Supp. 2 S.C.R. 448. 44 In this view of the matter, it is not necessary to decide the further question if a contract of this nature operates only as a contract to be performed in future which may be specifically enforced as soon as the property comes into existence or is a contract which fastens upon the property as soon as the settlor acquires it. In either view, the income from the shares will first accrue to the settlor before the beneficiary can get it. Such income will undoubtedly be assessable in the hands of the settlor despite the contract. We think that the true position is that if a person has alienated or assigned the source of his income so that it is no longer his, he may not be taxed upon the income arising after the assignment of the source, apart from special statutory provisions like section 16(1)(c) or section 16(3) which artificially deem it to be the assignor 's income. But if the assessee merely applies the income so that it passes through him and goes on to an ultimate purpose, even though he may have entered into a legal obligation to apply it in that way, it remains his income. This is exactly what has happened in the present case. We need only add that the principle laid down by the Privy Council in Bejoy Singh Dudhuria vs Commissioner of Income tax (3), does not apply to this case; because this is not a case of an allocation of a sum out of revenue before it becomes income in the hands of the assessee. In other words, this is not a case of diversion of income before it accrues but of application of income after it accrues. We have, therefore, come to the conclusion that the High Court correctly answered the question referred to it. The appeal fails and is dismissed with costs. Appeal dismissed.

The appellant who was the registered holder of 500 shares of a company executed a deed dated January 19, 1953, by which he assigned to his wife the right, title and interest to all dividends and sums of money which might be declared or might become due on account or in respect of those shares for the term of her natural life. During the accounting year which ended on March 31, 1953, the dividend declared on the shares amounted to Rs. 12,000, and in assessing the appellant for the assessment year 1953 54 the Income tax Officer included the said sum in his income under section 16(i)(c) and section 16(3) of the Indian Income tax Act, 1922. The appellant claimed that since the settlement was for the lifetime of his wife, the third proviso to section 16(i)(c) applied and the dividend which his wife received could not be deemed to be his income under section 16(i)(c), and that section 16(3) was not applicable because there was no transfer of the shares to his wife. Held, that on its true construction the deed dated January 19, 1953, was not a transfer of any existing property of the appellant namely, the shares held by him, but only a contract to transfer or make over in future every dividend and sum of money which may be declared or become due and payable on account or in respect of the shares, to his wife during her lifetime. Since the company could pay the dividend only to the registered shareholder or under his orders, the income continued to accrue to the appellant though applied subsequently towards payment to the wife under the terms of the contract. The income, therefore, was assessable in the hands of the appellant. Howrah Trading Co. Ltd. vs Commissioner of Income tax, Cal cutta, [1959] SUPP. 2 S.C.R. 448, relied on. Bacha F. Guzday vs Commissioner of Income tax, Bombay, ; , held not applicable. Bejoy Singh Dhudhuria vs Commissioner of Income tax, (1933) L.R. 60 I.A. 196, distinguished.

The assessee was the Managing Director of a Company originally assessed on a total income of Rs. 43407/ for the assessment year 1959 60. Thereafter the Income Tax Officer came to know that the assessee had been withdrawing moneys from the Company and that those amounts were liable to be treated as dividend under section 2(6A)(e) of the Act, he re opened the assessment. In the assessment proceedings that followed, the assessee claimed that the accumulated profits of the Company amounted to Rs. 1050 only and that amount alone could be considered as dividend under section 2(6A)(e) of the Act. The figure was worked out on the basis that Rs. 11,000 as a provision for tax and Rs. 6,900 as a provision for dividend had to be adjusted against the balance of Rs. 18,950 in the Profit and Loss Account. The Income Tax Officer rejected the contention of the assessee. The Appellate Assistant Commissioner dismissed the appeal filed by the assessee. The Income Tax Appellate Tribunal in second appeal, upheld the claim of the assessee that the words "accumulated profits" in section 2(6A) (e) of the Act could not be construed as including current profit but it rejected the contention that the two sums of Rs. 11,000 and Rs. 6,900 had to be taken into account in determining the figure of the "accumulated profits". It determined the "accumulated profits" at Rs. 18,950. The Revenue obtained a reference to the High Court on the question: "Whether the Appellate Tribunal was legally correct in holding that the accumulated profit will not include "current profits" for the purpose of section 2(6A) of the Act. " A second question was referred to the High Court at the instance of the assessee : "Whether the Tribunal was right in holding that Rs. 18,950 constituted accumulated profits for the purpose of section 2(6A) of the Act. " The High Court answered both the questions in favour of the assessee, the first question in the affirmative and the second question in the negative. On appeal to this Court, ^ HELD: 1. "Current profits" that is to say, profits earned by the Company during the year in which the loans were advanced to the assessee cannot be regarded as included within the "accumulated profits" of a Company within the meaning of section 2(6A) (e) of the Act. [947G 948E] Commissioner of Income Tax, Madras vs M. V. Murugappan

The respondent firm was assessed to income tax for the assessment years 1947 48, 1948 49 and 1949 50 under section 23(3). The Income tax Officer renewed the registration of the firm under section 26A of the Income tax Act and passed an order under section 23(6) allocating the shares of the various partners. The respondent preferred appeals against the orders of assessment to the Appellate Assistant Commissioner. Oil November 4, 1950, the Appellate Assistant Commissioner partly accepted the appeals in respect of the assessment years 1947 48 and 1948 49 but the appeal in respect of the assessment year 1949 50 was still pending. Meanwhile after issuing notice to the parties and hearing them the Commissioner, acting under section 33B(1), passed an order on June 5, 1952, cancelling the registration granted under section 26A on the ground that one of the partners of the firm was a minor, and directed the Income tax Officer to make fresh assessments for the three years. The respondent preferred appeals to the Appellate Tribunal which were allowed. On the application of the appellant the Tribunal referred, under section 66(1) of the Act, three questions to the High Court of Bombay. In regard to the assessment years 1947 48 and 1948 49 the High Court held that the orders of the Income tax Officer granting registration had merged in the appellate orders of the Assistant Appellate Commissioner and the revisional power of the Commissioner under section 33B(1) could not be exercised in respect of them. With regard to the renewal of registration for the year 1949 50 the High Court held that the Commissioner could not exercise his revisional power as the propriety of this order was open to consideration by the Appellate Assistant Commissioner in the respondent 's appeal pending before him. The appellant obtained special leave and appealed: Held, that the Commissioner had the authority under section 33B(1) to set aside the orders of registration made by the Income tax Officer. An order of the Income tax Officer granting registration was not appealable before the Appellate Assistant Commissioner. Such an order could be cancelled by the Commissioner in exercise of his revisional powers under section 33B(1) ; but it could not be cancelled by the Appellate Assistant Commissioner even in the exercise of his appellate jurisdiction when dealing with an appeal by an assessee. The theory that the order of a tribunal merges in the order of the appellate authority did not apply to the order of registration passed by the Incometax Officer. Commissioner of Income tax, Bombay North vs Tejaji Farasram Kharawala, , referred to. Durgabati and Narmadabala Gupta vs Commissioner of Income tax, , disapproved. But the Commissioner has no power while exercising his revisional jurisdiction under section 33B(1) of the Act to set aside the assessment orders. The Commissioner, in the present case, did 715 not really intend to set aside the assessment orders but merely to direct the Income tax Officer to make suitable consequential amendments in regard to the machinery or procedure. to be adopted to recover the tax payable by the respondent. The registration or non registration of a firm does not at all affect the computation of taxable income; it merely governs the procedure to be adopted in recovering the tax found due. Shapurji Pallonji vs Commissioner of Income tax, Bombay, , referred to.

On partition being effected through a suit, a Hindu joint family who has only an interest in the entire joint family property acfamily. The preliminary decree passed by the Court determined 10/16 as the share of the appellant family and 6/16 as that of the other branch. Those assets of the erstwhile larger joint family which could not be physically divided were auctioned between the two branches and in this manner a sugar mill was purchased for 34 lacs by the appellant family. In Income tax proceedings depreciation under section 10(2) (vi) of the Indian Income tax Act, 1922 was claimed on the above valuation of 34 lacs. The claim was rejected by the Income tax Officer as well as the Appellate Assistant Commissioner, on the ground that the value for the purpose of depreciation was not the price determined at the family auction, but the original cost to erstwhile larger joint family. The Tribunal held that the 6/16 share of the other branch was purchased at the auction and its value had to be taken as the basis of the price determined at the auction, but the appellant family 's own share of 10/16 was not purchased at the auction and therefore had to be valued at the original cost to the larger joint family. In reference, the High Court held that the distinction made by the Tribunal was wrong and that the shares of both branches had to be valued on the basis of the original cost to the larger family. Appeal was filed before this Court with certificate. HELD: Per Subba Rao and Sikri, JJ. It may be that in strict legal theory partition may not involve a transfer, but the substance of the transaction is that an erstwhile member of a joint Hindu family who has only an interest in the entire joint family property acquires an absolute title to a specific property. The cost of the property to the member at the date of partition would be the value given to it for the purpose of allotment. provided it was real, or the price at which he purchased it in auction, or the value of it ascertained otherwise. [647A C] In the case of assessees acquiring a property by purchase, gift, bequest, or succession, courts have held that the cost of the property to the assessee was not the original cost of it to his predecessor but its actual cost to him at the time of the purchase, gift, bequest or succession. In substance there is no difference in the matter of ascertaining the cost of an asset to an assessee whether he is a donee, purchaser, legatee, successor, or a divided member e.f a joint Hindu family. [646D; 647A] 642 Commissioner of Income tax, Madras vs The Buckingham & Carnatic Company, Ltd., Madras (1935)3 I.T.R. 384(P.C.), Jagata Coal Co. Ltd. vs Commissioner of Income tax, West Bengal , Indian Iron & Steel Co. Ltd. vs Commissioner of Income tax, Bengal, (1943) 11 I.T.R. 328 (P.C.), Francis Vallabaravar vs Commissioner of Income tax, Madras and Commissioner of Income tax, Bombay vs Solomon & Sons , referred to. Commissioner of Income tax, U.P. & C.P.v. Seth Mathuradas Mohta, (1939)7 I.T.R. 160, disapproved. In the present case the valuation given to the property was not notional but a real one; indeed the property was sold in the open auction between the members of the larger joint family and the value fetched thereunder entered into the scheme of partition. [647 C D] Therefore, even in respect of the appellant 's own share of 10/16, the valuation for the purposes of section 10(2)(vi) had to be on the basis the price which the appellant bid at the auction. Per Shah, J. (dissenting). By the preliminary decree the appellant family became entitled to a 10/16th share in every item of the property of the larger joint family; the other branch became entitle to the remaining i.e. 6/16th share in each item. The appellant being already owner of 10/16th share could not purchase the same at the auction. In substance the appellant purchased, by being declared the highest bidder, the remaining 6/16th share belonging to the other branch. [650 C E] The asset in question, viz, the sugar factory, at all material times remained a business asset. Acquisition of the interest of the other branch by the appellant did not alter the character or use of the asset; nor did it make any fundamental alteration in its value to the appellant so as wholly to displace its original value even in respect of its share which it continued to own. [654 B D] The Tribunal therefore, had rightly held that in respect of the 6/16th share of the other branch, depreciation had to be allowed to the appellant on the basis of the auction price. The High Court wrongly interfered with this finding the Revenue not having appealed against it. On the appellant 's 10/16th share, which the appellant could not be said to have purchased, depreciation had to be calculated on the basis of original cost to the larger family. [654 E G] Case law discussed.

The appellant created a trust in 1955 by transferring certain securities held by him to a bank as trustee. One of the beneficiaries of the trust was the appellant 's minor daughter M. The income accruing to M under the trust during the previous years relevant to the assessment years 1957 58, 1958 59, 1959 60 and 1960 61 was included in the assessments made on the appellant as an individual for those years by applying the provisions of section 16(3)(b) of the Indian Income Tax Act 1922. In the assessment for the year 1960 61 the Income tax Officer had also to deal with the appellant 's claim for the allowance under section 9(2) off the said Act in respect of two separate houses owned by the appellant and maintained by him for residential purposes in New Delhi. The Income tax Officer allowed the claim only in respect of one of the houses. The appellant 's appeals. before the authorities under the Act failed. The High Court decided the questions referred to it against the appellant. In appeals before this Court on certificate the contentions of the appellant which fell for consideration were : (i) (a) that section 16(3) (b) must be strictly construed; (b) that the assets covered by the trust deed not having been transferred to the wife or minor daughter but to a bank as trustee, section 16(3) (b) of the Act had no application; (c) even if section 16(3) (b) of the Act applied, what was to be included in computing the total income of the appellant was not the in come that had been received by the minor daughter under the trust deed but only so much of the income of the trustee as arose from the assets transferred to the trustee for the benefit of the minor child; (ii) that a reading of the first and second provisos to section 9(2) of the Act clearly showed that the allowance to an assessee is not confined only to one residential house HELD : (i) (a) it is true that section 16(3) (b) creates an artificial liability and must therefore be strictly construed. But in construing section 16(3)(b) Courts cannot ignore the clear and unambiguous expressions contained therein and all those expressions must receive a proper interpretation.[9 C D] C.I.T. Bombay vs Manual Dhanji, , C.I.T.,. Gujarat vs Keshavlal Lallubhai Patel, and; C.I.T., West Bengal II vs Prem Bhai Parekh (b) The contention that section 16(3) (b) applies only to those cases where ultimately the corpus of the trust property is also transferred to the wife or the minor child, must be rejected. The provisions of section 16(3)(b) are very clear, and, the only requirement so far as this aspect is concerned is that the assets Must be transferred. to, any person or association of persons and that transfer of assets must be for the benefit of the wife or the 2 minor child or both. In this connection it is pertinent to note the wordings of section 16(3) (a) (iii) and section 16(3) (a) (iv). The former provision clearly refers to assets transferred directly or indirectly to the wife by the husband and the latter provision refers to assets transferred directly or indirectly to the minor child not being a married daughter. But in cl. (b) of section 16(3) the transfer of assets is not to the wife or the minor child or both but to any person or association of persons. Therefore it is clear that when the legislature intended to provide for a direct transfer of assets either to the wife or to the minor child, it has used the expressions as are found in section 16(3) (a) (iii) and section 16(3) (a) (iv). The different phraseology used in cl. (b) of section 16(3) makes it clear that the transfer of assets need not be to the wife or the minor child. Nor does the said clause require that the corpus of the property so transferred to any person or association of persons should ultimately vest in the wife or the minor child [9G 1OB] C.I.T. Bombay vs Sir Mahomed Yusuf Ismail, [1944] 12 I.T.R. 8 approved. (c) From a plain reading of section 16(3) (b) it is clear that what is to be included in computing the total income of the assessee is that part of the income of the trust which is received for the benefit in this case of the minor daughter. It is the share income which has accrued to or has been received by the minor daughter under the trust deed in the relevant accounting year, that has to be included in the total income of the father, the assessee. The expression "so much of the income" occurring in this clause also makes it clear that the said provision relates to the share income of the minor daughter, in this case, and not that of the trustee bank. [11 B C] Tulsidas Kilachand and ors. vs C.I.T. Bombay City 1, and C.I.T. Bombay vs Manilal Dhanji, applied. (ii)A reading of the second proviso to sub section (2) of section

The right of appeal is a matter of substantive right and not merely a matter of procedure, and this right becomes vested in a party when the proceedings are first initiated in, and before a decision is given by, the inferior Court and such a right cannot be taken away except by express enactment or necessary intendment. Section 22(l.) of the Central Provinces and Berar Sales Tax Act, 1947, provided that no appeal against an order of assessment should be entertained by the prescribed authority unless it was satisfied that such amount of tax as the appellant might admit to be due from him, had been paid. This Act was amended on the 25th November, 1949, and section 22(l) as amended provided that no appeal should ])a admitted by the said authority unless such appeal was accompanied by satisfactory proof of the payment of the tax in respect of which the appeal had been preferred. On the 28th of November, 1947, the appellant submitted a return to the Sales Tax Officer, who, finding that the turnover exceeded 2 lacs, submitted the case to the Assistant Commissioner for disposal and the latter made an assessment on the 8th April, 1950. The appellant preferred an appeal on the 10th May, 1950, without depositing the amount of tax in respect of which he had appealed. The Board of Revenue was of opinion that section 22(l.) as amended applied to the case as the assessment was made, and the appeal was preferred, after the amendment came into force, ' and rejected the appeal. Held, (i) that the appellant had a vested right to appeal when the proceedings were initiated, i.e., in 1947, and his right to appeal was governed by the law as it existed on that date ; (ii) that the amendment of 1950 cannot be regarded as a mere alteration in procedure or an alteration regulating the exercise of the right of appeal, but whittled down the right itself, and it had no retrospective effect as the Amendment Act of 1950 did not expressly or by necessary intendment give it retrospective effect, and the 988 appeal could not therefore be rejected for non payment of the tax in respect of which the appeal was preferred. Colonial Sugar Refining Co. Ltd. vs Irving , Nanabin Aba vs Sheku bin Andu (I.L.R. , Delhi Cloth and General Mills Co. Ltd. vs Income tax Commissioner, Delhi (54 I.A. 421), Kirpa Singh vs Rasaldar Ajaipal Singh (A.I.R. 1928 Lab. 627), Sardar Ali vs Dalimuddin (I.L.R. applied. Badraddin Abdul Rahim vs Sitaram Vinayak Apte (I.L.R. disapproved. In re Vasudeva Samiar (A.I.R. 1929 Mad. 381), Ram Singha vs Sankar Dayal (I.L.R. 50 All. 965), Radhakisan vs Sri Dhar (A.I.R. , Gordhan Das vs Governor General in Council (A.I.R. 1950 Punj. 103) and Nagendra Nath Bose vs Monmohan referred to.

In respect of the accounting years ending March 31, 1957 and March 1958 respectively on the voluntary returns submitted by the respondent, the Income Tax Officer 'E ' Ward District II (1) Calcutta completed the assessment for these years (1957 58 and 1958 59) on total incomes of Rs. 7000/ and Rs. 7500/ respectively, the same having been made in the status of unregistered firm consisting of three partners, namely Asha Devi Vaid, Santosh Devi Vaid and Sugni Devi Vaid with equal shares. On August 2, 1962, the Commissioner of Income Tax issued notice to show cause why the said assessments should not be cancelled under section 33B of the Act as he felt that the completed assessments were erroneous as being prejudicial to the interests of the Revenue and the Income Tax Officer 'E ' Ward District II(1) Calcutta had no territorial jurisdiction over the case of the assessee. The notice was served on the assessee on August 3, 1962 and the hearing was fixed by the Commissioner for August 6, 1962. On the ground that none appeared and there was no application for adjournment, the Commissioner passed his order under section 33B ex parte on that date. By his said order the Commissioner cancelled the assessments made by the Income Tax Officer on three grounds (a) that some of the partners were minors and were not competent to enter into any partnership agreement with the result that the status of unregistered firm assigned to the assessee by the Income Tax Officer was clearly wrong and as such the assessments deserved to be cancelled; (b) that the books of accounts were unreliable and they were not properly examined by the Income Tax Officer with the result that the assessments made were prejudicial to the interests of the revenue and (c) that the Income Tax Officer has no territorial jurisdiction over the case which fell in the jurisdiction of Income Tax Officer, District III Calcutta and directed the Income Tax Officer having proper jurisdiction to make fresh assessments after examining the records of the assessee in accordance with law. The appeals preferred to the Appellate Tribunal under section 33B(3) were accepted. Finding that the Commissioner 's order passed at 11.30 A.M. ex parte was bad in as much as the notice served upon the assessee permitted filing of objections at any time during the course of August 6, 1962 and the objections were in fact filed later in the day, the Tribunal remanded the case with the direction to dispose it of afresh after giving due opportunity to the respondent assessee. On a reference to the High Court at the instance of the appellant, the 269 High Court held: (a) the assumption of jurisdiction by the Commissioner under section 33B of the Income Tax Act was valid in law; (b) the Tribunal acted properly in vacating or cancelling the Commissioner 's order, but, (c) the Tribunal did not act properly in directing the Commissioner to act under section 33B(1) because the period of limitation of two years prescribed under section 33(2)(b) for him to act under section 33B(1) had expired. In doing so, the High Court held that the provision of sub section 2(b) was absolute and covered even a revisional order of the Commissioner passed in pursuance of a direction given by any appellate authority. Allowing the appeal by Certificate, the Court ^ HELD: 1. Under sub section (1) of section 33B of the Income Tax Act, power has been conferred upon the Commissioner to revise Income Tax Officer 's orders but the exercise of such power is regulated by the two conditions mentioned therein namely, (a) he must consider the order sought to be revised to be erroneous as being prejudicial to the interests of the revenue and (b) he must give an opportunity to the assessee of being heard before revising it. Sub section (2)(b) prescribes a period of limitation in negative words by providing that "no order shall be made under sub s(1) after the expiry of two years from the date of the order sought to be revised". Sub s.(3) confers on the assessee a right to prefer an appeal to the Appellate. Tribunal against the Commissioners ' order made under sub s.(1) while sub section (4) indicates the power of the Appellate Tribunal in dealing with such appeal by providing that "such appeal shall be dealt with in the same manner as if it were an appeal under sub s.(1) of section 33". Two things stand out clearly on a fair reading of the two concerned provisions, namely, sub s.(2)(b) and sub s.(4). The bar of limitation contained in sub section (2)(b) is on the Commissioner 's power to pass revisional orders under sub section (1) and the same appears to be absolute in the sense that it applies to every order to be made under sub s.(1). At the same time sub s.(4) confers on the Appellate Tribunal very wide powers which it has while dealing with an appeal under section 33(1). In other words, the Appellate Tribunal has power "to pass such orders thereon (i.e. on the appeal) as thinks fit. " The word "thereon" restricts the jurisdiction of the Appellate Tribunal to the subject matter of the appeal which merely means that the Tribunal cannot adjudicate or give a finding on a question which is not in dispute and which does not form the subject matter of the appeal but the words "pass such orders thereon as it thinks fit" include all the powers (except possibly the power of enhancement) which are conferred on the Assistant Appellate Commissioner by section 31 and consequently the Tribunal has authority in exercise of its appellate powers to set aside the order appealed against and direct fresh assessment in the light of the observations made by it in its judgment. In other words, similar power is possessed by the Appellate Tribunal while dealing with the appeal under sub s.(4) of section 33B. [275 A H, 276 A] Hukamchand Mills 's case, ; applied. Two principles of construction are relating to casus omissus and the other in regard to reading the statute as a whole are well settled. Under the first principle, a casus omissus cannot be supplied by the Court except in the case of clear necessity and when reason for it is found in the four corners of the statute itself but at the same time a casus omissus should not be readily inferred and 270 for that purpose all the parts of a statute or section must be construed together and every clause of a section should be construed with reference to the context and other clauses thereof so that the construction to be put on a particular provision makes a consistent enactment of the whole statute. This would be more so if literal construction of a particular clause leads to manifestly absurd or anomalous results which could not have been intended by the Legislature. [277 B, 278 A B] Artemiou vs Procopiou, , Luke vs Inland Revenue Commissioner and 577 Quoted with approval. The object of introducing Section 33B with effect from March 30, 1948 was to confer revisional powers upon the Commissioner to correct the erroneous orders of an Income Tax Officer in so far as they were prejudicial to the interests of the revenue. The language of the sub sec.(1) clearly suggests that the said power was contemplated to be exercised suo motu by the Commissioner inasmuch as the opening words show that it was upto the Commissioner to call for and examine the record of any proceedings under the Act and on examination of the record if he were satisfied that any order passed by an Income Tax Officer was erroneous as being prejudicial to the interests of the revenue he could revise the same after giving an opportunity to the assessee of being heard. It is true that sub s.(2)(b) thereof prescribed a period of limitation on his power by providing that no order shall be made under sub s.(1) after the expiry of the two years from the date of the order sought to be revised by the Commissioner and a literal construction of sub s.(2)(b) also suggests that the bar of limitation imposed thereby was absolute in the sense that it applied to every kind of order to be made under sub s.(1) and no distinction was made between a suo motu order and an order that might be made by him pursuant to a direction given by any appellate or other higher authority. Sub s.(3) conferred on an assessee a right to prefer an appeal to the appellate Tribunal against the Commissioner 's order made under sub section (1) and under sub s.(4) the Tribunal had authority to deal with the impugned order of the Commissioner in such manner as it deemed fit in exercise of its appellate powers; for instance, it could confirm the impugned order, it could annul that order, or it could after vacating it remand the case back to the Commissioner for making a fresh assessment in the light of the observations made by it in its judgment or it could after calling for a remand report, rectify the erroneous order of the Income Tax Officer. Further there was no period prescribed within which an appeal against the impugned order of the Commissioner had to be disposed of by the Tribunal and in the normal course on rare occasions such appeals would have been heard and disposed of before the expiry of two years from the date of the Income Tax Officer 's order which was regard as erroneous by the Commissioner. More often than not such appeals would come up for hearing after the expiry of the said period of two years a fact fully known and within the contemplation of the Legislature when it introduced the section in the Act in 1948. [278 E H, 279 A D] 4. The Legislature did not intend to attenuate or curtail the appellate powers which it conferred on the appellate Tribunal in very wide terms under sub s.(4) by enacting sub section 2(b) prescribing a time limit on the Commissioner 's power to reverse an erroneous order of the Income Tax Officer when the Commissioner was seeking the exercise the same not suo motu but in pursuance of or obedience to a direction from the appellate authority. Any contrary and literal construction would lead to manifestly absurd result, because in a given 271 case, like the present one where the appellate authority (Tribunal) has found (a) the Income Tax Officer 's order to be clearly erroneous as being prejudicial to the interests of the revenue and (b) the Commissioner 's order unsustainable as being in violation of principles of natural justice; it would be difficult for the appellate authority to exercise its powers. Obviously it could not withhold its hands and refuse to interfere with Commissioner 's order altogether, for, that would amount to perpetuating the Commissioner 's erroneous order, nor could it merely cancel or set aside the Commissioner 's wrong order without doing anything about the Income Tax Officer 's order, for that, would result in perpetuating the Income Tax Officer 's order which had been found to be manifestly erroneous as being prejudicial to the revenue. Moreover, in exercise of its appellate powers it was open to the Tribunal itself to call for a remand report from either the Commissioner or the Income Tax Officer and rectify the Income Tax Officer 's erroneous order after giving opportunity to the assessee and in doing so no question of limitation would arise. It was equally open to the Tribunal to set aside the Commissioner 's order and remand the case directly to the Income Tax Officer giving requisite direction to rectify his erroneous order and thereupon the Income Tax Officer would carry out the Tribunal 's direction for, admittedly, the bar of limitation under sub s.(2)(b) was only on the Commissioner 's power to make an assessment afresh and not on the Income Tax Officer. If this be the correct position then it is gravely anomalous that the Tribunal should not be in a position to set aside the Commissioner 's order and remand the case back to the Commissioner for making a fresh assessment because in the meantime two years ' period of limitation has expired, for, it would mean that the Tribunal was prevented from achieving the desired effect directly through the Commissioner but it could do so indirectly through the Income Tax Officer. A literal construction placed on sub s.(2) (b) would lead to such manifestly absurd and anomalous results, which, were not intended by the Legislature. Therefore, the words of sub section 2(b) should be construed as being applicable to suo motu orders of the Commissioner in revision and not to orders made by him pursuant to a direction or order passed by the Appellate Tribunal under sub s.(4) or by any other higher authority. Such construction will be in consonance with the principle that all parts of the section should be construed together and every clause thereof should be construed with reference to the context and other clauses thereof so that the construction put on that particular provision makes a consistent enactment of the whole statute. [279 D H, 280 A G] Commissioner of Income Tax vs Kishoresingh Kalyan Singh Solanki, ; approved. It is well settled that the principle that the fiscal statute should be construed strictly is applicable only to taxing provisions such as a charging provision or a provision imposing penalty and not to those parts of the statute which contain machinery provisions and by no stretch could section 33B be regarded as charging provision. [281 C D] 6. A casus omissus has not to be readily inferred and it could not be inferred from the mere fact that both sections 33B and 34(3) together with the second proviso were inserted simultaneously in the Act by the same Amending Act of 1948 and that in the case of former a relaxing provision was not made as was made in the case of the latter provision, firstly because the two provisions operated in distinct fields and secondly it would be improper to do so without compar 272 ing the various stages of amendments through which each set of these Provisions had undergone since inception. The further aspect the Legislature has in the 1961 Act made the requisite provision removing or relaxing the bar of limitation, in section 263(3), is, not of much importance. Irrespective of the question whether the second proviso to section 34(3) was enacted ex majore cautella or not (over which conflicting views obtain) it is clear that section 263(3) of the 1961 Act must be regarded as an ex majore cautella provision. Admittedly, at the time when the said provision was enacted in the 1961 Act, the Bombay view held the field and there was no decision to the contrary of any other High Court. Obviously, therefore, the enactment of section 263(3) must be regarded as declaratory of the law which was already prevailing and this position has been clarified in the Notes on Clauses of the Income Tax Bill 1961 where it has been stated that sub cl. (3) of section 263 was new and had been added to get over the difficulty experienced in (wrongly stated 'caused by ') the Bombay High Court 's decision in Solanki 's case. The enactment of an ex majore cautella provision in the 1961 Act would, therefore, be a legislative recognition of the legal position that obtained as a result of judicial pronouncement qua the 1922 Act. [281 E H, 282 A] C.I.T. vs Sabitri Devi Agarwalla, over ruled. Pooran Mall 's case, ; relied on.

The appellant assessee was a partnership firm carrying on business inter alia of manufacture and erection of cranes. During the assessment year 1965 66, the assessee entered into two contracts for supply and erection of 3 motion electrical overhead travelling cranes. The assessee carried out both the contracts and fabricated and erected 3 motion electrical overhead travelling cranes according to the contract specifications. A question arose in the assessment of the assessee to sales tax for the assessment year 1965 66 whether the amount of Rs. 1,34,500/ received by the assessee under the contract with M/s. Kamlapati Motilal Sugar Mills and the amount of Rs. 2,38,000/ received under the contract with M/s. Upper Doab Sugar Mills Ltd., formed part of the turnover of the assessee and was liable to sales tax. The Sales Tax Officer took the view that the contracts were essentially contracts of sale of ready made cranes and the erection of the cranes at the factory site was merely incidental to the sales and the amounts of Rs. 1,34,500/ and Rs. 2,38,000/ received under the contracts were, therefore taxable. This view was upheld by the Assistant Commissioner in appeal, but in revision the Additional Judge (Revisions) held that each of the two contracts was a works contract not involving any sale of goods and hence the amounts were not exigible to sales tax. On a reference to the High Court at the instance of the Commissioner of Sales Tax, the High Court took the view that each of the two contracts was for supply of 3 motion electrical overhead travelling cranes as a complete unit and "the predominant object was supply of crane as complete unit" and "the bestowing of labour and skill in the execution of the contract" appeared to have been incidental to the supply of the machine. " The High Court observed that in its view parties "intended the property to pass in the subject matter of the contract, namely, the completed crane as movable property" and concluded that it was a contract of sale of goods and not a contract for work and labour. The High Court accordingly answered both the questions referred to it against the assessee and in favour of the Revenue. Allowing the appeal by special leave the Court, ^ HELD: 1. The primary test to find out whether a contract is a contract of sale or a contract for work and labour is whether the contract is one whose main object is transfer of property in a chattel as a chattel to the buyer, though some work may be required to be done under the contract as ancillary or incidental to the sale or it is carrying out of work by bestowal of labour and service and materials are used in execution of such work. The Court 's have evolved some subsidiary tests to resolve the difficulty arising in the application of this primary test as there are a large number of cases which are on the 622 border line and fall within what may be called "grey area". One such test formulated by the Supreme Court in Commissioner of Sales Tax, Madhya Pradesh vs Purshottam Premji, 26 STC 38 is: "The primary difference between a contract for work or service and a contract for sale of goods is that in the former there is in the person performing work or rendering service no property in the thing produced as a whole. .In the case of a contract for sale, the thing produced as a whole has individual existence as the sole property of the party who produced it (at some time before delivery, and the property therein passes only under the contract relating thereto to the other party for price." [628 C G] Commissioner of Sales Tax, M.P. vs Purshottam Premji, 26 STC 38; State of Rajasthan vs Man Industrial Corporation 24 STC 349; Sentinel Rolling Shutters & Engineering Co. (P) Ltd. vs Commissioner of Sales Tax, Maharashtra, ; ; applied. Each of the two contracts for fabrication and erection of a 3 motion electrical overhead travelling crane is not a contract for sale but a contract for work and labour, (a) It is essentially a transaction for fabricating component parts and putting them together and erecting them at the site so as to constitute a 3 motion electrical overhead travelling crane. The transaction is no different than one for fabrication and erection of an open godown or shed with asbestos or tin sheets fixed on columns, (b) It is not as if a 3 motion electrical overhead travelling crane is fabricated by the manufacturer and then sold and delivered to the customer as a chattel, (c) The fabrication and erection of a 3 motion electrical overhead travelling crane is a highly skilled and specialised job and the component parts have to be taken to the site and they are assembled and erected there and it is only when this process is complete, then a 3 motion electrical overhead travelling crane comes into being. The process of assembling and erection requires a high degree of skill and it is not possible to say that the erection of a 3 motion electrical overhead travelling crane at the site is merely incidental to its manufacture and supply. The fabrication and erection is one single indivisible process and a 3 motion electrical overhead travelling crane comes into existence only when the erection is complete. The erection is thus a fundamental and integral part of the contract, because without it the 3 motion electrical overhead travelling crane does not come into being. The manufacturer would undoubtedly be the owner of the component parts when he fabricated them but at no stage does he become the owner of 3 motion, electrical overhead travelling crane as a unit so as to transfer the property in it to the customer. The 3 motion electrical overhead travelling crane comes into existence only when the component parts are fixed in position and erected at the site, but at that stage it becomes the property of the customer because it is permanently embedded in the land belonging to the customer. The result is that as soon as 3 motion electrical overhead travelling crane comes into being, it is the property of the customer and there is, therefore, no transfer of property in it by the manufacturer to the customer as a chattel. [630C D, 631E H 632 A] Sentinel Rolling Shutters & Engineering Co. (P) Ltd. vs Commissioner of Sales Tax, Maharashtra, [1979] 1 SCR page 644: followed.

l Appeals Nos. 153 and 154 of 1960. Appeals by special leave from the Award dated February 5,1959, of the Industrial Tribunal, Bombay, in Reference (I.T.) No. 212 of 1958. S.D. Vimadalal, section N. Andley and J. B. Dadachanji, for the appellant in C. A. No. 153/60 and Respondent in C.A. No. 154/60. M.C. Setalvad, Attorney General for India and Janardan Sharma, for the respondents in C.A. No. 153/ 60 and Appellants in C.A. No. 154/60. December 9. The Judgment of the Court was delivered by WANCHOO, J. The only question raised in these two appeals by special leave is about the quantum of bonus to be paid to the workmen (hereinafter called the respondents) by Voltas Limited (hereinafter called the appellant) for the financial year 1956 57. The dispute between the parties was referred to the adjudication of the industrial tribunal Bombay. The appellant, it appears, had already paid 4 1/2 months ' basic wages as bonus for the relevant year but the respondents claimed it at the rate of six months ' basic wages subject to the minimum of Rs. 250 per employee. 169 The tribunal went into the figures and after making the relevant calculations came to the conclusion that the available surplus worked out according to the Full Bench formula justified the grant of bonus equal to five months ' basic salary; it therefore ordered payment of this amount excluding the amount already paid. The appellant in its appeal claims that the tribunal should have allowed nothing more than what the appellant had already paid; the respondents in their appeal on the other hand claim that they should have been allowed six months ' bonus. The principles on which bonus has to be calculated have already been decided by this Court in the Associated Cement Companies Ltd. vs Their Workmen (1) and the only question that arises for our consideration is whether the tribunal in making its calculations has acted in accordance with those principles. This leads us to the consideration of various points raised on behalf of the parties to show that the tribunal had not acted in all particulars in accordance with the decision in the Associated Cement Companies ' case (1). We shall first take the points raised on behalf of the appellant. The first point raised is that the tribunal was wrong in not allowing a sum of rupees one lac paid as contribution to political fund as an item of expense. It is urged that this is a permissible item of expense and therefore the tribunal should not have added it back in arriving at the gross profits. We are of opinion that the tribunal was right in not allowing this amount as expenditure. In effect this payment is no different from any amount given in charity by an employer, and though such payment may be justified in the sense that it may not be against the Articles of Association of a company it is nonetheless an expense which need not be incurred for the business of the company. Besides, though in this particular case the donation considering the circumstances of the case was not much, it is possible that permissible donations may be out of all proportion and may thus result in reducing the available (1) [1059] 2 S.C.R. 925. 22 170 surplus from which low paid workmen are entitled to bonus. We are therefore of opinion that though the law or the rules of the company may permit the appellant to pay such amounts as donations to political funds, this is not a proper expense to be deducted when working out the available surplus in the light of the Full Bench formula. The tribunal 's decision therefore on this point must be upheld. The second contention of the appellant relates to deduction of what it calls extraneous income. This matter has been considered by this Court in The Tata Oil Mills Co. Ltd. vs Ite Workmen and Others (1) and what we have to see is whether in accordance with the decision in that case, the appellant 's claim for deducting certain amounts as extraneous income is correct. Learned counsel for the appellant has pressed four items in this connection. The first item relates to a sum of Rs. 3.47 lacs. It is said that this was not the income of the year and therefore should not have been taken into account in arriving at the gross profits. The exact position with respect to this item is not clear and in any case learned counsel for the appellant appearing before the tribunal conceded that the amount could not be deducted from the profits. In view of that concession we are not prepared to allow the deduction of this amount as extraneous income. The second item is a sum of Rs. 1.76 lacs in respect of the rebate earned on insurance by the appellant with other companies by virtue of its holding principal agency. Obviously this is part of the insurance business of the appellant and the work in this connection is entirely handled by the insurance department of the appellant; as such the tribunal was right in not allowing this amount as extraneous income. The third item is a sum of Rs. 3 33 lacs being gain on foreign exchange transactions. These transactions are carried on in the normal course of business of the appellant. As the tribunal has rightly pointed out, if there had been loss on these transactions it would have certainly gone to reduce the gross profit,%; if there is a profit it has to be taken into account as (1)[1960] 1 S.C.R. 1. 171 it has arisen out of the normal business of the appellant. The tribunal was therefore right in not allowing this amount as extraneous income. The last item is a sum of Rs. 9.78 lacs being commission on transactions by government agencies and other organisations with manufacturers abroad direct. It seems that the appellant is the sole agent in India of certain foreign manufacturers and even when transactions are made direct with the manufacturers the appellant gets com mission on such transactions. The tribunal has held that though the transactions were made direct with the foreign manufacturers, the respondents were entitled to ask that the commission should be taken into account inasmuch as the respondents serviced the goods and did other work which brought such business to the appellant. It seems that there is no direct evidence whether these particular goods on which this commission was earned were also serviced free by the appellant like other goods sold by it in India. We asked learned counsel for the parties as to what the exact position was in the matter of free service to such goods. The learned counsel however could not agree as to what was the exact position. It seems to us that if these goods are also serviced free or for charges but in the same way as other goods sold by the appellant in India, the respondents are entitled to ask that the income from commission on these goods should be taken into account. As however there is no definite evidence on the point we cannot lay down that such commission must always be taken into account. At the same time, so far as this particular year is concerned we have to take this amount into account as the appellant whose duty it was to satisfy the tribunal that this was extraneous income has failed to place proper evidence as to servicing of these goods. A claim of this character must always be proved to the satisfaction of the tribunal. In the circumstances we see no reason to interfere with the order of the tribunal so far as this part of its order is concerned. Two other points have been urged on behalf of the 172 appellant with respect to the interest allowed on capital and on working capital. The tribunal has allowed the usual six per cent on capital and four per cent on working capital. The appellant claimed interest at a higher rate in both cases. We agree with the tribunal that there is no special reason why any higher rate of return should be allowed to the appellant. This brings us to the objections raised on behalf of the respondents. The main objection is to a sum of Rs. 4.4 lacs allowed by the tribunal as income tax, which is said to be with respect to the previous year. It appears that there is a difference between the accounting year of the appellant and the financial year. In the particular year in dispute there was an increase in the rate of tax which resulted in extra payment which had to be paid in this year. In these special circumstances, therefore, the tribunal allowed this amount and we see no reason to disagree. Next it is urged that the tribunal had allowed a sum of Rs. 4.76 lacs for making provision for gratuity as a prior charge. This is obviously incorrect, as this Court has pointed out in the Associated Cement Companies ' case (1) that no fresh items of prior charge can be added to the Full Bench formula, though at the time of distribution of available surplus such matters, as provision for gratuity and debenture redemption fund, might be taken into account. This disposes of the objections relating to the accounts. Two other points have been urged on behalf of the respondents. They are with respect to (1) salesmen and (2) apprentices. The tribunal has excluded these two categories from the award of bonus made by it. The respondents contend that they should also have been included. We are of opinion that the decision of the tribunal in this behalf is correct. So far as salesmen are concerned, the tribunal has examined the relevant decisions of other tribunals and has come to the conclusion that salesmen who are given commission on sales are not treated on par with other workmen in the matter of bonus. It has also been found that the clerical work done by salesmen is small and incidental to their duty as such; salesmen have (1) 173 therefore been held not to be workmen within the meaning of the Industrial Disputes Act. The tribunal has pointed out that the commission on an average works out at about Rs. 1,000 per mensem in the case of salesmen and therefore their total emoluments are quite adequate. Besides, the salesmen being paid commission on sales have already taken a share in the profits of the appellant on a fair basis and therefore there is no justification for granting them further bonus out of the available surplus of profits. As for the apprentices, the tribunal has held that there is a definite term of contract between them and the appellant by which they are excluded from getting bonus. Besides, as the appellant has pointed out, the apprentices are merely learning their jobs and the appellant has to incur expenditure on their training and they hardly contribute to the profits of the appellant. The view of the tribunal therefore with respect to apprentices also is correct. We now turn to calculation of the available surplus according to the decision in the Associated Cement Companies ' case (1). The gross profit found by the tribunal will stand in view of what we have said with respect to various items challenged by either party. The chart of calculation will be as follows: in Lacs Gross profits Rs. 109.97 Less depreciation 3.28 Balance 106.69 Less income tax @ 51.15 per cent. 54.20 Balance 52.49 Less dividend tax, wealth tax etc. 7.50 Balance 44.99 Less return on capital at 6 per cent. 13.20. Balance 31.79 Less return on working capital at 4 per cent. 1.66 Available surplus 30.13. (1) 174 Out of this, the tribunal has allowed five months ' basic wages as bonus to the respondents which works out at Rs. 16.80 lacs. In the circumstances it cannot be said that the award of the tribunal is not justified. We do not think that we would be justified in giving anything more than what the tribunal has awarded, because the appellant has to provide for a fund for gratuity, for it is a new concern which took over the old employees of another concern when it was started and has thus a greater liability towards gratuity than otherwise would be the case. We are therefore of opinion that the tribunal 's award of five months ' basic wages as bonus for the year in dispute should stand. We therefore dismiss both the appeals. In the circumstances we pass no order as to costs. Appeals dismissed.

The question in this appeal was whether the Tribunal was wrong in not allowing the amount paid to a political fund which was permissible as an item of expense and for disallowing the claim for deduction of certain amounts as extraneous income and whether the salesmen and apprentices were entitled to bonus. 168 Held, that though the law or the rules of the company per mitted the employer to pay amounts as donations to political funds, it was not a proper expense to be deducted when working out the available surplus in the light of the Full Bench formula. Held, further, that neither the profits from transactions which were carried out in the normal course of business, nor the commission earned on transactions entered directly with foreign manufacturers, where the workmen had serviced the goods and did other work which brought such business to the employer, could be allowed as extraneous income. Held, also that the salesmen who were given commission on sales had already taken a share in the profits of the company on a fair basis and there was no justification for granting them further bonus out of the available surplus of profits. That the apprentices hardly contributed to the profits of the company. Thus they were not entitled to any bonus. The Associated Cement Companies Ltd. vs Their Workmen, and The Tata Oil Mills Co. Ltd. vs Its Workmen and Ors., ; , applied.

Aggrieved by an Award of 195, the employees placed before the Company a fresh charter of demands which was mutually settled by a written agreement which provided, inter alia, that the existing rate of dearness allowance should prevail which was adjustable to any future substantial change in the cost of living index of the working class. As the cost of living increased disputes arose, and in spite of the said Award of 1951, 137 which was not terminated according to law, the dispute arising out of the said written agreement was referred for adjudication by the Government to the Second Industrial Tribunal, Calcutta, in September, 1956. In April 1957, the Government transferred the dispute from the Second Industrial Tribunal to the Fifth Industrial Tribunal. The Company, inter alia, contended that the Government had no power to transfer the dispute from one Tribunal to another and that the reference was bad as the 1951 Award had not been duly terminated. The Industrial Disputes (Amendment and Miscellaneous Provisions) Act (36 of 1956) amending the Industrial Disputes Act (14 Of 1947) came into force on August 28, 1956, giving authority to the Government to transfer a reference from one Tribunal to another, which was followed by a further amending Act, being Industrial Disputes (Amendment) Act (18 of 1957) whereunder among other things a new definition of 'Tribunal ' was given, whereby the Industrial Tribunal constituted prior to March 10, 1957, under section 7A of Act 14 Of 1947 was included. Held, that as a result of the amendments to the , the Government had authority to transfer a case from one Tribunal to another. 'Tribunal ' as defined by section 2(r) of the , as amended by Act 36 of 1956, read with amending Act 18 of 1957, empowers the Government to transfer a reference from one Tribunal to another. Where, in spite of a previous award, the employees after raising fresh demands entered into a new agreement with the employer which started a fresh chapter regulating the relationship of the parties, the previous award, though not terminated in accordance with the provisions of law, must be deemed to have been superseded. Held, further, that though article 136 of the Constitution is couched in the widest terms and confers a discretionary power, (which cannot exhaustively be defined) on the Supreme Court to grant special leave to appeal from the order of a tribunal, but it is necessary for the Supreme Court to exercise its said discretionary jurisdiction only in cases (a) where there is a violation of the principle of natural justice, (b) raises an important principle of industrial law requiring elucidation and final decision by the Supreme Court, or (c) discloses such other exceptional or special circumstances which merit the final decision by the Supreme Court. Such discretionary reserve power cannot obviously be so construed as to confer a right of appeal to any party from the decision of a Tribunal, where he has none under the law. is intended to be a self contained one and it seeks to achieve social justice on the basis of collective bargaining, conciliation and arbitration. Awards are given on circumstances peculiar to each dispute and the Tribunals are to a 18 138 large extent free from restrictions of technical considerations imposed on courts. A free and liberal exercise of the discretionary powers by the Supreme Court may materially affect the fundamental basis of the decision, namely, quick solution to such disputes to achieve industrial peace. Where an Industrial Tribunal on the consideration of the entire material placed before it and having regard to the overall picture, came to a conclusion of facts, the Supreme Court will not interfere with such finding of fact nor will it be justified to allow to make a new case for the first time before it. Pritam Singh vs State of Madras, ; ; Hem Raj vs State of Ajmer, and Sadhu Singh vs State of PEPSU, A.I.R. 1954 S.C. 272, referred to.

At the sale held by the Official Liquidator under the orders of the Bombay High Court, the appellant a public limited company, purchased the "Hirji Textile Mills" minus its goodwill and its workmen who were discharged earlier. The appellant invested some fresh capital in the business, renovated the machinery and employed workmen on fresh contracts which included 70% of the workmen formerly working in that factory and commenced to produce certain never types of things at the factory w.e.f. November 12, 1955, after obtaining a new licence to run it. When by the end of February, 1956 the Regional Provident Fund Commissioner made certain enquiries about the working of the factory in order to enforce the provisions Provident Fund Act against the appellant, the appellant wrote to him stating that The factory was an infant factory having been established on November 12,1955 and the period of three years had not elapsed from that date within the meaning of Section 16(1) (b) of the Act. When the Regional Provident Fund Commissioner was not convinced about its explanation, the appellant first filed a writ petition under Article 226 of the Constitution before High Court of Bombay in Miscellaneous Application No. 76 of 1957 challenging the applicability of the Act to the factory and after withdrawing it, filed Short Cause Suit No. 2088 of 1958 before the City Civil Court at Bombay for a declaration that the Act and the scheme framed thereunder could not be enforced against the factory until the expiry of three years from November 12, 1955 and that the appellant was not liable to make any contributions under the Act. The trial Court dismissed the suit holding, that in view of the several facts established in the case it could not be presumed that a new factory was established by the 517 appellant on November 12, 1955, that the continuity of the old factory had A not been broken and as such the appellant was liable to make contributions under the Act. The judgment of the trial Court was affirmed by the Bombay High Court in Appeal No.406/64. Hence the appeal by special leave. Dismissing the appeal, the Court, ^ HELD: 1.1. Every statute should be construed so as to advance the object with which it is passed and as far as possible, avoiding any construction which would facilitate evasion of the Act. [521 C] 1.2. In consonance with the directions enshrined in Article 43 of the Constitution, Employees ' Provident Fund Scheme is intended to encourage the habit of thrift amongst the employees and to make available to them either at the time of their retirement or earlier, if necessary, substantial amounts for their use from out of the provident fund amount standing to their credit which is made up of the contributions made by the employers as well as the employees concerned. The Act being a beneficent statue and section 16 of the Act being a clause granting exemption to the employer from the liability to make contributions, section 16 should receive a strict construction [521A B, 522A] 2.1. The criterion for earning exemption under section 16(1)(b) of the Act is that a period of three years has not yet elapsed from the date of establishment of the factory in question. It has no reference to the date on which the employer who is liable to make contributions acquired title to the factory which once established may be interrupted on account of factory holidays, strikes, lock outs, temporary breakdown of machinery, periodic repairs to be effected to the machinery in the factory, non availability of raw materials, paucity of finance etc., and also on account of an order of court as in the present case. Interruptions in the running of factory which is governed by the Act brought about by any of these reasons without more cannot be construed as resulting in the factory ceasing to the factory governed by the Act and on its restarting it cannot be said that a new factory is or has been established. On the resumption of the manufacturing work in the factory it would continue to be governed by the Act which does not state that any kind of stoppage in the working of the factory would give rise to a fresh period of exemption. In other words the period of three years should be counted from the date on which the factory was first established and the fact that there had been a change in the owners p makes no difference to the counting of period. [522A D, 524D E] Lakshmi Rattan Engineering Work vs Regional Provident Fund Commissioner, Punjab & Ors. SC, reiterated. Chaganlal Textile Mills Pvt. Ltd. Y.P.A. Bhaskar Misc. Appln. No. 289 of 1956 disposed of on November 5, 1956: M/s. Bharat Board Mills Ltd. vs The Regional Provident Fund Commissioner & Ors. Vegetable Products Ltd. vs Regional Provident Fund Commissioner W. Bengal & Ors. ; Jamnadas Agarwala & Anr. vs The Regional Provident Fund Commissioner West Bengal & Ors. ; 518 Robindra Textile Mills vs Secretary Ministry of Labour Govt. of India New Delhi & Anr A.I.R. 1936 Punjab 55. Hindustan Electric Co. Ltd. vs Regional Provident Fund Commissioner Punjub & Anr. A I.R 1959 Punjab 27 Regional Provident Fund Commissioner Punjab & Anr. v Lakshmi Rattan Engineering Works Ltd M/s. R.L. Sahni & Co vs Union of India represented by the Regional Provident Commissioner Madras & Anr. A.l.R. ; Kunnath Textile vs Regional Provident Fund Commisioner ; The New Ahmedabad v Bansidar Mills Pvt Ltd. Ahmedabad vs Union of India & Ors. A I R. 1968 Gujarat 71; approved. Provident Fund Inspector Trivendrum vs Secretary N.S. section Co operative Society Changanacherry ; Vithaldas Jagnnathdas & Anr. vs The Regional Provident Fund Commissioner Madras & Anr. ; distinguished.

The appellant Company issued a letter to its Contractor containing the terms and conditions of a contract of loading packed cement bags from its Packing Plants Into wagons or trucks. Under Clause 12 there was a stipulation that the Contractor shall be paid a sum for his work at a flat rate of 41 paise for each tonne of cement handled In Packing Plant No.1 and 30 paise for each tonne of cement handled in Packing Plant No.2 Clause 13 thereof, which contained a recital that the rate of loading in Clause 12 had been worked out on the basis of daily basic wages of Rs.2.35 paise, DA of Rs.1.21 paise and H.R.A of Rs.0.50 paise per day per worker, stipulated a terms of reimbursement by the appellant to the Contractor of the difference in DA over the amount of Rs.1.21 paise and annual increment etc. payable from mouth to month to every worker by him. The Contractor carried out his work and the appellant made payments of the sums payable to him under the contract. But no deductions of tax were made under Section 194C(1) of the Income Tax Act, 1961. The Income Tax Officer served two notices One in respect of assessment years 1973 74 and 1974 75 and the other for 1974 75 to 1977 78 on the principal officer of the appellant Company to show cause as to why action should not be taken against the appellant for non compliance with Section 194C(1).The appellant filed a Writ Petition before the High Court of Patna seeking the quashing of the notices but the same was dismissed. In appeal to this Court it was contended on behalf of the appellant 538 539 that (1) the 'work ' for the carrying of which the sum is required to be credited to the account of or paid to a Contractor under Section 194C(1) of, the Act ' is only a 'works contract ' and hence deduction "under that sub section could arise only to the extent where the sum credited to the account of or paid to a Contractor for, executing such works contract ' is comprised of the element of Income of the Contractor, (2) that the words 'on income. comprised therein ',appearing immediately after the words ' deduct an amount equal to two per cent of such sum as income tax in the concluding part of the sub section must be taken to mean the percentage amount deductible on the Income received by the Contractor under the contract and not on the sum credited 'to the account of 'or paid to the Contractor. Dismissing the appeal, this Court, HELD. 1. Them is nothing fit sub section (1) of Section 194C to show that the contract to carry out a work or the contract to supply labour to carry out a work should be confined to 'works contract '.There is no mason to curtail or to cut down the meaning of plain words used in the Section. .Any work ' means any work and not &."works contract ', which has a special connotation in the tax law. 'Work ' envisaged In the sub section, therefore has. a wide import and covers 'any work ' which one or the other of the organisations specified in the sub section can get carried out through a Contractor under a contract and further It includes obtaining by any of such organisations supply of labour under a contract with a Contractor for carrying out its work which, would have fallen outside the 'work ', but forks specific inclusion in the sub section. [544 B E] Brij Bhushan Lal Parduman Kumar etc. vs C.I. T., Haryana, Himachal Pradesh and New Delhi [1979] 2 S.C.R. 16, distinguished. The words in the sub section 'on income comprised therein ' appearing Immediately after the words 'deduct an amount equal to two per cent of such sum as income tax ' from their purport, cannot be understood as the percentage amount deductible from the income of the Contractor out of the sum credited to his account or paid to him in pursuance of the co Moreover the concluding part of the sub section requiring deduction of an amount equal to two per cent of such sum as income tax by, use of the words 'on income comprised therein ' makes It obvious that the amount equal to two per cent of the sum required to be deducted Is a 540 deducts at source. Hence on the express language employed in the sub section, it, is impossible to hold that the amount of the two per cent required to be deducted by the prayer out of the sum credited to the account of or paid to the Contractor has to be confined to his income component out of that sum, [545 D G] 2.1. There is also nothing in the language of the sub section which permits exclusion of, an amount paid on behalf of the organisaiton to the Contractor according to, the termsand conditions ofthe contract in reimbursement, of. the amount paidby to workers,from, the sum envisaged therein. [545 G H, 546 A]

Under section 12(5) read with 10(1) of the Industrial Disputes Act, if on consideration of a failure report u/s 12(4) from the conciliation officer, the appropriate Government is satisfied and is of opinion that there is an industrial dispute and a case for reference, it may make such reference to the labour court. On considering the "failure report", of the conciliation proceedings in respect of the appellant, an Electrical foreman, the respondent state informed him that his duties being supervisory with wages more than Rs. 500/ his case was not covered by the definition of the terms "workman" under the Industrial Disputes Act and therefore, not a fit case for adjudication. The appellant assailed the said orders under Art.226, which was dismissed. On appeal by special leave the appellant contended that the question whether an employee is a workman or not was a disputed question of fact and law and, therefore could only be decided by a labour court and on a reference only but not by the State Government while exercising its powers u/s 12(5). Dismissing the appeal, the Court ^ HELD: (1) The order of the Government acting under section 10(1) read with section 12(5) of the Industrial Disputes Act passed after subjective satisfaction is an administrative order and not a judicial or a quasi judicial one. [1012A] Sate of Madras vs C. P. Sararthy, and State of Bombay vs K. P. Krishnan & ors. [followed]. (ii) In entertaining an application for a writ of mandamus against an order made by the appropriate Government under section 10(I) read with section 12(S) of the Act the court does not sit in appeal over the order and is not entitled to consider the propriety or the satisfactory character of the reasons. If it appears from the reasons given that the appropriate Government took into account any consideration irrelevant or foreign, then the court may in a given case consider the case for a writ of mandamus. [1012 A C] Bombay Union of Journalists ors vs The State of Bombay

The respondent company, in its factory set up at Madras 1959, introduced slab system of dearness allowance (DA) i.e. the DA paid to the workmen was linked to the cost of living index as well as the basic pay. The double linked DA scheme, being consciously accepted as basic constituent by the company and its workmen in various settlements between them, became basic feature of the wagestructure and remained operative in the company for about 30 years, In the year 1983, a dispute arose between the company and its workmen. The matter was referred to the industrial Tribunal. One of the issues before the Tribunal was based on the demand of the Management for restructuring of the dear ness allowance scheme and to frame a new scheme. The Tribu nal abolished the existing slab system of DA and directed the dearness allowance to be linked only to the cost of living index at 33 paise per point over 100 points at the Madras city cost of living index 1936 base. Before the High Court, both the parties agreed not to press their respective writ petitions except on the issue of restructuring of 130 DA. Upholding the findings of the Tribunal on the sole surviving issue, the Single Judge dismissed the workmen 's writ petition. The intra Court appeal filed by the workmen was also dismissed. grieved, the workmen filed the appeal by special leave to this Court. It was contended on behalf of the workmen that the Tribunal and High Court grossly erred in taking Rs. 26 as a pre war wage of a worker in Madras region and holding that the rate of neutralization on the basis of cost of living index in December, 1984 was 192%; that even assuming that there was over neutralization, the existing pay structure/DA scheme could not be revised to the prejudice of the workmen unless their pay structure was within the concept of 'living wage ' and, in addition, it was proved that financially the company was unable to bear the burden; and that the company could not be permitted to abolish the DA scheme to the detriment of the workmen much less on the plea that the said scheme was more beneficial than the DA schemes adopted by other industries in the region. The respondent, contended that the company had proved to the satisfaction of the Tribunal that financially it was not in a position to bear the burden of existing DA scheme; that its workmen were in a high wage island and as such the revision of DA scheme was justified. It was also contended that so long as there was some basis and material to vali date the award, the jurisdiction under Article 136 of the Constitution stood repelled. On the question; whether the Management is entitled to restructure the DA scheme to the prejudice of the workmen on the ground that the existing system had resulted in over neutralization thereby landing the workmen in the high wage island Allowing the appeal of the workmen, this Court, HELD: 1.1. The management can revise the wage structure to the prejudice of the workmen in a case where due to financial stringency it is unable to bear the burden of the existing wage. But in an industry or the employment where the wage structure is at the level of minimum wage, no such revision at all, is permissible not even on the ground of financial stringency. [p. 142 E] Monthly Rated workmen at the Wadala factory of the Indian Hume 131 Pipe Co. Ltd. vs Indian Hume Pipe Co. Ltd., Bombay, ; , relied on. M/s Crown Aluminium Works vs Their Workmen, ; & Ahmedabad Mills Owners ' Association etc. vs The Textiles Labour Assosication; , , referred to. Killick Nixon Ltd. vs Killick & Allied Companies Employ ees Union, , distinguished. 1.2 The employees are entitled to the minimum wage at all times and under all circumstances. An employer who cannot pay the minimum wage has no right to engage labour and no justification to run the industry. [p. 137 C] 1.3 It is for the management, seeking to restructure the DA scheme to the disadvantage of the workmen, to prove to the satisfaction of the tribunal that the wage structure in the industry concerned is well above minimum level and the management is financially not in a position to bear the burden of the existing wagestructure. [p. 142 F] 2.1 'The concept of 'minimum wage ' is no longer the same as it was in 1936. Even 1957 is way behind. A worker 's wage is no longer a contract between an employer and an employee. It has the force of collective bargaining under the labour laws. Each category of the wage structure has to be tested at the anvil of social justice which is the live fibre of our society today. [pp. 136 H, 137 A] 2.2 The Tripartite Committee of the Indian Labour Con ference ' 1957 has formulated five norms for the fixation of 'minimum wage ' (i) three consumption units for one earner disregarding earnings of women, children and adolescents; (ii) minimum food requirement based on net intake calories; (iii) clothing requirement at 72 yards per annum for an average working family of four; (iv) house rent correspond ing to minimum area provided for under the Government 's Industrial Housing Scheme; (v) 20% of total minimum wage for fuel, lighting and other miscellaneous items. [p. 136 D G] Express Newspapers (P) Ltd. vs Union of India, , followed. Standard Vacuum Refining Co. of India vs Its Workmen & Anr., ; , relied on. 132 Keeping in view the socio economic aspect of the wage structure the following additional component has also to be taken into account: "(vi) children education, medical require ment, minimum recreation including festivals/ceremonies and provision for old age, marriages etc. should further constitute 25% of the total minimum wage," The wage structure which approximately answers these six components is nothing more than a minimum wage at subsist ence level. [p. 137 A C] 2.3 In spite of the promise by the Constitution of a living wage and a 'socialist ' framework to enable the work ing people a decent standard of life, industrial wage, looking as a whole, has not yet risen higher than the level of minimum wage. [p. 137 D E] 3.1 Purchasing power of today 's wage cannot be judged by making calculations which are solely based on 30/40 years old wagestructure. The only reasonable way to determine the category of wage structure is to evaluate each component of the category concerned in the light of the prevailing prices. There has been skyrocking rise in the prices and the inflation chart is going up so fast that the only way to do justice to the labour is to determine the money value of various components of the minimum wage in the context of today. [p. 140 F H] 3.2 In the instant case, the Company neither pleaded nor argued before the Tribunal that its financial position had so much deteriorated that it was not possible for it to bear the burden of the slab system of DA; nor did the Tribunal deal with this aspect of the matter while considering the demand of the Company for re structuring the DA scheme. [p. 144 F G] 3.3 Although the DA paid by the Company was somewhat higher than what was being paid by the other similar indus tries in the region, yet it could not be shown that what was being paid by the Company was higher than what would be required by the concept of need based minimum wage. In any case there is a very long way between the need based wage and the living wage. [p. 145 AB] 4. The Tribunal and the High Court acted in total oblivion of the legal position. Consequently, manifest injustice has been caused 133 to the workmen by the award. It can, therefore, not be said that jurisdiction under article 136 stands repelled. [p. 145 CD] Shaw Wallace & Co. Ltd. vs Workmen, & The Statesman Ltd. vs Workmen, ; , referred to. The Tribunal was not justified in abolishing the slab system of DA which had stood the test of time for almost 30 years and had been approved by various settlements between the parties and as such the award of the Tribunal and the High Court judgments were unsustainable. [pp. 144 AB; 145 DE] Buckingham and Carnatic Mills Ltd. vs Their Workers, [1951] 2 L.L,. J. 314 & Good Pastor Press vs Their Workers, , referred to.

Section 10(1)(b)(11) of the Banking Companies Act, 1949 provided:" No banking company shall employ any person whose remuneration or part of whose remuneration takes the form . of a share in the profits of the company. " The dispute between the appellant Banks and their employees related, inter alia, to the question whether the provisions of the Banking Companies Act, 1949, prohibit the grant Of bonus to bank employees. The Labour Appellate Tribunal took the view that section 10 of the Act did not stand in the way of granting bonus to bank employees, because bonus according to it was not a share in the profits of the company. On appeal, it was contended for the appellant Banks that bonus as awarded by the Industrial Courts is remuneration within the meaning of section 10 201 read with section 2 of the Banking Companies Act, 1949, and that it was also a share in profits, and therefore, the express provisions of section 10 read with section 2 override the provisions of the , so far as banking companies are concerned, and prohibit the award of bonus to employees of Banks. Held : (1) that the expression " shall employ any person in section 10 of the Banking Companies Act, 1949, means and includes " shall have in employment any person " and that in this respect the amendment of 1956, merely makes clear what was already meant by the section ; (2) that the word " remuneration " in section 10 of the Act has been used in the widest sense and includes bonus ; (3) that bonus in the industrial sense comes out of the available surplus of profits, and when paid, it fills the gap, wholly or in part, between the living wage and the actual wage. It is labour 's share in the profits, and as it is a remuneration which takes the form of a share in profits, it comes within the mischief of section 10 of the Act; (4) The , is not a declaratory Act, and except in the small matter of the expression " shall continue to employ " in sub section (1), it does not purport to explain any former law or declare what the law has always been. Consequently, though section 10 as amended by the Act Of I956 does not stand in the way of the grant of industrial bonus, for the period relating to the present appeals, the amended section had no retrospective effect. Accordingly, section 10 of the Banking Act, prior to the amend ment of 1956, prohibited the grant of industrial bonus to bank employees inasmuch as such bonus is remuneration which takes the form of a share in the profits of the banking company.

% The daily rated Vaccinators/lmmunisors working under the Delhi Municipal Corporation for more than eight years sought regularisation of their services and payment of wages at par with regularly appointed incumbents doing the same kind of work. On a reference the Industrial Tribunal took the view that the workmen concerned were not entitled to be regularised. Allowing the appeal by special leave, ^ HELD: The Vaccinators/lmmunisors involved in the appeal are entitled to be regularised. [176G] There was no justification for the respondent Corporation extracting the same amount of work from the workmen concerned on payment of daily wages at rates lower than the minimum salary which was being paid to other workmen who have been recruited regularly even though the workmen involved in the case have been working for a number of years. [176C D] The respondent Corporation to pay them wages at the rate equivalent to the minimum pay in the pay scale of regularly employed Vaccinators/lmmunisors without any increments with effect from the date of reference. They are also entitled to the corresponding dearness allowance. [176F] The respondent Corporation to prepare a scheme on a rational basis for absorbing as far as possible the workmen involved in the case 175 as regular Vaccinators/lmmunisors within six months. Process of absorption to be completed within eight months. Arrears of salary and allowance to be paid within four months. 1 5 [176G H] Daily Rated Casual Labour employed under P & T Department through Bhartiya Dak Tar Mazdoor Manch vs Union of India & Ors., and U.P. Income tax Department Contingent Paid Staff Welfare Association vs Union of India & Ors. ,(W.P. No. 1870 of 1986), followed.

Appeal No. 370 of 1959. Appeal by special leave from the judgment and order dated August 6, 1957, of the Bombay High Court, Nagpur, in Misc. Petition No. 512 of 1956. M. N. Phadke and Naunit Lal, for the appellant. Shankar Anand and A. G. Ratnaparkhi, for the respondents Nos. 2 4. N.P. Nathvahi, K. L. Hathi and R. H. Dhebar, for the Intervener (State of Bombay). December 9. The Judgment of the Court was delivered by WANCHOO, J. This is an appeal by special leave in an industrial matter. The appellant is the manager of a biri factory in Nagpur. Respondents 2 to 4 are working in that factory. They applied for leave for fifteen days from December 18, 1955, to January 1, 1956, and did not go to work during that period. The appellant did not pay their wages for these days and in consequence they applied to the Payment of Wages Authority (hereinafter called the Authority) for payment to them of wages which had been withheld. Their claim was that they were entitled to fifteen days ' leave in the year under sections 79 and 80 of the . The Authority allowed the claim and granted them a sum of Rs. 90/16/ in all as wages which had been withheld for the period of leave. Thereupon, the appellant filed an application under article 226 of the Constitution before the High Court at Nagpur. His main contention was that respondents 2 to 4 were not workers within the meaning of the and could not therefore claim the benefit 163 of a. 79 thereof The respondents contended that they were workers within the meaning of the and were entitled to the sum awarded to them by the Authority. The High Court on a consideration of the circumstances came to the conclusion that respondents Fir2 to 4 were workers under section 2(1) of the and therefore the order of the Authority was correct and dismissed the petition. The appellant then applied for a certificate to appeal to this Court which was refused. He then obtained special leave from this Court and that is how the matter has come up before US. 2(1) defines a worker to mean a person employed, directly or through any agency, whether for wages or not, 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 connected with, the manufacturing process, or the subject of the manufacturing process. The main contention of the appellant is that respondents 2 to 4 are not employed in the factory within the meaning of that word in section 2(1). Reliance in this connection is placed on two decisions of this Court, namely, Dharangadhara Chemical Works Ltd. vs State of Saurashtra (1) and Shri Chintaman Rao vs The State of Madhya Pradesh (2). In Dharangadhara Chemical Works (1), this Court held with reference to section 2 (s) of the Industrial Disputes Act, which defined "workman" that the word "employed" used therein implied a relationship of master and servant or employer and employee and it was not enough that a person was merely working in the premises belonging to another person. A distinCtion was also drawn between a workman and an independent contractor. The prima facie test whether the relationship of master and servant or employer and employee existed was laid down as the existence of the right in the employer not merely to direct what work was to be done but also to control the manner in which it was to be done, the nature or extent of such control varying in different industries and being (1) ; (2) ; 164 by its nature incapable of being precisely defined. The correct approach therefore to the question was held to be whether having regard to the nature of the work, there was due control and supervision of the employer. The matter came up again for consideration in Chintaman Rao 's case (1) which also happened to relate to biri workers, and section 2(1) of the had to be considered in it. It was held that the test laid down in Dharangadhara Chemical Works (2) with respect to section 2(s) of the Industrial Disputes Act would also apply to section 2(1) of the . Finally, it was pointed out that the question whether a particular person working in a factory was an independent contractor or a worker would depend upon the terms of the contract entered into between him and the employer and no general proposition could be laid down, which would apply to all cases. Thus in order to arrive at the conclusion whether a person working in a factory (like respondents 2 to 4 in this case) is an independent contractor or a worker the matter would depend upon the facts of each case. Let us then turn to the facts which have been found in this case. It has been found that the respondents work at the factory and are not at liberty to work at their homes. Further they work within certain hours which are the factory hours, though it appears that they are not bound to work for the entire period and can go away whenever they like; their attendance is noted in the factory; and they can come and go away at any time they like, but if any worker comes after midday he is not supplied with tobacco and is thus not allowed to work, even though the factory closes at 7 p.m. in accordance with the provisions of the and when it is said that they can return at any time, it is subject to the condition that they cannot remain later than 7 p.m. There are standing orders in the factory and according to those standing orders a worker who remains absent for eight days (presumably without leave) can be removed. The payment is made on piece rates according to the amount of work done but the management has the (1) ; (2) ; 165 right to reject such biris as do not come up to the proper standard. It is on these facts that we have to decide the question whether respondents 2 to 4 were employed by the appellant. It will be immediately noticed that the facts in this case are substantially different from the facts in Shri Chintaman Rao 's case (1). In that case the factory entered into contracts with independent contractors, namely, the Sattedars, for the supply of biris. The Sattedars were supplied tobacco by the factories and in some cases biri leaves also. The Sattedars were not bound to work in the factory nor were they bound to prepare the biris themselves but could get them prepared by others. The Sattedars also employed some coolies to work for them and payment to the coolies was made by the Sattedars and not by the factory. The Sattedars in their turn collected the biris prepared by the coolies and took them to the factory where they were sorted and checked by the workers of the factory and such of them as were rejected were taken back by the Sattedars to be remade. The payment by the factory was to the Sattedars and not to the coolies. In these circumstances it was held that the Sattedars were independent contractors and the coolies who worked for them were not the workers of the factory. The facts of the present case, however, are different. Respondents 2 to 4 have to work at the factory and that in itself implies a certain amount of supervision by the management. Their attendance is noted and they cannot get the Work done by others but must do it themselves. Even though they are not bound to work for the entire period during which the factory is open it is not in dispute that if they come after midday, they are not given any work and thus lose wages for that day, the payment being at piece rates. Further though they can stay away without asking for leave, the management has the right to remove them if they so stay away for a continuous period of eight days. Lastly, there is some amount of supervision inasmuch as the management has the right of rejection of the biris prepared if they do not come up to the proper standard. (1) ; 166 The question therefore that arises is whether in these circumstances it can be said whether the appellant merely directs what work is to be done but cannot control the manner in which it has to be done; of course, the nature or extent of control varies in different industries and cannot by its very nature be precisely defined. Taking the nature of the work in the present case it can hardly be said that there must be supervision all the time when biris are being prepared and unless there is such supervision there can be no direction as to the manner of work. In the present case the operation being a simple one, the control of the manner in which the work is done is exercised at the end of the day, when biris are ready, by the method of rejecting those which do not come up to the proper standard. In such a case it is the right to supervise and not so much the mode in which it is exercised which is important. In these circumstances, we are of opinion that respondents 2 to 4 who work in this factory cannot be said to be independent con tractors. The limited freedom which respondents 2 to 4 have of coming and going away whenever they like or of absenting themselves (presumably without leave) is due to the fact that they are piece rate workers; but the mere fact that a worker is a piece rate worker would not necessarily take him out of the category of a worker within the meaning of section 2(1) of the . Considering the entire circumstances and particularly the facts that if the worker does not reach the factory before midday he is given no work, he is to work at the factory and cannot work else where, he can be removed if lie is absent for eight days continuously and finally his attendance is noted and biris prepared by him are liable to rejection if they do not come up to the standard, there can be no doubt that respondents 2 to 4 are workers within the meaning of section 2(1) of the . This is also the view taken by the Bombay High Court in State vs Shankar Balaji Waje (1) in similar circumstances and that we think is the right view. Then it was urged that even if the respondents are (1) A.I.R. 1960 Bom. 167 workers under section 2(1), section 79 should not be applied to them as they can absent themselves whenever they like. In this very case it is said that the respondents remained absent for a longer period than that provided in the Act and therefore they do not need any leave. This argument has in our opinion no force. The leave provided under section 79 arises as a matter of right when a worker has put in a minimum number of working days and he is entitled to it. The fact that the respondents remained absent for a longer period than that provided in s, 79 has no bearing on their right to leave, for if they so remained absent for such period they lost the wages for that period which they would have otherwise earned. That however does not mean that they should also lose the leave earned by them under section 79. In the circumstances they were entitled under section 79 of the to proportionate leave during the subsequent calendar year if they had worked during the previous calendar year for 240 days or more in the factory. There is nothing on the record to show that this was not so. In the circumstances the appeal fails and is hereby dismissed with costs. One set of hearing costs. Appeal dismissed.

The appellant employed workmen in his bidi factory who had to work at the factory and were not at liberty to work at their houses; their attendance were noted in the factory and they had to work within the factory hours, though they were not bound to work for the entire period and could come and go away when they liked; but if they came after midday they were not supplied with tobacco and thus not allowed to work even though the factory closed at 7 p.m.; further they could be removed from service if absent for 8 days. Payment was made on piece rates according to the amount of work done, and the bidis which did not come upto the proper standard could be rejected. The respondent workmen applied for leave for 15 days and did not go to work, for which period the appellants did not pay their wages; in consequence the concerned workmen applied to the Payment of Wages Authority for payment of wages to them. The appellant 's contention that the respondent workmen were not his workmen within the meaning of the , was rejected and the claim for payment of wages was allowed. The question therefore was whether the appellants were workmen within the meaning of the . Held, that the nature of extent of control varies in different industries and cannot by its very nature be precisely defined. When the operation was of a simple nature and could not be supervised all the time and the control was at the end of day by the method of rejecting the work done which did not come up to proper standard, then, it was the right to supervise and not so much the mode in which it was exercised which would determine whether a person was a workman or an independent contractor. The mere fact that a worker was a piece rate worker would not necessarily take him out of the category of a worker within the meaning of section 2(1) Of the . In the instant case the respondent workmen could not be said to be independent contractors and were workmen within the meaning of section 2(1) of the . Held, further, that the leave provided for under section 79 of the arose as a matter of right when a worker had put 21 162 in a minimum number of working days and he was entitled to it. The fact that the workman remained absent for a longer period had no bearing on his right to leave. State vs Shankar Balaji Waje, A.I.R. 1960 Bom. 296, approved. Dharangadhara Chemical Works Ltd. vs State of Saurashtra, ; and Shri Chintaman Rao vs The State of Madhya Pradesh, ; , referred to.

The question for decision in this appeal was whether a dispute raised by the workmen ' relating to a person who was not a workman could be an industrial dispute as defined by section 2(k) of the , as it stood before the amendments Of 1956. The appellants, who were the workmen of Dimakuchi Tea Estate, espoused the cause of one Dr. K. P. Banerjee, Assistant Medical Officer, who had been dismissed unheard with a month 's salary in lieu of notice but who had accepted such payment and left the garden and the dispute raised was ultimately referred by the Government for adjudication under section 10 of the Act. Both the Tribunal and the Appellate Industrial Tribunal took the view that as Dr. Banerjee was not an workman within the meaning of the Act, the, dispute was not an industrial dispute as defined by section 2(k): Held, (per Das, C. J., and section K. Das, J., Sarkar, J., dissenting), that the expression 'any person ' occurring in section 2(k) of the , cannot be given its ordinary meaning and must be read and understood in the context of the Act and the object the Legislature had in view. Nor can it be equated either with the word 'workman ' or 'employee '. The two tests of an industrial dispute as defined by the section must, therefore, be, (1) the dispute must be a real dispute, capable of being settled by relief given by one party to the other, and (2) the person in respect of whom the dispute is raised must be one in whose employment, non employment, terms of employment, or conditions of labour (as the case may be), the parties to the dispute have a direct or substantial interest, and this must depend on the facts and circumstances of each particular case. Applying these tests, the dispute in the present case which was in respect of a person who was not a workman and belonged to a different category altogether, could not be said to be a dispute within the meaning of section 2(k) of the Act and the appeal must fail. Narendra Kumar Sen vs All India Industrial Disputes (Labour Appellate) Tribunal, , approved. Western India Automobile Association vs The Industrial Tribunal, Bombay, , distinguished 1157 Case law discussed. Per Sarkar, J. There is no reason why the words 'any person ' in section 2(k) of the Act should not be given their natural meaning so as to include an employee who is not a workman within the meaning of the Act. Consequently, a dispute concerning a person who is not a workman may be an industrial dispute within that section. The primary object which the Act has in view is the preservation of the industrial peace. The Act does not make the interest of the workmen in the dispute a condition of the existence of an industrial dispute. Such interest is incapable of definition and to make it a condition of an industrial dispute would defeat the object of the Act. Western India Automobile Association vs The Industrial Tribunal of Bombay, ; Narendra Kumar Sen vs The All India Industrial Disputes (Labour Appellate) Tribunal, and United Commercial Bank Ltd. vs Kedar Nath Gupta, , referred to. Even assuming that the workmen must be interested in order that there can be an industrial dispute, the present case satisfies that test and falls within the purview of section 2(k) of the Act.

Certain goods which are essential for the manufacturing process in the appellant 's mill were detained by the Excise Authorities for non payment of Central Excise Duty and consequently there was a disruption in the functioning of the appellant 's mill compelling the appellant to stop the working of the mill for the period from March 24, 1964 to June 10, 1964. The Respondent Sangh demanded that the employees who were affected by the said closure should be paid their wages for the aforesaid period. As the said demand was not accepted by the appellant, the respondent filed an application before the First Labour Court, praying for the payment of full closure compensation to the affected employees. The Labour Court held the appellant liable to pay closure compensation to the employees affected by the closure of the mill for the aforesaid period at the rate of 50% of the basic wages and dearness allowance. The Industrial Court partly allowing the appeal of the appellant, directed the appellant to pay closure compensation to the employees affected by the closure for the period from March 24,1964 to June 10, 1964 at the rate of 50 per cent of their basic wages and dearness allowance and further directed that where the employees had been sick and enjoyed sickness benefits for all the days or had been on privilege leave or enjoyed leave with wages for all the days or secured alternative employment for any period during the closure, such employees would 420 not be entitled to any closure compensation for such days, but in respect of such days half of the wages payable to Badli workmen in lieu of the said three categories of workmen would be paid to the Badli workmen equitably. In appeal to this Court, it was contended on behalf of the appellant that as the closure had been made in accordance with the provisions of the Standing orders 16 and 17 due to circumstances beyond the control of the appellant, the appellant is not liable to pay any compensation to its employees for the period of closure including payment to the Badli workmen. Allowing the appeal in part, ^ HELD: (1) The order of the Industrial Court in so far as it directs payment of compensation to the Badli workmen is set aside and, except that, the rest of the order of the Industrial Court is affirmed. [427F G] 2.(i) Sub section (4) of Sec. 42 read with the provision of section 78(1)(a)(iii) of the Bombay Industrial Relations Act 1946, makes it manifestly clear that an employee is entitled to challenge the refusal by the company to pay compensation of the closure and claim such compensation before the Labour Court whether or not such closure was due to circumstances beyond the control of the company, as enumerated in Standing order 16. The Respondent Sangh therefore, was entitled to make the application before the Labour Court claiming compensation for the period of closure even though such closure was made in accordance with the provisions of the Standing orders 16 and 17.[425E H] 2.(ii) The Standing order 16 provides that such closure can be made without notice and no compensation would be required to be paid in lieu of notice. It is clear from Standing order 16 that it does not contemplate that when there has been a closure on account of some unavoidable circumstances, no compensation is required to be paid to the employees. Therefore, the order of the Industrial Court directing payment of compensation to the employees of the appellant for the above period of closure is upheld. [426A C] 3. Badli workmen get work only in the absence, temporary or otherwise, of regular employees, and that they do not have any guaranteed right of employment. Their names are not borne on the muster rolls of the establishment concerned. Indeed a Badli workman 421 has no right to claim employment in place of any absentee employee. In A any particular case, if there be some jobs to be performed and the employee concerned is absent, the Company may take in a Badli workman for the purpose. Badli workmen are really casual employees without any right to be employed. Therefore, the Badli employees could not be said to have been deprived of any work to which they had no right and, consequently, they are not entitled to any compensation for the closure. It may be that the Company may not have to pay closure compensation to the three categories of employees as mentioned by the Industrial Court, but that does not mean that the company has to pay compensation to the Badli workmen in place of these categories of employees. [426D Il] Rashtriya Mill Mazdoor Sangh vs Appollo Mill Ltd., []960] 3 SCR 231 distinguished.

The appellant, R.S. Nayak, filed a complaint against the respondent, A.R. Antualy, a public servant being the Chief Minister of Maharashtra State under sections 161, 165 I.P.C. and section 5 of the Prevention of Corruption Act, 1947 (1947 Act) alleging abuse of office of Chief Minister. The complaint was rejected on account of absence of necessary sanction of the Governor of Maharashtra State under section 6 of the 1947 Act to prosecute the respondent. After the Governor issued necessary sanction, the appellant filed a fresh complaint in the Court of Special Judge against the respondent on the same grounds. However, on the date of filing fresh complaint the respondent had already resigned as Chief Minister. The respondent contended that the Special Judge had no jurisdiction to try him under section 7 of the Criminal Law Amendment Act, 1952 and that no cognizance could be taken on private complaint. The Special Judge rejected both the contentions. In the meantime the State Government issued a notification under section 7(2) of the Criminal Law Amendment Act, 1752 under which the case was transferred to another Special Judge. In a criminal revision application filed by the respondent against the order of earlier 496 Special Judge, a Division Bench of the High Court held that the Social Judge had jurisdiction to try the respondent and that the private complaint was maintainable. When the latter Special Judge proceeded with the case the respondent filed an application for his discharge on the grounds that the charge against him was baseless and that he being a Member of legislative Assembly (M.L.A) requisite sanction under section 6 of the 1947 Act was necessary. The Special Judge discharged the respondent holding that the respondent being M.L.A was a public servant within section 21 (12)(a) of I.P.C. and hl the absence of the sanction of the Legislative Assembly he could not take cognizance of offence. The Special Judge also held that. the material date for deciding the applicability of section 6 of the 1947 Act was the date on which the Court was asked to take cognizance of the offence. The appellant challenged the order of the Special Judge in this Appeal. The questions which arose for consideration were: (a) That is the relevant date with reference to which a valid sanction is a pre requisite for the prosecution of a public servant for offences enumerated in section 6 of the 1947 Act ? (b) If the accuse holds several offices occupying each of which makes him a public servant, is sanction of each one of the competent authorities entitled to remove him from each one of the offices held by him necessary and if anyone of the competent authorities fails or declines to grant sanction, is the Court precluded or prohibited from taking cognizance of the offence with which the public servant is charged, or is it implicit in section 6 of the 1947 Act that sanction of that competent authority alone is necessary which is entitled to remove the public servant from the office which is alleged to have been abused or misused for corrupt motives ? (c) Is M.L.A. a public. servant within the meaning of the expression in clauses 12(a), 3 and 7 of section 21 I.P.C. ? (d) Is sanction as contemplated by section 6 of the 1947 Act necessary for prosecution of M.L.A. and if so, which is the sanctioning authority competent to remove M.L.A. from the office of Member or the Legislative Assembly ? Allowing the appeal. ^ HELD: The provisions of the Act must receive such construction at the hands of the court as would advance the object and purpose underlying the Act and at any rate not defeat it. If the words of the statute are clear and unambiguous, it is the plainest duty of the court to give effect to the natural meaning of the words used in the provisions. In the event of an ambiguity of the plain meaning of the words used in the statute being self defeating, the court is entitled to ascertain the intention of the legislature to remove the ambiguity by construing the provision of the statute as a whole keeping in view what was the mischief when the statute was enacted and to remove which the legislature enacted the statute. Whenever a question of construction arises upon ambiguity or where two views are possible of a Provision, it would be the duty of the court to adopt that construction which would advance the object underlying the Act. [521 A C] The basic purpose underlying all canons of construction is the ascertainment 497 with reasonable certainty of the intention of Parliament in enacting the legislation. A For this purpose why should the aids which Parliament availed of such as report of a special committee preceding the enactment, existing state of law, the environment necessitating enactment of legislation, and the object sought to be achieved, be denied to court whose function is primarily to give effect to the real intention of the Parliament in enacting the legislation. Such denial would deprive the court of a substantial and illuminating aid to construction. Therefore, departing from the earlier English decisions, the reports of the committee which preceded the enactment of a legislation, reports of Joint Parliamentary Committee report of a commission set up for collecting information leading to the enactment are permissible external aids to construction. [527 A; D E] In construing a statute more especially the ancient statute, the court may look at the surrounding circumstances when the statute was enacted. The construction of ancient statutes may be eludicated by what in the language of the courts is called contemporanea expositio, that is, by seeing how they were understood at the time when they were passed. [528F G] Standard dictionaries as a rule give in respect of each word as many meanings in which the word has either been used or it is likely to be used in different contexts and connections. While it may be permissible to refer to dictionaries to find out the meaning in which a word is capable of being used or understood in common parlance, the well known cannon of construction should not even for a minute be overlooked that the meaning to the words and expressions used in a statute ordinarily take their colour from the context in which they appear. [539F G] Deputy Chief Controller of Imports & Exports New Delhi vs K.T. Kosalram Ors., ; at 517; and State Bank of India vs N. Sundara Money, ; , referred to. Section 6 of the Prevention of Corruption Act, 1947 bars the courts from taking cognizance of the offences therein enumerated alleged to have been committed by a public servant except with the previous sanction of the competent authority empowered to grant the requisite sanction. Therefore, when the court is called upon to take cognizance of such offences, it. must enquire whether there is a valid sanction to prosecute the public servant for the offence alleged to have been committed by him as public servant. Undoubtedly the accused must be a public servant when he is alleged to have committed the offence of which he is accused because sections 161, 164, 165 I.P.C. and section 5(2) of. the 1947 Act clearly spell out that the offences there in defined can be committed by a public servant. A trial without a valid sanction where one is necessary under section 6 would be a trial without jurisdiction by the court. It is well settled that the relevant date with reference to valid which a valid sanction is sine qua non for taking cognizance of an offence committed by a public servant as required by section 6 is the date when the court is called upon to take cognizance of the offence of which he is accused. If, therefore, when the offence is alleged to have been committed, the accused was a public servant but by the time the court is called upon to take cognizance of the offence committed by him as public servant, he has cased to be a public servant, section 6 will not be attracted and no sanction would be necessary for taking cognizance of the offence against him. This approach is in accord with the policy underlying s.6 in that a public servant is not to be exposed to harassment of a frivolous or speculative prosecution. If he has ceased to be a public 498 servant in the meantime, this vital consideration ceases to exist. [512D; H; 513 A E]. C.R. Bansi vs State of Maharashtra, [1971] 3 S.C.R. 236; R.R. Chari vs State of U.P., ; ; S.N. Bose vs State of Bihar, [1968] 3 S.C.R. Venkataraman vs The State. ; at 1052; K.S. Dharmaatan vs Central Government & Ors., ; , referred to. In the instant case, long before the date on which the cognizance was taken by the Special Judge, the accused had ceased to hold the office of the Chief Minister and as such had ceased to be a public servant in his capacity as Chief Minister. A fortiori no sanction as contemplated by section 6 was necessary before cognizance of the offence could be taken against the accused for offences alleged to have been committed in his former capacity as public servant. [514 D E] The submission that if the accused has held or holds a plurality of offices occupying each one of which makes him a public servant, under section 6 sanction of each one of the competent authorities entitled to remove him from each one of the offices held by him, would be necessary and if anyone of the competent authorities fails or declines to grant sanction, the court is precluded or prohibited from taking cognizance of the offence with which the public servant is charged is not acceptable. Such an interpretation of s.6 would render it as a shield to an unscrupulous public servant. Someone interested in protecting may shift him from one office of public servant to another and there by defeat the process of law. Such an interpretation is contrary to all cannons of construction and leads to an absurd end product which of necessity must be avoided. [520G; 518F C] The State (S.P.E. Hyderabad) vs Anr Commodore Kailash Chand, ; , referred to and partly dissented from. The expression 'office ' in the three sub clauses of s 6(1) clearly denotes that office which the public servant misused or abused for corrupt motives for which he is to be prosecuted and in respect of which a sanction lo prosecute him is necessary by the competent authority entitled to remove him from that office which he has abused. The sanction to prosecute a public servant can be given by an authority competent to remove him from the office which he has misused or abused because that authority alone would be able to know whether there has been a misuse or abuse of the office by the public servant and not some rank outsider. The authority entitled to grant sanction must apply its mind to the facts of the case, evidence collected and other incidental facts before according sanction. A grant of sanction is not an idle formality but a solemn and sacrosanct act which removes the umbrella of protection of government servants against frivolous prosecutions and the aforesaid requirements must therefore, be strictly complied with before any prosecution could be launched against public servants. Therefore, it is implicit in s.6 that sanction of that competent authority alone would be necessary which is competent to remove the public servant from the office which he is alleged to have misused or abused for corrupt motive and for which a prosecution is intended to be launched against him. [516H; 517A D] Mohd. Iqbal Ahmed vs State of A. P., [1979] 2 S.C.R. 1007, referred to. 499 The finding of the Special Judge that the respondent being M.L.A. was a public servant within clauses (12)(a) (3) and (7) of s.21 I.P.C. and sanction of the Legislative Assembly to prosecute him was necessary, is not correct. A person would be a public servant under clause (12)(a) of section 21 I.P.C. if he falls under any of the following three categories: (i) if he is in the service of the Government; or (ii) if he is hl the pay of the Government; or (iii) if he is remunerated by fees or commission for the performance of any public duty, by the Government. Looking into the history and evolution of s.21 I.P.C. as traced and adopted as an external aid to construction, it is clear that M.L.A. was not and is not a 'public servant ' within the meaning of expression in any of the clauses of section 21 I.P.C. Assuming that it would not be legally sound or correct according to well accepted cannon of construction of a statue of construe section 21(12)(a) by mere historical evolution of the section, the constitutionally valid approach would be to look at the language employed in the section to ascertain whether M.L.A. is a public servant within the meaning of the expression in that section. Depending upon the context, 'or '. The use of the expression 'or ' in the context in which it is used in cl.(12) (a) does appear to be a disjunctive. Therefore, those would be a public servant. The question is whether M.L.A. falls in under any of the above three categories? It was concerned that M.L.A. is not the service of the Government but it was contended that M.L.A. is in the pay of the Government. Undoubtedly, M.L.A. receives a salary and allowances his capacity as M.L.A. under the relevant statute. But does it make him a person 'in the pay of the Government '? The word 'pay ' standing by itself is open to various shades of meaning and when the word is used in a phrase in the pay of ' it is more likely to have a different connotation than when standing by itself. The phrase "in the pay of ' would ordinarily import the element of employment or paid employment or employed and paid by the employer. The phrase does not import of necessity a master servant relationship between the person receiving the pay and the Government as payer. Next what does the expression 'Government ' in cl. (12)(a) of section 21 I.P.C. connote ? Section 17 I.P.C. provides that the word "Government ' denotes the Central Government or the Government of a State. 71 I.P.C. provides that 'every expression which is explained in any part of the Code, is used in every part of the Code in conformity with the explanation '. Let it be noted that unlike the modern statute s.7 does not provide unless the context otherwise indicate ', a phrase that prefaces the dictionary clauses of a modern statute. Therefore, the expression "Government ' in section 21(12)(a) must either mean the Central Government or the Government of a State. The Central Government being out of considering the question is whether M.L.A. is the pay of the Government of a State or is remunerated by fees for the performance of any public duty by the Government of a State. Even though M.L.A. receives pay and allowances, he is not in the pay of he state Government because legislature of a State cannot be comprehended in the expression 'State Government '. This conclusion would govern also the third part of c. (12)(a) i.e. 'remunerated by fees for performance of any public duty by the Government. Therefore, if M.L.A. is not in the pay of the Government in the sense of executive government or is not remunerated by fees for performance of any public duty by the exe 500 cutive government, certainly, he would not be comprehended in the expression 'public servant ' within the meaning sf the expression in cl. (12)(a). He is thus not a public servant within the meaning of the expression in cl. (12)(a). This conclusion rein forces the earlier conclusion reached after examining the historical evolution of cl. (12)(a): [537 A B; 536G; E; H; 537 H;E; 539 E; 541 A; D F; 543 E; 551 A B] Evolution of Parliamentary Privileges by section K. Nag ; Legislative Bodies Corrupt Practices Act, 1925; Prevention of Corruption Act 1947 by Sethi and Anand P.60; Santhanam Committee Report dt. 31 3 1964; Lok Sabha Debates (Third Series Vol. 35, Cls. 729 and 731; The Anti Corruption Laws (Amendment) Bill, 1964 (enacted as Act 40 of 1964); G.A. Monerop vs The State of Ajmer, ; The State of Ajmer vs Shivji Lal [1959] supp. 2 S.C.R. 739; Prabhashanker Dwivedi and Anr. vs The State of Gujarat, AIR 1970 Gujart, AIR 1970 Gujarat 97; State of Gujart vs Manshanker Prabhashanker Dwivedi, ; Green vs Premier Glynrohonwy State Co. Ltd, at 568; Babi Manmohan Das Shah & Ors. vs Bishnu Das, ; at 839; Kamta Prasad Aggarwal etc. Executive Engineer, Ballabgarh & Anr., ; ; M. Karunanidhi vs Union of India, ; ; Costituent Assembly debates, Vol. VII p. 984; Rai Shib Ram jawaya Kapur & Ors. vs The State of Punjab [1975] 1 S.C.R. 225 at p. 236; Shamsher Singh & Anr. vs State of Punjab, ; Sardari Lalv. Union of India & Ors. ; ; His Majesty the King vs Boston 7 Ors., [1923 24] 33 Commonwealth Law Report 386. .82; Earskine May Parhamentary Practice 20 edition, p. 149, referred to The Submission that the accused would be a public servant within the meaning of the expression any person empowered by law to discharge any adjudicatory functions, in cl. (3) of s.21 I.P.C. must be rejected. Participation in a debate on a motion of breach of privilege or for taking action for contempt of the House and voting thereon in a constitutional function discharged by the members and therefore, it cannot be said that such adjudicatory functions if it can be so styled, constitutes adjudicatory function undertaken by M.L.A. as empowered by law. [554 E F] Special Ref. No. 1 of 1966; , at pages 490, 491 and 472; I.C. Golaknath vs State of Punajab, ; Sripadangalavaru vs State of Kerala and Anr.; [1973] Supp. S.C.R 1 referred to. The submission that M.L.A. would be a public servant within cl. (7) of s.21 I.P.C. must be rejected. (7) takes within its ambit 'every person who holds any office by virtue of which he is empowered to place or keep any person in confinement. Broadly stated the expression comprehends police and prison authorities or those under an obligation by law or by virtue of office to take into custody and keep in confinement any person. To say that M.L.A. by virtue of his office is performing 'policing or prison officers ' duties would be apart from doing violence to language lowering him in status. Additionally cl.(7) does not speak of any adjudicatory function. lt appears to comprehend situations where as preliminary to or an end product of an adjudicatory function in a criminal case, which may lead to imposition of a prison sentence, and a Person in exercise of the duty to be discharged by him by virtue of his office places or keeps any person in confinement. [554G, 555 F H] In view of the finding that M.L.A. is not a public servant under clauses (12)(a), (3) and (7) of s.21 I.P.C. and no sanction under s.6 of the Prevention of Corruption is necessary to prosecute him. it is not necessary to ascertain which would be the authority competent to sanction prosecution of M.L.A. [557 C] In the instant case, the allegations in the complaint are all to the effect that the accused misused or abused his office as Chief Minister for corrupt motives. By the time the Court was called upon to take cognizance of those offences, the accused had ceased to hold the office of Chief Minister. The sanction to prosecute him was granted by the Governor of Maharashtra but this aspect is irrelevant for concluding that no sanction was necessary to prosecute him under s.6 on the offences alleged to have been committed by the accused. Assuming that as M.L.A. the accused would be a public servant under s.21, in the absence of any allegation that he misused or abused his office as M.L.A. that aspect becomes immaterial. Further s.6 postulates existence of a valid sanction for prosecution of a public servant for offences punishable under section 161, 164, 165 I.P.C. and s.5 of the 1947 Act, if they are alleged to have been committed by a public servant. In view of the finding that M.L.A. is not a public servant within the meaning of the expression in s.21 I.P.C., no sanction under s.6 is necessary to prosecute him for the offences alleged to have been committed by him. [556 G; 557 A B]

The appellants, one a Sub Divisional Officer and the other a Naib Tehsildar, were entrusted with the duty of allotting land to displaced persons. The first respondent forcibly occupied the land allotted to B. On May 9, 1958, the first appellant ordered that B and other allottees similarly situated would be given possession of lands allotted to them on May 20, 1958. On May 16, 1958. the first respondent and others threatened with dispossession filed petitions in the High Court under article 226 of the constitution and obtained interim stay of delivery of possession till May 19, 1958, when the petitions would come up before the Division Bench for admission. On May 19, 1958, the Division Bench extended the operation of the stay order until May 23, 1958. The notice of the first stay order reached the appellants on May 19, 1958, but no notice of the second order was officially communicated to them till May 21, 1958. It was alleged that on May 20, 1938, the appellants, although informed of the second stay order by certain interested persons and the Advocate for one of the parties, formally dispossessed the respondent in disobedience of the Court 's order and handed over possession of the land to B. On the complaint of the respondent the High Court field that the .appellants were guilty of contempt of Court and, instead of committing them for contempt, administrated a warning as the appellants honestly believed that they were not bound to stay delivery of possession in absence of an official communication. The appellants appealed by special leave. Held, (per Das and Subba Rao, JJ.)that in a case of contempt for disobedience of a prohibitive order, as distinguished from an order of affirmative nature, it was not necessary to show that notice of the prohibitory order was served upon the party against whom it was granted. It would be sufficient if it was proved that the party had notice of it aliunde. N.Baksi vs O. K. (Thosh, A. T. R. (19.)7) Patn. 528, referred to. 128 There may be circumstances where officials entrusted with the carrying out of a legal order might have valid reasons to doubt The authenticity of the order conveyed to them by interested parties. But in the present case there could hardly be any such reasons. The appellants had really no justification for doubting the authenticity of an order communicated to them by an Advocate. Held, further. that in a matter relating to contempt of court, there cannot be both justification and apology. shareef vs The Hon 'ble Judges of the High Court of Nagpur; , , referred to. Although the appellants might have honestly believed that they were not bound to bold their band in absence of an official communication, that would be no defence to the charge of contempt of court, but only a relevant consideration in awarding the sentence. Per Daval, J. Contempt proceedings are criminal or quasi criminal in nature and it is essential that before any action can be taken the accusation must be specified in character. In the instant case, the respondent did not state that he was formally dispossessed. This would 'be for some reason if actual posssssion had been delivered. He could not be said to have come to court with clean hands. Further, the finding of the High Court that the appellants delivered possession honestly believing that they were not bound not to do so in the absence or the official communication meant that there was no defiance of the High Court 's order. There could be no willful disobedience since there was no belief in the existence of the order. It may not be necessary that the party against whom a prohibitory order was made must be served with the order, but it should have notice of the order before it could be expected to obey. Such notice must be from sources connected with the court passing the order. The alleged knowledge of the party cannot be made, to depend on the veracity of the witnesses examined by the party praying for action. In re Bryant L.R (1987 6) In Ex Parte Langly, Exparte Smith. In re Bishop L. R. and The Seraglio. L. R. , discussed.

The Industrial Court, Bombay, awarded bonus equal to 4 1/2 months ' wages to the operatives of the Tata Mills Ltd. and directed that those operatives who were no longer in the service of the Mills should be paid the bonus in one lump sum by a fixed date and in such cases claims in writing should be made to the Manager of the Mills. The operatives who made a claim before the date fixed were duly paid but payment was refused to operatives who applied after that date. The operatives who had been refused payment made applications to the Authority under the Payment of Wages Act. The Mills contended that the Authority had no jurisdiction to entertain the application, but the contention was rejected. The Mills filed a writ petition before the Bombay High Court which was dismissed by a Single judge and an appeal against that decision was also dismissed by a Division Bench: Held, that the bonus awarded by the Industrial Court was not wages within the meaning of section 2(Vi) of the Payment of Wages Act and as such the Authority had no jurisdiction to entertain the applications made to it under section I5 of the Act. Though such bonus was remuneration it was not remuneration payable on the fulfilment of the terms of the contract of employment, express or implied, as required by section 2(vi). F. W. Heilgers & Co. vs N. C. Chakravarthi, [1949] F.C.R. 356, followed.

The controversy that requires determination in this appeal is whether piece rated workers are entitled to over time wages for work done beyond the normal hours of 44 3/4 hours and upto 48 hours in a week, i.e. for 3 1/4 hours in a week and the rate at which they should be paid the overtime wages for those hours. The workers of the Clothing Factory are divided into two categories viz., (i) day workers and (ii) piece rated work ers. Whereas the day workers are paid wages in the scale of Rs.260 400, on the basis of their actual attendance the piece rated workers are paid on actual output or production calculated on the basis of time required for making the item at an hourly rate to be arrived at in accordance with the formula prescribed for the purpose. According to the appel lants, the piece rate system was introduced sometime in 1963 and since then the piece rate workers were paid overtime wages accordingly for work done beyond the normal working hours i.e. 44 3/4 hours (8 hours per day other than Satur days when the working hours are 4 3/4 hours), but the same was abruptly stopped from 1983 so much so that they were even denied the wage at the normal rate for work done beyond normal hours and upto 48 hours. Being dissatisfied, the appellant Union filed a writ petition in the High Court of Madras praying for a suitable direction to the respondents to pay the piece rate workers extra or overtime wages at the rate prescribed by section 59(1) of the Factories Act if the total working hours of any workman exceeded 44 3/4 hours in a week. The learned Single Judge of the High Court by his order dated 6th December 1983, dismissed the writ petition. An appeal was preferred by the appellant Union but whilst the said appeal was yet pending disposal by the High Court, the appellant Union filed yet another writ 618 petition in the same High Court, which was later transferred to the Central Administrative Tribunal and which has been disposed of by the Tribunal by the impugned order. Hence this appeal by the Union after obtaining special leave. The appeal preferred against the order of the learned single Judge of the High Court was later dismissed for default. The workers claim that they are entitled to extra wages for these 3 1/4 hours at double the normal rate in accord ance with section 59(1) of the Factories Act whereas the Union denies such liability. Dismissing the appeal, this Court, HELD: There is no dispute that the workers are paid overtime wages for work done in excess of 9 hours on any day or 48 hours in any week in accordance with section 59 of the Factories Act. This section does not provide for overtime wages for work done in excess of the normal working hours and upto 48 hours. [624C] Under the Presidential order of 1st September, 1959, overtime wage was payable for work in excess of normal working hours and upto 9 hours on any day or 48 hours in a week at the rate prescribed in the departmental rules. By the subsequent Presidential Order of 13th February, 1963, the method of calculation and payment of overtime wage to piece workers was outlined. Under these orders the day workers are allowed overtime wages for working beyond the normal working hours whereas piece workers are allowed piece work profits as may be earned by them for working beyond normal working hours and upto 48 hours in a week. [625A B] In the instant case, the grant of overtime wages for the period in excess of the normal working hours of 44 3/4 per week and upto 48 hours is governed by the relevant depart mental rules and Section 59(1) of the Factories Act comes into play only if a piece worker has worked beyond 9 hours in a day or 48 hours in a week and not otherwise. Further, piece workers are allowed piece work profits as may be earned by them for working beyond normal working hours and upto 48 hours in a week. [625G H] Union of India vs G.H. Kokil, , distinguished.

The appellant manufactures steel tubes in the outskirts of Ahmedabad city. It started its business in 1960, went into production since 1964 and waggled from infancy to adulthood with smiling profits and growling workers, punctuated by smouldering demands, strikes and settlement until there brewed a confrontation culminating in a head on collision following upon certain unhappy happenings. A total strike ensued whose chain reaction was a whole sale termination of all employees followed by fresh recruitment of workmen defacto breakdown of the strike and dispute over restoration of the removed workmen. As per the last settlement between the management and the workmen of 4th August, 1972, it was not open to the workmen to resort to a strike till the expiry of a period of five years; nor could the management declare a lock out till then. Any dispute arising between the parties, according to the terms arrived at were to be sorted out through negotiation or, failing that by recourse to arbitration. The matter was therefore, referred to an arbitrator and the arbitrator by his award held the action cf the management warranted. The respondent challenged the decision of the arbitrator under Article 226/227 of the Constitution and the High Court of Gujarat reversed the award and substantially directed reinstatement. Hence the appeals both by the Management and the workmen. Dismissing the appeals and modifying the awards substantially, the Court ^ HELD: (By Majority) Per Iyer J. On behalf of D. A. Desai J. and himself. (i) The basic assumption is that the strike was not only illegal but also unjustified. [210 H] 147 (ii) The management did punish its 853 workmen when it discharged them for reasons of misconduct set out in separate but integrated proceedings; even though with legal finesse, the formal order was phrased in harmless verbalism. [211 A] (iii) The action taken under the general law or the standing orders, was illegal in the absence of individualised charge sheets, proper hearing and personalise punishment if found guilty. None of these steps having been taken, the discharge orders were still born. But, the management could, as in this case it did, offer to make out the delinquency of the employees and the arbitrator had, in such cases, the full jurisdiction to adjudge de novo both guilt and punishment. [211 B C] (iv) Section 11A of the does take in an arbitrator too, and in this case, the arbitral reference, apart from section 11A is plenary in scope. [211 C D] (v) Article 226 of the Constitution, however restrictive in practice Is a power wide enough in all conscience, to be a friend in need when the summons comes in a crisis from a victim of injustice; and more importantly this extra ordinary reserve power is unsheathed to grant final relief without necessary recourse to a remand. What the Tribunal may in its discretion do the High Court too under Article 226, can, if facts compel so. [211 D E] (vi) The Award, in the instant case, suffers from a fundamental flaw that it equates an illegal and unjustified strike with brozen misconduct by every workman without so much as identification of the charge against each, after adverting to the gravamen of his misconduct meriting dismissal. Passive participation in a strike which is both illegal and unjustified does not ipso facto invite dismissal or punitive discharge. There must be active individual excess such as master minding the unjustified aspects of the strike, e.g., violence, sabotage or other reprehensible role. Absent such gravamen in the accusation, the extreme economic penalty of discharge is wrong. An indicator of the absence of such grievous guilt is that the management, after stating in strong terms all the sins of workmen, took back over 400 of them as they trickled back slowly and beyond the time set, with continuity of service, suggestive of the dubiety of the inflated accusations and awareness of the minor role of the mass of workmen in the lingering strike. Furthermore, even though all sanctions short of punitive discharge may be employed by a Management, low wages and high cost of living, dismissal of several hundreds with disastrous impact on numerous families is of such sensitive social concern that, save in exceptional situations, the law will inhibit such a lethal step for the peace of the industry, the welfare of the workmen and the broader justice that transcends transcient disputes. The human dimensions have decisional relevance. The discharge orders though approved by the Arbitrator are invalid. [211 E H, 212 A B] HELD FURTHER: 1. In a society, capital shall be the brother and keeper of labour and cannot disown this obligation of a partner in management, especially because social justice and Articles 43 and 43A are constitutional mandates. The policy directions in Articles 39, 41, 42, 43 and 43A speak af the right to an adequate means of livelihood, the right to work, humane conditions of work, living wages ensuring a decent standard of life and enjoyment of leisure and participation of workers in management of industries. De hors these 148 mandates, law will fail functionally. Suck is the value vision of Indian Industrial Jurisprudence. [155 B, G H, 156 A] 2. Jural resolution of labour disputes must be sought in the law life complex beyond the factual blinkers of decided cases, beneath the lexical littleness of statutory tests, in the economic basics of industrial justice which must enliven the consciousness of the Court and the corpus juris. [154 F G] The golden rule for the judicial resolution of an industrial dispute is first to persuade fighting parties, by judicious suggestions, into the peace making zone, disentangle the differences, narrow the mistrust gap and convert them through consensual steps, into negotiated justice. Law is not the last word in justice, especially social justice. Moreover in an hierarchical system, the little man lives in the short run but most litigation lives in the long run. So it is that negotiation first and adjudication next, is a welcome formula for the Bench and the Bar, the Management and Union. [157 C E] The anatomy of a dismissal order is not a mystery, once it is agreed that substance, not semblance, governs the decision. Legal criteria are not so slippery that verbal manipulations may outwit the Court. The fact is the index of the mind and an order fair on its face may be taken at its face value. But there is more to it than that, because sometimes words are designed to conceal deeds by linguistic engineering. The form of the order of the language in which it is couched is not conclusive. The Court will lift the veil to see the the nature of the order. [171 G H. 172 A] If two factors motive and foundation of the order co exist, an interference of punishment is reasonable though not inevitable. If the severance of service is effected the first condition is fulfilled and if the foundation or causa causans of such severance is the servant 's misconduct, the second is fulfilled. If the basis or foundation for the order of termination is clearly not turpitudes or stigmatic or rooted in misconduct or visited with evil pecuniary effects, then the inference of dismissal stands negated and vice versa. These canons run right through the disciplinary branch of master and servant jurisprudence, both under Article 311 and in other cases including workmen under managements. The law cannot be stultified by verbal haberdashery because the Court will lift the mask and discover the true face. [172 C E] Masters and servants cannot be permitted to play hide and seek with the law of dismissals and the plain and proper criteria are not to be misdirected by terminological cover ups or by appeal to psychic processes but must be grounded on the substantive reason for the order, whether disclosed or undisclosed. The Court will find out from other proceedings or documents connected with the formal order of termination what the true ground for the termination is. If thus scrutinised the; order has a punitive flavour in cause or consequence, it is dismissal. If it falls short of this test, it cannot be called a punishment. A termination effected because the master is satisfied of the misconduct and of the consequent desirability of terminating the service of the delinquent servant, it is a dismissal even if he had the right in law to terminate with an innocent order under the standing order or otherwise. Whether, in such a case the grounds are recorded in a different proceeding from the formal order does not detract from its nature. Nor the fact that, after being satisfied of the guilt, the master abandons the enquiry and proceeds to terminate. Given 149 an alleged misconduct and a live nexus between it and the termination of service the conclusion is dismissal, even if full benefits as on simple termination are given and non injurious terminology is used. [173 E H, 174 A] On the contrary, even if there is suspicion of misconduct, the master may say that he does not wish to bother about it and may not go into his guilt but may feel like not keeping a man he is not happy with. He may not like to investigate nor take the risk of continuing a dubious servant. There it is not n dismissal, but termination simpliciter, if no injurious record of reasons or punitive pecuniary cut back on his full terminal benefits is found. For, in fact, misconduct is not then the moving factor in the discharge, What is decisive is the plain reason for the discharge, not the strategy of a non enquiry or clever avoidance of stigmatising epithets. If the basis is not misconduct, the order is saved. [174 B D] Management of Murugan Mills vs Industrial Tribunal ; ; Chartered Bank vs Employees ' Union ; ; Western India Automobile Association vs Industrial Tribunal, Bombay ; Assam Oil Co. vs Workmen; , ; Tata Oil Mills Co. vs Workmen, ; @ 130; Tata Engineering & Locomotive Co. Ltd. vs S.C. Prasad & Anr. ; L. Michael and Anr. vs M/s. Johnson Pumps India Ltd., ; Workmen of Sudder Office, Cinnamore vs Management, , Municipal Corporation of Greater Bombay vs P.S. Malvankar; , ; referred to. Every wrong order cannot be righted merely because it was wrong. It can be quashed only if it is vitiated by the fundamental flaws of gross miscarriage of justice, absence of legal evidence, perverse misreading of facts, serious errors of law on the face of the order, jurisdictional failure and the like. [182 P G] While the remedy under article 226 is extraordinary and is of Anglosaxon vintage, it is not a carbon copy of English processes. Article 226 is a sparing surgery but the lancet operates where injustice suppurates. While traditional restraints like availability of alternative remedy hold back the Court, and judicial power should not ordinarily rush in where the other two branches fear to tread. judicial daring is not daunted where glaring injustice demands even affirmative action. The wide words of Article 226 are designed for service of the lowly numbers in their grievances if the subject belongs to the Court 's province and the remedy is appropriate to the judicial process. There is a native hue about article 226, without being anglophilic or anglophobic in attitude. Viewed from this jurisprudential perspective the Court should be cautious both in not over stepping as if Article 226 were as large as an appeal and not failing to intervene where a grave error has crept in. And an appellate power interferes not when the order appealed is not right but only when it is dearly wrong. The difference is real, though fine. [182 G H, 183 A B] The principle of law is that the jurisdiction of the High Court under Article 226 of the Constitution is limited to holding the judicial or quasi judicial powers within the leading sings of legality and to see that they do not exceed their statutory jurisdiction and correctly administer the law laid down by the statute under the Act. So long as the hierarchy of officers and appellate authorities created by the statute function within their ambit the manner in which they do so can be no ground for interference. The power of judicial supervision of the High Court under Article 227 of tho Constitution (as it then stood) is not 150 greater than those under Article 226 and it must be limited to seeing that a tribunal functions within the limits of its authority. The writ power is large, given illegality and injustice even if its use is severely disciplinary. The amended Article 226 would enable the High Court to interfere with an Award of the industrial adjudicator if that is based on a complete misconception of law or it is based on no evidence, or that no reasonable man would come to the conclusion to which the Arbitrator has arrived. [15 E G 1 86 D E] Navinchandra Shanker Chand Shah vs Manager, Ahmedabad Cooperative Department Stores Ltd., @ 140; approved. Rohtas Industries & Anr. vs Rohtas Industries Staff Union and Ors. ; followed. Nagendranath Bata and Anr. vs The Commissioner of Hills Divisions and Appeals, Assam & Ors. , ; ; Engineering Mazdoor Sabha vs Hind Cycle Lrd. [1963] Suppl. 1 SCR 625; State of A.P. vs Sreeeama Rao, ; @ 33; P. H. Kalyani vs M/s Air France, Calcutta, ; ; referred to. "Tribunal" simpliciter has a sweeping signification and does not exclude Arbitrator. A tribunal literally means a seat of justice, may be, a commission, a Court or other adjudicatory organ created by the State. All these are tribunal and naturally the import of the word, in Section 2(r) of the , embraces an arbitration tribunal. [188 E F H 189 A] Dawking vs Rokely, L.R. 8 Q.B. 255; quoted with approval. An Arbitrator has all the powers under the terms of reference, to which both sides are party, confer. In the instant case, the Arbitrator had the authority to investigate into the propriety of the discharge and the veracity of the mis conduct. Even if section 11A of the is not applicable, an Arbitrator under Section 10A is bound to act in the spirit of the legislation under which he is to function. A commercial Arbitrator who derives his jurisdiction from the terms of reference will by necessary implication be bound to decide according to law and when one says "according to law", it only means existing law and the law laid down by the Supreme Court being the law of land, an Arbitrator under section 10A will have to decide keeping in view the spirit of section 11A. [196 B D] Union of India vs Bungo Steel Furniture (P) Ltd. ; ; referred to. Per Koshal J. (Contra) 1. The orders of discharge could not be regarded as orders of their dismissal and were on the other hand, orders of discharge simpliciter properly passed under Model Standing order 23. [235 C D] (a) Clauses (3) and (4) of M.S.O. 25 speak of an inquiry only in the case of an order falling under sub clause (g) of clause (1) of that M.S.O. The only sub clause of clause (1) of M.S.O. 25 to which the provisions of clauses (3) and (4) of that M.S.O. would be attracted is sub clause (g) and if an order of discharge falls under M.S.O. 23, an inquiry under clauses (3) and 151 (4) of M.S.O. 25 would not be a pre requisite thereto even though such an a older is mentioned in sub clause (f) clause (1) of that M.S.O. [222 H, 223 A] (b) Under M.S.O.s. 23 and 25, the Management has the powers to effect termination of the services of an employee by having recourse to either or them. In action taken under M.S.O. 23, no element of punishment is involved and the discharge is a discharge simpliciter; and that is why no opportunity to the concerned employee to show cause against the termination is provided for. Dismissal, however, which an employer may order is in its very nature, a punishment, the infliction of which therefore has been made subject to the result of an inquiry (having the semblance of a trial in a criminal proceeding). Exercise of each of the two powers has the effect of the termination of the services of the concerned employee but must be regarded, because of the manner in which each has been dealt with by the M.S.O. as separate and distinct from the other. [223 C E] (c) To contend that once it was proved that the order of discharge of a workman was passed by reason of a misconduct attributed to him by the management, the order cannot but amount to an order of dismissal is wrong for two reasons. For one thing, clause (1) of M.S.O. 25 specifically states in sub clauses (f) that a workman guilty of misconduct may be discharged under M.S.O. 23. This clearly means that when the employer is satisfied that a workman has been guilty of misconduct he may [apart from visiting the workman with any of the punishments specified in sub clauses (a), (b), (c), (d) and (e) of clause (1) of M.S.O. 25] either pass against him an order of discharge for which no inquiry precedent as, provided for in clauses (3) and (4) of M.S.O. 25 would be necessary, or may dismiss him after holding such an inquiry which of the two kinds of order, the employer shall pass is left entirely to his discretion. [223 E H] It is true that the employer cannot pass a real order of dismissal in the garb of one of discharge. But that only means that if the order of termination of services of an employee is in reality intended to push an employee and not merely to get rid of him because he is considered useless, inconvenient or troublesome, the order even though specified to be an order of dismissal covered by sub clause (g) of clause (1) of M.S.O. 25. On the other hand if no such intention is made out the order would remain one of discharge simpliciter even though it has been passed for the sole reason that a misconduct is imputed to the employee. That is how M.S.Os. 23 and 25 have to be interpreted. M.S.O. 25 specifically gives to the employer the power to get rid of "a workman guilty of misconduct ' by passing an order of his discharge under M.S.O. 23. [224 A D] Secondly, the reasons for the termination of service of a permanent workman under M.S.O. 23 have to be recorded in writing and communicated to him if he so desires, under clause (4 A) thereof. Such reasons must obviously consist of an opinion derogatory to the workman in relation to the performance of his duties, and whether such reasons consist of negligence, work shirking or of serious overt acts like theft or embezzlement, they would in and case amount to misconduct for which he may be punished under M.S.O. 25. There being no case in which such reasons would not amount to misconduct, the result is that M.S.O. 23 would be render otiose if termination of service thereunder for misconduct could be regarded as a dismissal and such a result strikes at the very root of accepted canons of interpretation. If it was open to the Court to. "lift 152 the veil" and to hold an order of discharge to amount to dismissal merely because the motive behind it was a misconduct attributed to the employee, the services of an employee could be terminated without holding against him an inquiry such as is contemplated by clauses (3) and (4) of M.S.O. 25. [224 D G] Bombay Corporation vs Malvankar ; ; applied. Merely because it is the reason which weighed with the employer in effective the termination of services would not male the order of such termination as one founded on misconduct, for such a proposition would run counter to the plain meaning of clause (1) of M.S.O. 25. For an order to be "founded" an misconduct, it must be intended to have been passed by way of punishment, that is, it must be intended to chastise, or cause pain in body or mind or harm or loss in reputation or money to the concerned worker. If such an intention cannot be spelled out of the prevailing circumstances, the order of discharge or the reasons for which it was ostensibly passed, it cannot be regarded as an order of dismissal. Such would be the case when the employer orders discharge or the interests of the factory or of the general body of workers. [226 A C] Chartered Bank, Bombay vs The Chartered Bank Employees Union, ; ; The Tata Oil Mills Co. Ltd. [1964] 2 SCR p. 123; The Tara Engineering and Locomotives Co. Ltd. vs S.C. Prasad, ; Workmen of Sudder Office, Cinnamore vs Management, followed. The real criterion which formed the touchstone of a test to determine whether an order of termination of services is an order of discharge simpliciter or amounts to dismissal is the real nature of the order, that is, the intention with which it was passed. If the intention was to punish, that is to chastise, the order may be regarded as an order of dismissal; and for judging the intention, the question of mala fides (which is the same thing as colourable exercise of power) becomes all important. If no mala fides can be attributed to the management, the order of discharge must be regarded as one having been passed under M.S.O. 23 even though the reason for its passage is serious misconduct. (2) The arbitrator could not exercise tho power conferred on a Tribunal under section 11A of the 1947 Act and could not therefore interfere with the punishment awarded by the Management to the workmen (even if the discharge could be regarded a punishment). [235 D E] Throughout the I.D. Act, while 'arbitrator ' would include an umpire, a Tribunal would not include an arbitrator but would mean only an Industrial Tribunal constituted under the Act unless the context makes it necessary to give the word a different connotation. In sub section (1) of section 11, the word 'Tribunal ' has been used in accordance with the definition appearing in clause (r) section 2 because an arbitrator is separately mentioned in that sub section. In sub sections (2) and (3) of that section a Board, a Labour Court, a Tribunal and a National Tribunal have been invested with certain powers. A Tribunal as contemplated by sub sections (2) and (3) then, would not include an arbitrator. [233 A B] It is a well settled canon of interpretation of statutes that the language used by the Legislature must be regarded as the only source of its intention unless such language is ambiguous, in which situation the Preamble to the Act, the statement of objects of and Reasons for bringing it on the statute book and 153 the purpose underlying the legislation may be taken into consideration for ascertaining such intention. That the purpose of the legislation is to fulfil a socio economic need, or the express object underlying it does not come into the picture till an ambiguity is detected in the language and the Court must steer clear of the temptation to mould the written word according to its own concept of what should have been enacted. It is thus not permissible for the Supreme Court to take the statements of objects and Reasons or the purpose underlying the enactment into consideration, while interpreting section 11A of the I.D. Act. [231 F G, 234 Cl 3. The High Court exceeded the limits of its jurisdiction in interfering with the said punishment, in the instant case, purporting to act in the exercise of its powers under Article 227 of the Constitution of India. [235 E F] The High Court, while discharging its functions as envisaged by that Article, does not sit as a Court of Appeal over the Award of the Arbitrator but exercises limited jurisdiction which extends only to seeing that the arbitrator has functioned within the scope of his legal authority. In this view of the matter it was not open to the High Court to revise the punishment (if the discharge is regarded as such) meted out by the Management to the delinquent workmen and left intact by the arbitrator whose authority in doing so has not been shown to have been exercised beyond the limits of his jurisdiction. [234 G E, 235 A C] Nagendra Nath Bora and Anr. vs The Commissioner of Hills Division and Appeals, Assam and Ors. , ; ; P. H. Kalyani vs M/s Air France, Calcutta, ; , of A.P. vs Sree Rama Rao, ; ; Navinchandra Shakerchand Shakerchand Shah vs Manager Ahmedabad Cooperative Stores Ltd, ; referred to.

Appeal No. 506 of 1957. Appeal from the judgment and order dated July 21, 1955, of the High Court of Andhra, Guntur, in Writ Appeal No. 122 of 1954. K. N. Rajagopala Sastri and D. Gupta, for the appellant. T. V. B. Tatachari, for the respondent. December 8. , J. This appeal by the State of Andhra is from the judgment of the High Court, Andhra, dated July 21, 1955, on a ' certificate under article 133(1) (c) of the Constitution. The respondent joined the Madras Police Force as a Constable on September 1, 1939. He became a permanent Head Constable in 1946 and was promoted to officiate as a Sub Inspector on October 1, 1947, when his probation commenced. By order dated September 24, 1950, he was declared to have satisfactorily completed his period of probation and was brought to the "A" list with effect from September 10, 1950. He 47 was still merely officiating as a Sub Inspector, the effect of his being placed in List "A" being that he came into the category of an "approved probationer", i.e., fit for being confirmed as Sub Inspector when substantive vacancies arose. On August 3, 1952, the District Superintendent of Police, Krishna, issued an order reverting the respondent to the rank of Head Constable with effect from August 14, 1952, i.e., to the post which he substantively held, for the reason that there was not a sufficient number of vacancies in the post of Sub Inspectors for being filled by him. It may be mentioned that such reversion was not confined to the respondent alone but extended to 'a very large number of officiating Sub Inspectors, who were similarly promoters from the rank of Head Constables. The reverted officers petitioned to the Inspector General of Police and in reply thereto and in further explanation and clarification of the reasons for the reversions the Inspector General of Police, Madras, issued a memorandum on January 15, 1953, in the following terms: "MEMORANDUM. Sub: Officiating Sub Inspector Reverting as Head Constables Seniority over direct recruits Petitions. As direct recruits are recruited against vacancies specially reserved for them and cannot be reverted for want of vacancies, seniority between directly recruited Sub Inspectors and promoted Sub Inspectors should be determined separately. Their contention that they should not have been reverted in preference to direct recruits is not, therefore, correct. Their reversion as Head Constables is in order. " The respondent thereafter submitted a memorial to Government in which the principal challenge was to the view of the Government that the directly recruited Sub Inspectors formed a category distinct from the promotee Sub Inspectors as not being countenanced by the relevant rules relating to the constitution of the Police Establishment. Not having obtained any redress by reason of his memorial, the respondent 48 filed before the High Court of Madras a petition under article 226 of the Constitution (Writ Petition No. 524 of 1953) and prayed therein that the State of Madras may be directed by the issue of a writ of mandamus to refrain from enforcing the order reverting him as Head Constable but to consider his claim to be confirmed as Sub Inspector on the basis of his seniority in the list of approved probationers. Balakrishna Iyer, J., who heard the petition allowed it and issued a direction to the State "to forbear from giving effect to the ' order of reversion if the petitioner by virtue of his seniority among promoters can be included in the 30 per cent. already referred to". We shall be dealing in detail with the nature and scope of the rule as to the 30 per cent. referred to here, which formed the basis of the learned Judge 's order in its proper place and will not interrupt the narration of the events which have led to the appeal now before us. The State preferred an appeal from this judgment which was transferred to the High Court of Andhra after that Court. was formed. The learned Judges who heard the appeal differed from the learned Single Judge in his view as to the scope of the rule as to 30 per cent. but dismissed the appeal holding that the Government in directing the reversion of the promotee probationers had not observed strictly the relevant rule as to juniority prescribed in rule 5 of the Service Rules, to which rule we shall refer in due course. The State of Andhra thereafter moved the High Court for the grant of a certificate and having obtained it, has filed this appeal. Though in his petition under article 226 filed before the High Court of Madras, the petitioner had alleged that his reversion from the officiating post of Sub Inspector to his substantive post as Head Constable was a reduction in rank within the meaning of article 311(2) of the Constitution, i.e., a reduction by way of punishment effected without giving him an opportunity to show cause therefor, this contention was abandoned early in the proceedings before the Court and the case has proceeded throughout on both sides on the footing that the reversion was effected solely for administrative 49 reasons and not for any misconduct by way of punishment. Indeed, it may be mentioned that when the respondent was normally due for promotion to the substantive post of Sub Inspector without reference to the judgment of the High Court he was duly promoted to that post and he now occupies the post of a Sub Inspector drawing the increments and salary fixed therefor. Article 311(2) being out of the way. the questions that arise fall under two heads: (1) Was there a violation of the Service Rules when the respondent was reverted as Head Constable? (2) If there was such a violation, do breaches of Service Rules by themselves constitute an infringement of the legal rights of officers to whom they apply, entitling them to seek remedies therefor before Courts. The rules on the construction of which the answer to the first point depends are those framed, inter alia, under section 243 of the Government of India Act, 1935, entitled "Rules relating to the Madras Police Subordinate Service". Rule 3 which relates to recruitment and which was held to be violated, by the learned Single Judge ran in these terms: "Rule 3. Method of appointment and promotions: (a) Appointment to the several classes and categories shall be made as indicated in Annexure 1. ANNEXURE I Category 2 Method of Limitation Appointing appointment authority (1) (2) (3) (4) Sub Inspec Promotion Up to not In the mofus tors from Head more than sil the D.I.G. Constables 30% of the Police con Cadre cerned Direct recruitment Nil do This is followed by rules 4 and 5 which read: "Rule 4. Right of probationers and approved probationers to appointment to vacancies: A 7 50 vacancy in any class or category shall not be filled by the appointment of a person who has not yet commenced his probation in such class or category when an approved probationer or a probationer therein is available for such appointment. " "Rule 5. Order of discharge of probationers and approved probationers: (a) The order in which probationers and approved probationers. shall be discharged for want of vacancies shall be first, the probationers in order of juniority; and ,second, the approved probationers in order of juniority. (b) The order of discharge laid down in sub rule(a) may be departed from in cases where such order would involve excessive expenditure on traveling allowance or exceptional administrative inconvenience. " The other rules merely carry out the principles underlying those extracted and do not need to be set out. To appreciate the points urged before us by the learned counsel for the appellant State on the proper interpretation of these rules, it is necessary to set out the contentions respectively urged by the two parties in the Courts below and how they were dealt with. On behalf of the respondent the points urged were: (1) That on a proper construction of Rule 3, promotee Sub Inspectors referred to in departmental parlance as rank promotees, as distinguished from those directly recruited were entitled to be appointed to a minimum of 30 per cent. of the cadre strength and that this rule was violated in that at the time of the respondent 's reversion the force consisted only of less than 25 per cent. of rank promotees and more than 75 per cent. of those directly recruited. If the rule as to the proportion of appointments as laid down in Rule 3 had strictly been followed there would have been no necessity for reverting the respondent as Head Constable. (2) The3O per cent. and the 70 per cent. laid 51 down in r. 3 applied only at the stage of the initial recruitment of Sub Inspectors and that when once that recruitment was made and the probation of the officers started, no difference could under the rules be thereafter made between the two classes of appointees but that both of them constituted one unified force the members of which were entitled to be appointed to substantive posts as full members of the Service solely on the basis of their inter se seniority (apart from misconduct or inefficiency, etc.). The appointment to substantive posts of officers directly recruited in preference to persons like the respondent whose probation had commenced at an earlier date was therefore a violation of r. 4 of the Service Rules. (3) If at any time the cadre strength was reduced by the abolition of temporary posts there might have, to be reversions, but in reverting officers the rule as to juniority laid down by r. 5(a) had to be strictly followed. This rule made no distinction between Sub Inspectors appointed directly and rank promotees. Both formed a single category and among them those who had not completed their probation had to be reverted first and thereafter the approved probationers in the order of their juniority. In the present case the respondent urged that approved probationers like himself who were senior to several of the officiating Sub Inspectors directly recruited had been reverted out of turn in violation of r. 5(a). (4) If in the circumstances stated by the Government (which would be mentioned later), the directly recruited Sub Inspectors could not properly be reverted because of the assurances given to them, Government were bound to retain all rank promotee approved probationers as officiating Sub Inspectors until they could be appointed in substantive vacancies as full members thereof. In answer to these contentions the case which the State put forward was as follows: (1) The rule as to the proportion between the rank promotees and direct recruits laid down by r. 3 read with the Annexure, fixed only the maximum percentage of rank promotees. The words "up to, not 52 more than" meant and could in the context mean only, that the maximum proportion of rank promotees could be only 30 per cent. This was made clear by there being no limitation placed on the proportion of direct recruits. In other words, the 30 per cent. was the ceiling fixed and not any minimum and the rule in effect guaranteed direct recruits a minimum proportion of 70 per cent. There was therefore no violation of this rule when the, proportion of rank promotees fell to a little below 25 per cent. at the relevant date. (2) Even if r. 3 had been strictly followed the respondent would have derived no benefit from the operation of that rule because he was well below the level of rank promotees who would even then had to be absorbed. It may be mentioned that it was because of this feature that the order of Balakrishna lyer, J., took the form of directing the Government"to forbear from giving effect to the order of reversion if the petitioner by virtue of his seniority among promotees can be included among 30 per cent. " (3) On a proper construction of the rules, the proportions laid down in r. 3 applied whether or not at the stage of the initial recruitment, certainly at the stage of appointments to substantive posts, i.e., absorption as full members of the permanent strength of the cadre. It was their further contention based on the above, that for considering confirmations provided for by r. 4 the category of direct recruits had to be treated as a class different from the category of rank promotees and there was no question of seniority as between members of the two groups but only within each group. On this basis the State Government urged that at the stage of absorption governed by r. 4 the rule as to proportion had to be worked out and that consequently there had been no violation of that rule. (4) There had been no violation of r. 5 either, on two grounds (1) based on denying that there was a unified category of Sub Inspectors and in putting forward that the two classes which made up the Service, viz., direct recruits and rank promotees formed 53 different categories, and (ii) that even if they formed a single category of officers after their initial appoint ments, there had been no violation of the rule fixed for reversion by r. 5(a) by reason of the special circumstances of the case which brought their action within the specific provision in r. 5(b). In connection with this last submission it was pointed out that at the time of the police action in Hyderabad a large number of persons were recruited direct as Sub Inspectors to whom an assurance had been given that they would not be reverted. A large number of such temporary appointments were made and these directly recruited Sub Inspectors had to be provided with posts when temporary posts were getting abolished. This introduced an administrative problem which could be solved only by reverting the rank promotees. We shall now proceed to a consideration of the points thus in controversy between the parties and which were urged on either side before us. The first point to be dealt with is as to whether there had been an infraction of r. 3 of the Service Rules by reason of the proportion of rank promotees being less than 30 per cent. of the total number of Sub Inspectors in service at the date of the respondent 's reversion. As has already been pointed out, the learned Single Judge had rested his decision in favour of the respondent on an infraction of this rule, but the learned Judges of the High Court in appeal had taken a different view. Learned Counsel for the respondent sought to support the view that the words "up to, not more than 30 per cent" in the rule meant up to a minimum of 30 per cent. the effect of the addition of the words " not more than" being merely to eliminate fractions and permit the number to be rounded off to the nearest lower integer. It would be seen that the learned Single Judge had stressed the use of the words "up to" and practically gave no effect to the words " not more than" in arriving at the construction that he adopted. We consider that this construction is erroneous, particularly in the context of the provision as regards direct recruits, in regard to whom there is no limitation placed on the proportion which they 54 could have in the Service. Taken in conjunction with this provision it is clear that the words "up to, not more than" merely fix the maximum percentage of rank promotees in the category, leaving it to the appointing authorities to adopt any percentage below this figure. We consequently endorse the view which the learned Judges of the Andhra High Court took in dissenting from the construction which the learned Single Judge placed on the scope of r. 3. The reversion of the respondent cannot, therefore, be challenged on the ground that there had been an infraction of r. 3 of the Service Rules. The next question is as to whether r. 4 of the Service Rules by which confirmations were regulated, had been violated in promoting the more junior direct recruits to substantive posts in preference to rankpromotees like the respondent who were senior to them in service in the sense that the latter 's probation as officiating Sub Inspectors commenced earlier. The application of these rules in the context of the facts of this case depends largely on whether rank promotees and officers directly recruited form or do not form the same class or category becoming integrated into, one Service on their initial appointment to the Service. It is common ground that the two classes become integrated as members of a unified Service after appointment as full members of the Service. The point in controversy is limited to the period between the date of their initial appointment and their absorption as full members. If up to that date they formed two categories and the seniority in each group ha,,; to be reckoned separately, the order of the Government would be perfectly in order and constitute no breach of the rules. But if on the other hand officers recruited by either of the two modes promotions from the rank of Head Constables and Sub Inspectors directly recruited form an integrated and unified force from the very commencement of their appointments, then on the application of r. 4 confirmations ought to depend on mere seniority (subject to factors relevant to merit or demerit) as officiating Sub Inspectors without regard to the manner in which they were originally appointed. Though the 55 learned Single Judge did not directly pronounce on the effect of r. 4, the Andhra High Court held that the rule of seniority.prescribed by the rule had been violated. After expressing their disagreement with the learned Single Judge in his view that the minimum of 30 per cent. laid down by r. 3 had been violated, they observed: "Nor does it follow that we can countenance the argument of the learned Government Pleader that irrespective of the percentage of promoters on the cadre at a given time, all vacancies can be filled up, if the Government so chooses, only with direct recruits. We think that from both the classes of approved probationers, be it direct recruits or be it candidates from the ranks, selection should be made without any distinction, provided of course that so far as promotees are concerned the percentage of 30 is not exceeded. Now, it is admitted by the Government that the percentage of promotees, was only 24.5 at the time when the petitioner was sent back as Head Constable. That being so, it cannot be con tended for the State that the ceiling will be exceeded if the petitioner is promoted. As we read the rules, when once an officer qualifies as an approved probationer, no distinction can be made between him and a direct recrui t approved probationer. " We are unable to agree with the reasoning or the conclusion here expressed. It would be seen that the learned Judges have, though tacitly, accepted the case put forward by the Government, and in our view correctly, that the integration of the two groups is only after the stage of absorption as full members of the Service, and that at that stage the rule as to the proportion laid down in the annexure to r. 3 comes into operation. If the 30% which is the limit set for rank promotees for absorption as full members is merely a ceiling imposed for the benefit of direct recruits, as rightly held by the learned Judges, it is difficult to see how the rule could be Held to be violated because the proportion of rank promotees confirmed fell below the figure of 30. We, therefore, consider that there was no violation of the rule as to seniority 56 prescribed by r. 4 in the appointment of the direct recruits to substantive posts before the absorption of rank promotees like the respondent. We shall next proceed to deal with r. 5 which deals with the power of Government to effect reversions and the conditions and limitations prescribed there for. It would be seen that cl. (a) of r. 5 substantially reverses for the purpose of discharge or reversion the order in which confirmations are to be made as set out in r. 4. We have held that the respondent had no right under the rules to insist on his being confirmed, on the terms of r. 4 read in the light of r. 3. On the same line of reasoning it would follow that as direct recruits and rank promotees belonged to distinct classes the juniority for reversion had to be determined separately for each class and not on the basis of the two classes forming part of a unified force before con firmation. If ' this test were applied, it cannot be contended that the reversion of the respondent infringed r. 5(a). But this apart, the impugned order could also be sustained on the basis of the provision contained in cl. (b) of r. 5 which reads: "The order of discharge laid down in sub rule (a) may be departed from in cases where such order would involve excessive expenditure on travelling allowance or exceptional administrative inconvenience. " In the present case the Government explained their reason for the order for reversion of rank promotees in the affidavit which they filed to the writ petition in these terms: "His reversion was necessitated by the fact that a large number of Sub Inspectors on other duty in Hyderabad State reverted to this Stat e and that a number of temporary posts created for special purposes during the disturbed period immediately following the police action in Hyderabad had to be abolished and that the direct recruited Sub Inspectors had necessarily to be absorbed as Sub Inspectors as they cannot be asked to work in any lower 57 post being direct recruits to a particular category, viz., that of the Sub Inspector. This reversion of rank promoted Sub Inspectors was rendered absolutely necessary in the exigencies of service and for administrative purposes and as such, it cannot be deemed to be arbitrary or contrary to rules or in the nature of punishment as alleged by the peti tioner. " It was this circumstance that was stated before the High Court of Madras in the Writ Petition as that which brought the impugned order of reversion within "exceptional administrative inconvenience" provided for by the last words of the rule. The learned Single Judge accepted as correct the facts stated by the Government as the reason for the reversion, stating: "Mr. Seshachalapathi explained that Government were in a difficult position as a consequence of the members taken in connection with the police action in Hyderabad. A large number of persons were directly recruited as Sub Inspectors on the assurance that they would not be ousted. I do not suggest that Government should go back on any assurance that they may have given to these direct recruits. Far be it from me to encourage anything that might savour of bad faith on the part of Government. But I would still say that in order that Government may keep faith with those whom they recruited directly as Sub Inspectors they cannot break faith with or ignore the rights of those who were promoted as Sub Inspectors. " If the facts were accepted as correct, and we might point out that their accuracy was never challenged at any stage either in the High Court or before us, it appears to us that the order of reversion passed would be justified as being covered by the last words of cl. (b) even if the order laid down in r. 5(a) were infringed. In these circumstances it is not clear why the learned Judge should have observed: "The Government do not rest their case on Rule 5(b)" when the facts stated by Government and accepted by 8 58 him brought their action well within the scope of that clause. In their memorandum of grounds in Writ Appeal No. 122 of 1954 which the State filed to the High Court the appellants urged: "The learned Judge failed to appreciate the special circumstances of the situation which rendered the reversion necessary in the instant case". When the matter was before the High Court of Andhra the learned Judges observed"The learned Judge stated in his, judgment that the Government do not rest their case on Rule 5(b)". In their turn they too accepted the case of the Government as regards the circumstances which necessitated the order of reversion and observed: "The Government frankly stated, however, that they were in a difficult position because of certain measures which they were compelled to take in connection with the police action in Hyderabad when a large number of persons were directly recruited as Sub Inspectors with the assurance that they would be entertained per manently. In order to keep that assurance with such persons they were constrained to revert the rank promotees but there is no rule which enables the Government to do so. " We must express our dissent from the last sentence extracted above, because r. 5(b) makes specific provision for an order of discharge laid down in cl. (a) being departed from in cases where such order would entail "exceptional administrative inconvenience" and on the facts accepted both by the learned Single Judge and by the High Court of appeal the words extracted were attracted. Before leaving r. 5 there is one other matter to which we desire to advert and that relates to the observation of the High Court in the judgment now under appeal which seems to imply that if the Government found itself in difficulty owing to the assurances given to the officers directly recruited, they could under the rules have solved it, not by ordering the reversion of the rank promotees but by continuing them in their officiating posts until they could be absorbed as full members of the Service. This was one of the contentions urged by the respondent and the learned Judges say: 59 "It seems to us clear that whether they imposed merely a ceiling or whether there is an obligation upon the Government to fill up 30 per cent. of the vacancies from among promotees, the State cannot say, on the facts, before us, that there are no vacancies for promotees as such. " It looks to us impossible to support this view on any construction of the rules. In effect it means either that temporary posts could not be abolished, or that approved probationers could not be reverted. The first alternative could not obviously have been meant and the other is plainly contrary to the terms of r. 5(a) which makes provision for the reversion of approved probationers. Of course, as a measure of relief to their subordinates and to avoid hardship to them Government might retain people in their officiating posts, but it is quite a different thing to import a legal and enforceable obligation on their part to do so. In the view that we have taken that there has been no breach of the Service Rules in ordering the reversion of the respondent as a Head Constable, the question as to whether an infraction of a Service Rule confers a legal right which could be agitated in Court does not arise. We do not propose, therefore, to consider that question and indeed we did not call upon learned counsel for the appellant to argue that part of his case. The appeal is accordingly allowed, the judgment of the High Court set aside and Writ Petition No. 524 of 1953 dismissed. In view of the order of the High Court dated February 3, 1956, by which the appellant was granted a certificate under article 133(1)(c) of the Constitution subject to the condition that the respondent would be entitled to his taxed costs incurred in this Court in any event from the appellant, there will be an order that the appellant will pay the costs of the respondents in the appeal, in this Court. Appeal allowed.

The respondent, holding the substantive rank of a Head Constable in the Madras Police Service, was promoted to officiate as a probationary Sub Inspector and, on the completion of the period of probation, placed in the category of approved probationers for confirmation when substantive vacancies arose. Instead of being confirmed he was, for administrative reasons, reverted to his substantive post as the number of vacancies in the post of Sub Inspectors was not sufficient to include him. Having failed to obtain redress from the Government, he moved the High Court under article 226 of the Constitution. Annexure 1 of r. 3 of the service rules provided that the percentage of promotions from the rank of Head Constable to that of Sub Inspector was to be "upto not more than 30% of the cadre", but provided no limitation for direct recruitment, r. 4 provided that no vacancy shall be filled by the appointment of a person who had not yet commenced his probation when an approved probationer or a probationer was available; cl. (a) of r. 5 provided that, for want of vacancy, the probationers were to be discharged first in order of juniority and thereafter the approved probationers in order of juniority and cl. (b) provided that this order of discharge might be departed from in cases involving, among others, exceptional administrative inconvenience. The Single judge, who heard the matter, held that there was a violation of r. 3 of the Service Rules and directed the State not to give effect to the order of reversion if by virtue of his seniority he could be included within the 30% prescribed for rank promotees by that rule. The Division Bench, on appeal, disagreed with the trial judge as to the scope of r. 3 but dismissed the appeal holding that the rule as to juniority prescribed by r. 5 of the service rules had not been strictly observed. The State filed an appeal on a certificate granted by the High Court. Held, that the words "upto and not more than 30% Of the cadre" in the Annexure 1 to r. 3, construed in the context of the provision relating to direct recruits which prescribes no limitation, clearly fix 30 as the maximum percentage of promotions 46 from the rank of Head Constables to the post of Sub Inspectors and leave the appointing authorities free to adopt any other percentage below that figure. There could, therefore, be no infraction of the rule if the percentage of rank promotees was less than 30% of the total number of the Sub Inspectors on ' the date of the reversion in question. Rule 4, which regulates the right of probationers and approved probationers to confirmation, applies only to the stage prior to confirmation when the integration of the rank promotees and the direct recruits takes place so as to form a united service and the proportion prescribed by r. 3 has effect. That rule has to be separately applied to the two classes and, consequently, there was no violation of that rule in appointing direct recruits to substantive posts in preference to the respondent. Under r. 5(a) the juniority for purposes of reversion has, on the same reasoning, to be determined separately for the direct recruits and the rank promotees who constitute separate classes. Even otherwise, the impugned order could be sustained under r. 5(b) in view of the case of administrative inconvenience made by the Government and accepted by the Courts below.

The appellant, who was employed in the Punjab Police, was found while working as a Police Censor to have detained certain letters illegally and later to have made use of copies and photographs of the them for blackmail. He was consequently reverted to his substantive post of head constable on January 14, 1944. Thereafter an enquiry was started against him by the Superintendent of Police and eventually he was dismissed from service on January 25, 1944. His representations to higher authorities having failed he instituted a suit challenging the legality of the order of dismissal on the grounds, inter alia, (1) that section 240(3) of the Government of India Act, 1935, had not been complied with, and (2) that as the appellant was alleged to have committed a criminal offence the Superintendent of Police could not hold a departmental enquiry in respect of such allegations in view of SS. 29 and 35 of the . Held : (1) that section 243 of the Government of India Act, 1935, 65 which was a special provision with regard to the subordinate ranks of police forces in India, excluded the operation of section 24G(3) of the Act to the appellant, who was, therefore, governed by the conditions of service as provided under the Police Regulations, and that the substance of section 240(3) which was brought into the Police Regulations in September 1946 long after the appellant had been dismissed was not applicable to him. Accordingly, he was not entitled to the second notice, under section 240(3), giving him a reasonable opportunity of showing cause against the action proposed to be taken in regard to him. North West Frontier Province vs Suraj Narain Anand and High Commissioner for India and High Commis sioner for Pakistan vs I. M. Lal, , referred to. (2) that the provisions of the , relating to offences committed by a police officer above the rank of a constable do not bar a departmental enquiry in respect of a matter where it is also possible to prosecute such an officer under that Act.

One V. Krishna Reddy filed an election petition against Veera Reddy, respondent No. 1, a returned candidate in the elections held for the Andhra Pradesh Legislative Assembly in February, 1978 on the ground that the returned candidate was disqualified to be chosen to fill the post under Section 9A of the Representation of People Act, 1951 inasmuch as he has subsisting contracts with the Government of Andhra Pradesh. The appellant, Thammarna was impleaded as original respondent No. 5 though he is not a necessary party. He did not file any written statement. Neither did he lead any evidence nor did he cross examine the witnesses produced by respondent No. 1 and the election petitioner. In fact, he did not even participate in the arguments before the High Court. In the appeal filed by Thammanna against the Judgment dated April 24, 1979 of the High Court of Andhra Pradesh dismissing the election petition filed by Krishna Reddy, a preliminary objection was raised as to whether the appellant had the locus standi to maintain the appeal. Dismissing the appeal, the Court, ^ HELD: (1) The appellant cannot, by any reckoning, be said to be a 'person aggrieved ' by the decision of the High Court, dismissing the Election Petition. [84C] (2) Before a person is entitled to maintain an appeal under Section 116C of the Representation of the People Act, 1951 which is analogous to Section 96(1) of the Civil Procedure Code, all the following three conditions must be satisfied: (1) that the subject matter of the appeal is a conclusive determination by the High Court of the rights with regard to all or any of the matters in controversy, between the parties in the election petition. (2) that the person seeking to appeal has been a party in the election petition, and (3) that he is a "person aggrieved", that is a party who has been adversely affected by the determination. In the present case, these conditions, particularly Nos. (1) and (3) have not been fulfilled. [79B D] 74 (3) Just as the term "decree" in Section 96(1) of the Civil Procedure Code means an adjudication which "conclusively determines all or any of the matter in controversy in the suit", the expression "any final order" as used in Section 116C of the Representation of the People Act contemplates a conclusive determination of all or any of the matters in controversy in the election petition between the parties. [78F G] (4) The appellant was not a necessary party to be impleaded as there was no allegations or claims in the election petition which would attract section 82 of the Representation of the People Act. In this case, the question of the Court joining him as a party respondent under Section 86(4) of the Act also did not arise, as he was impleaded before the High Court as respondent No. 5 though it was not obligatory for the Election Petitioner to do so. Even so, respondent No. 5 did not join the controversy. He neither joined issue with the contesting respondent No. 1 nor did he do anything tangible to show that he had made a common cause with the Election Petitioner against respondent No. 1. In fact, the only parties between whom the matters in controversy, were at issue, were the Election Petitioner and Respondent No. 1. [79F H] (5) Although the meaning of the expression "person aggrieved" may vary according to the context of the statute and the facts of the case, nevertheless, normally a 'person aggrieved ' must be a man who has suffered a legal grievance, a man against whom a decision has been pronounced which has wrongfully deprived him of something or wrongfully refused him something, or wrongfully affected his title to something. [80A B] Bar Council of Maharashtra vs M. V. Dabholkar, [1975] 2.S.C.C. 703 and J. N. Desai vs Roshan Kumar A.I.R. 1976 S.C. 576 at p. 534 referred to. (6) The principle that election petition is a representative action on behalf of the whole body of electors in the constituency has a very limited application to the extent it has been incorporated in Sections 109 to 116 of the Representation of the People Act and its application cannot be extended to appeals under the Act. Firstly, these provisions are to be found in Chapter IV, under the main caption: 'WITHDRAWAL AND ABATEMENT OF ELECTION PETITIONS '. Then, the provisions of these sections, also repeatedly refer to the withdrawal or abatement of 'election petitions ' and also to procedure in respect thereof before the 'High Court '. The provision relating to Appeals in Sections 116A, 116B and 116C, have been included separately, in Chapter 'IV A ', captioned "APPEALS". [81E G, 83G H, 84A] Secondly, Section 116C, enjoins upon the Supreme Court to hear and determine every appeal under this Act in accordance with the provisions of the Code of Civil Procedure and the Rules of the Court. No doubt this is, "subject to the provisions of the Act and the rules if any, made thereunder". But this clause only means that the provisions of the Code and the Rules of the Court in hearing an appeal to this Court will apply except to the extent their application has been excluded expressly or by necessary implication by any provision of the Act. There is no provision in Chapter IV A of the Act, analogous to Sections 109 to 116 of the Act, which curtails, restricts or fetters an appellants ' right to withdraw an appeal. Nor is there any such provision in the Code or the Rules of this Court which does so. If the intention of the Legislature was that the provision of Sections 109 to 116 which apply to the withdrawal of election petition, should also govern the withdrawal of appeals, there was no difficulty in inserting similar provisions in Section 116C or elsewhere in Chapter IV A. [81G H, 82A C] 75 Bijayananda Patnaik vs Satrughna Sahu, [1964] 2 S.C.R. 538 at p. 545, followed.

The first respondent was at the relevant time a Sub Inspector in the service of the State of Assam. In regard to certain allegations a confidential enquiry was held against him by the Superintendent of Police Anti Corruption Branch who submitted his report to the Government in 1957. A departmental enquiry was thereafter held. On receipt of the enquiry officer 's report, the Superintendent of Police asked for the respondent 's explanation and thereafter in December 1958 ordered his dismissal. The respondent 's appeal before the Deputy Inspector General of Police and his revisions before the Inspector General and the State Government failed. Thereupon the respondent filed a writ petition before the High Court challenging the validity of the departmental enquiry and the order of dismissal. The High Court allowed the petition on the ground that the enquiry officer had during the course of the enquiry consulted the Superintendent of Police Anti Corruption Branch and had taken into consideration the materials gathered from the records of the Anti Corruption Branch without making the report of that Branch and the said material available to the respondent. The State appealed to this Court by special leave contending that : (i) the enquiry officer was not influenced by his consultations with the Superintendent of Police Anti Corruption Branch and (ii) in any event the Superintendent of Police before ordering the respondent 's dismissal had himself considered the entire evidence. It was submitted that the appellate authority, i.e., the Deputy Inspector General of Police had also made a similar approach while considering the respondent 's appeal and therefore there had been no denial of natural justice. On behalf of the respondent it was urged that the orders relating to the appointment of the respondent as permanent Sub Inspector had been passed by the Inspector General of Police and therefore the Superintendent of Police was not competent to order his dismissal. HELD : (i) It is highly improper for an enquiry officer during the conduct of an enquiry to attempt to collect any materials from outside sources and not make that information so collected, available to the delinquent officer and further make use of the same in the enquiry proceedings. There may also be cases where a very clever and astute enquiry officer may collect outside information behind the back of the delinquent officer and, without any apparent reference to the information so collected, may have been influenced in the conclusions recorded by him against the delinquent officer concerned. If it is established that any material had been collected during the enquiry behind the back of the delinquent officer and such material had been relied on by the enquiry officer, without being disclosed to the delinquent officer, it can be stated that the enquiry proceedings are vitiated. [96 F H] 88 In the present case however there was no warrant for the High Court 's view that the enquiry officer took into consideration the materials found by the Anti Corruption Branch. On the other hand, a perusal of the report showed that each and every item of charge had been discussed with reference to the evidence bearing on the same and findings recorded on the basis of such evidence. Therefore it could not be stated that the enquiry officer in this case had taken into account the materials if any that he may have collected from the Anti Corruption Branch. Nor was there anything to show, in the discussion contained in his report that the enquiry officer was in any way influenced by the consultations that he had with the Anti Corruption Branch. If so, it could not be held that the enquiry proceedings were violative of the principles of natural justice.[97 E G] The fact that a copy of the report, of the Anti Corruption Branch was not furnished to the respondent was of no consequence in relation to the actual enquiry conducted against the respondent inasmuch as he had a full opportunity to cross examine the witnesses for the prosecution and of adducing evidence in his favour. Even assuming that there was some defect in the enquiry proceedings, there was no violation of principles of natural justice in the present case because the punishing authority, the Superintendent of Police, and the appellate authority, the Deputy Inspector General of Police had independently considered the matter and found the respondent guilty on the evidence on record. [98 A E] State of Mysore vs section section Makapur, ; , The Collector of Central Excise and Land Customs vs Sanawarmal Purhoit, Civil Appeals Nos. 1362 1363 of 1967 decided on 16 2 1968, applied. Executive Committee of U.P. State Warehousing Corporation vs Chandra Kiran Tyagi, Civil Appeal No. 559 of 1967, decided on 8 9 1969, distinguished. (iii) In view of Rule 66 of Part 11 of the Assam Police Manual and in view of the evidence on record the contention of the respondent that the Superintendent of Police is not the appointing authority for a Sub Inspector, could not be accepted. [99 F H; 100 C D]

The petitioner was appointed as Excise Sub Inspector in February 1964 in the State of U.P. and was later promoted as Excise Inspector on ad hoc basis on February 24, 1972. He was confirmed as Excise Sub Inspector w.e.f. April 1, 1967. Though promoted on ad hoc basis, the petitioner has continuously been working as Excise Inspector since February 24, 1972. Raghubir Singh and Ram Dhan, respondents are direct recruits to the post of Excise Inspector and they had joined the cadre later in point of time than the petitioner i.e. after 24.2.1972. They were promoted to the post of Excise Superintendent on 29.9.1983 and the petitioner was ignored. Being aggrieved the petitioner has filed this petition under Article 32 of the Constitution. According to the State and other respondents, the petitioner 's promotion to the post of Excise Inspector being on ad hoc basis was against the 1967 rules, he continues to be an ad hoc appointed and as such is not a member of the Excise Inspectors service constituted under the rules. His name has not been shown in the seniority list of Excise Inspectors. According to them his case has rightly not been considered for further promotion. On the other hand, it is contended on behalf of the petitioner that the 1967 Rules in as much as they confine the channel of promotion to Tari Inspectors and Clerks were wholly arbitrary and as such violative of Articles 14 and 16 of the Constitution. It is submitted on his behalf that the petitioner is, in any case, entitled to be promoted substantively to the cadre of excise Inspectors under 1983 rules and he is also entitled to fixation of seniority by counting his entire service as Excise Inspector from 1972 onwards. Respondents concede that the petitioner can be appointed under 1983 rules, but contend that he is not entitled to the benefit of past service for purposes of seniority. 885 Allowing the writ petition this Court HELD: When the 1967 rules were enforced on May 24, 1967 there was in existence a permanent cadre of Excise Sub Inspectors. The nature of duties of both the cadres were similar. The Excise Inspectors, on molasses duty of the ranges, used to supervise the work of excise Sub Inspectors under them. The Excise Sub Inspectors were thus natural contenders for the post of Inspectors. There was no justification whatsoever with the framers of the 1967 rules to have kept the Excise Sub Inspectors out of the channel of promotion to the post of Excise Inspectors. Prime facie there is no escape from the conclusion that the Excise Sub Inspectors were dealt with in an arbitrary manner by the framers of 1967 rules. [890H 891B] It is not disputed that under the 1983 rules, the petitioner is eligible to be promoted and appointed as Excise Inspector. [891C D] The 1983 rules came into force on March 24, 1983. There is nothing on the record to show as to why the petitioner was not considered for promotion under the 1983 rules till today. Inaction on the part of the State Government is wholly unjustified. The petitioner has been made to suffer for no fault of his. He has been serving the State Government as Excise Inspector since February 24, 1972 satisfactorily. [891E] Rule 21(i) of the 1983 rules specifically permits substantive appointment to the cadre of Excise Inspectors with back date. In all probability the provision of back date appointment was made in the 1983 rules to do justice to persons like the petitioner. The petitioner is eligible under the rules to be appointed as Excise Inspector by way of promotion. Accordingly the Court directed that the petitioner shall be deemed to be appointed by way of promotion as substantive Excise Inspector under the 1983 rules with effect from February 24, 1972. The petitioner shall be entitled to the benefit of his entire period of service as Excise Inspector from February 24, 1972 towards fixation of his seniority in the cadre of Excise Inspector. The petitioner shall be considered for promotion to the post of Excise Superintendent from a date earlier than the date when respondents Ram Dhan and Raghubir Singh were promoted to the said post. The petitioner shall also be entitled to be considered to the post of Assistant Excise Commissioner in accordance with the rules from a date earlier than the date when any of his juniors were promoted to the said post. [891G, 892B E] None of the respondents who have already been promoted to the 886 higher rank of Excise Superintendents or Assistant Excise Commissioners be reverted to accommodate the petitioner or any other person similarly situated. The State Government shall create additional posts in the cadre of Excise Superintendents and Assistant Excise Commissioners to accommodate the petitioner and other similar persons, if necessary. [892F] Masood Akhtar Khan & Ors. vs State of Madhya Pradesh, ; Direct recruits Class II Engineering Officers Association vs State of Maharashtra & Ors., ; ; P. Mahendran & Ors, etc. vs State of Karnataka Singh & Ors. , ; ; Krishena Kumar & Ors. vs Union of India & Ors. , ; ; A.K. Bhatnagar & Ors. vs Union of India & Ors. , ; ; Baleshwar Dass & Ors. etc. vs State of U.P. & Ors. , [1981] 1 S.C.C. 449; Narender Chadha & Ors. vs Union of India & Ors. , ; and Kumari Shrilekha Vidyarthi etc. vs State of U.P. & Ors. , , referred to.

The appellant, Parshotam Lal Dhingra, was appointed to the Indian Railway Service as a Signaller (Telegraphist) in 1924 and was promoted to the post of Chief Controller in 1950, both the posts being in class III Service. On July 2, 1951, he was appointed to officiate in class II Service as Asst. Superintendent Railway Telegraphs. On certain adverse remarks made against him in his Confidential Report for the year ending March 31, 1953, the General Manager on June 21. 1953, remarked as follows "I am disappointed to read these reports. He should revert as a subordinate till he makes good the short coming noticed in this chance of his as an officer. Portions underlined to be communicated to him. " Thereupon the appellant made a representation, but on (I) ; 829 August 19, 1953, the General Manager issued a notice as follows: "Shri Bishambar Nath Chopra, Instructor Railway Training School, Saharnpur, is transferred to Headquarters office and appointed to officiate in Class II service as Assistant Signal and Tele Communication Engineer (Telegraphs) vice Shri Parshotam Lal Dhingra who on relief reverts to Class III T appointment. " Against this order the appellant moved the High Court under article 226 of the Constitution. The single judge who heard the matter held that the order was invalid as the provisions of article 311(2) of the Constitution had not admittedly been complied with. The Division Bench on appeal, however, set aside the order of the Single judge and dismissed the appellant 's writ application. The question for decision was whether the order of the General Manager amounted to a reduction in rank within the meaning of article 311(2) of the Constitution and the appellant was entitled to a reasonable opportunity of showing cause against the order. Held (per Das, C. J., Venkatarama Aiyar, section K. Das, A. K. Sarkar jj., Vivian Bose J., dissenting) that the order of reversion made against the petitioner did not amount to a reduction in rank within the meaning of article 311(2) Of the Constitution and he was not entitled to the protection of that Article. Like article 31O of the Constitution, which makes no distinction between persons holding permanent or temporary posts in the matter of their tenure being dependent on the pleasure of the President or the Governor, article 311 which is in the nature of a proviso to article 310, also makes no distinction between permanent and temporary posts and extends its protection equally to all Government servants holding permanent or temporary posts or officiating in any of them. Laxminarayan Chiranjilal Bhargava vs The Union of India, I.L.R. ; Engineer in Chief, Army Head Quarters vs C. A. Gupta Ram, A.I.R. (1957) Punj. 42 ; State of Punjab vs section Sukhbans Singh, A.I.R. (1957) Punj. 191 and Chironjilal vs Union of India, A.I.R. (1957) Raj. 81, overruled. But the protection of article 31I can be available only where dismissal, removal or reduction in rank is sought to be inflicted by way of punishment and not otherwise. These were the major punishments evolved by the Service Rules and Rules of the Railway Code, and well understood as such, against which protection was sought to be provided by the Rules. These protections were in due course incorporated in section 240 of the Government of India Act, 1935, and reproduced in article 311 of the Constitution, thus qualifying the principle embodied in article 310(1). Venkataraman vs The Union of India, ; , referred to. jayanti Prasad vs The State of Uttar Pradesh, A.I.R. (1951) All. 793 ; Shrinvas Ganesh vs Union of India, A.I.R. (1956) Bom. 455; Jatindra Nath Biszwas vs R. Gupta, A.I.R. (1954) 830 Cal. 383 ; Rabindra Nath Das vs The General Manager, Eastern Railway, ; jatindra Nath Mukherjee vs The Government of the Union of India, ; Ahmad Sheikh vs Ghulam Hassan, A.I.R. (1957) J. & K. 11; Ganesh Balkrishna Deshmukh vs The State of Madhya Bharat, A.I.R. (1956) M.B. 172; D. P. Ragunath vs The State of Coorg, A.I.R. (1957) Mys. 8; M. V. Vichoray vs The State of Madhya Pradesh, A.I.R. (1952) Nag. 288; Kanta Charan Srivastava vs Post Master General, A.I.R. (1955) Pat. 381 and Sebastian vs State, A.I.R. (1955) Tr. CO. 12, approved. One test for determining whether the termination of service was by way of punishment or otherwise is to ascertain whether under the Service Rules, but for such termination, the servant has the right to hold the post. In the three cases of (1) substantive appointment to a permanent post, (2) temporary appointment for a fixed term and (3) a temporary appointment which has ripened into a quasi permanent status under the Temporary Service Rules, where such a right exists, the servant will be entitled to the protection of article 311. Conversely, where no such right can exist, as in the case of a probationary or officiating appointment to a permanent or temporary post or where the service has not ripened into a quasi permanent status, and under the general law the service can be terminated on reasonable notice, the termination of service cannot amount to a punishment and attract the Article. Broadly speaking, article 311(2) can apply to those cases where the Government servant, if in private employment, could maintain an action for wrongful dismissal, removal or reduction in rank. So where the Government has, by contract, express or implied, or under the Rules, the right to terminate the service at any time, such termination, in the manner provided in the contract or under the Rules, cannot attract the provisions of article 311. That does not, however, mean that the termination of service of a servant who has no right to the post can never be a dismissal or removal by way of punishment. Although in such a termination the actual motive of the Government must be wholly irrelevant, where it expressly chooses to penalise the servant for misconduct, negligence, inefficiency or the like by inflicting on him the punishment of dismissal, removal or reduction, the requirements of article 311 must be complied with. Satish Chander Anand vs The Union of India, (1953) S.C.R. 655 Shyam Lal vs The State of Uttar Pradesh, (1955) 1 S.C.R. 26 and Shrinivas Ganesh vs Union of India, L.R. 58 Bom. 673, referred to. A reduction in rank must, similarly, be a punishment if it carries penal consequences with it and the two tests to be applied are (1) whether the servant has a right to the post or the rank or (2) whether evil consequences such as forfeiture of pay or allowances, loss of seniority in his substantive rank, stoppage or postponement of future chances of promotion, follow as a result of the order. Where either of these tests applies, the reduction in 831 rank mast be one within the meaning of article 311 (2) of the Constitution and attract its protection. In the instant case, the appellant was holding an officiating post and had no right under the rules of the Railway Code to continue in it. Under the general law such appointment was terminable at, any time on reasonable notice, and the reduction could not operate ' as a forfeiture of any right. The order of the General Manager visited him with no evil consequences. Consequently, he was not reduced in rank by way of punishment. Per Bose J. While there can be no doubt that article 311 applies to all classes of Government Servants whether permanent, quasipermanent, officiating, temporary or on probation and that the words dismissal, removal and reduction in rank used therein have a special meaning, that Article, properly construed, cannot be confined to the penalties prescribed by the Service Rules. The gist of it is neither the form of the action nor the procedure nor what operated in the mind of the competent authority. The real test is whether evil consequences over and above those that would ensue from a "contractual termination" are likely to ensue. If they are, article 311 is attracted even though such evil consequences are not prescribed as "penalties" under the Rules. Though the conditions of service prescribed by the Rules can be varied unilaterally in some cases because of the "pleasure" of the President, they cannot be ignored as long as they stand, and if they are infringed while in force, article 311 will be attracted in an appropriate case. Satish Chandya Anand vs Union of India, ; and Shyam Lal vs State of Uttar Pradesh, ; , referred to. Nor can the protections afforded by article 311 be nullified by a splitting up of the order. In the present case the General Manager 's remarks in the confidential file, which formed a part of the operative order and was its real foundation, clearly indicated the mischief, that the appellant was not to be promoted to a like post until in the opinion of some competent Officer he had made good his previous short comings. That was an evil consequence, over and above that which would follow from a mere "contractual termination" of his engagement in the higher post, and so was sufficient to attract the protection of article 311.

The respondent, employed as Yard Master in the South Central Railway, was on duty between 14.00 and 22.00 hours on 23rd February '86. In the absence of a reliever, he was to continue his duty till 8.00 hours on 24th February '86. He allowed his staff to take meals and since they did not return within a reasonable time, he went towards the cabin where the staff usually took their meals. The Divisional Safety Officer who was coming down from the cabin, enquired of the respondent 's identity. The respondent in turn asked for the identity of the said officer. The officer was an noyed at this and threatened the respondent with dire conse quences. Immediately thereafter the respondent was placed under suspension. Further suspension followed and the re spondent was visited with the order of premature retirement under Rule 2046 of Indian Railway Establishment Code. Respondent challenged the said order before the Central Administrative Tribunal and the Tribunal, relying on its decision in Shri Gafoor Mia & Ors. vs Director, DMRL, AISLJ held that the Divisional Railway Manager who passed the impugned order of premature retirement was not competent to make such an order, and set aside the order. This appeal, by special leave, is against the Tribunal 's order. Though under sub clause (ii) of rule 2046(h), a class III employee cannot be retired prematurely after he has attained the age of 55 years, (unlike officers of class I & II) this clause was invoked in the case of respondent who was admittedly in class III service and did not attain the age of 55 years. Appellant relied on para 620(ii) of the Railway Pension 457 Manual which gives the authority power to remove from serv ice a railway servant after he completed 30 years service. On behalf of Respondent, it was contended that the appellant had been shifting its stand and trying to support the order on an extraneous ground which did not find a place in the order viz. unsatisfactory service record of the respondent; and there is no basis for it in view of the promotionS secured by the respondent, the last of which was just before the premature retirement. Dismissing the appeal, this Court, HELD: 1.1 The order was passed under Rule 2046(h)(ii) of the Indian Railway Establishment Code without verifying whether or not the incumbent had attained the age of fifty five years. Since the respondent was indisputably in class III service at the time the order came to be made, his case was governed by the second clause of Rule 2046(h). The impugned order recites that the respondent had already completed thirty years of qualifying service but it does not state that he had attained the age of fifty five years. According to the respondent he was running 54th year on that date. That obviously took his case out of the purview of the said rule. Even if the order was intended to he under Rule 2(2) of the Liberalised Pension Rules, 1950, this require ment had to be satisfied. The immediate and proximate reason for passing the impugned order was undoubtedly the unfortu nate incident of 23/24th February, 1986. BUt for that inci dent there was no occasion for the Review Committee to examine the case of the respondent. If the service record of the respondent was so bad as is now sought to be made out, he would not have been promoted to the post of Asstt. Yard Master an 22nd August, 1984 and later to the post of Yard Master on 31st January, 1986. The order of premature retire ment is punitive in nature and having been passed in fla grant violation of the principles of natural justice, cannot be allowed to stand. [426G H; 460F G; 463A B] 1.2 F.R. 56(j) of the Fundamental Rules is substantially the same as Rule 2046(h)(ii) of the Railway Establishment Code and Rule 2(2) of the Liberalised Pension Rules, 1950 is substantially the same as paragraph 620 of Railway Pension Manual. Since Rule 2(2) has been struck down as violative of Article 14 of the Constitution, paragraph 620(ii) would meet the same fate. Apart from the competence of the Divisional Railway Manager to pass the order, the order cannot also he supported under paragraph 620(ii). [462B D] 458 Senior Superintendent of Post Office & Ors., vs Izhar Hussain, ; , relied on. Union of India vs R. Narasimhan, ; , referred to. The authorities concerned will do well to amend Rule 2(2) of the Liberalised Pension Rules, 1950, and paragraph 620(ii) of the Railway Pension Manual, so as to incorporate therein the requirement of public interest, making it clear that premature retirement on completion of qualifying serv ice of thirty years can be ordered in public interest only. [463C D]

The respondent, was selected by the Deputy Inspector General of Police for admission to the Police Training College, and the result declaring him successful was issued by the order of the Inspector General of Police, and his appointment announced in the police Gazette. While the respondent was serving as a Sub Inspector of Police, charges were framed against him, under section 7 of The . The Superintendent of Police gave a report mentioning his past record, and recommended his removal from service. Notice to show cause, enclosing the findings of the Superintendent of Police was served on the respondent. The Deputy Inspector General, hold the enquiry, and agreed with the findings of the Superintendent of Police. The respondent filed an appeal to the Inspector,General of Police, which was rejected. In their order, both the Deputy Inspector General and Inspector General, took into consideration the past record of the respondent. The respondent filed a suit for a declaration that his removal was illegal and ineffective. The trial court dismissed the suit, but the High Court decreed the suit holding that no opportunity was given to the respondent to explain his past record which was taken into consideration. in appeal to this Court, the State contended that the respondent had notice that his past record would be taken into consideration, and alternatively, if the past record was taken into consideration for imposing lesser penalty, it was not necessary to mention in the show cause notice that the past record would be considered. The respondent contended that there has been breach of article 311(1) of the Constitution as he was appointed by the Inspector General of Police and removed by the Deputy Inspector General of Police and that he should have been tried under section 29 of the , before he was charged under section 7. HELD : The suit must be dismissed. (i) The respondent had notice that his past record would be taken into consideration because the Superintendent of Police had mentioned it 'in his, order, a copy of which was supplied to him. Further, on the charges against the respondent, he had been dealt with leniently and if the record was taken into consideration for the purpose of imposing a lesser punishment and not for the purpose of increasing the quantum or nature of punishment, then it was not necessary that it should be stated in the show cause notice that his past 'record would be taken into consideration. [397A; G H] State of Mysore vs K. Manche Gowda, ; , 548, referred to. (ii) The first appellate court 's conclusion that the respondent had been appointed by the Deputy Inspector General of Police, was a finding of fact and was binding on this Court. But apart from that the only document relied on by the respondent was the result sheet declaring him 393 successful after training and this had no relevance to his appointment as. Sub Inspector of Police. [398 A G] (iii) A Police Officer may also be liable to be prosecuted under section 29 of the but it is not necessary that in every case which falls within section 7 the Police Officer should first be prosecuted under section 29 before he can be proceeded under under section 7. Section 7 deals with disciplinary Proceedings makes certain breaches criminal offences. Section 29 does not in any way limit the operation of section 7. [399 C]

Criminal Appeal No. 63 of 1957. Appeal from the judgment and order dated March 2, 1956, of the Bombay High Court in Cr. A. No. 1258 of 1955. H. R. Khanna and R. H. Dhebar, for the appellant. N. section Bindra, for the respondents (Amicus curiae). December 9. The following Judgment of the Court was delivered by AYYANGAR, J. This appeal on a certificate under article 134(1) of the Constitution granted by the High Court of Bombay, principally raises for consideration the application and scope of article 20(2) of the Constitution and s.26 of the . 109 The facts necessary for the appreciation of the points involved in this appeal are few and may be briefly stated. The two respondents section L. Apte and Miss Dwarkabai Bhat were respectively the Managing Director, and the Managing Director of the Women 's department, of an insurance Company by name 'The Long Life Insurance Company ' which had its headquarters at Poona. A power of attorney had been executed by the company in favour of the first respondent in June, 1942, under which he was vested with the power, control and possession inter alia of the moneys belonging to the company with a view to have them invested in proper securities. The second respondent as Manaaing Director also acted under another power of attorney executed by the company in her favour in or about June, 1942, and by virtue thereof she was assisting the first respondent in main taining the accounts of the company. While the respondents were thus functioning, an audit conducted in 1952 disclosed that considerable sums of money amounting to over Rs. 55,000 were shown as cash balances with the first respondent. Further enquiries made by the Directors showed that moneys aggregating to over Rs. 95,000 had from time to time been withdrawn from the company by the first respondent with the assistance and sanction of the second respondent, professedly for the expenses of the company. Among the papers of the company was a voucher dated August 9, 1952, evidencing the withdrawal of this amount by the first respondent and signed by him and this also bore the signature of the second respondent in token of her sanction. The respondents, however, could furnish no proper account of the legitimate expenses of the company for which the amount was purported to be taken. Both the respondents were thereupon prosecuted for an offence under section 409 of the Indian Penal Code and also for an offence under section 105 of the Indian Insurance Act in Criminal Case 82 of 1953. The learned Magistrate convicted and sentenced both the respondents for both the offences with which they were charged. The respondents thereupon filed 110 appeals to the Court of the Sessions Judge, Poona and the learned Sessions Judge, by his order dated May 3, 1954, while confirming the conviction and sentence on the respondents under section 409 of the Indian Penal Code set aside their conviction under section 105 of the Indian Insurance Act. The reason for the latter order was the finding of the learned Sessions Judge that the sanction required by section 107 of the Indian Insurance Act which was a prerequisite for the initiation of the prosecution under section 105 had not been obtained before the complaint in respect thereof had beed filed. The conviction and sentence under section 409 of the Indian Penal Code which had been affirmed by the Sessions Judge in both the cases have now become final. Subsequetly the Insurance Company obtained the sanction of the Advocate General of Bombay under section 107 of the Indian Insurance Act and filed a complaint in the Court of the Judicial Magistrate, Poona, on January 18, 1955, against the two respondents charging each of them with an offence under section 105 of the Indian Insurance Act. The Magistrate took the case on file and directed the issue of process. Thereupon the two respondents made an application before the Magistrate on March 22, 1955, praying that the complaint against them may be dismissed as being barred by section 403(1) of the Criminal Procedure Code, by reason of their previous conviction by the Magistrate for the same offence under the Insurance Act and their acquittal in respect thereof by the Sessions Judge, pleading in addition that when the conviction by the Magistrate stood, they had even undergone a portion of the sentence imposed. The learned Magistrate overruled this plea on the ground that the acquittal of the respondents was not on the merits of the case, but for lack of sanction under section 107 of the Indian Insurance Act which rendered the Magistrate without jurisdiction to entertain the complaint. The trial was then proceeded with and evidence was led. But finally the Magistrate acquitted the respondents on the ground that article 20(2) of the Constitution and section 26 of the were a bar to their 111 conviction and punishment. The State of Bombay thereupon filed an appeal to the High Court under section 417 of the Criminal Procedure Code. The appeal was dismissed by the learned Judges who however granted a certificate on the strength of which this appeal has been preferred. As the prosecution against the respondents under section 105 of the Insurance Act has been held to be barred by reason of the provisions contained in article 20(2) of the Constitution and section 26 of the , it would be convenient to set out these provisions before entering on a discussion of their content and scope. Article 20(2) of the Constitution runs: "No person shall be prosecuted and punished for the same offence more than once. " Section 26 of the enacts: "Where an act or omission constitutes an offence under two or more enactments, then the offender shall be liable to be prosecuted and punished under either or any of those enactments, but shall not be liable to be punished twice for the same offence." As the application of these two provisions is conditioned by the identity of the two offences which form the subject of the prosecution or prosecutions, we might as well reproduce the relevant provisions constituting the two offences, viz., section 409 of the Indian Penal Code and section 105 of the Indian Insurance Act: "409. Whoever, being in any manner entrusted with property, or with any dominion over property in his capacity of a public servant or in the way of his business as a banker, merchant, factor, broker, attorney or agent, commits criminal breach of trust in respect of that property, shall be punished with imprisonment for life, or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine. " Criminal breach of trust referred to in the section is defined in section 405 of the Indian Penal Code in these terms: "405. Whoever, being in any manner entrusted 112 with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged. or of any legal contract, express or implied, which he has made touching the discharge of such trust, or wilfully suffers any other person so to do, commits 'criminal breach of trust '. " The offence created by the Indian Insurance Act is as follows: "105. (1) 'Any director, managing agent, manager or other officer or employee of an insurer who wrongfully obtains possession of any property of the insurer or having any such property in his possession wrongfully withholds it or wilfully applies it to purposes other than those expressed or authorised by this Act shall on the complaint of the Controller made after giving the insurer not less than fifteen days ' notice of his intention, or, on the complaint of the insurer or any member or any policy holder thereof, be punishable with fine which may extend to one thousand rupees and may be ordered by the Court trying the offence to deliver up or refund within a time to be fixed by the Court any such property improperly obtained or wrong fully withheld or wilfully misapplied and in default to Buffer imprisonment for a period not exceeding two years. (2)This section shall apply in respect of a provident society as defined in Part III as it applied in respect of an insurer." Before addressing ourselves to the arguments urged before as by the Yearned Counsel for the appellant State it is necessary to set out one matter merely to put it aside. The entire argument on behalf of the State before the High Court proceeded on denying that the order of a Criminal Court passed under section 105 of the Indian Insurance Act directing the accused to "deliver up or refund. any such property improperly withheld or wilfully misapplied" was a "punish ment" within either article 20(2) of the Constitution or 113 section 26 of the . The learned Judges of the High Court rejected this contention. Though learned Counsel for the appellant originally submitted that he was contesting this conclusion of the High, Court, he did not address us any argument under that head and we do not therefore find it necessary to dwell on this point any further, but shall proceed on the basis that a direction by the Magistrate to replace the moneys of the insurer with a penalty of imprisonment in default of compliance therewith was a "punishment" within article 20(2) of the Constitution and section 26 of the . Turning to the main points urged before us, we may premise the discussion by stating that it was not disputed before us by learned Counsel for the State, as it was not disputed before the learned Judges of the High Court, that the allegations to be found in the original complaint in Criminal Case 82 of 1953 on which the conviction under section 409 of the Indian Penal Code was obtained were similar to the allegations to be found in the complaint under section 105 of the Indian Insurance Act. It should, however, be mentioned that there was not any complete identity in the statement of facts which set out the acts and omissions on the part of the respondents which were alleged to constitute the two offences section 409 of the Indian Penal Code and section 105 of the Insurance Act. For instance, in the complaint which has given rise to this appeal, the crucial paragraphs detailing the allegations are 12 and 13 of the complaint which run: "12. The company submits that the accused has thus wrongfully obtained possession of Rs. 95,000 or having that property in his possession wrongfully withheld it or wilfully applied it to purposes other than those expressed or authorised by the , and committed an offence on the 9th August, 1952, under Sectionof the ." "13. The company through their Solicitorscalled upon the accused to explain his conduct within7 15 114 days from the receipt of the letter. The accused has failed and neglected to reply to the said letters. " It is obvious that on these allegations alone the offence of criminal breach of trust could not be established as they lack any reference to any entrustment or to the dishonest intent which are the main ingredients of the offence of criminal breach of trust. But to this point about the difference in the ingredients of the two offences we shall revert a little later. Even assuming that the allegations to be found in the two complaints were identical, the question, however, remains whether to attract the ban imposed by either article 20(2) of the Constitution or section 26 of the General ClausesAct on a second punishment, it is sufficient that the allegations in the two complaints are substantiallythe same or whether it is necessary further that theingredients which constitute the two offences should be identical. We shall first take up for consideration article 20(2) of the Constitution whose terms we shall repeat: "20. (2) No person shall be prosecuted and punished for the same offence more than once. " To operate as a bar the second prosecution and the consequential punishment thereunder, must be for "the same offence". The crucial requirement therefore for attracting the Article is that the offences are the same, i.e., they should be identical. If, however, the two offences are distinct, then notwithstanding that the allegations of facts in the two complaints might be substantially similar, the benefit of the ban cannot be invoked. It is, therefore, necessary to analyse and compare not the allegations in the two complaints but the ingredients of the two offences and see whether their identity is made out. It would be seen from a comparison of section 105 of the and a. 405 of Indian Penal Code (a. 409 of the Indian Penal Code being only an aggravated form of the same offence) that though some of the necessary ingredients are common they differ in the following: (1)Whereas under a. 405 of the Indian Penal Code the accused must be "entrusted" with property or with "dominion over that property", under section 105 of 115 the the entrustment or dominion over property is unnecessary it is sufficient if the manager, director, etc. "obtains possession" of the property. (2)The offence of criminal breach of trust (section 405 of the Indian Penal Code) is not committed unless the act of misappropriation or conversion or "the disposition in violation of the law or contract", is done with a dishonest intention, but section 105 of the postulates no intention and punishes as an offence the mere withholding of the property whatever be the intent with which the same is done, and the act of application of the property of an insurer to purposes other than those authorised by the Act is similarly without reference to any intent with which such application or misapplication is made. In these circumstances it does not seem possible to say that the offence of criminal breach of trust under the Indian Penal Code is the "same offence" for which the respondents were prosecuted on the complaint of the company charging them with an offence under section 105 of the . This aspect of the matter based on the two offences being distinct in their ingredients, content and scope was not presented to the learned Judges of the High Court, possibly because the decisions of this Court construing and explaining the scope of article 20(2) were rendered later. In Om Prakash Gupta vs State of U.P. (1) the accused, a clerk of a municipality had been convicted of an offence under section 409 of the Indian Penal Code for having misappropriated sums of money received by him in his capacity as a servant of the local authority and the conviction had been affirmed on appeal, by the Sessions Judge and in revision by the High Court. The plea raised by the accused before this Court, in which the matter was brought by an appeal with special leave, was that section 409 of the Indian Penal Code had been repealed by implication by the enactment of sub sections (1) (c) and (2) of section 5 of the Prevention of Corruption Act because the latter dealt with an offence of substantially the same type. This Court repelled that contention. It (1) ; 116 analysed the ingredients of the two offences and after pointing out the difference in the crucial elements which constituted the offences under the two provisions, held that there was no repeal of section 409 of the 'Indian Penal Code implied by the constitution of a new offence under the terms of the Prevention of Corruption Act. It was the application of this decision and the ratio underlying it in the context of article 20(2) ,of the Constitution that is of relevance to the present appeal. The occasion for this arose in State of Madhya Pradesh vs Veereshwar Rao Agnihotry (1). The res pondent was a tax collector under a municipality and was prosecuted for offences among others under section 409 of the Indian Penal Code and s 5(2) of the Prevention of Corruption Act for misappropriation of sums 'entrusted to him as such tax collector. By virtue of the provision contained in section 7 of the Criminal Law Amendment Act, XLVI of 1952, the case was transferred to a Special Judge who was appointed by the State Government after the prosecution was commenced before a Magistrate. The Special Judge found the accused guilty of the offence under section 409 of the Indian Penal Code and convicted him to three years ' rigorous imprisonment but as regards the charge under section 5(2) of the Prevention of Corruption Act, he acquitted the accused on the ground of certain procedural non compliance with the rules as to investigation prescribed by the latter enactment. The respondent appealed to the High Court against this conviction and sentence under section 409 of the Indian Penal Code and there urged that by reason of his acquittal in res pect of the offence under section 5(2) of the Prevention of Corruption Act, his conviction under section 409 of the Indian, Penal Code could not also be maintained, the same being barred by article 20(2) of the Constitution. The High Court of Madhya Bharat accepted this argument and allowed the appeal and the State challenged the correctness of this decision by an appeal to this Court. Allowing the appeal of the State, Govinda Menon, J., delivering the judgment of the Court observed: (1)[1957] S.C.R. 868: 117 "This Court has recently held in Om Prakash Gupta vs The State of U.P. that the offence of criminal misconduct punishable under section 5(2) of the Prevention of Corruption Act, 11 of 1947, is not identical in essence, import and content with an offence under section 409 of the Indian Penal Code In view of the above pronouncement, the view taken by the learned Judge of the, High Court that the two offences are one and the same, is wrong, and if that is so, there can be no objection to a trial and conviction under section 409 of the Indian Penal Code, even if the respondent has been acquitted of an offence under section 5(2) of the Prevention of Corruption Act, II of 1947 The High Court also relied on article 20 of the Constitution for the order of acquittal but that Article cannot apply because the res pondent was not prosecuted after he had already been tried and acquitted for the same offence in an earlier trial and, therefore, the well known maxim "Nemo debet bis vexari, si constat curiae quod sit pro una et eadem causa" (No man shall be twice punished, if it appears to the court that it is for one and the same cause) embodied in article 20 cannot apply" Before leaving this part of the case we might also point out that a similar view of the scope of the rule as to double jeopardy has always been taken by the Courts in America. The words of the Vth Amendment where this rule is to be found in the American Constitution are: "Nor shall any person be subject, for the same offence, to be twice put in jeopardy of life or limb." and it will be noticed that there as well, the ban is confined to a second prosecution and punishment for the same offence. Willoughby after referring to the words quoted in the Fifth Amendment says: "Cases may occur in which the same act ma y render the actor guilty of two distinct offences; In such cases the accused cannot plead the trial and acquittal, or the conviction and punishment for one offence in bar to a conviction for the other"(1). In Albrecht vs (1)Constitution of the United States, Vol. II. p. 1158. , 118 United States (1) Brandeis, J., speaking for a unanimous Court said: "There is a claim of violation of the Vth Amendment by the imposition of double punishment. This contention rests upon the following facts. Of the nine, counts in the information four charged illegal possession of liquor, four illegal sale and one maintaining a common nuisance. The contention is that there was double punishment because the liquor which the defendants were convicted for having sold is the same that they were convicted for having possessed. But possessing and selling are distinct offences. One may obviously possess without selling; and one may sell and cause to be delivered a thing of which he has never had possession; or one may have possession and later sell, as appears to have been done in this case. The fact that the person sells the liquor which he possessed does not render the possession and the sale necessarily a single offence. There is nothing in the Constitution which prevents Congress from punishing separately each step leading to the consummation of a transaction which it has power to prohibit and punishing also the completed transaction. " If, therefore, the offences were distinct there is no question of the rule as to double jeopardy as embodied in article 20(2) of the Constitution being applicable. The next point to be considered is as regards the scope of section 26 of the . Though section 26 in its opening words refers to "the act or omission constituting an offence under two or more enactments", the emphasis is not on the facts alleged in the two complaints but rather on the ingredients which constitute the two offences with which a person is charged. This is made clear by the concluding portion of the section which refers to "shall not be liable to be punished twice for the same offence,". If the offences are not the same but are distinct, the ban imposed by this provision also cannot be invoked. It therefore follows that in the present case as the respondents are not being sought to be punished for "the (1) (1927) 273 TT.S. I: ; 119 same offence" twice but for two distinct offences con stituted or made up of different ingredients the bar of the provision is inapplicable. In passing, it may be pointed out that the construction we have placed on article 20(2) of the Constitution and section 26 of the is precisely in line with the terms of section 403(2) of the Criminal Procedure Code which runs: "403. (2) A person acquitted or convicted of any offence may be afterwards tried for any distinct offence for which a separate charge might have been made against him on the former trial under section 235, sub section (1). " It would be noticed that it is because of this provision that the respondents before us were originally charged before the Magistrate in Criminal Case 82 of 1953 with offences under section 409 of the Indian Penal Code as well as section 105 of the Indian . The respondents in this case did not appear in this Court and as the appeal had to be heard ex parte Mr. N. section Bindra was requested to appear as amicus curiae to assist the Court at the hearing of the appeal. We express our thanks to him for the assistance he rendered. The appeal is accordingly allowed and the judgment and the order of the High Court is set aside and the case will go back to the Judicial Magistrate, Fourth Court, Poona, for being proceeded with according to law. Appeal allowed. Case remanded.

By article 20(2) of the Constitution "No person shall be prose cuted and punished for the same offence more than once. " Section 26 of the , provides, "Where an act or omission constitutes an offence under two or more enactments, then the offender shall be liable to be prosecuted and punished under either or any of those enactments, but shall not be liable to be punished twice for the same offence. " The respondents were both convicted and sentenced by the Magistrate under section 409 Of the Indian Penal Code and section 105 Of the Insurance Act. The Sessions judge on appeal upheld the conviction and sentence under section 409 of the Indian Penal Code, but set aside the conviction and sentence under section 105 of the Insurance Act on the ground that no sanction under section 107 of the Insurance Act had been obtained. Sanction was thereafter obtained and a fresh complaint was filed against the respondents under section 105 of the Insurance Act. The trial ended in an acquittal by the Magistrate who held that article 20(2) Of the Constitution and also section 26 of the were a bar to conviction. The State appealed to the High Court against the 108 order of acquittal but the appeal was dismissed. On further appeal by the State, Held, that the crucial requirement to attract article 202) Of the Constitution is that the two offences should be identical. it is, therefore, necessary to analyse and compare the ingredients of the two offences, and not the allegations made in the two complaints, to see whether their identity is established. So judged, there can be no doubt that in spite of the presence of certain common elements between the two, the offences under section 409 of the Indian Penal Code and section, 105 of the Insurance Act are distinct in their ingredients, content and scope and cannot be said to be identical. Om Prakash Gupta vs State of U. P., ; and State of Madhya Pradesh vs Veereshw ar Rao Agnihotry; , , referred to. A similar view of the scope of the rule as to double jeopardy has always been taken by the American Courts. Albrecht vs United States, ; 71 Law Ed. 505, referred to. In section 26 of the also the emphasis is not on the facts alleged in the two complaints but on the ingredients of the two offences charged. This construction of article 20(2) of the Constitution and section 26 of the , is precisely in line with section 403(2) of the Code of Criminal Procedure. Consequently, it could not be said, in the instant case, that the respondents were being sought to be punished for the same offence so as to attract either article 20(2) Of the Constitution or section 26 of the .

The petitioner Company carrying on the business of manu facturing bidis and having its head office at Jabalpur in the State of Madhya Pradesh made certain purchases of tobacco in the State of Bombay. The Sales Tax Officer assessed the petitioner to a purchase tax under the provisions of the Bombay Sales Tax Act, 1953. The petitioner contested the assessment of 710 purchase tax on the grounds that those transactions and pur chases were " Outside the State of Bombay " within the meaning of article 286(1)(a) of the Constitution read with the Explanation, that the provisions of the Bombay Sales Tax Act, 1953, did not authorise the imposition, levy or collection of any purchase tax on the transactions in question and that the transactions took place in the course of inter State trade and commerce. The petitioner 's appeal to the Assistant Collector of Sales Tax was dismissed and then the present petition for writs of mandamus and certiorari was filed in the Supreme Court. The petitioner contended that the Bombay Sales Tax Act, 1953, did not authorise the imposition of a tax on the purchase of bidi tobacco which was not one of the goods specified in column 4 of Schedule B of the said Act. The petitioner further contended that the purchased tobacco was delivered to it within the State of Bombay as a direct result of the purchase but it was intended to be sent to the State of Madhya Pradesh to be manufactured into bidis at that place. The only thing which was done in the Bombay State was to remove the stem and dust from the tobacco which process did neither amount to " consumption " of tobacco as contemplated under the Explanation to article 286 of the Constitution nor did it convert the tobacco which was sent to the Head Office into an article " commercially different " from the tobacco purchased from the cultivators. In their counter affidavit the respondents averred that the raw tobacco was converted into bidi pattis before it was sent outside Bombay State both of which were commercially different articles and the market value of which was also different. These averments were not controverted by the petitioner. Held, that the words " all goods other than those specified from time to time in Schedule A and in the preceding entries " in entry 8o of Schedule B of the Bombay Sales Tax Act, 1953, amounted to a specification of goods for the purposes of section lo of the Act and as bidi tobacco purchased by the petitioner was not within Schedule A or any of the earlier entries in Schedule B purchase tax at the rate mentioned against entry 8o was leviable under section 1o of the Act. Whenever a commodity was so dealt with as to change it into another commercial commodity there was consumption of the first commodity within the meaning of the Explanation to article 286 of the Constitution. State of Travancore Cochin vs Shanmugha Vilas Cashew Nut Factory, ; , followed. The delivery of tobacco in Bombay State for changing it into bidi patti which is a commercially different article amount ed to delivery for the purpose of consumption and the purchase fell within the meaning of article 286(i)(a) of the Constitution and took place inside tile Bombay State.

The appellant filed suit No. 56 of 1953 against H for recovery of certain monies on the basis of promissory notes. As the suit was under 0. 7 of the Madras High Court Original Side Rules H was given leave to defend it on furnishing certain security. Accordingly H executed in favour of the Registrar, Madras High Court, a security bond charging certain properties 'for the payment of Rs. 50,000,. The document was attested by only one witness. At the time of registration it was signed by two identifying witnesses and the Sub Registrar. The trial Judge decreed the appellant 's suit and the decree mentioned that the charge created by H 's security bond would enure for the benefit of the decree holder. In execution proceedings the properties in question were sold and the proceeds deposited in court. At this stage the three respondents who also held money decrees against H applied to the Court for ratable distribution of the assets realised in the execution of the appellant 's decree in suit No. 56 of 1953. The trial Judge dismissed their applications. In Letters Patent Appeals the High Court held that in the absence of attestation by the two witnesses the security bond executed by H was invalid inasmuch as a charge on property created under section 100 of the attracted the provisions of section 59. As to the decree passed in suit No,. 56 of 1953 the High Court held that in view of the decree holder 's omission to amend the plaint by adding a prayer for enforcement of the charge the decree should be construed as containing merely a recital of the fact that a security bond had been executed. On these findings the High Court held that the respondents were entitled to rateable distribution. Against the High Court 's orders the appellant filed appeals in this Court. On the question of attestation he contended that the sub Registrar and the two identifying witnesses must also be treated as having attested the security bond. HELD : (i) The essential conditions of a valid attestation under section 3 of the are : (1) two or more witnesses have seen the executant sign the instrument or have received from him a personal acknowledgment of his signature; (2) with a view to attest or to hear witness to this fact each of them has signed 'the instrument in the presence of the executant. It is essential that the witness should have put his signature animo attestendi, that is, for the purpose of attesting that he has seen the executant sign or has received from him a personal acknowledgment of his signature. If a person puts his signature on the docu 514 meat for some other purpose, e.g., to certify that he is a scribe or an identifier or a registering officer, he is not an attesting witness. [519 C D] Prima facie the registering officer puts his signature on the document in discharge of his statutory duty under section 59 of the and not for the purpose of attesting it or certifying that he has received from the executant a personal acknowledgment of his signature. [520 B C] In the present case the evidence did not show that the registering officer and the identifying witnesses signed the document with the intention of attesting it. Nor was it shown that the registering officer signed it in the presence of the executant. The document could not therefore be said to have been attested by these witnesses and must be held to have been signed by one attesting witness only. [520 D] Veerappa Chettiar vs Subramania, I.L.R. , Girja Datt vs Gangotri, A.I.R. 1955 S.C. 346, Abinash Chandra Bidyanidhi Bhattacharya vs Dasarath Malo, I.L.R. 56 Cal. 598, Shiam Sundar Singh vs Jagannath Singh, 54 M.L.J,. 43 and Surendra Bahadur Singh vs Thakur Behari Singh, , referred to. (ii)Section 100 of the does not attract the provisions of section 59. [521 C D] The first paragraph of section 100 consists of two parts. The first part concerns the creation of a charge over immovable property which may be by act of parties or by operation of law. No restriction is put on the manner in which a charge can be made. [521 C] When such a charge has been created the second part comes into play. It provides that all the provisions hereinbefore contained which apply to a simple mortgage shall, so far as may be, apply to such charge. The second part does not address itself to the question of creation of a charge. It does not attract the provisions of section 59 relating to the creation of a mortgage. The second part moreover makes no distinction between a charge created by act of parties and a charge by operation of law. Obviously the provision of section 59 are not attracted to a charge by operation of law. Likewise the legislature could not have intended that the second part would attract the provisions of section 59 to a charge created by act of parties. [521 D E] If a charge can be made by a registered instrument only in accordance with section 59, the subsequent transferee will always have notice of the charge in view of section 3 of the Act. But the basic assumption of the doctrine of notice enunciated in the second paragraph is that there may be cases when the subsequent transferee may not have notice of the charge. The plain implication of this paragraph is that A charge can be made without any writing. [521 F G] If a non testamentary instrument creates a charge of the value of Rs. 100/ or upwards the document must be registered under section 17(1) (b) of the Indian . But there is no provision of law which requires that an instrument creating the charge must be attested by witnesses. [521 G H] The object of the second part of the first paragraph of section 100 is to make it clear that the rights and liabilities of the parties in case of a charge shall so far as may be the same as the rights and liabilities of the parties of a simple mortgage. It was not intended to prescribe any particular mode for the creation of a charge. [522 B] 515 It followed that the security bond in the present case was not required to be attested by witnesses. It was duly registered and was valid and operative. [522 C] Viswanadhan vs Menon, I.L.R. and Shiva Rao vs Shanmugasundaraswami I.L.R. , disapproved. Baburao vs Narayan, I.L.R. , 819 822, approved. (iii)The decree in suit No. 56 of 1963 on its true construction declared that the security bond created a charge over the properties in favour of the plaintiffs for payment of the decretal amount and gave them the liberty to apply for sale of the properties for the discharge of the encumbrance. Pursuant to the decree the properties were sold and the assets were held by the court. The omission to ask for an amendment of the plaint was an irregularity, but that did not affect the construction of the decree. [522 D E] (iv)The immovable properties had been sold in execution of a decree ordering sale for the discharge of the encumbrance thereon in favour of the appellant. Section 73(1) proviso (c) therefore applied and the proceeds of the sale after defraying the expenses of the sale must be applied in the first instance in discharging the amount due to the appellant. Only the balance left after discharging this amount could be distributed among the respondents. [523 B] (v)Since the respondents ' own case rested on the assumption that the properties were lawfully sold they could not be allowed to raise the objection that the High Court had no territorial jurisdiction for sale of properties outside the local limits of its ordinary original jurisdiction. [522 G] Seth Hiralal Patni vs Sri Kali Nath, ; , 751 52, Bahrein Petrolium Co. Ltd. vs P. J. Pappu, ; , 462 63 and Zamindar of Etiyapuram vs Chidambaram Chetty, I.L.R. 43 Mad . 675 (F.B.), referred to.

The appellants, in execution of a decree passed in a suit filed by them under section 180 of the U.P. Tenancy Act, 1939, on December 2, 1948 took back possession of the land in dispute from the respondent Nos. 4 and 5 (respondents for short). On the advent of the U.P. Zamindari Abolition and Land Reforms Act, 1950 ( '1950 Act ' for short) the respondents moved an application under section 232 of the 1950 Act to regain possession of the land on the ground that they hand acquired the status of adhivasis udder that Act. The Assistant Collector dismissed the application. The respondents appealed to the Additional Commissioner. The appellants contended that since the village in which the land in dispute was situated was put into consolidation under the U.P. Consolidation of Holdings Act, 1953 ( '1953 Act ' for short), the Additional Commissioner had no jurisdiction to hear the appeal. The appellants also submitted that a statement under section 8 and 8A of the 1953 Act was published in which they were shown as bhumidars of the land in question and the respondents had not objected to the entries. The Additional Commissioner, by his order dated June 15, 1956, allowed the appeal. Pursuant to that order the entries in the said statement were corrected and the respondents acquired possession of the land. The Board of Revenue, before whom the Additional Commissioner 's order was challenged, held that the Additional Commissioner had no jurisdiction to hear the appeal on merits. On September 11, 1958 the appellants moved an application under section 144 of the Code of Civil Procedure before the Sub Divisional officer praying for restitution of possession. This application and the subsequent appeals were rejected by the authorities. Dismissing a writ petition filed by the appellants the High Court held that the proceedings under section 144 of the Code of Civil Procedure could not succeed, but since the decision recorded by the authorities under the 1953 Act had become final, it was always open 288 to the petitioners to move the first appellate court to decide the appeal in terms of the decision of the consolidation authorities. Thereupon, in August 1966, the appellants filed a suit under sections 209 and 229 (b) of the 1950 Act against the respondents for a decree for possession on the ground that they were bhumidhars of the land in question under the 1950 Act. The Assistant Collector decreed the suit. The Additional Commissioner allowed the appeal filed by the respondents. The Board of Revenue dismissed the appellants ' second appeal. The appellants filed a writ petition in the High Court. A single Judge of the High Court dismissed the writ petition. A Division Bench of the High Court dismissed the special appeal filed by the appellants. Hence this appeal. The respondents contended: (i) that the suit was barred by limitation and the appellants were not entitled to the benefit of section 14(1) of the ; and (ii) that the suit was barred by section 49 of the 1953 Act. Dismissing the appeal, ^ HELD. 1. The party seeking benefit of section 14 (1) of the must satisfy the three conditions laid down in the section, namely, (i) that the Party as the plaintiff was prosecuting another civil proceeding with due diligence (ii) that the former proceeding and the later proceeding relate to the same matter in issue; and (iii) that the former proceeding was being prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it.[297G H] 2. The expression 'other cause of a like nature ' will have to be read ejusdem generis with the expression 'defect of jurisdiction '. So construed the expression other cause of a like nature must be so interpreted as to convey something analogous to the preceding words from defect of jurisdiction '. The defect of jurisdiction goes to the root of the matter as the court is incompetent to entertain the proceeding. The proceeding may as well fail for some other defect. Not all such defects can be said to be analogous to defect of jurisdiction. Therefore, the expression other cause of a like nature on which some light is shed by the Explanation (C) to section 14 which provides "misjoinder of parties or causes of action shall be deemed to be a cause of like nature with defect of jurisdiction", must take its colour and content from the just preceding expression, defect of jurisdiction '. Prima facie it appears that there must be something taking to a preliminary objection which if it succeeds, the court would be incompetent to entertain the proceeding on merits. Such defect could be said to be of the like nature ' as defect of jurisdiction. Coversely if the party seeking benefit of the provision of section 14 failed to get the relief in earlier proceeding not with regard to anything connected with the jurisdiction of the court or some other defect of a like nature, it would not be entitled to the benefit of s 14. [300C G] India Electric Works Ltd. vs James Mantosh & Anr., ; , referred to. In a proceeding under section 144 of the Code of Civil Procedure, the party applying for restitution has to satisfy the court of first instance that a decree under which it was made to part with the property is varied or reversed or modified in appeal or revision or other proceeding or is set aside or modified in any suit instituted for the purpose and therefore, restitution 289 must be ordered. In such a proceeding, the party seeking restitution is not required to satisfy the court about its title or right to the property save and except showing its deprivation under a decree and the reversal or variation of the decree. [298C D; E] 4. In the instant case, the High Court rightly declined to grant benefit of the provision of sec 14 of the to the appellants because the second and third condition laid down in section 14 (1) were not satisfied. It may be assumed that the earlier proceeding under section 144 of Civil Procedure Code was a civil proceeding for the purpose of section 14 (1) and that the appellants were prosecuting the same with due diligence. But it is difficult to accept that the subsequent proceeding relates to same matter in issue as was involved in the earlier proceeding. The appellants merely claimed in their application under section 144 that in view of the reversal of the order by the Board of Revenue the respondents are not entitled to retain possession and that restitution should be evicted because the appellants lost possession under the order of the Additional Commissioner which was reversed by the Board of Revenue. The cause of action was the reversal of the order of the Additional Commissioner. When they failed to obtain restitution, the appellants filed a substantive suit under sections 209 and 229 (b) of the 1950 Act. It was a suit on title as bhumidars for possession against respondents alleging unauthorised retention of possession. It had nothing to do with the order of the Additional Commissioner. Moreover, the appellants failed in the earlier proceeding not on the ground that the authority had no jurisdiction to entertain the application nor on the ground that there was any other defect of a like nature, but on merits inasmuch as the authorities and the High Court held that in view of the decision of the authorities under 1953 Act, the appellants are not entitled to restitution. [301B; 299A; 298G H; 299A] 5. Once an allotment under section 49 of the U.P. Consolidation of Holdings Act, 1953 became final, a suit would not lie before a civil or revenue court with respect to rights in lands or with respect to any other matter for which a proceeding could or ought to have been taken under that Act. [301G] 6. In the instant case, once the village was denotified, as found by the authorities and the High Court the allotment made under the 1953 ACI became final and it could not be questioned in a suit before civil or revenue Court in view of the bar enacted in section 49. [302A B] 7. The appellants ' submission that after reversal of the Additional Commissioner 's order dated June 15, 1956 the respondents had neither a legal nor equatable right to be in possession, has no force. Assuming that the appellants had acquired the status of bhumidars the same was subject to the provision contained in section 20 (b) read with Explanation I of the U.P. Zamindari Abolition and Land Reforms Act, 1950 according to which, as correctly found by single Judge of the High Court, the respondents would become adhivasis of the land. Such adhivasis if they had lost possession were entitled to regain the same by making an appropriate application under section 232 of that Act. The respondents did move such an application which ultimately was accepted by the Additional Commissioner. Therefore, primarily, legally and additionally in equity, respondents have an iron clad case to be in possession against appellants. [294H; 296D G] 290

The appellant landlord executed a lease in respect of the disputed premises in favour of respondent 2 for three years as far back as 1 4 1942. In 1948, a suit was brought by the appellant for eviction of the tenant for non payment of rent on the ground of conversion of the user of the premises. The suit for possession was however dismissed but a decree dated 31 11 1948 for arrears of rent was passed and it was held that Laxmi Bank was the real tenant. Subsequently, the Bombay High Court ordered the Bank to be wound up and in the winding up proceedings, the High Court appointed an Official Liquidator who on 16 2 1961 sold the tenancy rights to respondent No. 1. The sale was confirmed by the High Court on the same date and as a result thereof respondent No. 1 took possession the premises on 24 2 1961. On 5 1 1961, the landlord appellant filed an application under the Delhi Rent Control Act for eviction of Laxmi Bank. On 31 7 1961, a decree for eviction was passed in favour of the appellant. On 22 1 1963, respondent No. 1 filed a suit for declaration that he was a tenant of the landlord appellant. The suit was dismissed for non prosecution on 5 5 1964 and an application to set aside the ex parte order was also dismissed and the appeal against that order also failed. Thereafter respondent No. 1 filed an application under Section 25 of the Delhi Rent Control Act for recalling the warrant of possession issued by the Court in pursuance of the decree dated 31 7 1961 in favour of the appellant. The Rent Controller allowed it on 20 12 1966. An appeal to the Rent Controller Tribunal was ordered by order dated 25 11 1968 in favour of the appellant. A second appeal filed by respondent No. 1 to the High Court was allowed in his favour and the Rent Controller 's order allowing recalling of the warrant of possession was restored. Hence the appeal by special leave by the landlord. Allowing the appeal, the Court ^ HELD: 1. The application of respondent No. 1 under Section 25 of the Delhi Rent Control Act is clearly barred by the principle contained in order IX Rule 9 Civil Procedure Code. It was the appellant who brought the previous suit which resulted in a decree for eviction of the tenant on 31 7 1961 a date when the Ist respondent had already taken possession of the premises by virtue of transfer made by the Official Liquidator. There is nothing to show that respondent No. 1 was a tenant within the meaning of Delhi Rent Control 445 Act so as to maintain an application under section 25 of the Act, when in fact he was an unlawful sub lessee. [447A, E, F G] Suraj Ratan Thirani and Ors. vs Azamabad Tea Co. and Ors. ; ; applied. The language of section 14(b) of the Delhi Rent Control Act is wide enough not only to include any sub lease but even an assignment or any other mode by which possession of the tenanted premises is parted. In view of the wide amplitude of section 14 (b), it does not exclude even in involuntary sale. [448D E] In the instant case, the official Liquidator had merely stepped into the shoes of Laxmi Bank which was the original tenant and even if the official liquidator had transferred the tenancy interest to respondent No. 1 under the order of the Court, it was on behalf of the original tenant. It was undoubtedly a voluntary sale which clearly fell within the mischief of section 14 (1) (b) of the Delhi Rent Control Act. Assuming that the sale by the Official Liquidator was an involuntary sale, then it undoubtedly became an assignment as provided for by section 14 (b) of Delhi Rent Control Act. [448A C] Krishna Das Nandy vs Bidhan Chandra Roy, A.I.R. 1959 Cal. 181 Overruled.

The appellant company, incorporated in India, entered into a contract on June 18, 1945, for the supply of five hundred bales of jute, with the respondent company which was incorporated in England and which had its registered office in London. The contract, inter alia, provided that in the event of default of tender or delivery, the seller shall pay to the buyer as and for liquidated damages 10s. per ton plus the excess (if any) of the market value over the contract price, the market value being that of jute contracted for on the day following the date of default. There was a provision for arbitration, under which any claim or dispute whatever arising out of, or in relation to this contract or its construction or fulfilment shall be referred to arbitration in London in accordance with the bye laws of the London jute Association. Disputes having arisen regarding the performance of the contract the respondent referred the matter to the arbitration of the London jute Association, who appointed two of its members as the arbitrators. The appellant did not reply to the notice given by the arbitrators but filed an application on 570 August 10, 1949, under section 33 Of the , in the Calcutta High Court, praying, inter alia, (a) for a declaration that the arbitration agreement was void on the ground of uncertainty, and (b) for a declaration that there was in fact and in law no contract between the parties on account of mutual mistake of the parties. Notice was given by the appellant to the respondent and the London jute Association that further steps in the arbitration proceedings should not be taken pending disposal of the application under section 33 Of the . The arbitrators, however, proceeded with the arbitration and gave their award on October 17, 1949. On November 26, 195i, an application was filed by the respondent in the Calcutta High Court under section 5 of the , praying that judgment be pronounced in accordance with the award. The appellant contended that the award was invalid on the grounds, inter alia, (i) that the award was bad under section 35 of the , as it was made after the receipt of the notice of filing of the petition dated August 10, 1940, under section 33 of the , by the respondent and the arbitrators and during the pendency of the said application, and (2) that the liquidated damages provided under the award included not only the difference between the contract price and the market price on the date of default but also a further sum of 10s. per ton, that the extra amount was against the provisions Of sections 73 and 74 of the , and that, therefore, the award was bad on the face of it and could not be enforced in view of the provisions Of section 7(e) of the , which lays down that an award cannot be enforced in India if it is contrary to the Law of India. Held: (i) that the subject matter of the legal proceedings under section 33 Of the , which relates to the existence and validity of the arbitration agreement, are not matters within the competence of the arbitrators, and do not therefore cover any part of the subject matter of the reference. Consequently, section 35 of the is inapplicable. (2) The award does not violate the provisions of sections 73 and 74 Of the , as the arbitrators have only awarded the maximum amount named in the contract.

The appellant was a chartered accountant and a partner of a firm of auditors. This firm acted as auditors of two companies, among others, registered under the Indian , the entirety of the shares of one of which are owned by the Union Government and the entirety of the shares of the other by the West Bengal Government. The appellant was declared elected to the Lok Sabha. His election was challenged by two voters of the constituency by means of an election petition. The main ground raised was that the appellant was at the relevant period the holder of an office of profit under the Government of India as well as the State Government and hence he was disqualified from standing for election under article 102(1)(a) of the Constitution. The Election Tribunal accepted this contention and declared the election of the appellant void. The appellant filed an appeal before the High Court in which he did not succeed. The present appeal was by virtue of a certificate granted by the High Court under article 133(1)(c) of the Constitution. It was contended before this Court that on a true construction of the expression "under the Government of India or the Government of any State" occurring in cl. (a) of article 102 (I.) of the Constitution the appellant could not be said to hold an office of profit under the Government of India or the Government of West Bengal. It was argued that the various tests, namely, who has the power to appoint, who has the right to remove, who pays the remuneration, what are the functions and who exercises the control should all co exist and each must show subordination to the Government. The fulfillment of some of the tests alone, would not be sufficient to determine that a person holds an office of profit under the Government. It was contented on behalf of the respondent that the tests were not cumulative and that the court should look to the substance rather than to the form. Held : (i)For holding an office of profit, under the Government a person need not be in the service of the Government and there need not be any relationship of master and servant between them. 312 (ii)The examination of the various provisions of the Com panies Act, 1956 (sections 224, 227, 618 and 619) showed that so far as the two companies in question were concerned the appellant was appointed as an auditor by the Central Government, was removable by the Central Government, that the Comptroller and the Auditor General of India exercised full control over him and that his remuneration was fixed by the Central Government under sub section (8) of section 224 of the though it was paid by the companies concerned. (iii)Where the several elements, the power to appoint, the power to dismiss, the power to control and give directions as to the manner in which the duties of the office are to be performed and the power to determine the question of remuneration are all present in a given case then the officer in question holds the office under the authority so empowered. It is not necessary that all these must co exist nor is the fact that the source from which the remuneration is paid is not from public revenue decisive. (iv)The appellant held an office of profit under the Government of India within the meaning of article 102(1)(a) of the Constitution of India and as such he was disqualified for being chosen as a member of Parliament. Maulana Abdul Shakur vs Rikhab Chand, [1958] S.C.R. 387, distinguished. Ramappa vs Sangappa, ; , referred to.

For the year of account ending March 31, 1955, the appellant, a private limited company, earned a total income of Rs. 49,843. The company declared a ' dividend of Rs. 11,712 on July 13, 1955, and before the close of the year of assessment 1955 55 declared an additional dividend of Rs. 5,612, thereby distributing in the aggregate dividend which was not less than 767 60% of the total income, reduced by the income tax and supertax payable by it. The company then claimed rebate at the rate of one anna in the rupee on the amount computed according to Sch. 1, Part 1, Item B, read with section 2 of the Finance Act, 1955. The Income tax authorities rejected the claim on the ground that the expression "company to which the provisions of section 23A of the Income tax Act cannot be made applicable" in the provision of law aforesaid in the Finance Act, 1955, on which the appellant company relied, referred to a company against which in no circumstances could an order under section 23A be made, and private limited companies being companies in respect of which an 'order under section 23A could be made if the conditions prescribed relating to distribution of dividend were fulfilled, the benefit of rebate was not admissible in favour of the appellant company. The Appellate Tribunal and the High Court took the view that the benefit of a rebate provided by the Finance Act could not be denied to a private company if the conditions prescribed in section 23.A(1) of the Income tax Act were fulfilled, because, according to their view, the expression "can not be made applicable" only refers to a state of affairs in which having regard to the circumstances an order tinder section 23A could not be made. Held, that the appellant company was entitled to the rebate claimed by it. The expression "to which the provisions of section 23A of the Income tax Act can not be made applicable" in Sch. 1, Part 1, Item B, of the Finance Act, 1955, meant that the appli cability of section 23A of the Income tax Act depended upon an order to be made by the Income tax Officer, and not upon any exclusion by the provisions of the Act. It was only when an order under section 23A would not, having regard to the circumstances, be.justified that the right to obtain rebate under the Finance Act was claimable.

Appeals Nos. 494 and 495 of 1958. Appeals from the judgment and order dated April 18, 1955, of the Madras High Court in Case referred Nos. 53 of 1952 and 44 of 1953. Hardayal Hardy and D. Gupta, for the appellant. A. V. Viswanatha Sastri, R. Ganapathy Iyer, section Padmanabhan and G. Gopalakrishnan, for the respondent. December 8. The Judgment of the Court was delivered by SHAH, J. These are two appeals filed with certificates of fitness granted by the High Court of Judicature at Madras. Appeal No. 494 of 1958 arises out of orders passed in certain Excess Profits Tax Appeals and Appeal No. 495 of 1958 arises out of orders passed in certain Income tax References, Excess Profits Tax Appeals and Business Profits Tax Appeals. M/s. N. M. Rayaloo Iyer & Sons hereinafter referred to as the assessees are a firm carrying on business principally in dyes and chemicals. They are the chief representatives in "South India" of the products of the Imperial Chemical Industries Company (India) Ltd. hereinafter referred to as the "I.C.I.". The business in dyes and chemicals was in the years material to these appeals, conducted in the name and style of "Colours Trading Company", with its Head Office at Madura and in thirteen branch offices in different 63 towns in "South India". The busines was carried on originally in partnership by three brothers, N. M. R. Venkatakrishna Iyer, N. M. R. Subbaraman and N. M. ' R. Krishnamurti. On April 13, 1946, N. M. R. Subbaraman retired from the firm and the share of N. M. R. Venkatakrishna Iyer was taken over by a private limited company N. M. R. Venkatakrishna Iyer & Sons Ltd., but the business was, notwithstanding the changes in the personnel, continued in the original name and style. One N. M. R. Mahadevan (son of N. M. R. Venkatakrishna Iyer) hereinafter referred to as Mahadevan was employed by the assessees as the General Manager of the Colours Trading Co. By letter dated April 17, 1940, the assessees wrote to Mahadevan agreeing to pay him remuneration at the rate of Rs. 1,800 per annum and 5% of the net profits of the concern (Colours Trading Company) calculated by deducting from the gross profits of the business, salaries, wages and other outgoings but without making any deduction for capital. By letter dated March 30, 1943, the salary of Mahadevan was fixed at Rs. 3,000 per annum and the commission was enhanced to 12 1/2% of the net profits of the Colours Trading Company. The branch offices were managed by local managers and assistant managers who were paid in addition to monthly salary, annual and special bonus and dearness allowance. The assessees received from the I. C. I. commission at rates varying between 7 1/2% and 12% on different products sold to them. With effect from April 1, 1944, the I. C. I. allowed a special emergency commission of 5% on all dyes and dye stuffs sold to the assessees. This special emergency commission was increased to 15 % on all sales on or after March 1, 1945, but was subsequently reduced to 10% on sales on and after September 1, 1946. These appeals relate to the liability of the assessees to Excess Profits Tax for the chargeable accounting periods ending April 13, 1943, April 12, 1944, April 12, 1945, and, March 31, 1946, and for Business Profits Tax for the chargeable accounting periods ending April 12, 1946, March 31, 1947, April 13, 1947, March 31, 1948, and April 12, 1948. 64 The assessees claimed that they had paid to their employees in the years of account 1942 43 to 1947 48 under agreements executed from time to time a share in the special emergency commission received from the I. C. I., in addition to monthly salary, dearness allowance and general and special bonus. The I. C. I. in allowing the emergency commission by its letter dated January 24, 1944, recommended that 1% out of the 5% commission allowed may be "passed on" by the assessees to their "sub distributors". The assessees claimed that pursuant to this recommendation, they paid to their employees commission at rates varying between 1 1/2% to 4%, and when the emergency commission was increased to 15% and the I. C. I. by letter dated February 23, 1945, recommended that 6% out of this commission may be passed on to the sub distributors, the assessees claimed to have distributed commission at rates varying from 2% to 7 1/2% and in some cases at a rate as high as 12%. Under the service agreements, commission was payable to the employees only if the turnover in dyes exceeded Rs. 1,00,000 net in any year, but to employees in several branches the assessees claimed to have paid commission at generous rates even when the turnover fell far short of that amount. In the year of account ending April 12, 1945, there was a revision of the scales of salaries of the employees, and the assessees commenced giving to their employees dearness allowance and special bonus which in the aggregate exceeded 50% of the basic annual salary and also annual bonus equal to the annual salary. The result of this revision of emoluments was that each employee received an amount equal to at least 21 times his enhanced basic salary. In addition to this remuneration, the assessees claimed that they had paid a share in the commission which in some cases exceeded 12 times the basic salary. In computing the total income of the assessees for the years 1943 44 and 1944 45 for purposes of income tax, the Income tax Officer disallowed the payment of 12 1/2% of the net profits of the Colours Trading Co. to Mahadevan and in computing the income for the 65 assessment years 1945 46, 1946 47, 1947 48 and 194849 the Income tax Officer disallowed the commission. paid to the branch managers and other employees. In appeal the Appellate Assistant Commissioner set aside the order which disallowed the amount of commission paid to Mahadevan and following the order of the Income tax Appellate Tribunal in certain Excess Profits Tax appeals, allowed 5% of the net profits without deduction of Excess Profits Tax or Business Profits Tax, or 121% after deduction of Excess Profits Tax or ' Business Profits Tax whichever was higher. That order was confirmed in appeal by the Income tax Appellate Tribunal. The Tribunal also confirmed the order disallowing the emergency commission paid to the branch managers and other employees, and in the computation of taxable income for purposes of Income tax, Excess Profits Tax and Business Profits Tax, added back all those payments. At the instance of the assessees, the Tribunal referred two sets of questions to the High Court under section 66(1) of the Income tax Act read with section 21 of the Excess Profits Tax Act. Questions 1 to 3 in Referred Case No. 44 of 1953 were: (1) Whether in allowing a deduction under section 10(2) (xv) of the Income tax Act, the Income tax Officer is precluded from going into the question whether the amount was paid wholly and exclusively for the purpose of the assessee 's business? (2) Whether there was any material before the Tribunal to hold that the commission payment to N. M. R. Mahadevan at 121 % before deduction of Excess Profits Tax or Business Profits Tax was not wholly and exclusively laid out for the purpose of the assessee 's business? (3) Whether the commission payment to the branch managers, assistant managers and other employees is an expenditure laid out wholly and exclusively for the purpose of the business? Questions referred in Referred Case No. 53 of 1952 were: 66 (1) Whether the Appellate Tribunal erred in law in holding that in accordance with the terms of letters dated 17th April, 1940, and 30th March, 1943, and the conduct of the parties the Excess Profits Tax payable by the assessee should be deducted from the profits before the commission of 12 1/2% payable to M. N. R. Mahadevan is calculated? (2) Whether there is any material on evidence sufficient in law for the Appellate Tribunal to hold that the commission of 12 1/2% on profits paid to Mahadevan was unreasonable within the meaning of Rule 12 of Schedule 1 of the Excess Profits Tax Act? (3) Whether on the facts and circumstances of the case the disallowance by the Excess Profits Tax authorities of the commission paid to branch managers is justified under Rule 12 of Schedule 1 of the Excess Profits Tax Act? The material provisions relating to allowances under the Excess Profits Tax Act and the Business Profits Tax Act (which Act superseded the Excess Profits Tax Act as from March 30, 1946) were on the questions arising in this case substantially the same and hereafter reference to the Excess Profits Tax Act will in respect of the period after March 30, 1946, be deemed to be a reference to the Business Profits Tax Act. In the opinion of the High Court, in computing the taxable income, the deductions claimed by the assessees fell to be considered not under section 10(2)(xv) of Income tax Act but properly under section 10(2)(x) of the Income tax Act, the latter being a specific provision in the Act relating to deduction of commission or bonus paid to an employee. The High Court observed that in assessing liability to Excess Profits Tax the bonus or commission paid to the employees of the tax payer may be permitted as a deduction in the light of section 10(2)(x) of the Income tax Act and r. 12 of Sch. 1 to the Excess Profits Tax Act. The case of Mahadevan, according to the High Court, did not present much difficulty, the only question which fell to be determined in this case being whether in allowing deduction of commission at the rate of 12 1/2% on the net profits, the 67 Excess Profits Tax paid by the assessees was to be taken into account. Following a judgment of the Punjab High Court in Commissioner of Income tax, Delhi vs Delhi Flour Mills Ltd. (1), the High Court observed that in computing net profits Excess Profits Tax could not be deducted, but on the materials on the record, the question whether the commission paid to the branch managers and other employees was properly deductible could not be decided, and accordingly the High Court called for and obtained from the Tribunal a supplementary statement of facts. The High Court after considering the supplementary statement observed that the assessees had undoubtedly distributed substantial sums out of the emergency commission to its managers and assistant managers in the branches at rates well above the minima recommended by the I. C. I., but the distribution was at rates within the percentages allowed by the I. C. I., as additional commission and the balance retained by the appellants out of the emergency Commission was also substantial. In the view of the High Court, the Tribunal had to consider three factors, (1) the reasonableness of the commission in the light of the conditions laid down in section 10(2)(x), (2) the reasonableness of the percentages above the minima suggested by the I. C. I., and (3) the need for maintaining the reputation of the I. C. I., and the distributor in conditions that prevailed during that period when "black marketing was rampant", but observed the High Court "the Tribunal had made no real attempt to analyse the evidence before it to justify its conclusion that only the minima recommended by the I.C.I. and nothing in excess satisfied the test of reasonableness under r. 12, Sch. 1, of the Excess Profits Tax Act". They then observed that, whether the test of reasonableness is that prescribed by section 10(2)(x) of the Income tax Act or whether reasonableness has to be judged in the light of commercial expediency under r. 12, Sch. 1, of the Excess Profits Tax Act, the expenditure was to be judged from the point of view of a businessman and not by the application of any subjective standard of a taxing (1) 68 officer and that on an analysis of the materials furnished, they were unable to see anything per se unreasonable in the amounts of commission actually paid by the assessees to the branch managers and assistant managers in the branches. The High Court also observed that the minima recommended by the I. C. I. did not provide the only or an absolute standard for judging the reasonableness of the payments made, and stated: "No doubt, the employees of the assessee were in receipt of regular salaries and bonuses. But then, a sub distributor if he had not been paid a salary, would have had to be paid a share of the basic commission itself. What the assessee got in the years in question was in the nature of a windfall. It shared it with its employees. It had been instructed to share it. The emergency commission was allowed by the Imperial Chemical Industries so that the distributors could maintain the reputation of the Imperial Chemical Industries in the market even under the disturbed conditions that prevailed in those years. If, to maintain that reputation and to maintain its own, the assessee paid to its employee s even on a liberal basis, a share of that emergency commission, it is a little difficult to hold that, while receipt of the emergency commission was reasonable, sharing it beyond a particular point would per se be unreasonable, in the sense that no prudent businessman in that line of business, in those years, and in the market condition that prevailed then, with ample scope for black marketting, would have paid out commission on such a basis". They then concluded: "Though, of course, it was for the assessee to show that it was entitled to the deduction claimed under section 10(2)(x) of the Income tax Act and r. 12 of Sch. 1 of the Excess Profits Tax Act, there was really no basis on record to show that judged from the point of view of a businessman, payments in excess of the minima recommended by the Imperial Chemical Industries were not reasonable. We are of 69 opinion that the entire claim should have been allowed both under section 10(2)(x) of the Income tax Act and under r. 12 of Sch. 1 of the Excess Profits Tax Act on the ground that the statutory requirements were satisfied by the assessee. " The High Court accordingly answered the questions about the disallowance of commission paid to the employees of the assessees being justified under r. 12, Sch. 1, of the Excess Profits, Tax Act in the negative. Against those orders, these two appeals have been preferred with certificates of fitness from the High Court. The first question which falls to be considered is whether in the computation of taxable income for purposes of Income tax and Excess Profits Tax, commission allowed to Mahadevan at 12 1/2% should be allowed after deducting the Excess Profits Tax paid. By the agreement dated April 17, 1940, as modified by the agreement dated March 30, 1943, Mahadevan was to be paid remuneration at the rate of Rs. 3,000 per annum and 121 % of the net profits of the Colours Trading Company. In the view of the High Court in determining the "net profits" under the agreement "in accordance with the principles of commercial accountancy and the principles laid down under the Excess Profits Tax Act" the Excess Profits Tax which is a tax on profits could not be deducted. In our judgment the question is one of the true interpretation of the agreement. Mahadevan was under the agreement to receive 121% commission on the net profits of the Colours Trading Co. calculated by deducting from the gross. profits of the business the salaries, wages and other outgoings. The expression "outgoings" is not restricted to business or commercial outgoings. The agreement specifically disentitles the employers to make deductions of capital expenditure, but there is no indication that the outgoings are to be business outgoings only. There is nothing in the agreement or in the context justifying the view that in the expression 'outgoings ' is not included the Excess Profits Tax paid by the assessees. In Commissioner of Income Tax, Delhi vs Delhi 70 Flour Mills Co. Ltd. (1), it was observed by this Court in construing a similar agreement that the Excess Profits Tax was a part of the profits itself, but it was no part of the net profits contemplated by the parties; if it was a part which had to be deducted in arriving at the net profits, that is to say, the divisible profits which alone the parties had in mind, as a matter of construction the net profits meant divisible profits and were to be ascertained after deduction of Excess Profits Tax. Counsel for the Revenue has not challenged the decision of the High Court that in computing taxable income for the purpose of income tax commission paid to the various employees is a permissible deduction under section 10(2)(x) of the Income tax Act. The only question which survives on this branch for consideration is, therefore, whether those deductions are permissible in the assessment of Excess Profits Tax. By section 21 of the Excess Profits Tax Act, amongst other provisions, section 10 of the Income tax Act is made applicable with modifications if any as may be prescribed as if it were a provision of the Excess Profits Tax Act and refers to the Excess Profits Tax instead of Income tax. By section 2(19), the expression "profits" means profits determined in accordance with Sch. 1 of the Act which lays down the rules for computation of profits for the purpose of Excess Profits Tax Act. Rule 12 of Sch. 1 (which was added by section 4 of the Excess Profits Tax Ordinance, 1943 provided as follows: "(1) In computing the profits of any chargeable accounting period no deduction shall be allowed in respect of expenses in excess of the amount which the Excess Profits Tax Officer considers 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 concerned: Provided that no disallowance 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. (2) [1959] Supp. 1 S.C.R. 28. 71 (2) Any person who is dissatisfied with the decision of the Excess Profits Tax Officer under this rule may. appeal in the prescribed time and manner to the Appellate Tribunal. (3) In relation to chargeable accounting periods ending after the 31st day of December, 1942, the Central Government may make rules for determining the extent to which deductions shall be allowed in respect of bonuses or commissions paid. We were informed at the bar that though authorised, the Central Government did not make rules for determining the extent to which deductions shall be allowed in respect of bonuses or commissions paid. The Excess Profits Tax Act was substituted as from the year 1946 by the Business Profits Tax Act, 1947. That Act also defined by ' section 2, cl. (16), the expression "profits" as meaning profits determined in accordance with Sch. 1 and by section 19, the provisions of the sections of the Indian Income tax Act as applied to the Excess Profits Tax Act by virtue of sections 21 and 21A in so far they were not repugnant to the provisions of the Business Profits Tax Act applied to that Act as they applied to Excess Profits Tax Act and by cl. (3) of Sch. 1, a provision substantially similar to cls. (1) & (2) of cl. 12, Sch. 1, of the Excess Profits Tax Act was incorporated. Profits of a business for purposes of Excess Profits Tax Act have to be ascertained by reference to section 10 of the Income tax Act modified to the extent directed by Sch. 1 of the Excess Profits Tax Act. By cl. (12) of Sch. 1 of the Excess Profits Tax Act, a deduction in respect of expenses in excess of the amounts which the Excess Profits Tax Officer considers reasonable and necessary having regard to the requirements of the business and in the case of payments for services to the actual services rendered by the persons concerned, is not to be allowed. The deduction to be allowed, it is true, does not depend upon any subjective satisfaction of the Excess Profits Tax Officer, but on objective standards as to what is reasonable and necessary having regard to the requirements of the business and in the case of payments for services 72 to the actual services rendered by the persons concerned. The order passed by the Excess Profits Tax , 'Officer is open to review by the Tribunal to which appeal against the order of the Excess Profits Tax Officer lies. But in considering whether the deduction is properly claimed, the primary duty is vested by the Legislature in the Excess Profits Tax Officer. It is for him subject to review by the Tribunal to decide whether the deduction is reasonable and necessary, having regard to the requirements of the business and in case of payments for services to the actual services rendered. The jurisdiction which the High Court exercises on questions referred to it under the Excess Profits Tax Act is merely advisory; the High Court is not sitting in appeal over the judgment of the taxing authorities. If the taxing authorities having regard to the circumstances come to a conclusion that expenditure claimed as a deduction is not reasonable and necessary, it is not open to the High Court to substitute its own view as to what may be regarded as reasonable and necessary. Even if the High Court holds that the taxing authorities have committed an error in law by misconceiving the evidence, or by applying erroneous tests, or otherwise by acting perversely, the High Court may in answering the questions submitted, lay down the true principles applicable to the ascertainment of the permissible deductions and leave it to the taxing authorities to adjudicate upon the reasonableness and necessity of the expenses in the light of the requirements of the business. In the case in hand, the Excess Profits Tax Officer held, (a) that the employees of the assessees were being amply remunerated for services rendered by adequate salary, generous dearness allowance and annual bonus equal to the basic salary, (b) that the emoluments of the employees had been increased year after year and there was no material to show that the employees had made a persistent demand for increased emoluments, (c) that the commission was credited to the employees ' account at the end of the year and was carried forward but no payments were made to 73 them ' (d) that the agreements which had been produced by the assessees were fabricated with a view to, reduce tax liability, and (e) that the expenditure ' claimed was not proved to have been laid out wholly and exclusively for the purpose of the business. Taking into account these circumstances, the Excess Profits Tax Officer held that the remuneration paid to the employees was adequate and any additional commission paid was in excess of what was reasonable and necessary. The only criticism urged by counsel for the assessees against the grounds given is that the Excess Profits Tax Officer observed that while the net profit according to the Profit & Loss Account of the firm was Rs. 20,487 leaving a share of Rs. 6,800 only to each of the partners, some of the managers got more than this amount. It appears that the Excess Profits Tax Officer committed an error in so observing. The profits of the Colours Trading Co. as disclosed by the order of assessment for the year 1945 46 were Rs. 99,435 and not Rs. 20,487; but that error did not affect the ultimate conclusion recorded by the Excess Profits Tax Officer. According to the books of account of the assessees for the year 1943 44 of the business in dyes, the profits were Rs. 99,435 and they claimed to have distributed a commission of Rs. 1,00,715 to their employees out of the emergency commission, which was prima facie wholly disproportionate to the amount received by them. The order passed by the Excess Profits Tax Officer was confirmed in appeal by the Appellate Tribunal. In the view of the Appellate Tribunal, no additional incentive was required to sell dyes and chemicals in the years in question because dyes and chemicals were in short supply and there was a rise in demand. The Tribunal also referred to the table setting out the distribution among the employees of dearness allowance, bonus and salary in the relevant years, and observed: "In addition to the generous allowances, the payment of this sum appears to us a payment made in order to dissipate the profits. It would be sufficient to say that including the commission alleged 10 74 to have been paid, the total emoluments would be something like 1200% and in some cases even more than the basic annual salary. There is no doubt in our mind, that this was wholly unnecessary for business purposes. " Observing that the assessees having no sub distributors, the direction given by the I.C.I. did not require the assessees to "pass on" the commission to their employees, they concluded that the expenditure alleged to have been incurred was not reasonable and necessary within the meaning of r. 12, Sch. 1, of the Excess Profits Tax Act. The following table which is incorporated in the statement of case of the Tribunal sets out for the four years in question the emergency commission received by the assessees and the aggregate amount paid by them to their employees. Extra commis Amount of commis Assessment sion received sion paid by the year. by the assessee. assessee. Rs. Rs. 1945 46 1,28,533 1,00,715 1946 47 3,20,391 2,44,698 1947 48 3,15,934 1,28,506 1948 49 3,70,964 1,75,079 This distribution out of the emergency commission to the employees has to be viewed in the context of the following circumstances set out by the Tribunal: (1)that even though the I.C.I. recommended payment to sub distributors and the assessees had no sub distributors, they claimed to have paid commission to their employees at rates in excess of the minimum rates recommended by I.C.I. (2) that this commission was paid to the employees in branches in which the annual turnover did not exceed Rs. 1,00,000 even though the agreements which the assessees had executed expressly provided that the commission was to be paid only if the annual turnover in a branch exceeded Rs. I lakh and (3)that the basic salaries of the employees had been substantially increased from time to time and generous dearness allowance and Deepavali bonus 75 were given besides the annual bonus to the employees. An analysis of annexure 'IL" to the supplemental statement of case made by the Tribunal discloses some striking instances of Payments to employees. One Themaswamy was paid annually commission varying from Rs. 15,000 to Rs. 23,000 when his basic salary was Rs. 2,100 per annum; one K. N. Rajagopalachari was paid commission varying from Rs. 16,000 to Rs. 12,000 when his basic salary was Rs. 1,260 per annum; one section L. Radhakrishnan was paid commission varying from Rs. 5,700 to Rs. 13,000 when his salary varied between Rs. 516 and Rs. 636 per annum and one K. R. Rama Rao was paid commission varying from Rs. 4,600 to Rs. 10,520 his salary being Rs. 492 and later increased to Rs. 612 per annum. There was thus ample evidence in support of the conclusion of the Excess Profits Tax Officer which was confirmed by the Tribunal. As we have already observed, it is the province of the Excess Profits Tax Officer and the Tribunal to assess the permissible deductions in the context of reasonableness and necessity having regard to the requirements of the business and interference with the conclusion is permissible if the view of the taxing authorities is vitiated by an error of law or is not based on any materials, or the conclusion is such that no man instructed in law could have arrived at. It is true that in considering whether the deduction claimed by the assessees for payments made as bonus or commission paid to an employee is to be allowed, the taxing officer must have regard to the provisions of section 10(2)(x) of the Income tax Act and cl. (12) of Sch. 1 of the Excess Profits Tax Act; and in assessing the reasonableness, consideration of commercial expediency must undoubtedly be taken into account. But commercial expediency must be viewed in the light of the requirements of the business and the actual services rendered by the persons concerned. Any abstract consideration of commercial expediency is out of place. In our view, the High Court was not justified in seeking to reappreciate the evidence on which the 76 conclusion of the Excess Profits Tax Officer which was confirmed by the Tribunal was based. Their jurisdiction being advisory, the High Court had to answer the questions submitted for opinion on the facts found; if the High Court held the view that the taxing authorities had misdirected themselves in law or had made a wrong inference in law or had failed to apply the correct tests or had misconceived the evidence, it was. open to them to invite the attention of taxing authorities to the error committed by them; but the High Court could not set aside the decision of the taxing authorities on a reappreciation of the evidence. We may also point out that even if the High Court concluded that the total disallowance of the deduction claimed was not justified, the High Court could not substitute its own view as to what was reasonable and necessary. The High Court bad, if it disagreed with the taxing authorities, still to answer the questions submitted and leave to the consideration of the Excess Profits Tax Officer what in the circumstances was reasonable and necessary. Counsel for the assessees submitted that in any event, the Tribunal having in its supplementary statement of case stated that payment in excess of what was recommended by the I.C.I. was unjustified, this court may so modify the order of the High Court that deductions of the amounts which were recommended by the I.C.I. may be regarded as permissible deductions. The I.C.I. recommended distribution of a certain percentage out of the emergency commission to the sub distributors; but in the administrative set up of the assessees, the sub distributors did not find a place. The assessees carried on their business through paid employees. In terms therefore the recommendation by the I.C.I. had no application to the assessees. It is true that even if the assessees did not carry on the business through sub distributors, payment made to its employees if reasonable and necessary having regard to the requirements of the business, may still be deductible, but that in our judgment is a matter to be decided by the taxing authorities and not by us. 77 The Tribunal had come to the conclusion that no payment in addition to the salary, annual bonus and, special bonus was justified and any expression of opinion to the contrary in the supplementary statement pursuant to the order for statement of case could not in our judgment affect the conclusion originally recorded. In our view the answer to the question whether the disallowance by the Excess Profits Tax authorities of the commission paid to branch managers was justified under r. 12, Sch. 1, of the Excess Profits Tax Act should have been answered in the affirmative. On the view taken by us, Appeal No. 494/1958 will be allowed, but there will be no order as to costs. Appeal No. 495 of 1958 will be allowed with *costs. Appeals allowed.

The respondents, a firm carrying on business in dyes and chemicals under the name and style of Colours Trading Com pany, with their head office at Madurai and thirteen branch offices in different towns, were the chief representatives in South India of the products of the I. C. I., a manufacturing concern. M was employed as the General Manager of the respondents and by virtue of an agreement, he was to be paid remuneration at the rate of Rs. 3,000 per annum and 12 1/2% of the net profits of the company calculated by deducting from the gross profits of the business the salaries, wages and other outgoings. The branch offices were managed by local managers and assistant managers who were paid in addition to monthly salary, annual and special bonus and dearness allowance. The respondents received from the I. C. I. commission at varying rates on the different products sold to them and with effect from April 1, 1944, the I.C.I. allowed a special emergency commission of 5% recommending that 1% out of the commission allowed may be passed on by the respondents to their sub distributors. The respondents claimed to have distributed to their employees commission pursuant to the recommendation of the I.C.I. at rates varying between 2% and 7 1/2% and in some cases at a rate as high as 12%. Though under the service agreement, commission was payable to the employees only if the turnover exceeded Rs. 1,00,000 net in any year, the respondents claimed to have paid them commission at generous rates even when the turnover fell far short of that amount. In the year of account ending April 12, 1945, there was a revision of the scales of salaries of the employees, as a result of which the employees received an amount equal to 2 1/2 times the enhanced basic salary and also commission sometimes exceeding 12 times the basic salary. In computing the total income of the respondents for the years 1943 44 and 1944 45 for purposes of income tax, the income tax Officer disallowed the payment Of 12 1/2% of the net 61 profits to M, and for the years 1945 49 he disallowed the commission paid to the branch managers and other employees on the ground that taking into account all the circumstances the remuneration paid to the employees was adequate and that any additional commission paid was in excess of what was reasonable or necessary. The Appellate Tribunal confirmed the order of the Income tax Officer except in the case of M to whom payment of 5% of the net profits without deduction of Excess Profits Tax or Business Profits Tax, or 12% after deduction of Excess Profits Tax or Business Profits Tax, whichever was higher, was regarded as permissible deduction. The High Court, on reference, took the view, inter alia, that in determining the net profits under the agreement with M, the excess profits tax could not be deducted, that in considering the question whether the bonus or commission paid to the employees in the present case might be permitted as a justifiable deduction, in the light of section 10(2)(X) Of the Income tax Act and r. 12 of Sch. 1 of the Excess Profits Tax Act, the test of reasonableness of the expenditure was to be judged from the point of view of a business man and not by the application of any subjective standard of a taxing officer, and that on an analysis of the materials furnished, there was nothing per se unreasonable in the amounts of commission actually paid by the respondents to the branch managers and assistant managers. Held: (i) that the question whether in the computation of the taxbale income, the commission payable to M under the agreement entered into with him by the respondents should be allowed before deducting the excess profits tax, depended on the true interpretation of the agreement; the expression "outgoing" in the agreement was not restricted to business or commercial outgoings but included the excess profits tax paid by the assessees, and that, consequently, the net profits of which M was to be given a percentage by way of commission should be computed after deducting the excess profits tax paid. Commissioner of Income tax, Delhi vs Delhi Flour Mills Co., Ltd., [1959] SUPP. 1 S.C.R. 28, relied on. (2) that under cl. (12) Of Sch. 1 of the Excess Profits Tax Act, 1940, it was for the Excess Profits Tax Officer, subject to review by the Tribunal, to decide whether the deduction was reasonable and necessary, having regard to the requirements of the business and in case of payments for services, to the actual services rendered by the persons concerned; it was not open to the High Court exercising its jurisdiction on questions referred to it under the Excess Profits Tax Act, to substitute its own view as to what may be regarded as reasonable and necessary and to set aside the decision of the taxing authorities on a re appreciation of the evidence. If the High Court considered that the taxing authorities had committed an error in law by misconceiving the evidence or by applying erroneous tests or 62 otherwise by acting perversely, the proper course for it was in answering the questions submitted, to lay down the true principles applicable to the ascertainment of the permissible deductions and to leave it to the taxing authorities to adjudicate upon the reasonableness and necessity of the expenses in the light of the requirements of the business. (3) that there was ample evidence in support of the conclu sion of the Excess Profits Tax Officer which was confirmed by the Tribunal, and that the question, whether the disallowance by the excess profits tax authorities of the commission paid to branch managers was justified under r. 12 of Sch. 1 of the Excess Profits Tax Act, should have been answered in the affirmative.

The appellant company made a claim under section 5 of the Income tax (Double Taxation Relief) (Indian States) Rules, 1939, for refund of the income tax paid by it in an Indian State. The claim was rejected by the Income tax Officer as time barred. The Commissioner of Income tax and the Central Board of Revenue refused to interfere and the appellant sought no further legal remedy against their orders. Subsequently on certain tax demands being made by the Income tax Officer, the appellant made representation that the amounts in respect of which application had earlier been made under r. 5 should be set off against the demand as provided by section 49E of the Indian Income tax Act, 1922. The Income tax authorities having rejected this claim also, the appellant went to the High Court under article 226 of the Constitution. The High Court held that the expression found to be due" in section 49E clearly meant that there must be, prior to the claim of set off, an adjudication whereunder an amount is found due by way of refund to the person claiming set off. Since there was no such adjudication in the appellant 's favour, the writ petition was dismissed. However a certificate of fitness under article 133(1) (c) was granted to the appellant. HELD : (i) It is not necessary that there should be a prior adjudication before a claim can be allowed under section 49E. There is nothing to debar the Income tax Officer from determining the question whether a refund is due or not when an application is made to him under section 49E. The words "is found" do not necessarily lead to the conclusion that there must be a prior adjudication. [419 D E] (ii) The set off under section 49E must however be "in lieu of payment ' which expression connotes that payment is outstanding i.e. there is a subsisting obligation on the Income tax Officer to pay. If a claim to refund is barred by a final order, it cannot be said that there is a subsisting obligation to make the payment. [419 F G] Stubbs vs Director of Public Prosecutions , relied on. (iii) In the present case the orders of the Commissioner and the Central Board of Revenue rejecting the appellant 's claim under r. 5 of the Indian State Rules had become final. They were not challenged even in the petition under article 226. There was thus no subsisting obligation on the part of the Income tax Officer to make payment to the appellant, and the claim of the appellant under section 49E must therefore, fail. [419 G H]

In exorcise of the powers conferred by section 29 of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960 (Tamil Nadu Act 18 of 1960), the Government of Tamil Nadu by a Notification No. II (2) H. O. 6060/76 dated 21 t November, 1976 exempted the Buildings owned, inter alia by all the co operative societies from all the provisions of the said Act. Since the protection available to the petitioners, who wore tenants in a building belonging to respondent No. 2, an Apex Society registered under the Tamil Nadu Co operative Societies Act, 1961 and covered by the said notification. had been withdrawn and since the petitioners were facing the imminent prospect of suffering eviction decrees against them, they filed the present writ petitions challenging the constitutional validity of the impugned notification on the ground that the same was violative of article 14 of the Constitution. The petitioners contended that treating the buildings owned by all the co operative societies in the State of Tamil Nadu as falling into one group while exercising the power under sec. 29 of the Act will have to be regarded as a rational classification based on an intelligible differentia but the differentia on which this classification was based had no excuse with the object of curbing the two evils of rack renting and unreasonable eviction for which the power to grant exemption had been conferred upon the State Government under sec. 29 of the Act and since the impugned notification did not satisfy be test of nexus the exemption granted to all such buildings could not be sustained and Will have to be regarded as discriminatory and violative of article 14. In other words Counsel urged that there was and is up warrant OF any presumption that co operative societies qua landlords will not indulge in rack renting or will not unreasonably evict tenants; in fact they would not be different from other private landlords so far as the two evils sought to be curbed by the Act are concerned and therefore Counsel urged that the exemption granted could not be said to be in conformity with the guidance afforded by the scheme and the previsions of the Act. 417 Dismissing the petitions, ^ HELD: It is true that under sec. 4 of the Tamil Nadu Co operative Societies Act the very object of every co operative society registered thereunder is the promotion of economic interests of its members and sec. 62 of the Act provides for payment of dividends on shares to its members as also for payment of bonus to its members and paid employees. But these aspects of a co operative society do not mean that it could be likened to any other body undertaking similar activities on commercial lines and to do so would be to miss the very basis on which the co operative movement was launched and propagated and has been making progress in the country during the last several decades. Indisputably, co operative societies which carry on their activities in various fields do so for the purpose of attaining the social and economic welfare of a large section of the people belonging to the middle class and the rural class by encouraging thrift, self help and mutual aid amongst them, especially by eliminating the middle man. But the object of promoting the economic interrupts of the members has to be achieved by following co operative principles where the profit motive will be restricted to a reasonable level unlike other commercial bodies where sky is the limit so far as their desire to earn profits is concerned. Sections 4 and 62 of the Act and Rule 46 of the Rules make it clear that in the matter of distribution of profits by way of payment of dividend to members and payment of bonus to members as well as paid employees restrictions have been placed by law and the same is maintained at a reasonable level and considerable portion of the net profits is apportioned and required to be carried to various kinds of funds, like co operative development fund, co operative education fund, reserve fund etc. In fact it is such statutory appropriations and restrictions on payment of dividends and bonus which differentiates co operative societies from other bodies undertaking similar activities on commercial lines and therefore, the buildings belonging to such co operative societies are substantially different from the buildings owned by private landlords. Further it has to be appreciated that these statutory provisions are applicable to all types of co operative societies specified in Rule 14 whatever be their nature or functions. The profit element being maintained at a reasonable level by provisions of law in all types of co operative societies there is every justification for the assumption that no co operative society will indulge in rack renting or unreasonable eviction. In this view of the matter if the State Government came to the conclusion that in the case of co operative societies there being no apprehension that they would indulge in either of these two evils exemption from the provisions of the Tamil Nadu Act No. 18 of 1960 should be granted in favour of buildings belonging to such co operative societies it will have to be regarded is a legitimate exercise of the power conferred on it under sec. 29 of the Act the same being in conformity with the guidance afforded by the preamble and provisions of the Act in that behalf. [422D 5; 424C G] Besides, on the factual side of the issue the facts and circumstances put forward by the State Government in its counter affidavit which have gone unchallenged clearly show that the differentia on the basis of which the classification was made had a clear nexus with the object with which the power to grant exemption has been conferred upon the State and therefore the impugned notification will have to be regarded as valid. [425E F] 418

The appellant land owner held lands in excess of 30 standard acres as on 6.4.1960. He filed a return as required by the Tamil Nadu Land Reforms (Fixation of Ceiling on Land) Act, 1961 and an enquiry was initiated by the Authorised Officer concerned under Section 9(2)(b) of the Act. Several objections raised by the appellant were rejected and the Authorised Officer came to the conclusion that the family of the appellant could be reckoned to be of five members be tween 6.4.1960 and 2.10.1962 and thus the appellant was entitled to 30 standard acres; his wife and daughter however could hold 10 and 7.71 standard acres respectively as strid hana. The appellant was asked to elect which lands he wished to be included in his holding and state which lands should be treated as surplus. Feeling aggrieved by the said deter mination, the appellant preferred an appeal under Section 78(1) to the Land Tribunal. The appellant contended (i) that the Authorised Officer had wrongly included the lands of his minor sons, unmarried daughter and wife gifted to them long before 1960; (ii) that subsequent to the filing of the appeal, the Act was amended as a consequence whereof his rights and liabilities with regard to the fixation of ceil ing area were required to be worked out on the basis of the revised date of commencement of the Act i.e. 15.2.1970; notified date being 2.10.1970. It was also urged by the appellant that the lands of his eldest son Laxminarayanan could not be included in his holding. On those grounds amongst others relating to the effect of subsequent transac tions the appellant prayed that the matter ought to be remanded to the Authorised Tribunal for a de novo considera tion. The appellant authority rejected all the contentions and dismissed the appeal, whereupon the appellant preferred a revision application before the High Court. Before the High Court his plea regarding subsequent transactions was confined to the documents executed between 15th February 1970, the date of commencement of the 359 Act, and 2nd October 1970, the notified date; contentions regarding other transactions were not pressed. The High Court accepted this contention and took the view that even in respect of proceedings which commenced prior to the coming into force of the Amending Act, an affected person can take advantage of the provisions contained In Section 2 IA. The High Court held that while Section 2 of the Amending Act reduced the ceiling area to half, benefit was conferred by Section 21A and hence both the provisions had to be read together. On that reasoning the High Court opined that the three documents relating to subsequent transactions executed between the said date, could not be ignored in fixing the ceiling area unless it was found that the documents were executed to defeat the provisions of the Act, in which case the transactions may be declared void under Section 22 of the Act. The High Court accordingly directed the Authorised Officer to make further inquiries regarding the three trans actions in question and pass appropriate orders. The High Court rejected the other contentions. The appellant being aggrieved with the rejection of other points raised before the High Court has preferred this appeal by special leave. Dismissing the appeal, this Court, HELD: The proceedings in this case had started and concluded before the Authorised Officer long before the Amending Act saw the light of the day. Under Section 3(1) of the Amending Act, any action taken (including any order made, decision or direction given, proceeding taken, etc.) under the provisions of Act before the date of publication of the Amending Act, can be continued and enforced after the said date in accordance with the provisions of the Act as if the Amending Act had not been passed. This is however, subject to subsection (2) which carves out an exception to sub section (1) insofar as the reduction of the ceiling area from 30 standard acres to 15 standard acres is concerned. [367E G] B.K.V. Radhamani Ammal vs Authorised Officer, Land Reforms, Coimbatore, , referred to.

The appellant, at the time a resident of Lahore, was asses sed to income tax on an income of Rs. 49,047 for the assessment year 1944 45 by the Income tax Officer, Lahore. After the partition in 1947 he shifted to Delhi and resided there. He was one of the three share holders of a company called Indra Singh and Sons Ltd. of Calcutta, the shares of all the three shareholders being equal. The company at a meeting held oil April 17, 1943, passed its accounts for the year ending March 31, 1942, but declared no dividends although the accounts disclosed large profits. On June 11, 1947, the Income tax Officer, Calcutta, passed an order under section 23A of the Income tax Act that the sum of Rs. 4,74,370, being the appellant 's share of the undistributed assessable income of the company, be included in his income for the assessment year 1944 45. Thereupon the Income tax Officer, Delhi, on April 10, 1948, issued a notice to the appellant, who was then working as the Defence Minister of India and residing in Delhi, under section 34 of the Act to file a revised return, which he did under protest, reopened the earlier assessment and by a fresh order made on March 25, 1949, assessed the appellant on an income of Rs. 5,23,417 for the year in question. It was contended on behalf of the appellant that the proceeding under section 34 could be held only in Lahore and not in India at all. The question for determination was whether the Income tax Officer, Delhi, could validly reassess the appellant under section 34 of the Act. Held, that the issue of a notice under section 34 of the Income tax Act, 1922, under the provision of the section itself, attracted such provisions of the Act as might apply to a notice issued under section 22(2) of the Act and since section 64 of the Act was the only provision under which the place of assessment upon a notice under section 22(2) could be determined, in absence of anything to the contrary in the Act, section 64 applied to an assessment under section 34 of the Act. The appellant was, therefore, rightly assessed by the Income tax Officer, Delhi, under section 64(2) of the Act. 483 C. V.Govindarajulu vs Commissioner of Income tax, Madras, I.L.R. and Lakshminarain Bhadani vs Commissioner of Income tax, Bihar and Orissa, , held inapplicable. The time specified by the proviso to section 64(3) could have no application since the contention in the present case was that the assessment under section 34 could be made only in Lahore and not in India at all. Section 23A of the Act, as it then stood, raised only one fiction, and not two, and that was of an income arising on a specific date in the past with the purpose that such income might be included in the income of a share holder for assessment. That income must, therefore, be deemed to have existed on the date for the purpose of assessment and, if not included in the assessment for the relevant year, must be taken to have actually escaped assessment so as to attract section 34 of the Act. Dodworth vs Dale, , D. & G. R. Rankine vs Com missioners of Inland Revenue, and Chatturam Horliram Ltd. vs Commissioner of Income tax, Bihar and Orissa, ; , held inapplicable. There is no warrant for the proposition that section 23A of the Act was meant to apply only to cases where pending assessment for any year, an order is made under that section creating a fictional income that year. Such an order could, therefore, be made even after the assessment of the income of the share holder for the year concerned had already been completed. But section 23A does not itself provide for any assessment being made and that has to be made under other provisions of the Act authorising assessment including section 34. It is not correct to say that section 23A(1), as it then stood, was beyond the competence of the Legislature and was as such unconstitutional. Under Entry 54 of List I of the Seventh Schedule to the Government of India Act, 1935, the Legislature could pass not only a law imposing a, tax on a person on his own income but also a law preventing him from evading the tax payable on his income and there can be no doubt that section 23A, properly construed, was meant to prevent such evasion.

The appellant was carrying on the business of a railway contractor in a place in the district of R. In April 1943, the Income tax Officer of R which was under the charge of the Commissioner of Income tax, Bengal (Mufassil), served a notice under section 22(2) of the Indian Income tax Act, 1922, on the appellant who in pursuance of the notice filed the return on February 28, 1944. The Income tax Officer then served notices on him under SS. 22(4) and 23(2) Of the Act for the production of books, etc., but before the final assessment was made, the Central Board of Revenue by an order passed under section 5(2) of the Act, transferred the appellant 's case along with some other assessment cases, to the Commissioner of Income tax (Central), Calcutta. On February 11, 1948, the Income tax Officer, Calcutta, to whom the appellant 's case was assigned, issued notices again under SS. 22(4) and 23(2) of the Act and after making the usual enquiries made the assessment order on March 15, 1948. The appellant 's appeals to the Appellate Assistant Commissioner and then to the Appellate Tribunal raising objections to the legality of the transfer of his case to Calcutta and to the jurisdiction of the Income tax Officer, Calcutta, were dismissed. The Appellate Tribunal held that as the objection related to the place of assessment it was not competent for the Tribunal to go into that question. The appellant then made an application to the Commissioner of Income tax for reference under section 66(1) of the Act, but this was dismissed on the ground that the assessee never raised any objection before the Income tax Officer to his jurisdiction and that, in any case, the question of jurisdiction could not arise out of the order of the Tribunal. An application filed by the appellant to the High Court under section 66(2) of the Act was dismissed and though the order of dismissal was not taken up on appeal, the appellant filed an appeal to the Supreme Court against the order of the Appellate Tribunal. It was contended for the appellant that under section 64(1) and (2) of the Act he was entitled to be assessed by the Income tax Officer of the area within which the place of his business was situate, that the 302 assessment by the Income tax Officer of Calcutta was illegal assumption of jurisdiction and that, in any case, the order of transfer by the Central Board of Revenue under section 5(2) of the Act was not valid because, if it wanted to transfer the assessment proceedings from the file of one Income tax Officer to another it could be done only under section 5(7A) and not under section 5(2). Held : (1) Sub section (7A) of section 5 which confers on the Central Board of Revenue the power to transfer any case from one Income tax Officer to another is not a provision which in any way modifies or cuts down the power given to the Central Board of Revenue under sub section 2 of section 5 which enables it to specify as to which of the Commissioners would perform functions in respect of different areas, persons, incomes or cases or classes thereof. The two sub sections are complementary and operate in two separate spheres. Pannalal Binjraj vs Union of India, ; and Bidi Supply Co. vs Union of India, ; , distinguished. In the present case, the Central Board of Revenue directed the Commissioner of Income tax (Central), Calcutta, to exercise his functions in respect of certain cases including the case of the appellant and that fell under section 5(2) and not under section 5(7A). The order of transfer was, therefore, valid. (2)The jurisdiction of the Income tax Officer, Calcutta, to make the assessment on the appellant cannot be challenged, in view of sub section 5(a) of section 64 of the Act, under which sub sections (1) and (2) of section 64 have no application to an assessee in respect of whom anorder has been made by the Central Board of Revenue under S.5(2) of the Act. (3) Objections as to the place of assessment cannot be raised in appeal either before the Appellate Assistant Commissioner or before the Appellate Tribunal. Wallace Brothers & Co. Ltd. vs Commissioner of Income tax, Bombay, Sind and Baluchistan, and Seth Kanhaiyalal vs Commissioner of Income tax, [1936] 5 I.T.R. 739, relied on. Dayaldas Kushiram vs Commissioner of Income tax (Central), and Dina Nath Hem Raj vs Commissioner of Income tax, All. 616, distinguished. Consequently, as the question as to the place of assessment could not arise out of the order of the Appellate Tribunal no such question of law could be referred to the High Court.

In this appeal by special leave brought by the auction purchaser against the Judgment of the Madras High Court the sole question for consideration is as regards the period of limitation for making a deposit to make an application under Rule 89 of Order XXI of the Civil Procedure Code, 1908 to set aside the sale of immovable property sold in execution of a decree. Whether the deposit is to be made within 30 days from the date of the sale as required by sub rule (2) of Rule 92 of Order XXI or within 60 days from the date of sale as provided in Article 127 of the ? Following its earlier decision in Thangammal & Ors. vs V.K. Dhanalakshmi & Anr. and the decision of this Court in Basavantappa vs Gangadhar Narayan Dharwadkar & Anr., the High Court had held that Article 127 governed the period of limitation to make a deposit in terms of Rule 89. Setting aside the judgment of the High Court on the question of limitation, this Court in allowing the appeal, HELD: The correct construction of Rule 92(2) of Order XXI of the Civil Procedure Code, 1908 leads to the irresist ible conclusion that the time for making a deposit in terms of Rule 89 of Order XXI is 30 days, and Article 127 of the prescribing the period for making an application under Rule 89 has no relevance to the prescribed time for making the deposit. Neither provision has any effect on the other as to time. [489G H; 490A] Basavantappa vs Gandadhar Narayan Dharwadkar & Anr., ; , over ruled. Nalinakaya Bysack vs Shyam Sunder Haldar & Ors. , ; at 545; Mersey Docks vs Henderson, [1988] 13 App. 595,602; 484 SUPREME COURT REPORTS [1990] 1 S.C.R. Crawford vs Spooner, [1846] 6 Morre P.C. 1, 8, 9; Seaford Court Estates vs Asher, All E.R., [1949] 2.155 at 164 M. Pentiah & Ors. vs Muddala Veeramallappa & Ors., ; at 314 Heydon 's case ; 76 ER 637; Dakshayini & Ors. vs Madhavan, AIR 1982 Kerala 126, referred to.

The Respondent firm imported from Japan, "metallised polyester films" which were in the shape of film rolls several metres long. The goods were cleared on payment of customs duty as well as additional duty/countervailing duty leviable under section 3 of the Customs Tariff Act. Thereaf ter the Respondent firm moved three applications claiming refund of the additional duty of customs paid by it. The claim was made under the terms of a notification of exemp tion issued under section 25(1) of the Customs Act. Under notification No 228/76 dated 2.8.1976, an exemption from the Customs Tariff Act was granted in respect of "articles made of plastics, all sort but excluding those specified in the Table annexed and failing under Chapter 39 of the First Schedule to the Customs Tariff Act. The Tribunal accepted the claim of refund made by the ' Respondent. In so doing it relied on the decisions of the Madras High Court in Precise Impex P. Ltd. vs Collector, , of the Calcutta High Court in Continental Marketing P. Ltd. vs Union, and of the Bombay High Court in A.V. Jain vs Union, WP 2136 of 1986 decided on 30.1.1987. The Tribunal also referred to its earlier decision in Export India Corporation P. Ltd. vs Collector; and Collector vs Fancy Dying and Printing Works Bombay. The Tribunal held that the goods imported by the Re spondent were articles made of plastics but they were "films" and thus not one of the Categories of articles mentioned in the Table. Aggrieved by the decision of the Tribunal, the Collector of Customs has filed these appeals under section 130 E(B) of the . 232 Before this Court the Department contended that the goods are "sheets" or "foils" or other "rectangular or profile shape" and hence liable to duty. The assesses ' assertion is that the goods are "films" though specie of plastics articles yet they are different from any mentioned in the table. According to it even if they are treated only as thin sheets of plastic material, they can be described only as "sheetings" and not sheets. On consideration of the rival contentions advanced by the parties and after making reference to the other relevant notifications granting exemption issued under rule 8(1) of the Central Excise Rules in respect of items falling under Item No. 15A of the Central Excise Tariff Act, this Court dismissing the appeals, HELD: Films made of plastic fall in a category of their own and do not fail within the categories of articles ex cepted by the Table. Film is a well known, distinct and independent category of plastic article known to commerce. [235A] The Court agreed with the view of the Bombay High Court that, though for certain purposes there is a distinction between "films", "foils" and "sheets", so far as the article presently in question is concerned it is recognised in trade only as "film". [238F] The goods under consideration cannot be described either as "foils or sheets". A film roll of indefinite length and not in the form of individual cut piece can be more appro priately described as "sheetings" rather than ' 'sheets". [238G ;239A] The expression "other rectangular or profile shapes" in the table is also not appropriate to bring in the items in question. For one thing, the articles have a distinct name in the market as "films" and therefore they are outside the table. It will not be possible to accept the contention that articles which have a clear commercial identity as "films" should be brought within the wide and vague expression "other rectangular or profile shapes", because if the film is cut into small pieces each piece will be rectangular in shape. The items imported do not come in a rectangular shape they are imported as rolls of polyester films. They are not articles of rectangular shape. Nor would it be possible to treat them as of other "profile" shape. The Court was unable to attribute any precise meaning to the expression "profile" shape but it cannot be taken to be comprehensive enough to take in any shape whatever. If the expression "rectangular" or other "profile" shape in the table is given 233 such wide and unrestricted interpretation then practically any article of plastic can be brought within the meaning of one or other of the expressions used in the Table and thus the entire exemption can be altogether deprived of any content. The Court took the view that the articles are "films" and, as, this expression does not find specific mention in the table, the assessee is entitled to exemption under the main part of the notification. [239E H; 240A]

Appeal No. 427 of 1959. Appeal by special leave from the Award dated February 18, 1958, of the Industrial Tribunal (Textiles) U.P., Allahabad, in Petitions (under section 6 E) Nos. (Tex.) 3 and 4 of 1957 and 1 of 1958. M. C. Setalvad, Attorney General for India and G. C. Mathur, for the appellant. B. P. Maheshwari, for the respondents. December 12. The Judgment of the Court was delivered by GAJENDRAGADKAR, J. Three applications made by the appellant the Lord Krishna Textile Mills under section 6 E(2)(b) of the United Provinces (Act XXVIII of 1947) for obtaining the approval of the Industrial Tribunal to the dismissal of 8 of its workmen have been rejected; and the Tribunal has refused to accord its approval to the action taken by the appellant. This appeal by special leave challenges the legality, validity as well as the propriety of the said order, and the principal question which it seeks to raise is in regard to the scope of the enquiry permissible under section 6 E(2)(b) as well as the extent of the jurisdiction of the Tribunal in holding such an enquiry. Section 6 E(2) of the U. P. Act is identical in terms with section 33 of the (XIV of 1947) (hereafter called the Act), and for convenience we would refer to the latter section because what we decide in the present appeal will 206 apply as much to cases falling under section 6 E(2)(b) of the U. P. Act as those falling under section 33(2)(b) of the Act. It appears that on October 12, 1957 when the appellant 's Controller of Production and the General Superintendent were discussing certain matters in the office of the appellant mills, Har Prasad, one of the 8 workmen dismissed by the appellant, came to see the Controller along with some other workmen. These workmen placed before the Controller some of their grievances; and when the Controller told their leader Har Prasad that the grievances set forth by them were not justified Har Prasad replied that the Controller was in charge of the management of the appellant mills and could do what he liked, but he added that the ways adopted by the management were not proper and "it may bring very unsatisfactory results". With these words Har Prasad and his companions left the office of the Controller. Two days thereafter Har Prasad and Mool Chand saw the Controller again in his office and complained that one of the Back Sizers Yamin had reported to them that the Controller had beaten him; the Controller denied the allegation whereupon the two workmen left his office. At about 6 p.m. the same evening a number of workmen of the appellant mills surrounded Mr. Contractor, the General Superintendent, and Mr. Surti when they were returning to their bungalows from the mills and assaulted and beat them. The two officers then lodged a First Information Report at Thana Sadar Bazar, Saharanpur about 9 p.m.; thereupon the Inspector of Police went to the scene of the offence, and on making local enquiries arrested two workmen Ramesh Chander Kaushik and Tika Ram. This offence naturally led to grave disorder in the mills, and the officers of the mills felt great resentment in consequence of which the mills remained closed for three days. The appellant 's management then started its own investigations and on October 17 it suspended five workmen Har Prasad, Majid, Zinda, Yamin and Manak Chand. Notice was served on each of these suspended workmen calling upon them to explain their conduct and 207 to show cause why they should not be dismissed from the service of the mills. As a result of further investigation the management suspended two more workmen Om Parkash and Satnam on October 24 and served similar notices on them. Ramesh Chander Kaushik and Tika Ram were then in police custody. After they were released from police custody notices were served on them on November 24 asking them to show cause why their services should not be terminated. All the workmen to whom notices were thus served gave their explanations and denied the charges levelled against them. An enquiry was then held according to the Standing Orders. At 'the said enquiry all the. workmen concerned as well as the representatives of the union were allowed to be present and the offending workmen were given full opportunity to produce their witnesses as also to cross examine the witnesses produced by the management against them. As a result of the enquiry thus held the management found the charges proved against the workmen concerned, and on November 19 Om Parkash, Satnam, Majid, Yamin, Zinda and Har Prasad were dismissed. These dismissed workmen were asked to take their final dues together with one month 's pay in lieu of notice as required by the Standing Orders, On Decem ber 20, the enquiry held against Tika Ram and Ramesh Chander concluded and as a result of the findings that the charges were proved against them the said two workmen were also dismissed from service and required to take their final dues with one month 's wages in lieu of notice. At this time an industrial dispute in respect of bonus for the relevant year was pending before the Industrial Tribunal (Textile) U.P., Allahabad. The appellant, therefore, made three applications before the Tribunal under section 6 E(2) of the U. P. Act on November 21 and 27 and December 21, 1957 respectively. By these applications the appellant prayed that the Industrial Tribunal should accord its approval to the dismissal of the workmen concerned. On February 18, 1958 the Tribunal found that the appellant had failed to make out a case for dismissing the 208 workmen in question, and so it refused to accord its approval to their dismissal. Accordingly it directed the appellant to reinstate the said workmen to their original jobs with effect from the dates on which they were suspended with continuity of service, and it ordered that the appellant should pay them full wages for the period of unemployment. It is on these facts that the question about the construction of section 6 E(2)(b) of the U.P. Act falls to be considered. As we have already observed the material provisions of section 6 E of the U. P. Act are the same as section 33 of the Act after its amendment made by Act 36 of 1956; and since the fatter section is of general application we propose to read the relevant provisions of section 33 of the Act and deal with them. All that we say about this section will automatically apply to the corresponding provisions of section 6 E of the U. P. Act. Section 33 occurs in Chapter VII of the Act which contains miscellaneous provisions. The object of section 33 clearly is to allow continuance of industrial proceedings pending before any authority prescribed by the Act in a calm and peaceful atmosphere undisturbed by any other industrial dispute; that is why the plain object of the section is to maintain status quo as far as is reasonably possible during the pendency of the said proceedings. Prior to its amendment by Act 36 of 1956 section 33 applied generally to all cases where alteration in the conditions of service was intended to be made by the employer, or an order of discharge or dismissal was proposed to be passed against an employee without making a distinction as to whether the said alteration or the said order of discharge or dismissal was in any manner connected with the dispute pending before an industrial authority. In other words, the effect of the unamended section was that pending an industrial dispute the employer could make no alteration in the conditions of service to the prejudice of workmen and could pass no order of discharge or dismissal against any of his employees even though the proposed alteration or the intended action had no connection whatever with the dispute pending. between him and his employees. This led to a general 209 complaint by the employers that several applications had to be made for obtaining the permission of the specified authorities in regard to matters which were not connected with the industrial dispute pending adjudication; and in many cases where alterations in conditions of service were urgently required to be made or immediate action against an offending workman was essential in the interest of discipline, the employers were powerless to do the needful and had to submit to the delay involved in the process of making an application for permission in that behalf and obtaining the consent of the Tribunal. That is why, by the amendment made in section 33 in 1956 the Legislature has made a broad division between action proposed to be taken by the employer in regard to any matter connected with the dispute on the one hand, and action proposed to be taken in regard to a matter not connected with the dispute pending before the authority on the other. Section 33(1) provides that during the pendency of such industrial proceedings no employer shall (a) in regard to any matter connected with the dispute alter to the prejudice of the workmen concerned in such dispute the conditions of service applicable to them immediately before the commencement of such proceedings, or (b) for any misconduct connected with the dispute discharge or punish whether by dismissal or otherwise any workman connected with such dis pute, save with the express permission in writing of the authority before which the proceeding is pending. Thus the original unamended section has now been confined to cases where the proposed action on the part of the employer is in regard to a matter connected with a dispute pending before an industrial authority. Under section 33(1) if an employer wants to change the conditions of service in regard to a matter connected with a pending dispute he can do so only with the express permission in writing of the appropriate authority. Similarly, if he wants to take any action against an employee on the ground of an alleged misconduct connected with the pending dispute he 27 210 cannot do so unless he obtains previous permission in writing of the appropriate authority. The object of placing this ban on the employer 's right to take action pending adjudication of an industrial dispute has been considered by this Court on several occasions. In the case of the Punjab National Bank Ltd. V. Its Workmen (1) this Court examined its earlier decisions on the point and considered the nature of the enquiry which the appropriate authority can hold when an application is made before it by the employer under section 33(1) and the extent of the jurisdiction which it can exercise in such an enquiry. "The purpose the Legislature had in view in enacting section 33", it was held, "was to maintain the status quo by placing a ban on any action by the employer pending adjudication"; and it was added "but the jurisdiction conferred on the Industrial Tribunal by section 33 was a limited one. Where a proper enquiry had been held and no victimisation or unfair labour practice had been resorted to, the Tribunal in granting permission had only to satisfy itself that there was a prima facie case against the employee and not to consider the propriety or adequacy of the proposed action". It is significant that the Tribunal can impose no conditions and must either grant permission or refuse it. It is also significant that the effect of the permission when granted was only to remove the ban imposed by section 33; it does not necessarily validate the dismissal or prevent the said dismissal from being challenged in an industrial dispute. This position is not disputed before us. What is in dispute before us is the nature of the enquiry and the extent of the authority 's jurisdiction in holding such an enquiry under section 33(2). Section 33(2) deals with the alterations in the conditions of service as well as discharge or dismissal of workmen concerned in any pending dispute where such alteration or such discharge or dismissal is in regard to a matter not connected with the said pending dispute. This class of cases where the matter giving rise to the proposed action is unconnected with the pending industrial dispute has now been taken (1) ; 211 out of the scope of section 33(1) and dealt with separately by section 33(2) and the following sub sections of section 33. Section 33(2) reads thus: "During the pendency of any such proceeding in respect of an industrial dispute, the employer may, in accordance with the standing orders applicable to a workman concerned in such dispute, (a) alter, in regard to any matter not connected with the dispute, the conditions of service applicable to that workman immediately before the commencement of such proceeding; or (b) for any misconduct not connected with the dispute, discharge or punish, whether by dismissal or otherwise, that workman: Provided that no such workman shall be discharged or dismissed, unless he has been paid wages for one month and an application has been made by the employer to the authority before which the proceeding is pending for approval of the action taken by the employer. " It would be noticed that even during the pendency of an industrial dispute the employer 's right is now recognised to make an alteration in the conditions of service so long as it does not relate to a matter connected with the pending dispute, and this right can be exercised by him in accordance with the relevant standing orders. In regard to such alteration no application is required to be made and no approval required to be obtained. When an employer, however, wants to dismiss or discharge a workman for alleged misconduct not connected with the dispute he can do so in accordance with the standing orders but a ban is imposed on the exercise of this power by the proviso. The proviso requires that no such workmen shall be discharged or dismissed unless two conditions are satisfied; the first is that the employee concerned should have been paid wages for one month, and the second is that an application should have been made by the employer to the appropriate authority for approval of the action taken by the employer. It is plain that whereas in cases falling under section 33(1) no action can be taken by the employer unless he has 212 obtained previously the express permission of the appropriate authority in writing, in cases falling under sub section (2) the employer is required to satisfy the specified conditions but he need not necessarily obtain the previous consent in writing before he takes any action. The requirement that he must obtain approval as distinguished from the requirement that he must obtain previous permission indicates that the ban imposed by section 33(2) is not as rigid or rigorous as that imposed by section 33(1). The jurisdiction to give or withhold permission is prima facie wider than the jurisdiction to give or withhold approval. In dealing with cases falling under section 33(2) the industrial authority will be entitled to enquire whether the proposed action is in accordance with the standing orders, whether the employee concerned has been paid wages for one month, and whether an application has been made for approval as prescribed by the said sub section. It is obvious that in cases of alteration of conditions of service falling under section 33(2)(a) no such approval is required and the right of the employer remains unaffected by any ban. Therefore, putting it negatively the jurisdiction of the appropriate industrial authority in holding an enquiry under section 33(2)(b) cannot be wider and is, if at all, more limited, than that permitted under section 33(1), and in exercising its powers under section 33(2) the appropriate authority must bear in mind the departure deliberately made by the Legislature in separating the two classes of cases falling under the two sub sections, and in providing for express permission in one case and only approval in the other. It is true that it would be competent to the authority in a proper case to refuse to give approval, for section 33(5) expressly empowers the authority to pass such order in relation to the application made before it under the proviso to section 33(2)(b) as it may deem fit; it may either approve or refuse to approve; it can, however, impose no conditions and pass no conditional order. Section 33(3) deals with cases of protected workmen and it assimilates cases of alterations of conditions of service or orders of discharge or dismissal proposed to 213 be made or passed in respect of them to cases falling under section 33(1); in other words, where an employer wants to alter conditions of service in regard to a protected workman, or to pass an order of discharge or dismissal against him, a ban is imposed on his rights to take such action in the same manner in which it has been imposed under section 33(1). Sub section (4) provides for the recognition of protected workmen, and limits their number as therein indicated; and sub section (5) requires that where an employer has made an application under the proviso to sub section (2), the authority concerned shall without delay hear such application and pass as expeditiously as possible such orders in relation thereto as it deems fit. This provision brings out the legislative intention that, though an express permission in writing is not required in cases falling under the proviso to section 33(2)(b), it is desirable that there should not be any time lag between the action taken by the employer and the order passed by the appropriate authority in an enquiry under the said. proviso. Before we proceed to deal with the merits of the dispute, however, we may incidentally refer to another problem of construction which may arise for decision under section 33(2)(b) and which has been argued before us at some length. When is the employer required to make an application under the proviso to section 33(2)(b)? Two views are possible on this point. It may be that the proviso imposes two conditions precedent for the exercise of the right recognised in the employer to dismiss or discharge his workman pending a dispute. The use of the word "unless" can be pressed into service in support of the argument that the two conditions are conditions precedent; he has to pay wages for one month to the employee, and he has to make an application for approval; and both these conditions must be satisfied before the employee is discharged or dismissed. On this view it would be open to the employer to discharge or dismiss his employee after satisfying the said two conditions without waiting for the final order which the authority may pass on the application made before it in that 214 behalf. The Legislature has indicated that there should be no time lag between the making of the application and its final disposal, and so by sub section (5) it has specifically and expressly provided that such application should be disposed of as expeditiously as possible. This view proceeds on the assumption that the word "unless" really means "until" and introduces a condition precedent. On the other hand, it is possible to contend that the application need not be made before any action has been taken, and that is clear from the fact that the application is required to be made for approval of the action taken by the employer. "Approval" according to its dictionary meaning suggests that what has to be approved has already taken place; it is in the nature of ratification of what has already happened or taken place. The word "approval" in contrast with the word "previous permission" shows that the action is taken first and approval obtained afterwards. Besides, the words "action taken" which are underlined by us, it may be argued, show that the order of discharge or dismissal has been passed, and approval for action thus taken is sought for by the application made by the employer. On the first construction the words "action taken" have to be construed as meaning action proposed to be taken, whereas on the latter construction the said words are given their literal meaning, and it is said that the discharge or dismissal has taken place and it is the action thus taken for which approval is prayed. In support of the first view it may be urged that the words "action taken" can well be interpreted to mean "action proposed to be taken" because it is plain that the condition as to payment of wages cannot be literally construed and must include cases where wages may have been tendered to the workman but may not have been accepted by him. In other words, the argument in support of the first interpretation is that in the construction of both the conditions the words "paid" and "action taken" cannot be literally construed, and in the context should receive a more liberal interpretation. "Paid wages" would on that view mean "wages 215 tendered" and "action taken" would mean "action proposed to be taken". If these two words are literally construed there may be some inconsistency between the notion introduced by the use of the word "unless" and these words thus literally construed. It may also be urged in support of the first contention that if the ban imposed by the proviso does not mean that an application has to be made before any action is taken by the employer it would be left to the sweet will of the employer to make the requisite application at any time he likes. The section does not provide for any reasonable period within which the application should be made and prescribes no penalty for default on the part of the employer in making such an application within any time. On the other hand, this argument can be met by reference to section 33A of the Act. If an employer does not make an application within a reasonable time the employee may treat that as contravention of section 33(2)(b) and make a complaint under section 33A, and such a complaint would be tried as if it is an industrial dispute; but, on the other hand an employer can attempt to make such a complaint ineffective by immediately proceeding to comply with section 33(2)(b) by making an application in that behalf and the authority may then have to consider whether the delay made by the employer in making the required application under section 33(2)(b) amounts to a contravention of the said provision, and such an enquiry could not have been intended by the Legislature; that is why the making of the applica tion should be treated as a condition precedent under the proviso. If that be the true position then the employer has to make an application before he actually takes the action just as he has to tender money to the employee before dismissing or discharging him. But, if it is not a condition precedent, then he may pass an order of discharge or dismissal and make an application in that behalf within reasonable time. We have set forth the rival contentions in regard to the construction of the proviso, but we do not propose to express our decision on the point, because, having regard to their pleadings, we cannot allow the respondents to raise this question for our decision in the 216 present appeal. It is clear from the contentions raised before the Tribunal and the pleas specifically raised by the respondents in their statement of case before this Court that both parties agreed that the application in question had been properly made under the proviso; and the only point at issue between them is about the validity and propriety of the order under appeal having regard to the limited jurisdiction of the enquiry under section 33(2)(b), and it, is to that question that we must now return. Before we do so, however, we ought to add that our attention had been drawn to three decisions of this Court in which, without any discussion of the point, the validity of the employers ' applications made under section 33(2)(b) appears to have been assumed though the said applications were presumably made after the employers had dismissed their employees. They are: Delhi Cloth and General Mills Ltd vs Kushal Bhan (1); The Management of Swatantra Bharat Mills, New Delhi vs Ratan Lal (2 ); and The Central India Coal fields Ltd., Calcutta vs Ram Bilas Shobnath (3). We wish to make it clear that these decisions should not be taken to have decided the point one way or the other since it was obviously not argued before the Court and had not been considered at all. In view of the limited nature and extent of the enquiry permissible under section 33(2)(b) all that the authority can do in dealing with an employer 's application is to consider whether a prima facie case for according approval is made out by him or not. If before dismissing an employee the employer has held a proper domestic enquiry and has proceeded to pass the impugned order as a result of the said enquiry, all that the authority can do is to enquire whether the conditions prescribed by section 33(2)(b) and the proviso are satisfied or not. Do the standing orders justify the order of dismissal? Has an enquiry been held an provided by the standing order? Have the wages for the month been paid as required by the proviso?; and, has an application been made as prescribed by the proviso? This last (1) ; (2) Civil Appeal No. 392 of 1959 decided on 28.3.1960 (3) Civil Appeal No. 162 of 1959 decided on 31.3.1960 217 question does not fall to be decided in the present appeal because it is common ground that the application has been properly made. Standing Order 21 specifies ' acts of omission which would be treated as misconduct, and it is clear that under 21(s) threatening or intimidating any operative or employee within the factory premises is misconduct for which dismissal is prescribed as punishment. This position also is not in dispute. There is also no dispute that proper charge sheets were given to the employees in question, an enquiry was properly held, and opportunity wag given to the employees to lead their evidence and to cross examine the evidence adduced against them; in other words, the enquiry is found by the Tribunal to have been regular and proper. As a result of the enquiry the officer who held the enquiry came to the conclusion that the charges as framed had been proved against the workmen concerned, and so orders of dismissal were passed against them. In such a case it is difficult to understand how the Tribunal felt justified in refusing to accord approval to the action taken by the appellant. It has been urged before us by the appellant that in holding the present enquiry the Tribunal has assumed powers of an appellate court which is entitled to go into all questions of fact; this criticism seems to us to be fully justified. One has merely to read the order to be satisfied that the Tribunal has exceeded its jurisdiction in attempting to enquire if the conclusions ,of fact recorded in the enquiry were justified on the merits. It did not hold that the enquiry was defective or the requirements of natural justice had not been satisfied in any manner. On the other hand it has expressly proceeded to consider questions of fact and has given reasons some of which would be inappropriate and irrelevant if not fantastic even if the Tribunal was dealing with the relevant questions as an appellate court. "The script in which the statements have been recorded", observes the Tribunal, "is not clear and fully decipherable". How this can be any reason in upsetting.the finding of the enquiry it is impossible to 28 218 understand. The Tribunal has also observed that the evidence adduced was not adequate and that it had not been properly discussed. According to the Tribunal the charge sheets should have been more specific and clear and the evidence,should have been more satisfactory. Then the Tribunal has proceeded to examine the evidence, referred to some discrepancies in the statements made by witnesses and has come to the conclusion that the domestic enquiry should not have recorded the conclusion that the charges have been proved against the workmen in question. In our opinion, in making these comments against the findings of the enquiry the Tribunal clearly lost sight of the limitations statutorily placed upon its power and authority in holding the enquiry under section 33(2)(b). It is well known that the question about the adequacy of evidence or its sufficiency or satisfactory character can be raised in a court of facts and may fall to be considered by an appellate court which is entitled to consider facts; but these considerations are irrelevant where the jurisdiction of the court is limited as under section 33(2)(b). It is conceivable that even in holding an enquiry under section 33(2)(b) if the authority is satisfied that the finding recorded at the domestic enquiry is perverse in the sense that it is not justified by any legal evidence whatever, only in such a case it may be entitled to consider whether approval should be accorded to the employer or not; but it is essential to bear in mind the difference between a finding which is not supported by any legal evidence and a finding which may appear to be not supported by sufficient or adequate or satisfactory evidence. Having carefully considered the reasons given by the Tribunal in its award under appeal, we have no hesitation in holding that the appellant is fully justified in contending that the Tribunal has assumed jurisdiction not vested in it by law, and consequently its refusal to accord approval to the action taken by the appellant is patently erroneous in law. Mr. Maheshwari, however, wanted us to examine the case of Har Prasad, because, according to him, Har Prasad has been victimised by the employer for 219 his trade union activities. Har Prasad is the President of the Kapra Mill Mazdoor Union, Saharanpur, and it is because of his activities as such President that the appellant does not like him. It is common ground that at the relevant time Har Prasad was not recognised as a protected workman, and so his case does not fall under section 33(3). The Tribunal has observed that this workman has not been named by any witness as having taken part in any assault, and it was therefore inclined to take the view that his dismissal amounted to victimisation. We have carefully considered this workman 's case, and we are satisfied that the Tribunal was not justified in refusing to accord approval even to his dismissal. It is common ground that Har Prasad led the deputation to the Controller of Production both on October 12 and October 14; and the threat held out by him on the earlier occasion is not denied by him. In terms he told the Controller that his conduct would bring trouble. It is significant that some of the workmen who assaulted the officers on October 14 had accompanied Har Prasad and were present when he gave the threat to the Controller. Sushil Kumar, who is the appellant 's Controller of Production, has deposed to this threat. The sequence of events that took place on October 14 unambiguously indicates that it was the threat held out by Har Prasad and the incitement given by him that led to the assault on the evening of October 14. Mr. Sushil Kumar 's evidence appears to be straightforward and honest. He has frankly admitted that in the past Har Prasad had been co operating with him and that he had. never instigated any attack on the officers on any previous occasion. Har Prasad no doubt denied that there was any exchange of hot words during the course of his interview with the officers but he has not disputed Mr. Sushil Kumar 's evidence that he uttered a warning at the time of the said interview. In fact his contention appears to have been that action should have been taken against him soon after he uttered the threat. On the evidence led at the enquiry, the enquiry officer came to the conclusion that the charge framed against this workman had 220 been clearly proved. The charge was that he had plotted and hatched a conspiracy for assaulting the General Superintendent, Weaving Master, Chief Engineer, Factory Manager and the Controller of Production. The details of the charge were specified, and at the enquiry it was held that these charges had been proved. There is no doubt that these charges, if proved, deserve the punishment of dismissal under the relevant standing orders. The Tribunal, however, purported to examine the propriety of the finding recorded against Har Prasad and came to the conclusion that the said finding was not justified on the merits. As we have already pointed out the Tribunal had no jurisdiction to sit in appeal over the findings of the enquiry as it has purported to do. The result is that the conclusion of the Tribunal in regard to all the workmen is unjustified and without jurisdiction. The appeal is accordingly allowed, the order passed by the Tribunal is set aside, and approval is accorded to the action taken by the appellant under section 6E. There will be no order as to costs. Appeal allowed.

Two officers of the appellant were assaulted by the workmen. In this connection the appellant served notices on eight workmen calling upon them to explain their conduct and to show cause why they should not be dismissed. In their explanations the workmen denied the charges. Thereupon a proper enquiry was held according to the Standing Orders, as a result of which the charges were found proved against the workmen and the appellant dismissed the workmen and asked them to take their final dues together with one month 's pay in lieu of notice. As a dispute in respect of bonus was pending before the Industrial Tribunal, the appellant made applications to it under section 6E(2) of the U. P. , for approval of the dismissal of the workmen. The Tribunal refused to accord its approval and directed the appellant to reinstate the workmen from the date of suspension and to pay full wages for the period of unemployment. The appellant contended that the Tribunal acted beyond its jurisdiction and assumed powers of an appellate Court over the decision of the appellant. Held, that the Tribunal had assumed jurisdiction not vested in it by assuming powers of an appellate Court and its refusal to accord approval was patently erroneous in law. The requirement of obtaining approval under section 6E(2)(b) of the U. P. Act (or section 33(2) Of the Central Act) in cases of dismissal or discharge for misconduct not connected with a pending dispute as distinguished from the requirement of obtaining previous permission under section 6E(1) of '.the U. P. Act (or section 33(1) of the Central Act) in cases of misconduct connected with a pending dispute indicated that the ban imposed by section 6E(2) was not as rigid or rigorous as that imposed by section 6E(1). The jurisdiction to give or withhold permission was Prima facie wider than the jurisdiction to give or withhold approval. Where the employer had held a proper domestic enquiry and had dismissed the workmen as a result of such enquiry, all that the Tribunal could do was to enquire: (i) whether the Standing Orders justified the dismissal, (ii) whether the enquiry had been held as provided by the Standing Orders, (iii) whether wages for one month had been paid and (iv) whether an application for approval had been made as prescribed. In the present case all these conditions were 205 satisfied but the Tribunal lost sight of its limitations and assumed powers of an appellate Court entitled to go into question of fact. The Punjab National Bank Ltd. vs Its Workmen, [1960] S.C.R. 806, referred to. Quaere: Whether the application for approval under section 6E(2)(b) of the U. P. Act or under section 33(2)(b) of the Central Act could be made after the order of dismissal had been passed or whether it had to be made before passing such an order. Note: Section 6E of the U.,P. is identical in terms with section 33 of the Central .

The respondent had made an application under section 53 C Of the Companies Act, 1913, with an alternative prayer for winding up against the appellant company, to the District judge, Poona, who had been authorised under the Act to exercise jurisdiction. While the application was pending the Companies Act, 1913, was repealed by the . The appellant company thereupon applied to the District judge to dismiss the application on the ground that he had ceased to have any jurisdiction to deal with the application on the repeal of the Of 1913. Held, that section 6 of the General Clauses Act preserved the jurisdiction of the District judge to deal with the application under section 153 C Of the Indian Of 1913, notwithstanding the repeal of that Act. Section 647 of the did not indicate any intention to affect the rights under the Indian of 19I3, for section 658 of the of 1956 made section 6 of the General Clauses Act applicable notwithstanding anything contained in section 647 of that Act. 86 Section 24 of the General Clauses Act does not put an end to any notification. It does not therefore cancel the notification issued under the Indian of I9I3 in so far as that notification empowered the District judge to exercise jurisdiction under section 153 C of the Indian of I9I3 even though under section 10 of the of 1956, a District judge can no longer be empowered to exercise jurisdiction under (a) sections 1397 to 407 of the , which correspond to section I53 C Of the Indian , 19I3 or (b) in respect of the winding up of a company with a paid up share capital of not less than Rs. 1,00,000/ which the appellant company was.

The appellant, an employee of the Northern Railway was removed from service. His appeal against the order of removal was rejected by the General Manager. The appellant feeling aggrieved filed a writ petition under article 226. in the writ petition, the General Manager was joined as a respondent but the Union of India was not impleaded. On appeal, the Division Bench confirmed the decision of the single Judge. The counsel for the appellant contended that the General Manager is the authority to hear the matters regarding the removal and, therefore, he is the proper authority. Dismissing the appeal by Special Leave, HELD: The appellant was servant of the Union. The order of removal is removal from the service of the Union. Any order of a court would have to be enforced against the Union. The General Manager or any other authority acting in the Railway AdminiStration is as much a servant of the Union as the appellant was in the present case. The Union of India represents the Railway Administration. The Union carries administration through different servants. Any order setting aside the removal would fasten liability on the Union of India and not on any servant of the Union. There fore, the Union of India is a necessary party. [410G H, 411A B] Hari Vishnu Kamnath vs Ahmad Syed Isak & Ors., A.I.R. 1954 Nagpur 166 and Observer Publications P. Ltd. vs Railway Board, Ministry of Railways, Govt. of India, New Delhi , distinguished.

Right from 1939, the demand of jute in the world market was rather lean and with a view to adjusting the production of the jute mills to the demand of the world market, various jute mills formed an Association styled as Indian Jute Mills Association and the appellant is one such member of the said Association. As per the objects of the Association a quinquenniel working time agreement was entered into between the members of the Association restricting the number of working hours per week, for which the mills shall be entitled to work their looms. The fourth working time Agreement was entered into between the members of the Association on 9th December, 1954 and it was to remain in force for a period of five years from 12th December 1954. As per the first clause of the fourth working time Agreement no signatory shall work more than forty five hours of work per week subject to alteration in accordance with the provisions of clauses 7(1)(2) and (3) and further subject inter alia to the provision of clause (10) and under that clause, a joint and several agreement could be made providing that throughout the duration of the working time agreement, members with registered complements of loom not exceeding 220 shall be entitled to work upto seventy two hours per week. Clause 6(a) enabled members to be registered as a "Group of Mills" if they happened to be under the control of the same managing agents or were combined by any arrangement or agreement and it was open to any member of the Group Mills so registered to utilise the allotment of hours of work per week of other members in the same group who were not fully utilising the hours of work allowable to them under the working time agreement, provided such transfer of hours of work was for a period not less than six months. Clause 6(b) further (J prescribed three other conditions precedent subject to which the allotment of hours of work transferred by one member to another could be utilised by the latter and two of them were: (i) All agreements to transfer shall, as a condition precedent to any rights being obtained by transferee, be submitted with an explanation to the Committee and Committee 's decision . whether the transfer shall be allowed shall be final and conclusive and (ii) If the Committee sanctions the transfer, it shall be a condition precedent to its utilisation that a certificate be issued and the transfer registered. This transaction of transfer of allotment of hours of work per week was commonly referred to as sale of looms hours by one member to another. The consequence of such 1371 transfer was that the hours of work per week transferred by a member were liable to be deducted from the working hours per week allowed to such member under the working time agreement and the member in whose favour such transfer was made entitled to utilise the number of working hours per week transferred to him in addition to the working hours per week allowed to him under the working time agreement. The assessee, under this clause purchased loom hours from four different jute manufacturing concerns which were signatories to the working time agreement, for the aggregate sum of Rs. 2,03,255/ during the year 1st August 1958 to 31st July 1959. In the course of the assessment year 1960 61 for which the relevant accounting year was the previous year 1st August 1958 to 31st July 1959, the assessee claimed this amount of Rs. 2,03,255/ as revenue expenditure on the ground that it was part of the cost of operating the looms which constituted the profit making apparatus of the assessee. claim was disallowed by the Income Tax officer, but on appeal, the Appellate Assistant Commissioner accepted the claim and allowed the deduction on the view that the assessee did not acquire any capital asset when it purchased the loom hours and the amount spent by it was incurred for running the business of working it with a view to producing day to day profits and it was part of operating cost or revenue cost of production. The Revenue preferred an appeal to the Tribunal, and, having lost before it, carried the matter before the High Court by a reference. The High Court, following the decision of the Supreme Court in Commissioner of Income Tax vs Maheshwari Devi Jute Mills Ltd., held that the amount paid by the assessee for purchase of the loom hours was in the nature of capital expenditure and was therefore not deductible under section 10(2) (xv) of the Income Tax Act. Hence the appeal by assessee by special leave. Allowing the appeal, the Court ^ HELD: 1. An expenditure incurred by an assessee can qualify for deduction under section 10(2)(xv) only if it is incurred wholly and exclusively for the purpose of his business, but even if it fulfills this requirement, it is nob enough; it must further be of revenue as distinguished from capital nature 2. Maheshwari Devi Jute Mills ' case was a converse case where the question was whether an amount received by the assessee for sale of loom hours was m the nature of capital receipt or revenue receipt and the Supreme Court took the view that it was in the nature of capital receipt and hence not taxable. The decision in Maheshwari Devi Jute Mills ' case cannot on this account be regarded as an authority for the proposition that payment made by an assessee for purchase of loom hours would be capital expenditure, because it is not a universally true proposition that what may be capital receipt in the hands of the payee must necessarily be capital expenditure in relation to the payer. The fact that a certain payment constitutes income or capital receipt in the hands of a recipient is not material in determining whether the payment is revenue or capital disbursement qua the payer. Whether it is capital expenditure or revenue expenditure would have to be determined having regard to the nature of the transaction and other relevant factors. [1378 G H, 1379 A D] H Race Course Betting Control Board vs Wild, 22 Tax Cases 182. quoted with approval. 1372 3. Again, Maheshwari Devi Jute Mills ' Case proceeded on the accepted basis that loom hours were a capital asset and the only issue debated was whether the transaction in question constituted sale of this asset or it represented exploitation of the asset by permitting its user by another while retaining ownership. No question was raised before the Court as to whether tho loom hours were an asset at all nor was any argument advanced as to what was the true nature of the transaction. This question is res integra and therefore this decision cannot be regarded as an authority for the proposition that The amount paid for purchase of loom hours was capital and not revenue expenditure. [1379 E, 1380 F] 4. It is quite clear from the terms of the working time agreement that the allotment of loom hours to different mills constituted merely a contractual restriction on the right of every mill under the general law to work its looms to their full capacity. If there had been no working time agreement, each mill would have been entitled to work its looms uninterruptedly for twenty four hours a day throughout the week, but that would have resulted in production of jute very much in excess of the demand in the world market, leading to unfair competition and precipitous fall in jute price and in the process, prejudicially affecting all the mills and therefore with a view to protecting the interest of the mills who were members of the Association, the working time agreement was entered into restricting the number of working hours per week for which each mill could work its looms. The allotment of working hours per week under the working time agreement was clearly not a right conferred on a mill, signatory to the working time agreement. It was rather a restriction voluntarily accepted by each still with a view to adjusting the production to the demand in the world market and this restriction could not possibly be regarded as an asset of such mill. This restriction necessarily had the effect of limiting the production of the mill and consequentially also the profit which the mill could otherwise make by working full looms hours. But a provision was made in clause 6(b) of the working time agreement that the whole or a part of the working hours per week could be transferred by one mill to another for a period of not less than six months and if such transfer was approved and registered by the Committee of the Association, the transferee mill would be entitled to utilise the number of working hours per week transferred to it in addition to the working hours per week allowed to it under the working time agreement, while the transferor mill could cease to be entitled to avail of the number of working hours per week so transferred and those would be liable to be deducted from the number of working hours per week otherwise allotted to it. The purchase of loom hours by a mill had therefore the effect of relating the restriction on the operation of looms to the extent of the number of working hours per week transferred to it, so that the transferer mill could work its looms for longer hours than permitted under the working time agreement and increase is profitability. The amount spent on purchase of looms hours thus represented consideration paid for being able to work the looms for a longer number of hours. Such payment for the purchase of loom hours cannot be regarded as expenditure on capital account. [1380 F H, 1381 A E] 6. The decided cases have, from time to time, evolved various tests for distinguishing between capital and revenue expenditure but no test is amount or conclusive. There is no all embracing formula which can provide a ready solution to the problem; no touchstone has been devised. Every case has to be decided on its own facts keeping in mind the broad picture of the whole 1373 Operation in respect of which the expenditure has been incurred. Two of these tests are: (a) The test of enduring benefit as laid down in British Insulated and . Helsby Cables Ltd. vs Atherton, 10 Tax Cases 155. Even this test must yield were there are special circumstances leading to a contrary decision There may be cases where expenditure, even if incurred for obtaining advantage of enduring benefit, may, none the less, be on revenue account and the test one during benefit may break down. It is not every advantage of enduring nature acquired by an assesses that brings the case within the principle laid down in this test. What is material to consider is the nature of the advantage in a commercial sense. that it is only where the advantage is in the capital field that the expenditure would be disavowable on an application of this test. If the advantage consists merely in facilitating the assesses 's trading operations or enabling the management and conduct of the assesses 's business to be carried on more efficiently or more profitably while leaving the filed capital untouched. the expenditure would be on revenue account, even though tho advantage may endure for an indefinite future. The test of enduring benefit in therefore not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances off a given case. [1381 E G, 1382 A E] commissioner of Taxes vs Nchanga Consolidated Copper Mines Ltd., followed. (b) The test based on distinction between fixed and circulating capital as applied in John Smith and Sons vs Moore, 12 Tax Cases, 266. So long as tho expenditure in question can be clearly referred to the acquisition of an asset which falls within one or the other of these two categories such a test would be a critical one. But this test also sometimes breaks down because there are many forms of expenditure which do not fall easily within these two categories and not infrequently, the line of demarcation is difficult to draw and leads to subtle distinctions between profit that is made "out of" assets and profit that is made "upon" assets or "with" assets. Moreover, there may be cases where expenditure though referable to or in connection with fixed capital is nevertheless allowable as revenue expenditure e.g. expenditure incurred in preserving or maintaining capital assets. This test is therefore clearly not one of universal application. [1383 A D] Commissioner of Taxes vs Nchanga Consolidated Copper Mines LTD [1965]58 ITR 241; followed. It is true that if disbursement is made for acquisition of a source of profit or income, it would ordinarily be in the nature of capital expenditure But it cannot be said in the present case that the assesses acquired a source d profit or income when it purchased loom hours. The source of profit or income was the profit making apparatus and this remained untouched and unaltered, There was no enlargement of the permanent structure of which the income would be the produce or fruit. What the assesses acquired wag merely an advantage in the nature of relation of restriction on working hours imposed by the working time agreement, so that the assesses could operate its profit earning structure for a longer number of hours. Undoubtedly the profit earn 1374 ing structure of the assesses was enabled to produce more goods, but that was not because of any addition or augmentation in the profit making structure but because the profit making structure could be operated for longer working hours. The expenditure incurred for this purpose was primarily and essentially related to the operation or working of the looms which constituted the profit earning apparatus of the assesses. It was an expenditure for operating or working the looms for longer working hours with a view to producing a larger quantity of goods and earning more income and was therefore in the nature of revenue expenditure. [1384 A D] 7. When dealing with cases where the question is whether expenditure incurred by an assesses is capital or revenue expenditure, the question must be viewed in the larger context of business necessity or expediency. If the outgoing expenditure is so related to the carrying on or the conduct of the business that it may be regarded as an internal part of the profit earning process and not for acquisition of an asset or a right of a permanent character. the possession of which is a condition of the carrying on of the business, the expenditure may be regarded as revenue expenditure. [1384 H, 1385 A C Nelletroms ' Property Ltd. vs Federal Commr. Of Taxation, ; ; Robert Addis & Sons Collieries Ltd. vs Inland Revenue 8 Tax Case, 671 quoted with approval. Bombay Steam Navigation Co. P. Ltd. vs Commissioner of Income Tax, ; followed. In the instant case (a) the payment made by the assesses for the purchase of loom hours was expenditure laid out as part of the process of profit earning. It was an outlay of a business in order to carry it on and to earn profit out of the expense as an expense of carrying it on. It was part of the cost of operating the profit earning apparatus and was clearly in the nature of revenue expenditure; and [1385 D E (b) the payment of Rs. 2,03,255/ made by the assesses for purchase of loom hours represented Revenue expenditure and was allowable as a deduction under section 10(2) (xv) of the Income Tax Act. [1387 C D] Commissioner of Income Tax v Nchanga Consolidated Copper Mines ltd. ; Commissioner of Taxes vs Curron Company 45 Tax Cases 18; followed.

The respondent sought special leave to appeal to the High Court under section 417(3) of the Code of Criminal Procedure, 1898 against the acquittal of the petitioner by the trial court. The application was made beyond the period of limitation but the High Court condoned the delay under section 5 of the . In their application for special leave to appeal to this Court the petitioners contended that the time limit of 60 days prescribed under section 417(4) was mandatory and as such the High Court had no jurisdiction to extend the time limit by resort to section 5 of the . Dismissing the special leave petitions, ^ HELD: (1) The order granting special leave was not an order outside the power of the High Court. In a case where an application for special leave to appeal from an order of acquittal is filed after the coming into force of the , section 5 would be available to the applicant and if he can show that he had sufficient cause for not preferring the application within the time limit of 60 days prescribed in sub section (4) of section 417, the application would not be barred and despite the expiration of the time limit of sixty days, the High Court would have the power to entertain it. [265B C] (2) Since under the section 5 is specifically made applicable by section 29(2) it could be availed of for the purpose of extending the period of limitation prescribed by a special or local law if the applicant can show that he had sufficient cause for not presenting the application within the period of limitation. It is only if the special or local law expressly excludes the applicability of section 5 that it stands displaced. Section 29(2) (b) of the Limitation Act, 1908 specifically excluded the applicability of section 5 while section 29(2) of the 1963 Act in a clear and unambiguous terms provides for applicability of section 5. [264F, E] Kaushalya Rani vs Gopal Singh ; , explained.

The Industrial Tribunal, Ahmedabad, on a dispute referred to it under section 10(2) of the took up for consideration four demands for basic wages and adjustment, dearness allowance, gratuity and retrospectivity of the demands of the workmen. The Tribunal gave its award on 30th of November 1971 which was published on 20th January, 1972 in the Maharashtra Government Gazette. The appellant company, feeling aggrieved by the award, filed in the Supreme Court a petition for special leave to appeal under Article 136 of the Constitution. Pursuant to a notice, the respondent workmen put in appearance and filed a counter affidavit. After some arguments the appellant Company at its request was permitted to withdraw the leave petition as per the order of the Court dated 21st of August, 1972 which reads: "Upon hearing counsel the Court allowed the special leave petition to be withdrawn". Four days thereafter the company filed a petition under Article 226 of the Constitution before the High Court challenging the award. The petition was virtually based on the same facts and grounds as were taken in the special leave petition before the Supreme Court. The learned single Judge who heard the petition determined the circumstances on the basis of the respective affidavits filed by the parties in which the company unconditionally withdrew its special leave petition and in view of those circumstances equated the withdrawal of the leave petition with the dismissal of the same. Relying on Vasant Vithal Palse and Ors. vs The Indian Hume Pipe Co. Ltd. and Anr. , a decision of that court, the learned Judge dismissed the writ petition in limine. A Letters Patent Appeal against the said order of dismissal also met the same fate. However, a petition under Article 133 of the Constitution for a certificate of fitness to appeal to the Supreme Court was accepted by the said Division Bench and a certificate was granted and hence the appeal. Allowing the appeal, the Court ^ HELD: 1. Permission to withdraw a special leave petition cannot be equated with an order of dismissal. If a non speaking order of dismissal cannot operate as res judicata for entertaining a fresh writ petition on the same facts and grounds taken in the special leave petition, an order permitting the withdrawal of the writ petition for the same reason cannot so operate. [219B,222C D] 214 Workmen of Cochin Port Trust vs Board of Trustees of Cochin Port Trust and Anr., ; , followed. Punjab Beverages Pvt. Ltd. vs Suresh Chand and Anr. , ; ; Hoshnak Singh vs Union of India and Ors., ; ; Daryao and Ors. vs The State of U.P. and Ors., ; , discussed. Vasant Vithal Palse and Ors, v The Indian Hume Pipe Co. Ltd. and Anr. , ; Management of Western India Match Co. Ltd., Madras vs The Industrial Tribunul, Madras and Anr. A.I.R. 1958 Mad. 398, distinguished. The order of a court has to be read as it is. If the Supreme Court intended to dismiss the petition at the threshold. it could have said so explicitly. In the absence of any indication in the order itself, it will not be proper to enter into the arena of conjecture and to come to a conclusion on the basis of extraneous evidence that the Supreme Court intended to reject the leave petition. If the Order of the Supreme Court is read as it is there is not the slightest doubt that the Supreme Court had allowed the company to withdraw the leave petition, in the instant case. The approach of the High Court in having perused the affidavits filed by the parties to know the circumstances under which the leave petition was withdrawn is not correct. [217 C D]

Under sections 3 and 8 of the U. P. the Governor issued an Order dated March 10, 1948, making dletailed provisions for the settlement of Industrial Disputes. Clause 5(a) of the Government Order empowered, among others, a recognised association of employers to refer an industrial dispute for adjudication to the Conciliation Board. Clause 23 provided that no employer shall discharge or dismiss any workman during the pendency of an inquiry except with the written permission of the Regional Conciliation Officer, and Cl. 26 provided for penalties for contravention of Cl. 23. The appellant proposed to dismiss certain workmen. Though at the time there was a dispute pending inquiry, the appellant did not seek permission under cl. 23 to dismiss the workmen; but the Employers ' Associa tion of Northern India made an application under cl. 5(a) to the Board to adjudicate and give an award that the appellant was entitled to dismiss the workmen. The workmen contended that the reference under cl. 5(a) was incompetent as the appellant had ,not first taken proceedings under Cl. Held, that the application under cl. 5(a) of the G. O. was not 24 186 maintainable, as the employer could not take advantage of cl. 5(a) during the pendency of an inquiry when Cl. 23 was applicable. If cls. 5(a) and 23 were held to ' apply at the same time there would be disharmony as by resorting to cl. 5(a) when Cl. 23 was applicable, the employers would be contravening cl. 23 and rendering themselves liable to the penalties under section 26. But there was complete harmony if it was held that cl. 5(a) applied in all other cases of dismissal or discharge except where an inquiry was pending within the meaning of Cl. 23. Besides Cl. 23 was a special provision which prevailed over the general provisions in cl. Kanpur Mill Mazdoor Union vs Employers ' Association of Northern India, , approved. De Winton vs Brecon, , Churchill vs Crease, (182S) 5 Bing. 177 and United States vs Chase, ; , referred to.

In respect of a dispute between the appellant company and the respondent company which was referred to the arbitration of the Bengal Chamber of Commerce in terms of the arbitration clause contained in the contract entered into on April 6, 1951, an award was made on February 29, 1952, allowing the claim of the appellant. The respondent made an application in the High Court for having the award set aside on the ground, inter alia, that the contract was void under the provisions of the Raw jute (Central jute Board and Miscellaneous Provisions) Act, 1951, inasmuch as it had not been entered into in the manner specified in sections 5, 6 and 7 of the Act as required therein. On December 14, 1950, the Government of West Bengal had promulgated an Ordinance called the Raw jute (Central jute Board and Miscellaneous Provisions) Ordinance, 1950, for the better regulation of the trade, and on December 29,1950, a notification was issued specifying December 30, 1950, as " the appointed day for the purposes of sections 5, 6 and 7 Of the said Ordinance." Subsequently the Ordinance was replaced by the Act which by section 16, provided:. . . any notification issued. . under the Raw Jute (Central jute Board and Miscellaneons Provisions) Ordinance, 1950, shall, on the said Ordinance ceasing to operate, be deemed to have been issued under this Act as if this Act had commenced on the 14th day of December 1950. " It was contended for the appellant that the notification dated December 29, 1950, could not be read as having brought sections 5, 6 and 7 Of the Act into force, because, on a plain reading of it, the notification did not purport to bring any of the sections of the Act into force, but expressly brought sections 5, 6 and 7 of the Ordinance into force and that the said sections of the Act not having been brought into force, the contract in question was valid and, consequently, the award was binding and enforceable. Held, that in order to give full effect to the two legal fictions created in section 16 of the Act that the Act shall be deemed to have commenced on December 14, 195o, and that the notification issued under the Ordinance shall be deemed to have 80 been issued under the Act, the principle of mutatis mutandis has to be adopted and the word " Act " substituted for the word " Ordinance " used in the notification dated December 29, 1950. Consequently, the provisions of sections 5, 6 and 7 Of the Act were applicable to the contract in question.

Appeal No. 31 of 1960. Appeal by special leave from the judgment and order dated March 14, 1957, of the Patna High Court in Miscellaneous Judicial Case No. 165 of 1957. P. K. Chatterjee, for the appellant. section P. Varma, for respondents Nos. 1 and 4. Nooni Coomar Chakravarti and B. P. Maheshwari, for respondent No. 2. 1960. December 12. The Judgment of the Court was delivered by DAS GUPTA, J. This appeal by special leave is against an order of the High Court of Judicature at Patna dismissing summarily an application of the present appellant under article 226 and article 227 of the Constitution. The appellant was a workman employed in the Digha factory of Bata Shoo Company (Private) Limited, since October, 1943. On January 13, 1954, the management of the company served him with a charge sheet alleging that he had been doing anti union activities inside the factory during the working hours and so was guilty under section 12B(1) of the Standing Orders and Rules of the company. On 198 January 14, he submitted a written reply denying the charge and asking to be excused. On January 15, the management made an order terminating his services with effect from January 18, 1954. An industrial dispute was raised on this question of dismissal by the Union and was referred along with a number of other disputes to the Industrial Tribunal, Bihar, by a notification dated April 29, 1955. After written statements were filed by the Union and the management, February 20, 1956, was fixed for hearing at Patna. Thereafter numerous adjournments were given by the Tribunal on the joint petition for time filed by both the parties stating that all the disputes were going to be compromised. On November 16, 1956, the Tribunal made an order fixing December 20, 1956, "for filing compromise or hearing". On December 20, 1956, however a fresh application for time was filed but it was stated that agreement had already been reached on some of the matters and opportunity was asked for to settle the other matters. The case was however adjourned to January 21, 1957, for filing a compromise or hearing. On that date a further petition was again filed and a further extension of time was allowed till February 1, 1957. On January 31, the parties, that is, the management and the Union filed a joint petition of compromise settling all points of disputes out of court. Prior to this, on January 12, 1957, the present appellant had made an application praying that D. N. Ganguli and M. P. Gupta, two of his co workers might be allowed to represent his case before the Tribunal instead of Fateh Singh, the Secretary of the Union and that he did not want his case to be represented by Fateh Singh as he had no faith in him. This application was dismissed by the Tribunal by an order dated February 26, 1957. On March 7, 1957, the appellant filed a fresh petition stating that he had not authorised Fateh Singh to enter into any agreement in his case and praying that the agreement filed in respect of his case should not be accepted and that he and his agents should be heard before the disposal 199 of the case. This prayer was not allowed by the. Tribunal and by an order dated March 11, 1957, an award in terms of the petition of compromise was made. The appellant filed his application to the Patna High Court on March 13, 1957, praying for an issue of an appropriate writ or direction quashing the Tribunal 's order of February 26, 1957, by which the Tribunal had rejected his prayer for representation by a person of his own choice in place of Fateh Singh, the Secretary of the Union. Prayer was made in this petition also for a direction on the Tribunal not to record the compromise in so far as it related to the appellant 's case and to give its award without reference to the settlement and on proper adjudication of the matter. The High Court dismissed this application summarily. It is against that order of dismissal that the present appeal by special leave has been preferred. On behalf of the appellant it is argued that the Tribunal committed a serious error in rejecting his application to be represented by a person of his own choice instead of Fateh Singh, the Secretary of the Union and thereafter in making an award on the basis of the reference. It has to be noticed that on the date the application *as made before the High Court the award had already been made and so there could be no direction as prayed for on the Tribunal not to make the award. If however the appellant 's contention that the Tribunal erred in rejecting his application for separate representation was sound he would have been entitled to an order giving him proper relief on the question of representation as well as regarding the award that had been made. The sole question that arises for our determination therefore is whether the appellant was entitled to separate representation in spite of the fact that the Union which had espoused his cause was being repre. sented by its Secretary, Fateh Singh. The appellant 's contention is that he was a party to the dispute in his own right and so was entitled to representation according to his own liking. The question whether when a dispute concerning an individual workman is taken up by the Union, of which the workman is a member, as 200 a matter affecting workmen in general and on that basis a reference is made under the Industrial Disputes Act the individual workman can claim to be heard independently of the Union is undoubtedly of some importance. The question of representation of a workman who is a party to a dispute is dealt with by section 36 of the Industrial Disputes Act. That section provides that such a workman is entitled to be represented in any proceeding under the Act, by (a) an officer of a registered trade union of which he is a member, (b) an officer of a federation of trade unions to which the trade union of which he is a member is affiliated and (c) where the workman concerned is not a member of any trade union by an officer of any trade union concerned with the industry, or by any other workman employed in that industry. The appellant was the member of a trade union; and he was actually represented in the proceedings before the Tribunal by an officer of that Union, its Secretary, Fateh Singh. The Union through this officer, filed a written statement on his behalf. Upto January 12, 1957, when the appellant filed his application for separate representation, this officer, was in charge of the conduct of the proceedings on behalf of the appellant. Never before that date, the appellant appears to have raised any objection to this representation. The question is, whether, when thereafter he thought his interests were being sacrificed by his representative, he could claim to cancel that representation, and claim to be represen. ted by somebody else. In deciding this question, we have on the one hand to remember the importance of collective bargaining in the settlement of industrial dis putes, and on the other hand, the principle that the party to a dispute should have a fair hearing. In assessing the requirements of this principle, it is necessary and proper to take note also of the fact that when an individual workman becomes a party to a dispute under the Industrial Disputes Act he is a party, not independently of the Union which has espoused his cause. It is now well settled that a dispute between an individual workman and an employer cannot be an 201 industrial dispute as defined in section 2(k) of the Industrial Disputes Act unless it is taken up by a Union of the workmen or by a considerable number of workmen. In Central Provinces Transport Service Ltd. vs Raghunath Gopal Patwardhan (1) Mr. Justice Venkatarama Ayyar speaking for the Court pointed out after considering numerous decisions in this matter that the preponderance of judicial opinion was clearly in favour of the view that a dispute between an employer and a single employee cannot per se be an industrial dispute but it may become one if it is taken up by an Union or a number of workmen. "Notwithstanding that the language of section 2(k) is wide enough to cover disputes, between an employer and a single employee", observed the learned Judge, "the scheme of the Industrial Disputes Act does appear to contemplate that the machinery provided therein should be set in motion to settle only disputes which involve the rights of workmen as a class and that a dispute touching the individual rights of a workman was not intended to be the subject of adjudication under the Act, when the same had not been taken up by the Union or a number of workmen". This view which has been re affirmed by the Court in several later decisions recognises the great importance in modern industrial life of collective bargaining between the workman and the employers. It is well known how before the days of collective bargaining labour was at a great disadvantage in obtaining reasonable terms for contracts of service from his employer. As trade unions developed in the country and collective bargaining became the rule the employers found it necessary and convenient to deal with the representatives of workmen, instead of individual workmen, not only for the making or modification of contracts but in the matter of taking disciplinary action against one or more workmen and as regards all other disputes. The necessary corollary to this is that the individual workman is at no stage a party to the industrial dispute independently of the Union. The Union or those (1)[1954] S.C.R. 956. 26 202 workmen who have by their sponsoring turned the individual dispute into an industrial dispute, can therefore claim to have a say in the conduct of the proceedings before the Tribunal. It is not unreasonable to think that section 36 of the Industrial Disputes Act recognises this position, by providing that the workman who is a party to a dispute shall be entitled to be represented by an officer of a registered trade union of which he is a member. While it will be unwise and indeed impossible to try to lay down a general rule in the matter, the ordinary rule should in our opinion be that such representation by an officer of the trade union should continue throughout the proceedings in the absence of excep tional circumstances which may justify the Tribunal to permit other representation of the workman concerned. We are not satisfied that in the present case, there were any such exceptional circumstances. It has been suggested that the Union 's Secretary Fateh Singh himself had made the complaint against the appellant which resulted in the order of dismissal. it has to be observed however that in spite of everything, the Union did take up this appellant 's case against his dismissal as its own. At that time also, Fateh Singh was the Secretary of the Union. If are Union had not taken up his cause, there would not have been any reference. In view of all the circumstances, we are of opinion, that it cannot be said that the Tribunal committed any error in refusing the appellant 's prayer for representation through representatives of his own choice in preference to Fateh Singh, the Secretary of the Union. As a last resort, learned counsel for the appellant wanted to urge that the Secretary of the Union had no authority to enter into any compromise on behalf of the Union. We find that no such plea was taken either in the appellants application before the Tribunal or in his application under articles 226 and 227 of the Constitution to the High Court. Whether in fact the Secretary had any authority to compromise is a question of fact which cannot be allowed to be raised at this stage. 203 In the application before the High Court a statement was also made that the compromise was collusive and mala fide. The terms of the compromise of the dispute regarding the appellant 's dismissal were that he would not get reemployment, but by way of "humanitarian considerations the company agreed without prejudice to pay an ex gratia amount of Rs. 1,000/ (Rupees one thousand) only" to him. There is no material on the record to justify a conclusion that this compromise was not entered in what was considered to be the best interests of the workman himself In our opinion, there is nothing that would justify us in interfering with the order of the High Court rejecting the appellant 's application for a writ. The appeal is accordingly dismissed. There will be no order as to costs. During the hearing Mr. Chakravarty, learned counsel for the company, made a statement on behalf of the company that in addition to the sum of Rs. 1,000 which the company had agreed to pay to the appellant as a term of settlement the company will pay a further sum of Rs. 500 (Rupees five hundred) only ex gratia and without prejudice. We trust that this statement by the counsel will be honoured by the company.

On the termination of the appellant 's services by his employer an industrial dispute was raised by his union and the question of his dismissal along with a number of other disputes was referred to the Industrial Tribunal. After several adjournments of the case the management and the union filed a joint petition of compromise settling all the points in dispute out of Court. Prior to this the appellant filed an application praying that he might be allowed to be represented by two of his co workers instead of the Secretary of the Union in whom he had no faith and who had no authority to enter into the compromise on his behalf. This prayer was not allowed by the Tribunal which made an award in terms of the compromise. The appellant, thereupon, made an application to the High Court praying for a writ quashing the order of the Tribunal disallowing him to be represented by a person of his own choice and 197 also for a direction to the Tribunal not to record the compromise. The High Court summarily dismissed the Writ Petition. , On appeal by special leave, Held, that the appellant was Dot entitled to separate repre sentation when already being represented by the Secretary of the union which espoused his cause. A dispute between an individual workman and an employer cannot be an industrial dispute as defined in section 2(k) of the Industrial Disputes Act unless it is taken up by a Union of workmen or by a considerable number of workmen. When an individual workman becomes a party to a dispute under the Industrial Disputes Act be is a party, not independently of the Union which has espoused his cause. Central Provinces Transport Service Ltd. vs Raghunath Gopal Palwardhan, , followed. Although no general rule can be laid down in the matter, the ordinary rule should be that representation by an officer of the trade union should continue throughout the proceedings in the absence of exceptional circumstances justifying other representation of the workman concerned.

The plaintiff filed a suit against his brothers who had for merly constituted a joint family for a declaration that the partnership which had been formed by them after they ceased to be joint in respect of a sugar mill stood dissolved on May 13, 1944, on which date one of the brothers had filed an earlier suit for dissolution of the partnership. The earlier suit had been dismissed for default. The plaintiff in the present suit also prayed for a decree for accounts from defendants I and 2 as well as for the appointment of a Receiver. The trial court decreed the suit, ordered winding up and appointed a Commissioner. It also directed the accounts prayed for. Before the High Court Kanshi Ram who had not filed a written statement and against whom the proceedings in the trial court had been ex parte contended that the suit was barred by limitation and in any event he should not be called upon to account. The plaintiff contended that the suit was one for distribution of the assets of a dissolved firm and was not barred by limitation. The High Court while noticing that the plea of limitation taken by one of the parties was raised before it for the first time, held that by reason of section 3 of the Limitation Act it was bound to take notice of the bar of limitation and dismissed the suit. Having decided Kanshi Ram 's plea the High Court passed consequential orders with regard to the several appeals by the other defendants. On appeal it was contended in this Court that the question of limitation which was not raised even in the grounds of appeal before the High Court was a mixed question of fact and law and it should not have been entertained by the High Court. Hold, that the suit for dissolution filed on May 13, 1944, had ended in a dismissal for default, and as such no date 317 of dissolution of the partnership as contemplated by 0.20, r. 15, of the Code of Civil Procedure had been fixed by the Court; the plaint could not be construed as the notice contemplated by section 43 of the Partnership Act, to terminate the partnership. Even on the assumption that the summons accompanied by the plaint could be said to be the service of notice for dissolution of the partnership, the date of dissolution could only be the date on which the last of the partners was served. With all these questions of fact to be investigated, the High Court had committed an error in treating the question of limitation as purely one of law and allowing it to be raised at the hearing for the first time before it, at the instance of a party who had not filed a written statement and raised an issue on the question before the trial court.

The contract workers engaged by the management of the Tata Iron and Steel Company Ltd., Jamshedpur in the perma nent and regular nature of work before February 11, 1981 in (1) transportation of materials within the plant which was not dependent on outside supply, (2) processes connected with manufacturing process, (3) removal and handling of waste products, and (4) sweeping and cleaning of machines etc., sought permanent employment under the principal em ployer. The dispute was referred by the State Government under section 10 of the to the Industrial Tribunal. The Tribunal held that the workmen constituted the contract labour and, therefore, the reference was not main tainable. It further held that action, if any, had to be taken under section 10 of the , power to take steps for which vested in the State Government and not in the Tribunal. The writ petition challenging the award was dismissed by the High Court in limine. In the appeal by special leave it was brought to the notice of the Court on behalf of the management that con tract labour was now confined to item 3 only. Disposing of the appeal, the Court ordered: 1. The reference to the Tribunal shall now read: "Wheth er the contract workers engaged by the management of the Tata Iron and Steel Company Ltd., Jamshedpur in the perma nent and regular nature of work before 11.2.1981 are enti tled to permanent employment in 978 regard to items 1, 2 and 4 under the principal employer". [980B C] 2. The State Government to take its own decision within three months under the provisions of the in regard to item No. 3 as to whether the contract labour employment should be terminated. [980D] 3. The Tribunal to dispose of the dispute within six months. [980F]

The appellant Co operative Housing Society Ltd. made some unauthorised constructions in a 36 storeyed building. The Bombay Municipal Corporation issued a show cause notice calling upon the society to show cause as to why the upper eight floors of the building should not be demolished so as to limit the development to the permissible Floor Space Index (F.S.I.) since the additional Floor Space Index to the extent of 2773 sq. was gained by the appellant. The appellants submitted a reply to the show cause notice. The Administrator of the Municipal Corporation made an order on 21st Septmber, 1984 requiring the appellant to demolish 24,000 sq. on the eight upper floors of the building on the basis of 3000 sq. on each floor. The Administrator as well as the State Government dismissed the representation and appeal by the appellant. So the appellant filed a writ petition in the High Court which also dismissed with the observation that the appellant be given a choice to reduce the construction upto permissible limit by any alternative proposal within the four corners of the rules and regulations within one month from 28th October 1985 the Municipality may consider. The appellant made application to the Municipal Corporation giving several alternative proposals on 21st November 1985. But it also preferred a special leave petition before this court against the High Court Judgment. The special leave petition leave petition was dismissed on January 17, 1986. The appellants alleged that they submitted another proposal to the Municipal Corporation on 17th February, 1986 and a meeting for hearing alternative proposals was fixed up by the Municipal commissioner and put forward its case in support of the new proposals and the Municipal Commissioner said he would consider the proposals and take decision. On 27th December 1988 the appellant wrote a letter to the Municipal Commissioner to consider the alternative proposal i.e. of 746 vertical demolition of the building instead of demolishing the eight upper floors. In January, 1989 the officers of the corporation agreed that demolition can be made vertically so as to bring the entire construction within the permissible Floor Space Index where as the work of demolition of upper eight floors of the building were entrusted to a company by the Municipal Commissioner. So the appellant again filed a writ in the High Court. It was dismissed by the Single Judge as well as by the Division Bench dated 5th March, 1990. The appellants came by Special Leave Petition in this Court; The main grievance of the appellant being that vertical demolition proposal was not considered. Inspite of orders of this Court in this regard to the Municipal Corporation no agreeable solution could fructify. The proposal was examined by the Municipal Commissioner but rejected on 13th November, 1990 and submitted the detailed report to this Court. Dismissing the petition the Court HELD: The appellant had made illegal constructions in violation of Floor Space Index to the extent of more than 24000 sq. The decision taken by the Municipal Commissioner does not suffer from any want of jurisdiction nor is violative of any law or rules. It is well settled that the High Court under Article 226 of the Constitution is not an appellate Court on the administrative decision taken by the authorities. Since the tendency of raising unlawful constructions and unauthorised encroachments is increasing in the entire country and such activities are required to be dealt with by firm hands. Such unlawful constructions are against public interest and hazardous to the safety of occupiers and residents of the multistoreyed buildings. [749F, 750B, E F] This case should be a pointer to all the builders that making of unauthorised construction never pays and is against the interest of the society at large. The rules, regulations and by laws are made by the corporations or development authorities taking in view the larger public interest of the society and it is the bounden duty of the citizens of obey and follow such rules which are made for their own benefits. [750H 715B]

The respondent was appointed as a temporary clerk in an engineering division of the Government. The attempt of another clerk to impersonate and appear for him in a depart mental examination was detected. The Executive Engineer obtained explanations from both the clerks and reported the matter to the Superintending Engineer, who brought the matter to the notice of the ChiefEngineer. The Chief Engi neer wrote to the Superintending Engineer to award suitable punishment. The Superintending Engineer passed the order that the respondent a "temporary clerk is hereby served with one month 's notice to the effect that his services shall not be required after one month from the date of receipt of this notice. " The respondent filed a suit challenging the order on the ground that the termination was one passed by way of punishment and therefore attracted Art 311 of the constitution;. and since the provisions of the Article had not been complied had not been complied with the order was void. The Trial Court and the First Appellate Court dismissed the suit. But the High Court went,through the official correspondence preceding the passing of the impugned order, and observing that a close scrutiny of the facts on record showed that the order was passed by way of punishment on the basis of the enquiry proceeding and as a result of the recommendation by the Executive Engineer followed by the direction issued by Chief Engineer, allowed the second appeal. Allowing the appeal to this Court, HELD :(1) It is no longer open to any one to urge that the constitutional position in regard to cases of the present nature is not clear. An examination of the deci sions of this Court shows that there is no real conflict in their ratio decidendi. Even if there is a conflict, the proper course for a High Court is to find out and follow the opinion expressed by larger benches of this Court in preference to those expressed by smaller benches of this Court. This practice is followed by those Court itself and has hardened into a rule of law. [475B C] Union of India & Anr. K.S. Subramanian; , , followed. State of U.P. & Ors vs Sughar Singh [1974] 2 .S.C.R. 335: ; , The State of Punjab vs P.S. Cheema A.I.R. 1975 S.C. 1096, Satish Chandra Anand vs The Union of India ; , Shyam Lal vs State of U.P. ; , Parshotam Lal Dhingra vs Union of India ; , Gopi Kishore Prasad vs Union of India AIR. , The State of Orissa & ,Anr. vs Ram Narayan Das ; , Madan Gopal vs State of Punjab [1963] 3 S.C.R. 716, Rajendra Chandra Banerjee vs Union of India ; , Champakal Chimanlal Shah vs The Union of. India , Jagdish Mitter vs Union of India A.I.R. 1964 S.C. 449, State of Punjab & Anr. vs Shri Sukh Raj Bahadur ; , Union Of India 463 & Ors. R.S. Dhaba , State of Bihar & Ors. vs Shiva Bhikshuk Mishra R.S. Sial vs The State of U.P. & Ors. , Shamsher Singh & Anr. vs State of Punjab ; and The Regional Manager & Anr. vs Pawan Kumar Dubey [1976] 3 S.C.R. 540 referred to. (2) Before it is held that an order terminating the services of a Government servant amounts to punishment the Court must hold that either of the two tests,namely, (a) that the servant had a right to the post or (b) that he had been visited with evil consequences such as forfeiture of pay etc., is satisfied. Therefore, an order terminating the services of a temporary servant or probationer under the Rules of employment and without anything more will not attract article 311. Where a departmental enquiry is contem plated but an enquiry is not in fact proceeded with, article 311 will not be attracted unless it can be shown that the order, though. unexceptionable in form, is made following a report based on misconduct. Even though misconduct, negli gence, inefficiency or other disqualification may be the motive for the order of termination, if a right exists under the contract or the rules to terminate his services, then article 311(2) is not attracted unless the misconduct or negli gence is the very foundation of the order. Where there are no express words in the impugned order itself ' which throw a stigma on the Government servant, the Court would not delve into secretariat files to discover whether some kind of stigma could be inferred on such research. [469 A B; 473 C; 471 H; 475 F] Parshotam Lal Dhingra vs Union of India [1958] S.C.R. 828, R.S. Sial vs The State of U.P. & Ors. [1974] 3 S.C.R. 754, Shamsher Singh & Ant. vs State of Punjab ; and 1. N. Saksena vs State of Madhya Pradesh ; followed. (3) The respondent was a temporary hand and had no right to the post. Under the contract of service and the service rules applicable to him the State had the right to terminate his services by giving him one month 's notice. The order ex facie is an order of termination of service sim pliciter. It does not cast any stigma on the respondent nor does it visit him with evil consequences, nor is it founded on misconduct. Therefore, the respondent could not invite the Court to go into the motive behind the order and claim the protection of article 311(2) of the Constitution. [475 D E] (4) The High Court failed to appreciate the true legal .and constitutional position and upset the concurrent findings of fact arrived at by the Courts below, ignoring the well settled principle of law that a second appeal cannot be entertained on the ground of erroneous findings of fact, however, gross the error might seem to be. [475 G H] Paras Nath Thakur vs Smt. Mohani Das & Ors. [1960] 1 S.C.R. 271. Sri Ramanuja Jeer & Ors. vs Sri. Ranga Ramanuja Jeer & Anr. ; , P. Ramachandra Ayyar vs Ramalingam ; and Madamanchi Ramappa & . Anr. vs Muthaluru Bojappa ; , referred to.

The appellants who were manufacturers of cigarettes and tobacco in the State of Bihar contested the levy of sales tax on sales effected by them during the financial years 1949 5o and 1950 51 on the ground that as a direct result of every sale effected by them the goods concerned were delivered outside the State of Bihar and were, therefore, exempted from tax liability under article 286(i)(a) of the Constitution. Both the Superintendent of sales tax and the Deputy Commissioner of sales tax, Bihar, overruled the objection of the appellants, and following a previous ruling of the Board of Revenue of Bengal in a case known as the Bengal Timber Case (61 of 1952) held the appellants liable to pay the tax. The appellants paid the tax demanded but filed an application in revision to the Board of Revenue, claiming a constitutional exemption from tax on every sale effected by them as a result of which goods were delivered outside the State of Bihar whether the delivery was for consumption in the State of first delivery or not. The Board passed the following order on the revision petition. " As regards the admitted despatches of the goods outside the State after the 26th January, 1950, when the Constitution came into force, the learned lower court has been guided by the decision of the Board in the Bengal Timber Case (No. 61 of 1952). But this ruling of the Board stands superseded by the subsequent decision of the Supreme Court in the United Motors Case According to the decision of the Supreme Court, no tax could be levied on despatches to the places outside the state after the 26th January, 1950, and on this point the petitions are allowed, and the sales tax officer directed to recalculate the amount of tax payable by the assessee ". The appellants taking the above order to be in their favour claimed refund of the tax already paid by them and the sales tax authorities contested the position and claimed that they were bound to refund the tax only on those sales wherein the goods were delivered outside the State for consumption in the State of first delivery. The department thereafter sought clarification of the above order. The Board refused to clarify or explain its order and passed an order saying that " no further clarification was really required in view of the specific reference to the judgment of the Supreme Court in the United Motors Case ". Thereafter as the authorities still refused to refund the balance of the tax the appellants filed two applications in the High Court for the issue of a writ of mandamus to compel the refund. The High Court held that the Board 's decision that sales in which the goods were delivered outside the State for consumption, not in the State of first delivery but in other States were also exempted from tax, was wrong and that the appellants were not entitled to a writ of mandamus for enforcing a wrong order. On appeal by special leave, Held, that the proper construction of the Board 's orders was that the sales tax officer was directed to decide the relief that 108 should be given to the assessee on the officers ' interpretation of the decision of this Court in the United Motors Case. The Board did not determine the effect of that judgment and did not decide that every sale in which the goods were delivered outside the State of Bihar was exempted from liability to tax. The principle that a subordinate tribunal should not refuse to carry out the directions of a superior tribunal was therefore not applicable to the instant case. Bhopal Sugar Mills vs Commissioner of Income tax, [1961] 1 S.C.R. 474, held inapplicable. The United Motors Case merely decided that sales in which goods were delivered outside the State for consumption in the State of first delivery would fall under the Explanation to article 286(1) of the Constitution and would therefore be exempted from tax liability, but it did not deal with other sales in which the goods thus delivered were for consumption, not in the State of first delivery but in other states. Such sales would on the order of the Board of Revenue which was binding on the appellant be liable to tax in accordance with the previous decision of the Board of Revenue in the Bengal Timber Case. State of Bombay vs United Motors (India) Ltd. and Ors., ; , explained and applied. Board of Revenue of the State in the Bengal Timber Case, 61 of 1952, referred to.

The appellant entered into a contract with the Government of India. The contract contained an arbitration clause. For certain supplies made under the contract the appellant made representations to the Government or payment and for arbitration of disputes. On or about July 10, 1958 Government refused to refer the matter for arbitration. On July 11, 1961 the appellant flied an application in the Court of the District Judge under sections 8 and 20 of the , for filing the arbitration agreement and for an order of reference of the disputes to an arbitrator appointed by the court. The respondent contended that the application was barred by Limitation. The District Judge allowed the application, holding that there was no limitation for making an application under sections 8 and 20. The defendant 's appeal was dismissed by the High Court as incompetent in so far as it challenged the order under section 8 but was allowed in so far as it challenged the order under section 20. The High Court held that an application under section 20 is governed 'by article 181 of the Indian Limitation Act, 1908. In coming to this conclusion the High Court took into account the settled judicial view that the. operation of article 181 is limited to applications under the Code of Civil Procedure. and reasoned as follows: Article 181 should be construed as if the words 'under the Code ' were added in it. The repealed paragraph 17 of the second schedule to the Code and re enacted it in section 70 with minor modifications. That being so section 8(1) of the applied and the implied reference in article 181 to paragraph 17 of the second schedule to the Code should be construed as a reference to section 20 of the . Appeal against the High Court 's judgment was filed with certificate. HELD: The 'appeal must be allowed. By the the Legislature amended articles 158 and 178 of the Limitation Act and made them applicable to the relevant proceedings under the but no similar change was made in article 181. It is manifest that save as provided in articles 158 and 178 there would not be any limitation for other applications under the Act. Further there is nothing to indicate that for the purpose of limitation section 20 of the 1940 Act should be regarded as a re enactment of the corresponding provision of the Code and not of the Indian Arbitration Act, 1899. [236 D G] In the circumstances it is not possible to construe the implied reference in article 181 to the Code of Civil Procedure as a reference to the or to hold that article 181 applies to applications under that Act. The rule of construction given in section 8(1)of the cannot be applied, as it appears that the legislature had a 233 different intention. It follows that an application under sections 8 and 20 of the is not governed by article 181. The Limitation Act does not prescribe any period of limitation for such an application. [236 G H] The present application under sections 8 and 20 was therefore not barred by limitation. [237 A] Bai Manekbai vs Manekji Kavasji, Born. 213, 214 Hansraj Gupta vs Official Liquidator Dehra Dun Mussourie Electric Tramway Company, (1933) L.R. 60 I.A. 13, 20, Shah Mulchand & Co. vs Jawahar Mills Ltd. ; , 371, Bombay Gas Co. vs Gopal Bhiva, ; and Wazirchand Mahajan & Anr. vs Union of India, ; , referred

The appellant was employed in the State Bank of Patiala, The Mall, Patiala from July 13, 1973 till August 21, 1974, when her services were terminated. Despite some breaks in service for a few days, the appellant had admittedly worked for 240 days in the year preceding August 21, 1974. According to the workman, the termination of her service was "retrenchment" within the meaning of that expression in Section 2(OO) of the , since it did not fall within any of the excepted cases mentioned in Section 2(OO). Since there was "retrenchment", it was bad for non compliance with the provisions of section 25 F of the . On the other hand, the contention of the management was that the termination of services was not due to discharge of surplus labour. It was due to the failure of the workman to pass the test which would have enabled him to be confirmed in the service. Therefore, it was not retrenchment within the meaning of section 2(OO) of the . The Presiding Officer, Central Government, Industrial Tribunal cum Labour Court, accepted the management 's contention and decided against the workman appellant. Hence the appeal by special leave. Allowing the appeal, the Court ^ HELD: (i) The discharge of the workman on the ground that she did not pass the test which would have enabled him to be confirmed was "retrenchment" within the meaning of section 2(OO) and, therefore, the requirements of section 25F had to be complied with. [892 F G] (ii) Section 2(OO) of the uses a wide language particularly the words "termination. for any reason whatsoever". The definition "retrenchment" expressly excludes termination of service as a "punishment inflicted by way of disciplinary action". It does not include, voluntary retrenchment of the workman or retrenchment of the workman on reaching the age of superannuation or termination of the service of the workman on the ground of continuous ill health. The Legislature took special care to mention that these were not included within the meaning of "termination by the employer of the service of a workman for any reason whatsoever". This emphasises the broad interpretation to be given to the expression "retrenchment". [887 E H, 888 A] 2. If due weight is given to the words "the termination by the employer of the service of a workman for any reason whatsoever" and if the words 'for any reason whatsoever" are understood to mean what they plainly say, it is difficult to escape the conclusion that the expression 'retrenchment ' must include every termination of the service of a workman by an act of the employer. The underlying assumption, of course, is that the undertaking is running as an under 885 taking and the employer continues as an employer but where either on account of transfer of the undertaking or on account of the closure of the undertaking the basic assumption disappears, there can be no question of 'retrenchment ' within the meaning of the definition contained in section 2(OO) of the Act. [888 A C] Hariprasad Shivshankar Shukla vs A.D. Divakar [1957] SCR 121: applied. By introducing section 25 FF and Section 25 FFF, Parliament treated the termination of the service of a workman on the transfer or closure of an undertaking as "deemed retrenchment". The effect was that every case of termination of service by act or employer even if such termination was a consequence of transfer or closure of the undertaking was to be treated as 'retrenchment ' for the purposes of notice, compensation etc. " The expression "termination of service for any reason whatsoever" now covers every kind of termination of service except those not expressly included in section 25F or not expressly provided or by other provisions of the Act as 25 FF And 25 FFF. [888 C F] 4. The manifest object of Section 25 FF and section 25 FFF is to so compensate the workman for loss of employment as to provide him the wherewithal to subsist until he finds fresh employment. The non inclusion of 'voluntary retirement of the workmen, retirement of workmen, on reaching the age of superannuation, termination of the service of a workman, on the ground af continued ill health ' in the definition of 'retrenchment ' clearly indicate and emphasise the true object of 25F, 25 FF and 25 FFF and the nature of the compensation provided by those provisions." [888 F H] Indian Hume Pipe Co. Ltd. vs The Workman ; followed. The submission that notwithstanding the comprehensive language of the definition of retrenchment ' in section 2(OO) the expression continues to retain its original meaning, namely, discharge from service on account of surplus age is not correct. It cannot be assumed that Parliament was undertaking an exercise in futility to give a long winded definition merely to say that the expression means what it always meant. [889 D E] Hariprasad Shivshankar Shukla vs A.D. Divakar [1957] SCR 121, Hindustan Steel Ltd. vs The Presiding Officer, Labour Court Orissa & Ors. ; State Bank of India vs Shri N. Sundaramoney ; Delhi Cloth and General Mills Ltd. vs Shambunath Mukherjee & Ors. ; ; explained and followed. Management of M/s Willcose Buckwell India Ltd. vs Jagannath & Ors. AIR 1974 S.C. 1164; Employees in Relation vs Digmoden Colliery vs Their Workmen ; ; distinguished. L. Robert D 'Souza vs Executive Engineer, Southern Railway and Anr. (1979) KLJ Kerala 211; The Managing Director, National Garage vs J. Gonsalves (1962) KLJ 56. Goodlas Nerolac Paints vs Chief Commissioner, Delhi ; Rajasthan State Electricity Board vs Labour Court ; over ruled.

minal Appeal No. 119 of 1958. Appeal by special leave from the judgment and order dated July 29, 1957, of the Rajasthan High Court, Jodhpur, in Criminal Appeal No. 42 of 1954. 16 122 B. L. Kohli and C. L. Sareen, for the appellants. section K. Kapur and D. Gupta, for the respondent. December 9. The Judgment of the Court was delivered by SUBBA RAO, J. This is an appeal by special leave against the conviction and sentence by the High Court of Judicature for Rajasthan at Jodhpur of the 9 appellants under section 304, read with section 149, and section 148 of the Indian Penal Code. The 9 appellants, along with 34 other persons, were accused before the Sessions Judge, Merta. Briefly stated the case of the prosecution was as follows: There were two factions in village Harnawa one consisting of Rajputs and other of the cultivators of the village. Admittedly there were disputes between these two factions in respect of certain fields. At about 3 30 p.m. on October 31, 1951, the day after Diwali, popularly known as Ram Ram day, both the groups went to a temple called Baiji kathan. The cultivators went first to the temple and sat in the place which was usually occupied by the Rajputs. Subsequently when the Rajputs went there, they found their usual sitting place occupied by the cultivators and took that as an insult to them. Though they were invited by the pujari to sit in some other place, they refused to do so and went to a banyan tree which was at a short distance from the temple. There they held a brief conference and then returned to the temple armed with guns, swords and lathies. The Rajputs fired a few shots at the cultivators and also beat them with swords and lathies. As a result, 16 of the cultivators received injuries and of these 6 received gun shot injuries, of which two persons, namely, Deena and Deva, succumbed to the injuries. Out of the remaining 14 injured persons, 3 received grievous injuries and the rest simple ones. Forty three persons, alleged to have taken part in the rioting, were put up for trial before the Sessions Judge,, Merta, for having committed offences under section 302, read with section 149, and section 148 of the Indian Penal Code. Five of the accused admitted their presence at the scene of 123 occurrence but pleaded that after they had made their customary offerings at the temple and when they were returning they were attacked by the cultivators. Others pleaded alibi. The learned Sessions Judge held that it had not been established that the accused had a common object to kill the cultivators and that it had also not been proved beyond any reasonable doubt that any of the accused was guilty of a particular offence. On these findings, he acquitted all the accused. On appeal the learned Judges of the High Court found that the accused were members of an unlawful assembly, that they were animated by a common object of beating the cultivators and that further out of the 43 accused it had been clearly established that the appellants, who are 9 in number, took part in the activities of the unlawful assembly. On that finding they held that the accused were guilty of culpable homicide not amounting to murder under section 304, read with section 149, Indian Penal Code; they also held that appellants 1, 2, 3 and 4 were also guilty under section 148 of the Indian Penal Code, as they were armed with deadly weapons, and the rest under section 147, Indian Penal Code. For the offence under section 304, read with section 149, the appellants were sentenced to ten years ' rigorous imprisonment, and for the offence under section 148, appellants 1 to 4 were further sentenced to one year 's rigorous imprisonment and the rest under section 147, to six months ' rigorous imprisonment. Having examined the entire evidence, they agreed with the learned Sessions Judge that no case had been made out against the other accused beyond any reasonable doubt. The appeal was, therefore, allowed in respect of the nine appellants and dismissed in respect of the others Learned counsel for the appellants contended that the Sessions Judge came to a reasonable conclusion on the evidence and that the. High Court had no substantial and compelling reasons to take a different view. In recent years the words "compelling reasons" have become words of magic incantation in every 124 appeal against acquittal. The words are so elastic that they are not capable of easy definition; with the result, their interpretation varied between two extreme views one holding that if a trial court acquitted an accused, an appellate court shall not take a different view unless the finding is such that no reasonable person will come to that conclusion, and the other accepting only the conscience of the appellate court as the yardstick to ascertain whether there are reasons to compel its interference. In the circumstances we think it necessary to clarify the point. The scope of the powers of an appellate court in an appeal against acquittal has been elucidated by the Privy Council in Sheo Swarup vs King Emperor There Lord Russell observed at p. 404 thus: ". . the High Court should and will always give proper weight and consideration to such matters as (1) the views of the trial Judge as to the credibility of the witnesses, (2) the presumption of innocence in favour of the accused, a presumption certainly not weakened by the fact that he has been acquit ted at his trial, (3) the right of the accused to the benefit of any doubt, and (4) the slowness of an appellate court in disturbing a finding of fact arrived at by a Judge who had the advantage of seeing the witnesses Adverting to the facts of the case, the Privy Council proceeded to state, ". . They have no reason to think that the High Court failed to take all proper matters into consideration in arriving at their conclusions of fact. " These two passages indicate the principles to be followed by an appellate court in disposing of an appeal against acquittal and also the proper care it should take in re evaluating the evidence. The Privy Council explained its earlier observations in Nur Mohammad vs Emperor (2) thus at p. 152: "Their Lordships do not think it necessary to read it all again, but would like to observe that there really is only one principle, in the strict use of the word, laid down there; that is that the High (1) (1934) L.R. 61 I.A. 398. (2) A.I.R. 1945 P.C. 151. 125 Court has full power to review at large all the evidence upon which the order of acquittal was founded, and to reach the conclusion that upon that evidence the order of acquittal should be reversed. " These two decisions establish that the power of an appellate court in an appeal against acquittal is not different from that it has in an appeal against conviction; the difference lies more in the manner of approach and perspective rather than in the content of the power. These decisions defining the scope of the power of an appellate court had been followed by all the courts in India till the year 1951 when, it is said, this Court in Surajpal Singh vs The State (1) laid down a different principle. But a perusal of that judgment does not bear out the construction which is very often placed thereon. The passage relied upon is found at p. 201 and it reads thus: "It is well established that in an appeal under section 417 of the Criminal Procedure Code, the High Court has full power to review the evidence upon which the order of acquittal was founded, but it is equally well settled that the presumption of innocence of the accused is further reinforced by his acquittal by the trial court, and the findings of the trial court which had the advantage of seeing the witnesses and hearing their evidence can be reversed only for very substantial and compelling reasons. " On the facts of that case this Court held, "we are inclined to hold that the Sessions Judge had taken a reasonable view of the facts of the case, and in our opinion there were no good reasons for reversing that view". We think that these observations are nothing more than a restatement of the law laid down by the Privy Council and the application of the same to the facts of the case before the Court. Though in one paragraph the learned Judges used the words "substantial and compelling reasons" and in the next paragraph the words "good reasons", these observations were not intended to record any disagreement (1)[1952] S.C.R. 193. 126 with the observations of Lord Russell in Sheo Swarup 's case (1) as to matters a High Court would keep in view when exercising its power under section 417 of the Criminal Procedure Code. If it had been so intended, this Court would have at least referred to Sheo Swarup 's case (1), which it did not. The same words were again repeated by this Court in Ajmer Singh vs The State of Punjab (2). In that case the appellate court set aside an order of acquittal on the ground that the accused had failed to explain the circumstances appearing against him. This court held that as the presumption of innocence of an accused is reinforced by the order of acquittal, the appellate court could have interfered only for substantial and compelling reasons. The observations made in respect of the earlier decisions applied to this case also. Mahajan, J., as he then was, delivering the judgment of the court in Puran vs State of Punjab (3) again used the words "very substantial and compelling reasons", but immediately thereafter the learned Judge referred to the decision of Sheo Swarup 's case(1) and narrated the circumstances which an appellate court should bear in mind in interfering with an order of acquittal. This juxtaposition of the so called formula and the circumstances narrated in Sheo Swarup 's case (1) indicate that the learned Judge used those words only to comprehend the statement of law made by the Privy Council. Mukherjea, J., as he then was, in C. M. Narayan vs State of Travancore Cochin (4) again referred to thePrivy Council decision and affirmed the wide powerof an appellate court and also the proper approach in an appeal against acquittal. The learned Judge did not introduce any further limitation on the power of the appellate court. But it was observed that the High Court had not clearly kept before it the well settled principles and reversed the decision of the trial court 'without noticing or giving due weight and consideration to important matters relied upon by that court '. In Tulsiram Kanu vs The State (5) this (1) (1934) L.R. 61 I.A. 398. (2) ; (3) A I.R. (4) (5) A.I.R. 1954 8.C. I. 127 Court used a different phraseology to describe the approach of an appellate court against an order of acquittal. There the Sessions Court expressed that there was clearly reasonable doubt in respect of the guilt of the accused on the evidence put before it. Kania, C. J., observed that it required good and sufficiently cogent reasons to overcome such reasonable doubt before the appellate court came to a different conclusion. This observation was made in connection with a High Court 's judgment which had not taken into consideration the different detailed reasons given by the Sessions Judge. In Madan Mohan Singh 's case (1), on appeal by special leave, this Court said that the High Court 'had not kept the rules and principles of administration of criminal justice clearly before it and that therefore the judgment was vitiated by non advertence to and misapprehension of various material facts transpiring in evidence and the consequent failure to give true weight and consideration to the findings upon which the trial court based its decision '. In Zwinglee Ariel vs State of M. P. (2) this Court again cited the passage from the decision of the Privy Council extracted above and applied it to the facts of that case. In Rao Shiv Bahadur Singh vs State of Vindhya Pradesh(1), Bhagwati, J., speaking for the Court, after referring to an earlier decision of this Court, accepted the principle laid down by the Privy Council and, indeed, restated the observations of the Privy Council in four propositions. It may be noticed that the learned Judge did not use the words cc substantial and compelling reasons". In section A. A. Biyabani vs The State of Madras (4), Jagannadhadas, J., after referring to the earlier decisions, observed at p. 647 thus: "While no doubt on such an appeal the High Court was entitled to go into the facts and arrive at its own estimate of the evidence, it is also settled law that, where the case turns on oral evidence of witnesses, the estimate of such evidence by the trial court is not to be lightly set aside. " (1) A.I.R. 1954 S.C. 637. (2) A.I.R. 1954 S.C. 15. (3) A I.R. (4) A.I.R. 1954 S.C. 645. 128 The learned Judge did not repeat the so called formula but in effect accepted the approach of the Privy Council. The question was again raised prominently in the Supreme Court in Aher Raja Khima ,"v. The State of Saurashtra(1). Bose, J., expressing the majority view, stated at p. 1287 thus: "It is, in our opinion, well settled that it is not enough for the High Court to take a different view of the evidence; there must also be substantial and compelling reasons for holding that the trial court was wrong: Ajmer Singh vs State of Punjab (2); and if the trial Court takes a reasonable view of the facts of the case, interference under section 417 is not justifiable unless there are really strong reasons for reversing that view. " It may be noticed that the learned Judge equated "substantial and compelling reasons" with "strong reasons". Kapur, J., in bhagwan Das V. State of Rajasthan(1) referred to the earlier decisions and observed that the High Court should not set aside an acquittal unless there are " substantial and compelling reasons" for doing so. In Balbir Singh vs State of Punjab (4), this Court observed much to the same effect thus at p. 222: "It is now well settled that though the High Court has full power to review the evidence upon which an order of acquittal is founded, it is equally well settled that the presumption of innocence of the accused person is further reinforced by his acquittal by the trial Court and the views of the trial Judge as to the credibility of the witnesses must be given proper weight and consideration; and the slowness of an appellate Court in disturbing a finding of fact arrived at by a Judge who had the advantage of seeing the witnesses must also be kept in mind and there must be substantial and compelling reasons for the appellate Court to come to a conclusion different from that of the trial Judge. " These observations only restate the principles laid down by this Court in earlier decisions. There are (1) ; (2) [1953] S.C.P. 418, 423. (3) A.I. R. (4) A.I.R. 1957 S.C. 216. 129 other decisions of this Court where, without discussion, this Court affirmed the judgments of the High Courts where they interfered with an order of acquittal without violating the principles laid down by the Privy Council. There is no difficulty in applying the principles laid down by the Privy Council, and accepted by this Court, to the facts of each case. But appellate courts are finding considerable difficulty in understanding the scope of the words "substantial and compelling reasons" used by this Court in the decisions cited above. This Court obviously did not and could not add a condition to section 417 of the Criminal Procedure Code. The words were intended to convey the idea that an appellate court not only shall bear in mind the principles laid down by the Privy Council but also must give its clear reasons for coming to the conclusion that the order of acquittal was wrong. The foregoing discussion yields the following results: (1) an appellate court has full power to review the evidence upon which the order of acquittal is founded; (2) the principles laid down in Sheo Swarup 's case(1) afford a correct guide for the appellate court 's approach to a case in disposing of such an appeal; and (3) the different phraseology used in the judgments of this Court, such as, (i) "substantial and compelling reasons", (ii) "good and sufficiently cogent reasons", and (iii) "strong reasons" are not intended to curtail the undoubted power of an appellate court in an appeal against acquittal to review the entire evidence and to come to its own conclusion; but in doing so it should not only consider 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 its arriving at a conclusion on those facts, but should also express those reasons in its judgment, which lead it to hold that the acquittal was not justified. With this background we shall now look at the judgment of the Sessions Judge and that of the High (1) (1934) L.R. 61 I.A. 398. 17 130 Court to ascertain whether the High Court anywhere departed from the principles laid down by the Privy Council. The framework of the judgment of the learned Sessions Judge may be shortly stated thus: The first question was whether the case of the prosecution that the Rajputs met. under a banyan tree, conspired to beat the Jats and came back to the temple armed with weapons was true. This fact was spoken to by several eve witnesses, including Goga (P.W. 1), Chandra (P.W. 2) and Doongar Singh (P.W. 21). This fact was also mentioned in the First Information Report lodged by Doongar Singh (P.W. 21). There were 20 eyewitnesses who spoke about the conspiracy; and, out of them, P.Ws. 5, 8, 9, 11, 12, 15, 16, 17, 18. 24 and 25 received injuries during the riot. The learned Sessions Judge considered the evidence of P.Ws. 1 and 2 and rejected it on unsubstantial grounds and on the basis of insignificant discrepancies. Therefter, he noticed that all the other eye witnesses, with slight and inconsequential variations, spoke to the fact of their returning from the banyan tree with lathies, swords and guns ' but he did not give a definite finding whether he accepted that evidence or not, though at the fag end of the judgment he found that he could not hold that the assembly of Rajputs had any common object of killing anybody. Then the learned Sessions Judge proceeded to consider whether any of the Rajputs were recognized by any of the witnesses. He divided the accused into three groups, namely, (i) those accused who were amongst the Rajputs when they had come for darshan of Baiji, (ii) those accused who were amongst the Rajputs when they returned from the banyan tree but for whom the evidence of taking part in the actual rioting is divided, and (iii) those accused for whom most of the eye witnesses have stated that they had committed rioting and inflicted injuries on the assembly of cultivators. Taking the first group, the learned Sessions Judge, for the reasons given by him earlier, rejected the evidence of Goga and Chandra, pointed out that 28 accused had not been named unanimously by all the eye witnesses, 131 noticed that there was long standing enmity between the Rajputs and the cultivators, and laid down a criterion that, for determining the presence of any particular accused, there should be an allegation against him about doing any overt act in the unlawful, assembly. By applying the said yardstick he held that none of the accused falling in the first group, which included appellants 7, 8 and 9, was guilty of the offences with which they were charged. Coming to the second category, with which we are not concerned in this appeal, the learned Sessions Judge again applied the test that an overt act should be proved against each of the accused and held that no case had been made out against them. Adverting to the third group, after noticing that 12 of the eye witnesses were those who received injuries, the learned Sessions Judge applied another test for accepting their evidence. In effect and substance the test adopted by him was that an accused identified only by one witness and not proved to have done any overt act should be acquitted by giving him the benefit of doubt. Applying this test to the said witnesses he held that the said accused were not guilty. After considering the evidence in the aforesaid manner, he came to the following final conclusion: "I cannot hold that the assembly of Rajputs had any common object of killing anybody. All happened at the spur of the moment. Those Rajputs who took part in the rioting have not been truthfully named. Innocent persons have been implicated and the cases of those persons who are alleged to have committed any overt acts are also full of doubts. " On appeal the learned Judges of the High Court, as already stated, allowed the appeal in respect of the 9 appellants and dismissed it in regard to the others. The learned Judges of the High Court observed that it had not the slightest hesitation in holding that the case put forward by the prosecution, by and large, represented the substantial truth and that the incidents at the banyan tree were true. They pointed out that the reasons given by the Sessions Judge for not believing the evidence of the main witnesses, Goga 132 and Chandra, who spoke as to what happened at the banyan tree, could not be sustained and that the alleged discrepancies and contradictions in their evidence were not such as to detract from truthfulness. We have also gone through the evidence of Goga and Chandra and we entirely agree with the observations of the learned Judges of the High Court that their evidence was natural and consistent and that the alleged discrepancies pointed out by the Ses sions Judge were not either contradictions at all or, even if they were so, they were so trivial as to affect in any way their veracity. The learned Judges further pointed out that the evidence of Goga and Chandra was supported by the evidence of Doongar Singh (P. W. 21), a police constable, who gave the First Information Report at the earliest point of time. The recitals in the First Information Report corroborate his evidence. The learned Judges then indicated that this version was practically supported by other eve witnesses and that they did not see any reason why it should have been invented, if it was not true. Having regard to the said evidence, they found themselves entirely unable to accept the conclusion of the learned trial Judge that this was a case where a stray beating was given by some individuals on the side of the Rajputs to some individuals on the Bide of the Jats. They found that the Rajputs were members of an unlawful assembly and that they were all animated by a common object of beating the cultivators. Having held that the learned Sessions Judge was clearly wrong on the question of unlawful assembly, the learned Judges proceeded to consider the case of each accused. They adopted the following principle, based upon the decision of this Court in Abdul Gani vs State of M. P. (1): "We quite recognise that in a case of rioting where two inimical factions are involved, exaggerations are bound to be made, and some innocent persons are likely to be falsely implicated; but all the same, it is the duty of the courts not to throw out the whole case by following the easy method of (1) A.I.R. 1954 S.C. 31. 133 relying on discrepancies, and, where the case for the prosecution is substantially true, to find out if any of the accused participated, in the offence, and if their presence is established beyond all reasonable doubt, punish them for the offences committed by them. " They found, on the evidence, that appellant 1, Sanwat Singh, who was present on the spot was a member of the unlawful assembly and had actually struck Sheonath with his sword as a result of which his three fingers were cut; that appellant 2, Dhan Singh, was one of the persons who took a leading part in the beating; that appellant 3, Mangej Singh, was undoubtedly one of the participants in the unlawful assembly; that appellant 4, Kalu Singh, was armed with a sword and attacked the Jats and that his version that he had been first attacked by the Jats was not true; that appellant 5, Narain Singh, was one of the members of the unlawful assembly and that he had given beatings to P.W. 25; that appellant 6, Gulab Singh, struck Sheokaran Jat with lathies; and that appellant 7, Sabal Singh, appellant 8, Baney Singh, and appellant 9, Inder Singh, who admitted their presence at the spot but stated that they were attacked by the Jats, were clearly participators in the beating. As regards the other accused, the learned Judges, having examined the entire evidence, agreed with the Sessions Judge in holding that no case had been made out against those accused beyond all reasonable doubt. So far as these accused are concerned there is no evidence to show that any of them had a weapon or that they had taken any active part in assaulting one or other of the Jats. In the result, the learned Judges of the High Court found that the appellants formed an unlawful assembly to beat the Jats and that they must have known that murders were likely to be committed in prosecution of that common object. On that finding, they convicted and senten ced the appellants as stated earlier in the judgment. Now, can it be said that, as learned counsel for the appellants argues, the Judges of the High Court had ignored any of the principles laid down by the Privy 134 Council and subsequently accepted by this Court? We think not. The foregoing analysis of the findings of the two courts discloses the following facts: The Sessions judge, on the general case of the prosecution that the Rajputs, chagrined by the attitude of the Jats in occupying their usual place in the temple, went to the banyan tree, conferred for a short time and came back to the temple to attack the Jats, rejected the evidence of the main witnesses for the prosecution, namely, Goga, Chandra and Doongar Singh, on grounds which do not stand a moment 's scrutiny and ignored the voluminous evidence, which corroborated the evidence of the said three witnesses, without giving valid or acceptable reasons for the same. The learned Sessions Judge did not even give a definite finding on this version of the prosecution case, though impliedly he must be deemed to have rejected it. In regard to the individual cases he divided the witnesses into three categories, and, applying mechanical tests, refused to act upon their evidence. The High Court rightly pointed out that there was no reason why the voluminous evidence in support of the general case and why the evidence of the three witnesses, Goga, Chandra and Doongar Singh, should be rejected. The learned Judges of the High Court accepted their evidence, which conclusively established that the general case was true and that the appellants actually took active part in attacking the Jats with swords and lathies. In doing so, the learned Judges did not depart from any of the principles laid down by the Privy Council. Indeed, they interfered with the judgment of the Sessions Judge, as they came to the conclusion that, the said judgment, in so far as the appellants were concerned, was clearly wrong and contrary to the overwhelming and reliable evidence adduced in the case. The learned Judges of the High Court, in our opinion, approached the case from a correct perspective and gave definite findings on a consideration of the entire evidence. The question now is, whether the appellants have made out any case for interference with the judgment of the High Court under article 136 of the Constitution. 135 Article 136 of the Constitution confers a wide discretionary power on this Court to entertain appeals in suitable cases not otherwise provided for by the Constitution. It is implicit in the reserve power that it cannot be exhaustively defined, but decided cases , do not permit interference unless "by disregard to the forms of legal process or some violation of the principles of natural justice or otherwise, substantial and grave injustice has been done". Though article 136 is couched in widest terms, the practice of this Court is not to interfere on questions of fact except in excep tional cases when the finding is such that it shocks the conscience of the court. In the present case, the High Court has not contravened any of the principles laid down in Sheo Swarup 's case (1) and has also given reasons which led it to hold that the acquittal was not justified. In the circumstances, no case has been made out for our not accepting the said findings. In the result, the appeal fails and is dismissed. Appeal dismissed.

There were two rival factions in a certain village one con sisting of Rajputs and the other of cultivators. On a particular festival day both the groups went to a temple for worship and cultivators who reached the temple first occupied a place therein which was usually occupied by Rajputs. Subsequently Rajputs arrived and resented the occupation of the sitting place by the cultivators. They shifted to a short distance and after holding a brief conference came back to the temple and attacked the cultivators with guns, swords and lathis as a result of which several persons were injured and two were killed. 43 persons alleged to have taken part in the rioting were put up for trial before the Sessions judge for having committed offences under section 302 read with section 149 and section 148 of the Indian Penal Code. The Sessions judge held that a common object on the part of the accused to kill the cultivators had not been established and that it had also not been proved beyond reasonable doubt that the accused were guilty of a particular offence. On these findings the Sessions judge acquitted all the accused. On appeal the High Court after examining the entire evidence found some of the accused guilty of culpable homicide not amounting to murder under section 304 read with section 149 and section 148 of the Indian Penal Code and sentenced them to various terms of imprisonment. The appeal in respect of some other accused was dismissed as no case had been made out against them beyond any reasonable doubt On appeal by special leave against the conviction and sentence by the High Court, Held, that the words "substantial and compelling reasons" for setting aside an order of acquittal used by this Court in its decisions were intended to convey the idea that an appellate court shall not only bear in mind the principles laid down by the Privy Council in Sheo Swarup 's case but must also give its clear reasons for coming to the conclusion that the order of acquittal was wrong. The following results emanate from a discussion of the case law on appeals against acquittal: (1)an appellate court has full power to review the evidence upon which the order of acquittal is founded; (2) the principles 121 laid down in Sheo Swarup 's case afford a correct guide for the appellate court 's approach to a case disposing of such an appeal; (3) the different phraseology used in the judgments of this Court, such as (1) "substantial and compelling reasons", (II) "good and sufficiently cogent reasons", and (III) "strong reasons", are not intended to curtail the undoubted power of an appellate Court in an appeal against acquittal to review the entire evidence and to come to its own conclusion, but in doing so it should not only consider 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 conclusion on those facts, but should express the reasons in its judgment, which led it to hold that the acquittal was not justified. Sheo Swarup vs King Emperor, (1934) L. R. 61 I. A. 398, con sidered and followed. Nur Mohammad vs Emperoy, A.I.R. 1945 P.C. 151, Surajpal Singh vs The State, ; , Ajmer Singh vs The State of Punjab, ; , Puran vs State of Punjab, A.I.R. 1953 S.C. 459, C. M. narayan vs State of Travancore Cochin, , Tulsiram Kanu vs The State, A.I.R. 1954 S.C. 1, Madan Mohan Singh 's case, A.I.R. 1954 S.C. 637, Zwinglee Ariel vs State of U. P., A.I.R. 1954 S.C. 15, Rao Shiv Bahadur Singh vs State of Vixdhya Pradesh, ; , section A. A. Biyabani vs The State of Madras, A.I. R. , Aher Raja Khima vs The State of Saurashtra, ; , Bhagwan Das vs The State of Rajasthan, ; and Balbir Singh vs State of Punjab, A.I.R. 1957 S.C. 216, discussed. The High Court approached the instant case from a correct perspective and gave definite findings on a consideration of the entire evidence, and in so doing it did not depart from any of the principles laid down by the Privy Council in Sheo Swarup 's case and also gave reasons for holding that the acquittal was not justified. Abdul Gani vs State of M. P., A.I.R. 1954 S.C. 31, referred to. Although the powers of this Court under article 136 of the Constitution are very wide, interference is not permitted unless "by disregard to the forms of legal process or some violation of the principles of natural justice or otherwise, substantial and grave injustice has been done," on questions of fact the practice of this Court is not to interfere except in exceptional cases when the finding is such that it shocks the conscience of this Court,

Section 29 of the Indian Arms Act, 1878, provided that for prosecution for an offence under section 19(f) of the Act com mitted in the territories north of the jumna and Ganga no sanction was required but sanction was required for the pro. section if the offence was committed in other areas. j was found in possession of an unlicensed firearm in Delhi, and though sanction under section 29 was necessary, he was tried and convicted without obtaining such sanction. B was found in possession of an unlicensed firearm in Saharanpur and as no sanction under section 29 was necessary for his prosecution he was tried and convicted without obtaining any sanction. The respondents contended that section 29 offended article 14 of the Constitution and was unconstitutional. j contended that even if section 29 was invalid in its operation as regards territories to the. ,North of the jurnna and Ganga it was not invalid in its 865 application to the other territories as the parts of section 29 were separate and severable. B contended that if the portion of section 29 which offended article 14 was struck down the remaining portion was complete in itself and required sanction for prosecution in all cases, and that if s.29 was void in toto s.19 could not stand and also become void and unenforceable. Held, that section 29 Arms Act offended article 14 and was unconstitutional and as such no sanction was necessary for the prosecution of either j or B. The differentiation between the territories north of the jumna and Ganga and the other territories had no relevance now to the object of the legislation. The differentiation had come into being an account of the fact that the largest opposition to the British Government in 1857 had come from the people to the north of the jumna and Ganga and they had been disarmed. But now after more than a century conditions have changed and the distinction could not be sustained on any ground pertinent to the object ,of the law in question. Mehar Chand vs State, A.I.R. (1959) All. 660, approved. Held, further, that it was not permissible to strike out only the offending words from section 29 and to read the section as requiring sanction for prosecution for offences in areas north of the jamna and Ganga. The section could. not be construed as for bidding what it expressly authorised. Nor could the section insofar as it required sanction for prosecution for offences committed in other territories be severed from the rest and held valid as that would necessarily again result in discrimination. The entire section 29 must be struck down. Bhai Singh vs State, A.I.R. (1960) All. 369. approved. Chamarbaugwalla vs Union of India, ; , referred to. Held, further, that section 29 was severable from the other, provisions of the Act and that its invalidity did not affect the validity of section 19. Section 19 was a substantive provision providing punishment for violation of sections 14 and 15 and section 29 was merely procedural and in general the invalidity of a procedural provision could not be held to affect the validity of a substantive provision. There was nothing in the Arm Act to take it out of the general rule. Section 29 was intended for giving protection to the subjects against frivolous and vexatious prosecutions but sanction was not one of the elements of the under offence s, 19(f). It could not be said that the legislature 866 would not have enacted the ' law without the; protection afforded by section 29. Davis vs Wallace, (1921)257 U.S. 477; ; and Lemka Parmers ' Grain Company; , ; 66 L. Ed. 458, referred to.

Respondent No. 1 obtained a mortgage decree for Rs. 1,14,581/14/6 against one Rao Raja Inder Singh (the judgment debtor). The mortgage money was advanced under three mortgages, and the mortgaged properties consisted of Jagirs and some non Jagir immovable property. The latter property was sold in execution and Rs. 33,750/ paid to the decree holder in partial satisfaction of the decree. Then the decree holder filed an execution petition in the Court of the District Judge for the balance amount i.e. Rs. 99,965/3/6, praying for attachment of the amount of compensation and rehabilitation grant which would be paid to the judgment debtor on account of resumption of his Jagir. The judgmment debtor submitted two applications in which he claimed relief under sections 5 and 7 of the Rajasthan Jagirdars ' Debt Reduction Act. The decree holder, in his reply, to those petitions urged that the provisions relied in were ultra vires the Constitution of India, being in contravention of articles 14, 19 and 31 of the Constitution. Thereafter the decree holder moved a petition under article 228 of the Constitution before the High Court, praying that the execution case pending in the Court of the District Judge, be withdrawn from that court to the High Court. The High Court transferred the case to its file. By its judgment the High Court could held that apart from the later part of section 2(e) excluding certain debts and section 7 (2) of the Act, the rest of the Act was valid. The High Court granted a certificate under article 133(1)(c) of the Constitution to the State of Rajasthan to file an appeal to this Court. Hence the appeal: Held: (i) That the impugned part of section 2(e) infringes article 14 of the Constitution for the reason that no reasonable classification is disclosed for the purpose of sustaining the impugned part of section 2(e). It is now well settled that in order to pass the test of permissible classification, two conditions must be fulfilled, namely, (1) that the classification must be founded on an intelligible differentiation which distinguishes persons or things that are to be put together from others left out of the group, and (2) that the differential must have a rational relationship to the object sought to be achieved by the statute in question. The said condition No. 2 above has clearly not been satisfied in this case. The object sought to be achieved by the impugned Act was to reduce the debts secured on the Jagir lands which had been resumed under the provisions of the Rajasthan Land Reforms and Resumption of Jagirs Act. The fact that the debts are owed to a Government or local authority or other bodies mentioned in the impugned part of section (2) (e) has no rational relationship with the object sought to be achieved by the Act. Further, no intelligible principle underlies the exempted categories of debts. The reason why a debt advanced on behalf of a person by the Court of Wards is clubbed with a debt due to a State or a scheduled bank and why a debt due to a non scheduled bank is not excluded from the purview of the Act is not discernible. Manna Lal vs Collector of Jhalwar. ; , Nand Ram Chhotey Lai vs Kishore Raman Singh, A.I.R. (1962) All 521 and 905 Jamnalal Ramlal Kimtee vs Kishendas and State of Hyderabad, A.I.R. (1955) Hyd. 194, distinguished. (ii) Section 7(2) is valid as it imposes reasonable restrictions, in the interests of general public. on the rights of a secured creditor. This sub section has been designed with the object of rehabilitating a Jagirdar whose Jagir properties have been taken over by the State for a public purpose at a low valuation. If this provision was not made, the Jagirdar would find it diffcult to start life afresh because his future income and acquired properties would be liable to attachment and sale for the purpose of satisfying the demands of such creditors.

The petitioner sought admission to a medical college in the State of Maharashtra on the footing that she belonged to the Scheduled Tribe of Mahadeo Koli and submitted several caste certificates, including her father 's Secondary School Leaving Certificate. The Scrutiny Committee, the expert body for determining such claims, rejected her claim on the basis of entries made in 1945 in the register of the Municipal Primary School, where her father had his primary education, which showed that the caste of the petitioner 's father was recorded as 'Son Koli '. This decision was upheld by the Additional Commissioner for Tribal Development. The High Court summarily dismissed the petitioner 's writ petition. In the Special Leave Petition before this Court, on behalf of the petitioner it was contended that the High Court was in error in rejecting the Writ Petition summarily and that the Scrutiny Committee had proceeded on an entirely erroneous basis as the real basis of the petitioner 's claim was that Son Kolis were a section of the Schedule Tribe of Mahadeo Koli. Dismissing the Special Leave Petition, this Court, HELD: Entry 29 of the list of Scheduled Tribes in the State of Maharashtra, appearing in Para 9 of the shows that 'Koli Mahadeo ' is a Scheduled Tribe recognised in Maharashtra. In the list of Backward Classes issued by the State, Kolis are recognised as belonging to "other backward classes". Son Kolis are shown as belonging to other backward classes in the list of other backward classes. These docu ments nowhere support the claim that Son Kolis are a section of Scheduled Tribe of Mahadeo Koli. Though Kolis are de scribed as a tribe in the publication entitled "Transactions of the Bombay Geog 2 raphical Society from 1836 to 1838", a perusal of the rele vant observations shows that no distinction has been drawn in the said publication between castes and tribes. [2D F] Admittedly, Mahadeo Koli is a Scheduled Tribe whereas Son Koli is a caste. The Scrutiny Committee cannot be fault ed for placing great reliance on the entries in the register of the primary school where the petitioner 's father took his primary education, as at the time when these entries were made there was no reason why he should have made a wrong statement about the caste or tribe to which he belonged. These entries were made in 1945, when there was no special advantage which the Scheduled Tribe of Mahadeo Koli enjoyed over the members of the caste of Son Koli. The certificates relied upon by the petitioner have been rejected by the Scrutiny Committee primarily because these certificates were inconsistent with the entries in the said register of the Primary School relating to the petitioner 's father to which the Committee attached great probative value, as it was of the view that they were made at a time when no question of making any manipulation arose. The reasons given by the Scrutiny Committee for the rejection cannot be said to be irrelevant or perverse. There is no complaint that the rules of fair play have not been observed by the Scrutiny Commit tee. [4A E]

The three respondents, who were the General Manager, the Assistant Manager and the Secretary of the Laxmi Devi Sugar Mills Ltd., were charged under sections 12, 13 and 26 of the United Provinces Shop and Commercial Establishment Act, 1947, for contravening the provisions of the Act relating to holidays, leave and maintenance of certain registers regarding a class of field workers employed by the company to guide, supervise and control growth and supply of sugar cane for use in the factory. It was contended on their behalf that those employees were workers within the meaning of the and the United Provinces Shop and Establishment Act did not apply to them. The Judicial Magistrate rejected that contention and convicted the respondents under section 26 of the Act and sentenced them to pay a fine of Rs. 30 each. On a reference by the Sessions judge recommending that the said convictions and sentences may be set aside, the High Court acquitted the respondents. The State Government appealed to this Court by Special Leave. Held, that the order of acquittal passed by the High Court was erroneous. The provisions of the were intended to benefit only workers employed in a factory and since field workers guiding, supervising and controlling growth and supply of sugar cane for use in the factory were not employed in the factory, the did not apply to them and they fell within the definition of " Commercial Establishment " under the United Provinces Shop and Commercial Establishment Act, 1947.

Under Section 21(1)(a) of the Rajasthan Civil Courts Ordinance, 1950 the District Court is empowered to entertain an appeal from a decree of the value of only upto Rs.10,000. Appeals in other cases lie only to the High Court. In the instant case, a joint family house was brought to auction in satisfaction of an ex parte money decree to recover Rs.5,557.10. The respondent coparceners filed objec tions under Order 21 Rule 58 CPC, which were rejected. The sale was confirmed in 1958 and the sale certificate issued. They, thereupon, filed a suit under Order 21 Rule 63 CPC to set aside the sale, in which the valuation of the property sold in execution was put at Rs.15,000. The trial court dismissed the suit. The District Court, however, allowed the appeal and decreed the suit for resti tution of the property since possession had in the meantime been taken. The appellant auctionpurchaser raised objections to the execution on the ground that the said decree was a nullity as the District Court lacked pecuniary jurisdiction to entertain the appeal against the decree in the suit valued at Rs.15,000 under Section 21(1)(a) of the Ordinance, and that the decree being a declaratory one was incapable of execution. The executing court dismissed the objection petition but on appeal the order was reversed. On further appeal, the High Court set aside the appellate order. Allowing the appeal in part, the Court, HELD: The value of the amount of decree would be the value for the purpose of the suit under Order 21 Rule 63 CPC. In the instant case, the suit was laid to set aside the sale by declaring the decree of 26 Rs.5,557.10 to be invalid. Merely because the valuation of the property sold in execution had been put at Rs.15,000 the valuation of the suit under Order 21 Rule 63 CPC could not be treated to be that valuation. Accordingly, Section 21(1)(a) of the Ordinance was attracted. It could not, therefore, be said that the decree passed by the District Court for restitution of the property was a nullity. Since, it was not a mere declaratory decree but coupled with a decree for restitution of the property, the plaintiff was entitled to execution. [27G 28A, 28C] Radha Kunwar vs Reoti Singh, AIR 1916 PC 18 and Phul Kumar vs Ghanshyam Mishra, 35 IA 22 PC, referred to. However, in view of the fact that litigation was pending for a long period, it would be equitable if the appellant is permitted to pay the proper value of the house. The District Court is directed to assess the prevailing market value of the house and the site as on date. The appellant to pay the value thereof within a time fixed by the District Court. [28D, F]

These appeals raised the question of constitutional validity of the Vindhya Pradesh Abolition of jagirs and Land Reforms Act, I952 (XI Of 1952). Applications were made before the judicial Commissioner under article 226 of the Constitution on the ground that various provisions of the Act placed unreasonable restrictions on the exercise of the fundamental rights guaranteed by the Constitution. The judicial Commissioner held that the Act, excepting section 22(1), section 37 and cl. (4)(e) of the Schedule to the Act, was constitutionally valid. The State appealed against that part of the order which declared the three provisions unconstitutional and one of the petitioners appealed against the order declaring the rest of the Act constitutional. Held, that the appeal of the State must be allowed and that of the petitioner dismissed. It was not correct to say that section 22 of the Act, which lays down the scheme for giving, effect to section 7(a) of the Act which permits the jagirdars to remain in possession of certain lands even after the abolition of their jagirs, is a piece of colourable legislation and, therefore, ultra vires the Legislature. That section cannot be said to discriminate as between jagirdars on the one hand and other occupants of land, to whom section 28(1) applies, on the other, since they belong to distinct and different classes. 107 Even assuming that they belong to the same class and section 22 is discriminatory, that section is protected by article 31A of the Constitution. The question as to colourable legislation ' is really one relating to legislative competency and there can be no doubt that the Vindhya Pradesh Legislature was perfectly competent to enact the impugned provisions under Entry 18, List II of the Seventh Schedule to the Constitution. K. C. Gajapati Narayan Deo vs The State of Orissa. [1954] S.C.R. i and Raghubir Singh vs The State of Ajmer (Now Rajasthan). [1959] SuPP1. (1) S.C.R. 478, relied on. There was no substance in the contention that section 37 of the Act is repugnant to section 9 of the Code of Civil Procedure and consequently ultra vires the State Legislature. The Vindaya Pradesh Legislature had undoubtedly the power under Entry 3, List II of the Seventh Schedule to make a provision like section 37 Of the Act and, once it did so, the last part of section 9 of the Code would apply and the jurisdiction of the Civil Courts would be barred by section 9 of the Code read with section 37 of the Act. Nor was it correct to say that cl. (4)(e) of the Schedule deprives the jagirdar of his proprietory interest without compensation. Although he may have to pay rent for the land remaining with him, no revenue for such land was any longer payable by him and the revenue is taken into account in assessing compensation. The entire Act, therefore, falls within the protection of article 31A of the Constitution and, in view of the decisions of this Court, its constitutional validity is beyond question. Case law referred to.

The Code of Criminal Procedure, 1973, provides inter alia, by sub section (3) of section 3.8 that no appeal against an order of acquittal passed by a lower court shall be entertained under sub section (1) or sub s.(2) except with the leave of the High Court. A practice was prevalent in the Madhya Pradesh High Court, requiring the State Government or the Central Government, desirous of preferring an appeal under sub section (1) or sub section (2) of section 378 of the Code, to make an application for leave under sub section (3) thereof, and it was registered as a Miscellaneous Criminal Case and treated as a petition and as such placed before a Single Judge for hearing as per r. 1 (q), Chapter I, Part I, of the Madhya Pradesh High Court Rules. It was only when the Single Judge granted leave to appeal under sub section (3), that the petition for leave was registered as a Criminal Appeal and placed before a Division Bench for admission under sub section (1) of section 384. The State Government of Madhya Pradesh having decided to prefer an appeal under sub section (1) of section 378 filed an application for leave to appeal under sub section (3) setting out therein the grounds of appeal and the Single Judge who heard it refused to grant the leave. The State Government made an application for grant of certificate under Article 134 (1) (c) of the Constitution. The application was heard by a Division Bench. The contention was that there was inherent lack of jurisdiction on the part of the Single Judge to hear and decide an application for leave under sub section (3) of section 378 of the Code, inasmuch as under r. 1 (q) (ii) of the Madhya Pradesh High Court Rules, Chapter I, Part 1, the matter had to be dealt with by a Bench of two Judges. The High Court, following its earlier decision in State of Madhya Pradesh vs Narendrasingh, (1974) MPLJ (N) 102, rejected the contention, holding that the State had to obtain 'leave ' of the High Court under sub section (3) of section 378, before an appeal against acquittal was preferred under sub section (1) thereof and therefore the learned Single Judge had jurisdiction to deal with tho application for leave under sub section 82 In appeal to this Court the State Government contended that the making of an application for leave under sub section (3) of section 378 is tantamount to filing an appeal under sub section (1) thereof, that the High Court could grant leave and entertain the appeal at one and the same time inasmuch as an application under sub section (3) would be transmuted into an appeal under sub section (1) when leave is granted under sub section (3) and, therefore, the application for leave under sub section (3) must have been laid before a Bench of two Judges under r. 1 (q) (ii) of the High Court Rules. Allowing the appeal, ^ HELD: 1. An application for 'leave ' to appeal under sub section (3) of section 378 without which no appeal under sub section (I) or sub section (2) thereof can be entertained, being an integral part of the appeal, must be laid before a Bench of two Judges of the High Court under r. 1 (q) (ii), Chapter I, Part I of the Madhya Pradesh High Court Rules (as it stood before the amendment) and could not be heard and disposed of by a Single Judge of the High Court under r. 1 (q) of the Rules, as it stood prior to its amendment. [92 E F; 83 D] 2. Sub section (3) of section 378 was introduced by Parliament to create a statutory restriction against entertainment of an appeal filed by the State Government or the Central Government under sub section (1) or sub section (2) thereof from an order of acquittal passed in a case instituted otherwise than upon a complaint. T here is a difference in the procedure regulating entertainment of State appeals under sub section (1) or sub section (2) of section 378 and appeals against acquittals filed by a complainant under sub section (4) of section 378. On a comparison of the language employed in sub section (3) and sub section (4) of section 378, it is clear that in the case of an appeal by the State Government or the Central Government under sub section (1) or sub section (2), the Code does not contemplate the making of. an application for leave under sub section (3) while making of an application under sub section (4) is a condition precedent for the grant of special leave to a complainant under sub section The difference in language used in sub section (3) and sub section (4) of section 378 manifests the legislative intent to preserve a distinction between the two classes of appeals by prescribing two different procedures in the matter of entertainment of appeals against acquittals. While a period Of limitation has been prescribed in sub section (5) of section 378 for an application of the complainant under sub section (4), there is no period of limitation prescribed for an application for grant of Leave to appeal under sub section (3), obviously because the Code does not contemplate the making of an application for leave under sub section (3) of section 378. It, therefore, follows that the State Government or the Central Government may, while preferring an appeal under sub section (1) or sub section (2) of section 378 incorporate a prayer in the memorandum of appeal for grant of leave under sub section (3) thereof, or make a separate application for grant of leave under sub section (3) of section 378, but the making of such an application is not a condition precedent for a State appeal. [90 F H; 91 A C; 88 G H; 91 C D] State of Madhya Pradesh vs Narendra Singh, [1974] MPLJ (N) 102 over ruled. State of Rajasthan vs Ramdeen & ors. [1977] 3 S.C.R. 139 relied on. 83

o. 160 of 1952) under article 32 of the Constitution of India for the enforcement of fundamental rights. The facts of the case and arguments of the counsel are stated fully in the judgment. Petitioner No. I (Aswini Kumar Ghosh) in person. B. Sen for the respondents. N. C. Chatterjee (S.N. Mukherjee and B. Sen, with him) for the Incorporated Law Society, Calcutta High Court (Intervener No. 1) Dr. N. C. Sen Gupta (A. K. Dutt and V. N. Sethi, with him) for the Secretary, Bar Association, Calcutta High Court (Intervener No. 2). N. C. Chatterjee (B. Sen, with him) for Secretary, Bar Library, Calcutta High Court (Intervener No. 3). C. K. Daphtary, Solicitor General for India (G. N. Joshi and J. B. Dadachanji, with him) for the Secretary, Bar Association, Bombay High Court (Intervener No. 4). K. B. Naidu for Secretarv, Advocates ' AssociationMadras High Court (Intervener No. 5). M. C. Setalvad, Attoney General for India (Intervener No. 6). October 27. The The judgment of Patanjali Sastri C.J. and Vivian Bose and Ghulam Hasan JJ. was delivered by Patanjali Sastri C. J. Mukherjea and, Das JJ. delivered separate judgments. 5 PATANJALI SASTRI C. J. This is an application under article 32 of the Constitution for relief in respect of an alleged infringement of the fundamental right of the petitioners under article 19 (1) (g) or, alternatively, under article 136 for special leave to appeal from a judgment of the High Court of Judicature at Calcutta rejecting their application for the same relief under article 226. As the petitioners would clearly be entitled to relief under the one or the other form of remedy if their claim was well founded, no objection was taken to the maintainability of the present proceeding, and we desire to guard ourselves against being taken to have decided that a proceeding under article 32 would lie after an application under article 226 for the same relief the same facts had been rejected after due enquiry by a High Court. We express no opinion that point. The facts leading to this proceeding are not in dispute and may be briefly stated. The first petitioner is an Advocate of this Court and his name is also the roll of Advocates of the High Court of Calcutta. As an Advocate of the latter Court he is entitled, under the relevant rules there in force, both to act and to plead the Appellate Side but not to act or to appear, unless instructed by an Attorney, the Original Side. 18th July, 1951, he filed in the Registry the Original Side a warrant of authority executed in his favour by the second petitioner to defend the latter in a pending suit. The warrant was returned 27th July, 195 1, with the endorsement that it "must be filed by an Attorney of this Court under the High Court Rules and Orders, Original Side, and not by an Advocate". The return was made by an Assistant in charge of Suit Registry Department, who is called as the first respondent to this petition. The second respondent is the Registrar, Original Side, who is alleged to have refused the same ground to accept a warrant filed earlier in a company matter. It is conceded that the action of the respondent would be 6 valid apart from the right claimed by the first petitioner as an Advocate of this Court under the Supreme Court Advocates (Practice in High Courts) Act, 1951, (hereinafter referred to as the new Act) which provides that such Advocates are " entitled as of right to practise" in any High Court in India. The petitioners, however, claimed that the right to practise thus conferred included also the right to act as well as to appear without the intervention of an Attorney the Original Side, and moved the High Court under article 226 for issue of appropriate writs orders or directions to the respondent for enforcement of the right denied to them. A Special Bench consisting of Trevor Harries C.J., Chakravartti and Banerjee JJ. heard the motion and dismissed it, holding that the first petitioner did not, being enrolled as an Advocate of the Supreme Court, become entitled to act the Original Side of the Court. The second petitioner has since dropped out of these proceedings, and the first petitioner, who appeared in person and argued his case before us, is hereinafter referred to as the petitioner. I As the issues involved are of far reaching importance to certain sections of the Bar at Calcutta and at Bombay, this Court directed notice of the proceeding to be served the Incorporated Law Society, Secretary Bar Association, and Secretary, Advocates ' Association, Calcutta High Court, and Secretary, Bar Association, Bombay High Court, and all of them appeared by their learned counsel, while the Attorney General appeared in person as intervener. We have thus had the advantage of a full argument from all points of view. A brief historical survey of the functions, rights and duties of legal practitioners in this country may facilitate appreciation of the contentions of the parties. Before the Indian High Courts Act of 1861 (24 and 25 Vic. 104) was enacted, there were, in the territories subject to the British rule in India, Supreme Courts exercising jurisdiction mainly in the 7 Presidency Towns and Sudder Courts exercising jurisdiction over the mofussil. Though the Supreme Courts were given, by the Charter Acts and the Letters Patent establishing them, power to enroll Advocates who could be authorised by the rules to act as well as to plead in the Supreme Courts, rules were made empowering Advocates only to appear and plead and not to act, while Attorneys were enrolled and authorised to act and not to plead. In the Sudder Courts and the Courts subordinate thereto, pleaders who obtained a certificate from those Courts were allowed both to act and plead. When the Supreme Courts and the Sudder Courts were abolished and their jurisdictions were transferred to High Courts under the statute of 1861, this differentiation in the functions of legal practitioners was continued in the High Courts under the notion, apparently, that the High Court, in the exercise of its Ordinary Original Jurisdiction, was the successor of the Supreme Court, and that, the Appellate Side, it inherited the jurisdiction and powers of the Sudder Courts, with the result that Advocates were allowed only to appear and plead instructed by Attorneys empowered to act the Original Side as in the Supreme Court, while the Appellate Side, they were allowed both to act and plead as in the Sudder Courts. There was also another class of practitioners known as Vakils who were neither allowed to act nor to plead the Original Side, but were allowed both to act and plead the Appellate Side. Within a short time, however, the Vakils at Madras were permitted by a rule made by the High Court to appear, plead and act the Original Side as wel1 vide In the Matter of the Petition of the Attorneys(1) but the cleavage between the two jurisdictions, Original and Appellate, was maintained in the Calcutta and Bombay High Courts with modi fications by means of rules framed by the respective High Courts from time to time. While this was the position in the High Courts in the three Presidency Towns of Calcutta, Bombay and Madras, no distinction (1) (1876 78) I.L.R. I Mad. 24. 8 was drawn between Advocates and Vakils (except in the matter of authorisation by their clients) as regards their right to appear, plead and act in the other High Courts subsequently established in British India without original jurisdiction. The position in these Courts was correctly stated by a Full Bench of the Allahabad High Court thus: " Not only by the Letters Patent but by the Civil Procedure Code, an Advocate may act for his client in this Court in the manner in that statute set forth and do all things that a Pleader, that is, a Vakil, may do, provided always that he. be upon the Roll of the Court 's Advocates": Bakhtawar Singh vs Sant Lal(1). In this situation, the , (Act XVIII of 1879) which consolidated and amended the law relating to Legal Practitioners was passed. By section 4 it empowered the Advocates and Vakils enrolled in any High Court to "practise" in all subordinate courts and in any other High Court with the "permission" of the latter Court. No Vakil or 'Pleader, however, was to be entitled to "practise" in a High Court exercising jurisdiction in a Presidency Town. By section 5 all persons enrolled as Attorneys in any High Court became "entitled to practise" in all courts .subordinate to such High Court and in any court in British India other than a High Court established by Royal Charter the roll of which he is not entered. It is worthy of note that the right to practise thus conferred included the right to plead a,; well as to act in all the courts referred to above. Then came the , which was enacted in response to a demand by the legal profession for unification and autonomy of the Bar, and it achieved a certain measure of both, eliminating the two grades of practitioners, the Vakils and the Pleaders, by merging them in the class of Advocates who, were "entitled as of right to practise" in the High Courts in which they were enrolled and in any other court in British India, subject to certain (1) (1887) 9 All. 617, 621. 9 exceptions. It also provided for the constitution of Bar Councils for the High Courts with power to regulate the admission of Advocates, to prescribe their qualifications and to inquire into any case of miscouduct that may be referred to them. But the right to practise and the power to make rules were not to limit or in any way affect the unlimited powers of the High Courts at Calcutta and Bombay to make rules allowing or disallowing Advocates to practise their Original Side: (vide section 9 (4) and section 14). While such was the position of Advocates in the courts in what used to be known as British India, it is not a matter of dispute that Advocates practising in the courts of what were known as Indian States were allowed to appear, plead and act behalf of suitors. It will thus be seen that legal practitioners, by whatever name called, practising in all the High Courts in India, except the Original Side of the Calcutta and Bombay High Courts, and in the innumerable subordinate courts all over India were always entitled to plead as well as to act. In the Original Side of the Calcutta and Bombay High Courts alone, where the cleavage between the Original and Appellate jurisdictions continued to be marked, due, as we have seen, to historical reasons, the functions of pleading and acting, which a legal practitioner normally combines in his own person, were bifurcated and assigned, following "the usage and the peculiar constitution of the English Bar" (per Lord Watson in the case cited below), to Advocates and Attorneys respectively. In this situation, the establishment of the Supreme Court of India, exercising appellate jurisdiction over all the High Courts naturally stimulated the demand for the unification of the Bar in India, and Parliament enacted the new Act as a step towards that end. It is a brief enactment intituled "an Act to authorise Advocates of the Supreme Court to practise as of right in any High Court" and consists of only two 10 sections. Section I describes the short title of the Act and section 2 enacts (so far as material here : "Notwithstanding anything contained in the , or in any other law regulating the conditions subject to which a person not entered in the roll of Advocates of a High Court may, be permitted to practise in that High Court every Advocate of the Supreme Court shall be entitled as of right to practise in any High Court whether or not he is an Advocate of that High Court: Provided that nothing in this section shall be deemed to entitle any person, merely by reason of his being an Advocate of the Supreme Court, to practise in any High Court of which he was at any time a judge, if he bad given an undertaking not to practice therein after ceasing to hold office as such judge. " According to the petitioner 's contention, an Advocate of the Supreme Court becomes entitled as of right to appear and plead as well as to act in all the High Courts including the High Court in which he is already enrolled, without any differentiation being made for this purpose between the various jurisdictions exercised by those courts. The word "practise" as applied to an Advocate in India includes both the functions of acting and pleading, and there is nothing in section 2 to warrant the cutting down of that statutory right to pleading only the Original Side of the Calcutta High Court as the respondents seek to do. the other hand, the respondents contend that the non obstante clause in the first part of the section furnishes the key to the proper interpretation of its scope, and inasmuch as that clause supersedes only those pro visions of the Bar Councils Act, and of any other law which exclude persons not entered in the roll of Advocates of a High Court from the right to practise in that Court, the enacting clause must be construed as conferring only a right co extensive with the disability removed by the opening clause; that is to say, the section is designed only to enable Advocates of the Supreme Court who are not enrolled as 11 Advocates of any High Court to practise nevertheless in that High Court. The petitioner, who is already an Advocate of the Calcutta High Court, could derive no additional right from the section in relation to that Court, as he does not fall within the purview of the section. Alternatively, even if the provision is read as conferring Advocates of the Supreme Court the right to practise in relation to all the High Courts in India, including the High Courts in which they are already enrolled, the section does no more than entitle them to practise in conformity with the conditions subject to which advocates are permitted to practise in those Courts, for the word "practise" is a term of indefinite import and, as applied to an Advocate, it may mean pleading or acting or both, according to the conditions under which the profession of an Advocate is exercised in the court concerned. Both branches of this contention have found favour with the learned Judges of the court below. A third view was also suggested in the course of the debate before us. An Advocate of the Supreme Court is entitled under the Rules of that Court only to appear and plead and not to act, while Agents who are enrolled as such are entitled only to act but not to appear and plead. In dealing with the right of Advocates of the Supreme Court to "practise" in the High Courts, Parliament must therefore be taken to have used that word in the sense only of appearing and pleading, the object of section 2 being only to confer the Supreme Court Advocates the right to appear and plead in all the High Courts and no further or other right. Having given the matter our most careful and anxious consideration, we have come to the conclusion that the petitioner 's contention is correct and must prevail. As we have already seen, there are in this country more than 20 High Courts (including the Judicial Commissioners ' Courts which are treated as High Courts for this purpose), and in all these 12 High Courts excepting the original jurisdiction of the Calcutta and Bombay High Courts and in all the numerous subordinate courts, both civil and criminal, existing all over the country, an Advocate combines in himself both the functions of acting and pleading which constitute the. normal activities of all legal practitioners except members of the English Bar whose "usage and peculiar constitution" allow them only to appear and plead and not to act. It would seem that this peculiar British system of division of functions between Barristers and Attorneys is not in vogue even in all the British Dominions and Colonies. For instance, in the report of the case Queen vs Doutre(1), we find counsel for the respondent stating in the course of his argument that "In all the Provinces of Canada the functions of Barristers and Solicitors are united in the same person and the rules of the English Bar do not apply there". In upholding in that case the right of counsel to sue for and recover a quantum meruit in respect of professional services rendered by him, the Judicial Committee remarked: "Their Lordships entertain serious doubts whether in an English Colony where the common law of England is in force, they (i.e., general considerations of public policy) could have any application to the case of a lawyer who is not a more advocate or pleader and who combines in his own person various functions which are exercised by legal practitioners of every class in England all of whom, the Bar alone excepted, can recover their fees by an action at law. " It seems reasonable, therefore, to assume that the practice of law in this country generally involves the exercise of both the functions of acting and pleading, behalf of a litigant party; in other words, the Bar in India, generally speaking, is organised as a single agency. Accordingly, when the Legislature confers upon an Advocate "the right to practise" in a Court, it is legitimate to understand that expression as authorising him to appear and plead as well as to (1)(1883) 9 App. 13 act behalf of suitors in that Court. It is true that the word "practice" used in relation to a given profession means simply the pursuit of that profession and involves the exercise of the functions which are cordinarily exercised by the members of the pro fession. But it seems to be fallacious to relate that expression, as applied to an Advocate, either, the one, hand, to the Court in which the Advocate is enrolled or, the other, to the Court in which he seeks to exercise the statutory right conferred him. It must, in our opinion, be related to the general constitution of the Bar in India as a single agency in dealing with the litigant public, a system which prevails all over this vast country except in two small pockets where adual agency imported from England was maintained, owing, as we have seen, to historical reasons. We are accordingly unable to accept the suggestion that because the Advocates of the Supreme Court are not, under the Rules of that Court, entitled to act, the word "practise" as used by Parliament in section 2 must be understood in the restricted sense of appearing and pleading only. Parliament was, of course, aware that the right of the Advocates of the Supreme Court to practise in that Court was confined only to appearing and pleading, but the object of section 2 was to confer upon a designated body of persons, namely, the Advocates of the Supreme Court, a right to practise in other courts, viz., the various High Courts in India, whether or not they were already enrolled in such courts. This statutory right, which is conferred the Supreme Court Advocates in relation to other courts and which they did not have before) cannot, as a matter of construction, be taken to be, controlled by reference to what they are allowed or not allowed to do in the Supreme Court under the Rules of that Court. Such Rules are liable to be altered at any time in exercise of the rule making power conferred by article 145 of the Constitution. The scope and 14 content of the new statutory right conferred in relation to the High Courts could not have been intended to depend the varying scope of the functions which the Supreme Court Advocates are allowed to, exercise in that Court from time to time. Besides, the consequences of such a construction would be somewhat startling. For instance, if an Advocate of the Supreme Court not entered the Roll of the Allahabad High Court desired to practise in the latter Court where there are no Attorneys or Agents, he would find himself in a difficult situation. It was said that a, local Advocate could be engaged to instruct him, acting for the client. Even if it were permissible to substitute a local Advocate for an "Agent" to overcome the disability imposed by Order IV, Rule 11, of the Supreme Court Rules which prohibits an Advocate from appearing "unless he is instructed by an Agent", it would be tantamount to introducing a new type of dual agency where it does not exist at present, an innovation which, we think, could hardly have been contemplated. Such an interpretation would also render the right conferred by the new Act largely illusory in practice. The construction adopted by the learned Judges of the High Court, which relates the word "practise" in section 2 to the High Court in which the Supreme Court Advocate seeks to exercise his right, seems to us to be equally open to objections. In their view, that word as applied to the same Advocate should be understood in a wider or narrower sense in relation to different High Courts, and indeed, to different jurisdictions of the same High Court, according to the rules there in force. They say: "Since the section applies to a number of different High Courts where different conditions of practice prevail, the word 'practice ' has no one particular and invariable meaning in the section but its meaning must vary according as the section is applied to one High Court or another. In its application to each High Court it will have the meaning which an Advocate 's right to practise bears in that Court at 15 the time under the local rules and regulations. This meaning may be wider in relation to one High Court and narrower in relation to another, and even in relation to the same High Court it may not always remain the same, for a High Court may enlarge the professional rights of its Advocates and if it does so, Advocates of the Supreme Court will, thereafter, have the enlarged rights in that Court. But at any given point of time the rights of an Advocate of the Supreme Court to practise in any particular High Court in exercise of the power conferred him by section 2 can at most be co extensive with but no greater than the right which Advocates of that Court themselves possess at the time. " We are unable to agree with this ambulatory inter pretation of section 2. It may be that the full sense of the word "practise" as including. , both acting and pleading may be out down by the context in which it is used in a particular statute. But we do not find any such context in the language of the new Act or in its object as we conceive it. The construction which the learned Judges have placed section 2 was supported before us by attributing to the word ((practise" the "dictionary meaning", as it was called, of exercising a profession and postulating the exercise by the Advocate of the Supreme Court of different professions in different High Courts in which he may seek to appear. Thus, he exercises the profession of a Madras Advocate while appearing in Madras; the profession of an. Appellate Side Advocate or of an Original Side Advocate, as the case may be, while appearing those sides of the Calcutta and the Bombay High Courts, and so . The object of this curious differentiation is to read the different conditions under which. an Advocate exercises his professsion in each of those Courts or jurisdictions into the word "practise" itself as the necessary implication of its dictionary meaning so as to bring in the exclusion of acting the Original Side as part of its connotation. We find it difficult to appreciate this view. The Advocate of the Supreme Court in all the cases 16 referred to above seeks to practise only one profession, namely, the profession of an Advocate. As such he would be bound to observe the rules of practice of each Court, that is, the prescribed procedure for conducting legal proceedings in the Court concerned; but a rule which denies to him the right to exercise an essential part of his function by insisting a dual agency the Original Side is much more than a rule of practice and the power of making such a rule, unless expressly reserved by the new Act, as it was reserved in section 9 (4) and section 14(3) of the Bar Councils Act, would be repugnant to the right conferred by section 2. In this connection, it may be pertinent to point out that the power of the High Courts to make rules of practice regulating the procedure to be followed in the conduct of proceedings before them and the power to frame rules regulating the admission and conduct of legal practi tioners were always derived from distinct sources originally under different clauses of the Letters Patent establishing them and later from the Civil Procedure Code and the Bar Councils Act. The learned Judges have also overlooked an important distinction between the position of an Advocate of the Calcutta or the Bombay High Court in relation to his Court and that of an Advocate of the Supreme Court in relation to those Courts. The former is not entitled to practise "as of right" the Original Side of his High Court as his right to practise is made under section 14(1) (a) expressly subject to section 9(4) which reserves the power of those Courts to exclude him from such right so far as the Original Side is concerned. In other words,the local Advocate is not entitled "as of right" to practise the Original Side of those two High Courts, whereas it is open to argument and indeed is now argued that the Advocate of the Supreme Court becomes under the new Act entitled to practise "as of right" in all High Courts without any distinction in the matter of the jurisdictions exercised by them, because no, such power is preserved and continued in the new Act. In view of this 17 difference, which is vital to the petitioner 's contention, it is not correct to say that the right conferred the Supreme Court Advocate "can at most be co extensive with but no greater than the right which Advocates of that Court themselves possess at the time". Here, indeed, we reach the crux of the whole case. Now, section 14(1) (a) of the Bar Councils Act enacts 14.(1) An Advocate shall be entitled as of right to practise (a) subject to the provisions of subsection (4) of section 9, in the High Court of which he is an Advocate," and Section 9(4) provides: "Nothing in this section or in any other, provision of this Act shall be deemed to limit or in any way affect the powers of the High Courts of Judicature at Fort William in Bengal and at Bombay to prescribe the qualifications to be possessed by persons applying to practise in those High Courts respectively in the exercise of their original jurisdiction or the powers of those High Courts to grant or refuse, as they think fit, any such application, or to prescribe the conditions under which such persons shall be entitled to practise or plead." Section 14(3) reads "Nothing in this section shall be deemed to limit or in anyway affect the power of the High Court of Judicature at Fort William in Bengal or of the High Court of Judicature at Bombay to make rules determining the persons who shall be entitled respectively to lead and to act in the High Court in the exercise of its original jurisdiction. " It is to be noted that by virtue of the last two provisions to which the right of local Advocates is made expressly subject, the High Courts of Calcutta and Bombay have the power to "grant or refuse as they think fit" the application of any person applying to practise in the Original Side of those Courts, and the power to make rules laying down who shall plead and 18 who shall act that side. It is in exercise of these powers that the High Courts have framed the rules, to which reference has been made, cutting down the right of the Advocates of those Courts to practise the Original Side to appearing and pleading only and otherwise imposing restrictions that right, such as, that they shall not appear unless instructed by an Attorney. That is to say, the Advocates of those Courts are not entitled to practise as of right the Original Side. As the powers thus reserved are exercisable only in regard to the Original Side, the Advocates of these Courts are under section 14(1) (a) entitled as of right to practise in the appellate and other jurisdictions exercised by those Courts. Similarly, under section 2 of the new Act every Advocate of the Supreme Court is entitled as of right to practise in any High Court. But it is significant that no power is reserved, to the Calcutta or the Bombay High Courts to cut down this statutory right and confine it to pleading alone the Original Side. Why were the reservations which the Legislature took care to insert in the Bar Councils Act in conferring a statutory right of practice Advocates of the High Courts omitted in the new Act in conferring a similar right in similar terms the Advocates of the Supreme Court in relation to the High Courts? Why this departure from the pattern of what is, in this respect, a closely analogous piece of legislation? The respondents made two,answers to this question neither of which seems to us satisfactory. One was that the word "practise" itself connoted, in relation to the Original Side of the Calcutta and Bombay High Courts, only pleading and not acting, as Advocates of those Courts practising that side had long been only appearing and pleading instructed by Attorneys who acted for the suitors. This argument we have already rejected. But, even so, why insert section 9(4) in the Bar Councils Act and make the right under section 14(1) (a) subject to the overriding powers under section 9(4)? If the argument were valid, such provisions would have been wholly unnecessary, for, 19 even in their absence, the word "practise" would con . note only pleading and not acting. This indeed is an additional ground for rejecting that construction. It is legitimate, therefore, to conclude that the Legiglature used the word "practise" both in the Bar Councils Act and in the new Act in its full sense of acting and pleading, but while in the case of Advocates of the Calcutta and Bombay High Courts it has expressly preserved and continued the power of those courts to restrict or exclude the right of practice the Original Side, it has reserved no such overriding power under the new Act with the result that any restrictive rule cutting down the statutory right would be repugnant to section 2 and therefore void and inoperative. A similar view of the effect of section 14(1) (a) of the Bar Councils Act was expressed by a Full Bench of the Madras High Court in Powers of Advocates, In re (1), where it was held that a rule made by that Court excluding the Advocates enrolled there from acting the Insolvency Side became invalid and inoperative after the enactment of that Act, and we entirely agree with that decision. The learned Judges below attempted to distinguish that case, as Mr. Chatterjee for the respondents did before us, by observing that because the Bar Councils Act made no distinction between the different jurisdictions of the Madras High Court and the rules of that Court allowed the Advocates to act and plead the Original as well as the Appellate jurisdiction thereof, the learned Judges construed the word "practise" in section 14 to mean both acting and pleading. That is not a correct view of the reasoning employed by the Full Bench. The learned Judges failed to see that such reasoning would indeed lead to the opposite conclusion. As a matter of, fact, there was a rule under which the local Advocates were prevented from acting and they had accordingly not acted in the insolvency jurisdiction of that Court, so that if "practise" in section 14(1) (a) were to be construed (1) Mad. 92, 20 in the light of what the Advocates bad been doing in the past under the rules of that Court, the Court would have had to hold that the Advocates acquired no new right by virtue of section 14(1) (a) But the Full Bench held that they did and the gist of their reasoning was thus put by Kumaraswami Sastri J. who delivered the leading judgment: "The word 'practise ' ordinarily means 'appear, act and plead, unless there is anything in the subject or context to limit its meaning. I am of opinion that where an Act confers rights to a party in general terms and entitles him to perform more than one function, the cutting down of those rights by a rule would make that rule repugnant to the provisions of the Act. " It was next suggested that no support for the petitioner 's contention could be derived from the absence in the new Act of reservations like those contained in sections 9 (4) and 14 (1) (a) of the Bar Councils Act because the power of framing rules regarding legal practitioners given to the Chartered High Courts under their respective Letters Patent could be exercised only in respect of the Advocates enrolled in those Courts, and the reservation of a power so limited would be meaningless in the new Act which deals with the rights of the Supreme Court Advocates. This argument overlooks that those High Courts had unfettered discretion to admit or to refuse admission to any person to practise as an Advocate, Vakil or Attorney. Clause 9 of the Letters Patent of the Calcutta High Court, for instance, empowers that Court "to approve, admit and enroll such. . Advocates, Vakils and Attorneys as to the said High Court shall seem meet". The Bar Councils Act also assumed that a power to exclude any person from practising the Original Side existed in the High Courts, as is shown by section 9 (4) which provides that nothing contained in that Act shall be deemed to affect the power of the Calcutta and the Bombay High Courts to grant or refuse the application of "persons " applying to practise the Original Side of 21 those Courts or their power to prescribe the conditions under which " such persons" could practise that side. Be it noted that the word used is not " Advocates " which, in view of the definition in section 2 (1) (a), would indicate a power confined to the Advocates of those Courts. And when that Act proceeded to empower by section 14 (1) (a) an Advocate enrolled in a High Court to practise as of right in that Court, it took care to make it clear that the right so conferred was subject to the exercise of the power reserved under section 9 (4). But, as pointed out already, it is significant that Parliament, in conferring a similar right under the new Act the Supreme Court Advocates, did not reserve any such overriding power. In the absence of such reservation, the statutory right of a Supreme Court Advocate to plead as well as to act in the High Courts of Calcutta, and Bombay in the exercise of their original jurisdiction cannot be taken away or curtailed by those Courts, and any rules which they may have made in the past purporting to. exclude any Advocate from acting their Original Side, or from appearing and pleading unless he is instructed by an Attorney cannot affect such right. Turning now to the non obstante clause in section 2 of the new Act, which appears, to have furnished the whole basis for the reasoning of the Court belowand the argument before us closely, followed 'that reasoning we find the learned Judges begin by inquiring what are the provisions which that clause seek , to supersede and then place upon the enacting clause such Construction as would make the right conferred by it co extensive with the disability im posed by the superseded provisions. The meaning of the section will become clear", they, obser, "if we examine a little more closely what the, section in fact supersedes or repeals. The disability which the section removes and the right which it confers are coextensive. " This is not, in our judgments a correct approach, to the construction of section 2. It should 4 22 first be ascertained what the enacting part of the section provides, a fair construction of the words used according to, their natural and ordinary meaning, and the non obstante clause is to be understood as operating to set aside as no longer valid anything contained in relevant existing laws which is inconsistent with the new enactment. We will revert to this clause again presently. Following their line of approach, the learned Judges reached two conclusions: first, that section 2 confers no new right an Advocate of the Supreme Court in relation to the High Court in which he is already enrolled, but gives him the right to practise in the High Courts in: the roll of which he was not entered as, an Advocate. The petitioner was accordingly not within the purview of the section in relation to the Calcutta High Court of which. he was already an Advocate; and secondly, that the only pro visions superseded by the non obstante clause are section 8 (1) and section 14 (2) of the Bar Councils Act and Rule 38 of Ch. V of the Original Side Rules of the Calcutta High Court and a similar rule framed under section,15 (b) of the Bar Councils Act by the Calcutta Bar, Council, which prescribe the conditions subject to which Advocates of other High Courts are permitted to practise the Original and Appellate Sides of. that Court and the corresponding rules then in force in, the Bombay High Court. These provisions alone, it was said fell within the description " regulating the conditions subject to which a person not eptered in the roll of Advocates of a High Court may be. permitted to practise in that High Court. " All other provisions of the Bar Councils Act,, including sections 9 (4) and 14 (3), as well as other rules of the Original. Side of both Calcutta and Bombay High Courts have not been superseded or repealed by section 2 of the new, Act but continue in force. We now proceed to examine whether these conclusions are well founded. Much ado was made an both sides ;about the comina occurring just before the word " or " in the 23 non obstante clause, the petitioner stressing its importance as showing that the adjectival clause " regulating the conditions etc. " does not qualify the words " " which are separated by the comma and that, therefore, the whole of that Act is superseded, while 'learned counsel for the respondents insisted that in construing a statute punctuation marks should be left out of consideration. Nothing much we think, turns the comma, as it seems I grammatically more correct to take the adjectival clause as qualifying " law ". Having 'regard to the words anything contained" and the preposition "in" used after the disjunctive "or", the qualifying clause cannot reach back to the words " Bar Councils Act ". But, whichever way we take it, it must be admitted that, in framing the non obstante clause, the draftsman had primarily in, mind those Provisions which stood in the way of an Advocate not enrolled in any particular High Court practising in that Court. It does not, however, necessarily follow that section 2 is concerned only with the right of Advocates of the Supreme Court to practise in the High Courts in which they are not enrolled. The true scope of the enacting clause must, as we have observed, be determined a fair reading of the words used in their natural and ordinary meaning, and in the present case, there is not much room for doubt the point. The words " every Advocate " and " whether or not he is an Advocate of that High Court" make it plain that the section was designed to apply to the Advo cates of the Supreme Court not only in relation. to the High Courts of which they are not Advocates but also in relation to those High Courts in which they have been already enrolled. The learned Judges below dismissed the words " whether or not etc. " with the remark that " they are not very apposite ",,as " no one who is an Advocate of a particular High Court requires to be an Advocate of the Supreme Court in order to practise in that Court". While it may be true to say that section 2 does not give Advocates of many of the High Courts any additional right 24 in relation to their own Courts, it would, according to the petitioner 's contention, give at least to the Advocates of the Calcutta and Bombay High Courts some additional right in the Original Side of those Courts, and that may well have been the purpose of using those words. It is not a sound principle of construction to brush aside words in a statute as being inapposite surplusage, if they can have appropriate application in circumstances conceivably within the contemplation of the statute. Nor can we read the non obstante clause as specifically repealing only the particular provisions which the learned Judges below have been at pains to pick out from the Bar Councils Act and the Original Side Rules of the Calcutta and Bombay High Courts. If, as we, have pointed out, the enacting part of section 2 covers all Advocates of the Supreme Court, the non obstante clause can reasonably be read as overriding " anything contained" in any relevant existing law which is inconsistent with the new enactment, although the draftsman appears to have had primarily in his mind a particular type of law as conflicting with the new Act. The enacting part of a statute must, where it is clear, be taken to control the non obstante clause where both cannot be read harmoniously; for, even apart from such clause, a later law abrogates earlier laws clearly inconsistent with it. Posteriores leges priores contrarias abrogant (Broome 's Legal Maxims, 10th Edn., p. 347). Here, section 2 entitles every Advocate of the Supreme Court as of right to practise in any High Court in India. The phrase " entitled as of right " has evidently been adopted from the Bar Councils, Act, and we have already indicated our view that; the word "Practise as applied to a legal practitioner in,,, India includes, in the absence of any limiting or restrictive; context, both the functions of acting and pleading. The phrase " entitled as of right to practise " is an emphatic affirmation of a right to plead, and to act independently,of the will or discretion of any other person. Could it be said that sections 9 (4)and 14 (3) 25 of the Bar Councils Act are consistent with the existence of such a right ? As we have seen already, section 9 (4) preserves the powers of the High Courts at Calcutta and Bombay, among other things, " to grant or refuse, as they think fit " the applications of persons to practise in those High Courts in the exercise of their original jurisdiction How could a person be said to be entitled as of right to practise in a High Court if that Court has unfettered power to reject his application to practise an important side of its jurisdiction ? Similarly, bow Could a person be said to be entitled as of right to pleadin a High Court if that Court has the power to frame a rule which pre cludes him from pleading in the original jurisdiction of ;that Court unless he is instructed by an Attorney? Obviously, sections 9 (4) and 14 (3) of the Bar Councils Act and section 2 of the new Act entitling an Advocate of the. Supreme Court as of right to practise in any High Court cannot stand together. Whether by force of the non obstante clause liberally construed as indicated above or of the wellestablished maxim of construction already referred to, the new Act must have the effect of abrogating the powers reserved and continued in the High Courts by the aforesaid provisions of the Bar Councils Act. We cannot, therefore, agree with the learned Judges below that the said two provisions have not been superseded or repealed by section 2. As we have already observed, if such reservations bad also been inserted in the new Act, the analogy with section 14 (1) (a) of the Bar Councils Act would have been complete and the petitioner as an Advocate of the Supreme Court could be prevented by rules made in appropriate terms from acting the Original Side of the Calcutta and the Bombay High Courts. But, in the absence of such reservations in the new Act, his claim in these proceedings must succeed. It has been said in the course of the argument that, notwithstanding the absence of such reservations in the new Act, it must be assumed that the Advocates of the Suprme Court have become entitled to practise 26 in any High Court only subject to the rules and regulations of that Court or, as the High Court put it " section 2 does not confer Ian uncharted freedom the Advocates of the Supreme Court to practise in any High Court in any way they like, but only puts them, in each different High Court, a par with the; Advocates of that Court, where they must submit to the same terms and conditions as bind those Advocates". Otherwise, it was said, the Supreme Court Advocates would be "let loose" to practise in all Courts freed of all obligations to observe the rule and regulations of those Courts and the result would be confusion and chaos. Therefore, it was urged, the rules of the Calcutta and Bombay High Courts, which preclude Advocates of those Courts from acting the Original Side of their jurisdiction or from pleading without the intervention of an Attorney, are binding upon Supreme Court Advocates as well. We see no force in the argument which seems to proceed a misconception. The right of an Advocate to practise, as we have seen, normally Comprises the exercise of his two fold function ' of acting and pleading without the intervention of anybody else. Any rule or condition that prevents him from exercising one of those functions is plainly a cutting down of his right to practise and, affecting as it does the sub stance of his right, is in its operation, quite unlike the rules and conditions of practice under which all Advocates normally carry their business in courts. No one suggests that a Supreme Court Advocate is, by becoming entitled to practise in the High Courts, freed from all. obligation to conform to the ruler, of practice and regulations as, to costume and Such other matters, according to which the profession of law must be exercised in the various High Courts. There is a vital distinction between such rules and regulations and the rules which seek to out down the sub stance of an Advocate 's right to act and to plead by excluding him from the exercise of the one or the other of those two functions. The Bar Councils Act recognises this distinction by expressly reserving the 27 power of the High Courts of Calcutta and Bombay to exclude or impose restrictions upon the right of Advocates to plead and to act the Original Side, whereas no similar reservation has been considered necessary in respect of the power to make rules and regulations of the former type, because they were not regarded as derogating from the substance of the statutory right to practise. Suppose, for instance, the Calcutta, High Court made a rule that no person other than those mentioned in Rule 2 (1), Chapter I of the Original Side Rules (i.e., practising Barristers in England, N. Ireland, etc.) will be entitled to appear and plead its Original Side, could it reasonably be suggested that such a rule was only a matter of "internal administration" and, as such, would bind all Advocates practising in that Court even apart, from section 9 (4) ? Any rules which prevent an Advocate from acting the Original Side or appearing that side without the intervention of an Attorney constitute a serious invasion of his statutory right to practise, and unless the power to make such rules is reserved in the statute which confers the right they cannot prevail against that right. Reference was also made in this connection to the difficulty of exercising disciplinary control over the Supreme Court Advocates practising in the High Courts in which they are not enrolled but such difficulty, if any, may arise under both the interpretations contended for before us. It is not denied that a Supreme Court Advocate is entitled to, appear and plead and act the Appellate Side of all the High Courts and the question as to how disciplinary jurisdiction is to be exercised over him in relation to his activities the Original Side will have to be determined the same lines as in relation to his activities the Appellate Side and the possibility of any such difficulty arising cannot be more of an objection to the one construction than to the other. There was much argument before us as to the ob ject which Parliament had in view in passing, the; new, Act, each side suggesting an object which would 28 support the construction which it sought to place upon section 2. Each side relied upon the "statement of objects and reasons" annexed to the Bill in support of its own contentions. Reference was also made to speeches made the floor of the House by members during the debate the Bill. Our attention was also called to the form of the Bill as originally introduced in the House and its amendment by omitting part (a) of the proviso to clause (2) thereof. As regards the speeches made by the members of the House in the course of the debate, this Court has recently held that they are not admissible as extrinsic aids to the interpretation of statutory provisions: The State of Travancore Cochin & Another vs The Bombay Co. Ltd. etc.(1). As regards the propriety of the reference to the statement of objects and reasons, it must be remembered that it seeks only to explain what reasons induced the mover to introduce the Bill in the House and what objects he sought to achieve. But those objects and reasons may or may not correspond to the objective which the majority of members had in view when they passed it into law. The Bill may have undergone radical changes during its passage through the House or Houses, and there is no guarantee that the reasons which led to its introduction and the objects thereby sought to be achieved have remained the same throughout till the Bill emerges from the House as an Act of the Legislature for they do not form part,of the Bill and are not voted upon by the members. We, therefore, consider that the statement of objectsand reasons appended to the Bill should be, ruled out as an aid to the construction of a statute. The omission of part (a) of the proviso to clause (2) of the Bill seems to us to stand no higher footing. It sought to exclude from the purview of the Bill the right of an Advocate of the Supreme Court to plead or to act in any, High Court in the exercise of its original jurisdiction,. Its omissions was strongly relied by the petitioner as indicating the intension of (1) ; 29 Parliament that the right of a Supreme Court Advocate to plead and to act should prevail also the Original Side of a High Court. It was urged that acceptance or rejection of amendments to a Bill in the course of Parliamentary proceedings forms part of the pre enactment history of a statute and as such might throw valuable light the intention of the legislature when the language used in the statute admitted of more than one construction. We are unable to assent to this proposition. The reason why a particular amendment was proposed or 'accepted or rejected is often a matter of controversy, as it happened to be in this case, and without the speeches bearing upon the motion, it cannot be ascertained with any reasonable degree of certainty. And where the legislature happens to be bicameral, the second Chamber may or may not have known of such reason when it dealt with the measure. We hold accordingly that all the three forms of extrinsic aid sought to be resorted to by the parties in this case must be excluded from consideration in ascertaining the true object and intention of the Legislature. In the result, treating this proceeding as an appeal from the judgment of the High Court, we set aside the order of that Court and direct the respondents to receive any warrant of authority which the first; petitioner may produce from the legal representative of the second petitioner who is reported to have died in the course of the proceeding. We make no order as to costs. MUKHERJEA J. This case has been argued before us with elaborate fulness by the 'petitioner No. 1, Mr. Aswini Kumar Ghosh, who appeared in person, as well as by a number of eminent counsel representing the Barristers ' and Advocates ' Associations in the three principal High Courts in India. Having given their learned arguments the best consideration that I am capable of, I have come to the conclusion that this application cannot succeed. 30 The matter in controversy is a very short one. The petitioner No. I is an Advocate of the Calcutta High Court entitled to practise both its Original and Appellate Sides. This means, that he can both plead and act the Appellate Side of the Court and plead only its Original Side. Mr. Ghosh later got himself enrolled as an Advocate of the Supreme Court and after the passing of the Supreme Court Advocates (Practice in High Courts) Act, 1951, he asserted his right, the strength of the provision of that enactment, to " or act" also the Original Side of the Calcutta High Court. He actually filed "a warrant of power and appearance" behalf of the petitioner No. 2 in a suit pending in the Original Side of that Court in which the latter figures 'as the defendant. The warrant was returned to him by the Suit Registrar, Original Side, with an endorsement it, that it must be filed by an Attorney of the Court under the rules and orders of the Original Side of the High Court, and not by an Advocate. Being aggrieved by this refusal, the petitioners presented an application before the Calcutta High Court under article 226 of the Constitution, complaining of infraction of the right conferred upon the first petitioner by Act XVIII of 1951 and praying for an appropriate writ or order to enforce the same. A rule was granted this application by Bose J. sitting singly; and eventually, having regard to the importance of the question involved in the application, the rule was heard by a Special Bench of three Judges, con sisting of Trevor Harries C.J. and Chakravartti and Banerjee JJ. By the judgment, which was delivered by Mr. Justice Chakravartti 21st December, 1951, the rule was discharged and the application of the petitioner was dismissed. The petitioners have now come up to this court a substantive petition under article 32 of the Constitution and have also prayed for special leave to appeal against the judgment of the Calcutta High Court. We admitted the petition and issued notices to the Attorney General of India as well as to the Barristers ' and Advocates "Associations in those High Courts in India which are likely, 31 to be affected by the decision in the case. A number of them, as said above, appeared before us through counsel and we had also the advantage of hearing the learned Attorney General the points that were raised in course of hearing. The sole point for consideration in this case is, whether the petitioner No. 1, who is an Advocate of the Supreme Court ' can, in addition to exercising his right of pleading the Original Side of the Calcutta High Court which is not challenged by anybody, claim, by virtue of the provision of section 2 of Act XVIII of 1951, the right to "act" the Original Side of that Court, although according to the rules framed under the Letters Patent an Advocate of the Calcutta High Court may not appear in the Original Side unless instructed by an Attorney: (vide Chapter 1, Rule 37, of the Original Side Rules). To decide this question we will have to investigate the precise extent of the right that has been conferred upon the Supreme Court Advocates by section 2 of the Act mentioned above and ascertain what exactly is the meaning of the word "practise '. ' as used in that section '. The Act is a very short one and consists only of two sections. The first section gives the name and description of the Act which is intituled "The Supreme Court Advocates (Practice in High Courts) Act" and the object, as stated at the, outset before the enacting clause commences, is to "authorise Advocates of the Supreme Court to practise as of right in any High Court". The entire provision of the Act is contained in section 2 which runs thus "Notwithstanding anything contained in the (XXXVIII of 1926) or in any other law regulating the conditions subject to which a person not entered in the roll of Advocates of a High Court, may be permitted to practise in that High Court every Advocate of the Supreme Court shall be entitled as of right to ' practise in any High Court whether or not he is an Advocate of that High Court". 32 Upon this,aproviso is engrafted to the following effect that"nothing in this section shall be deemed to entitle any person merely by reason of his being an Advocate of the Supreme Court to practise in a High Court of which he was at any time a Judge, if he had given an undertaking not to practise therein after ceasing to hold office as such Judge". Then follows a short explanation which simply lays down that the expression "High Court" in the section includes the Court of a Judicial Commissioner and the statute ends there. It may be mentioned at the outset that the Supreme Court was established in the year 1950 and article 145(1) of the Constitution empowered the Court to make rules "for regulating generally the practice and procedure of the court" including (a) rules as to the persons practising before the Court '. The Supreme Court Advocates were not entitled to practise as of right in any of the High Courts/in India. The rules made by the different High Courts impose considerable restrictions and disabilities upon the Advocates of other High Courts who wanted to appear and conduct cases before them. The power to grant or withhold permission to these outside Advocates lay for the most part in the exercise of an unfettered discretion by the Chief Justice of the Court, and that too in individual cases, and instances were not rare of such permission being refused to lawyers of acknowledged eminence belonging to other High Courts. After the establishment of the Supreme Court in India and with the prospect of a united Bar looming in the minds of the people, this was felt to be extremely unjust and anomalous. It was primarily to remedy this defect in the existing law, that this particular enactment was passed by the legislature and the legislative purpose, as is disclosed in the language of the enactment, is to allow the Supreme Court Advocates access to the other High Courts in India as of right, untrammelled by any restriction or condition that the High Courts themselves might lay down in respect to the "Outside 33 Advocates. So far there is little room for any controversy. The dispute centers round the point as to the extent of right that the legislature conferred upon the Supreme Court Advocates in achieving this legislative purpose. The question is, what meaning is to be attributed to the word "practise" as used in the section ? Mr. Ghosh argues that the word "practise" in its ordinary and literal sense would mean the right to appear, plead and to act 'as well; and it is an established rule of construction that a literal interpreta tion should not be departed from unless there are adequate grounds for such departure. It is said next that the literal meaning of the word "practise" cannot be out down or controlled in any way by the language of the opening clause in section 2 of the Act; and that clause which maybe described as a non obstante clause is not confined in its operation to removal of the disabling provisions affecting those whose names are not entered as Advocates the roll of a particular High Court, but has the effect of excluding all the provisions of the Bar Councils Act for purposes of this enactment. It is further argued that the words "whether or not he is an Advocate of that High Court" occurring in section 2 unmistakably indicate that the legislature had not in mind the removal of disabilities attaching to outside Advocates merely, but that it intended to confer certain privileges domestic Advocates as well who happened to be enrolled as Advocates of the Supreme Court. All these matters require to be examined carefully. The word "practise" when used with reference to a profession means "to follow, pursue, work at, or exercise such profession". The profession Of an Advocate may contemplate both acting and pleading; under certain circumstances it may mean pleading alone without acting, but it can never mean acting simply, for those who are entitled to act only and have no right to plead do not come within the description of Advocates at all. There are other classes of nonAdvocate lawyers who like Solicitors and Agents can 34 act only but cannot plead, and to the carrying of their profession also the same expression practise" is applied. What is to be remembered in this connection is that the profession of an Advocate can be carried only in a court of law and within the framework of the rules and regulations that obtain in such court. The word "practise" when used with reference ,to an Advocate is an elastic expression, having no rigid or fixed connotation and the precise ambit of its contents can be ascertained only by reference to the rules of the particular forum in which the profession is exercised. Thus in the Supreme Court Rules the expression "Advocate" has been defined to mean "a person entitled to appear and plead before the Supreme Court". He has no right of acting at all. In Order IV, Rule 31, of the Rules, this right of an Advocate to 'appear and plead has been spoken of as the right of "practising"; while in the rule that follows, the function of an Agent, who can only act and not plead, has also been spoken of as "practice" before the Court. In the Bar Councils Act the right of practice as an Advocate has been defined in section 14 (1) which lays down that "an Advocate shall be entitled as of right to practise (a) subject to the provisions of subsection (4) of section 9, in the High Court of which he is an Advocate". The word "practise" has apparently been used here in the general sense of both pleading and acting and these rights have been limited by and made subject to the rules which the High Courts of Calcutta and Bombay may make, determining the persons who shall be entitled to plead and to act in these High Courts in the exercise of their original jurisdiction. Sections 9 (4) and 14 (3) of the Bar Councils Act expressly reserve to the Calcutta and the Bombay High Courts the power to make rules in this respect and under the rules framed by them an Advocate is not permitted to appear the Original Side unless he is instructed by an Attorney 35 The words "entitled to practise as of right" which occur in section 14 (1) mentioned above have also been used in other parts of the Bar Councils Act, to wit, in sections 4 (2), 5 (1) and 8 (1) of the Act; but the word "practise" in all these provisions does not mean pleading find acting in an unlimited sense. It connotes the same rights and the same limitations which are prescribed in section 14 of the Act. The same expression has been used in section 2 of the Supreme Court Advocates Act apparently in the same sense and with the same implications and it cannot be argued that it connotes an unrestricted right of pleading and acting because the reservations mentioned in section 14 (1) of the Bar Councils Act have not been repeated there. Mr. Ghosh has in this connection drawn our attention to two reported cases, one of which is a pronouncement of the Patna High Court and the other of the Madras High Court. In the Patna case(1) the question &rose as to whether an Advocate or Vakil whose name appeared the roll of any High Court could "act" behalf of his client by presenting an application for review of a judgment in a case which was tried by a court subordinate to the High Court. The question was answered in the affirmative and reliance was placed upon section 4 of the which lays down that "an Advocate or Vakil enrolled any High Court 'shall be entitled to practise in all courts subordinate to the court the roll of which he is entered". This case, it is to be noted, deals with Advocates ' right to practise in subordinate courts where no distinction at all exists between pleading and acting. Consequently, the word "practise" in this context does include both pleading and acting. In the Madras case(1) the point for consideration was, whether an Advocate enrolled in the High Court of Madras 'under the was entitled not only to appear and plead (1) Laurentius Ekka vs Dhuki, Pat 766. (2) In re the Powers of the Advocates, [1928] I.L.R.52 Mad. 92, 36 but also to "act" in the insolvency jurisdiction of the court, in spite of the provision in Rule 128 of the Insolvency Rules of the High Court, which gave such right only to the Attorneys. It was held that the Advocate had the right to "act" by reason of the provision contained in section 14 (1) of the Bar Councils Act which entitled an Advocate to practise as of right in the High Court in which he is an Advocate; and because so far as the Madras High Court was concerned the Bar Councils Act made no distinction between different jurisdictions of the court and did not save the powers of the court to frame rules in respect of the original and insolvency jurisdictions. In these circumstances, a rule which cut down the right conferred by sections 8 and 14 of the Bar Councils Act would be deemed to be repealed under section 19 (2) of the Act as being repugnant to its provisions. It was expressly stated in the judgment that the position was different in regard to the Bombay and Calcutta High Courts and so far as these courts were concerned, their powers were expressly saved by the Bar Councils Act. This decision clearly shows that the 'expression " practise" would not include "acting" if with regard to particular jurisdictions of a High Court there are valid rules to the contrary. The question for our consideration really is, what exactly is the position of a Supreme Court Advocate who wants to avail himself of the right of practising in any High Court in India in terms of section 2 of the Supreme Court Advocates Act? Is he to exercise the right only as a Supreme Court Advocate and in accordance with the rules which the Supreme Court itself has laid down in this respect, or is his position, when he appears before a High Court, the same as that of an Advocate enrolled in the said court and he has the same rights and disabilities which attach to such persons under its rules? The only other alternative that is or can be suggested and has been put forward behalf of the petitioner is that he is not ' fettered by any rules either of the Supreme Court or of the particular High Courtr in,which he appears; 37 and as the extent of his right depends upon the language of the section itself, the legislature by using the word "practise" has conferred upon him the righ of both pleading and acting in any High Court he chooses, irrespective of the rules of practice which obtain in such court. The first view does not appear to me to be tenable. 'I If it is held, that what the section contemplates is that a Supreme Court Advocate in exercising his right of practice in any High Court should be governed by the Supreme Court Rules, the Act itself would be altogether unworkable. It is laid down in Order IV, Rule 12, of the Supreme Court Rules that "no person shall appear as Advocate in any case unless he is instructed by an Agent. By "Agent" is meant an Agent of the Supreme Court and under no provision of law is such Agent entitled to act in any High Court in India. The result, therefore, is that if the Supreme Court Rules are applied, no Advocate would be entitled to appear in any High Court at all. It cannot be argued that even though the rules of the Supreme Court may not be strictly applicable, the intention of the legislature is that a Supreme Court Advocate in appearing before a High Court either the Original or the Appellate Side shall have only the right of pleading and he has to be instructed by an Attorney or a local Advocate who is competent to act. Whatever the merits of this view might otherwise be, the language of the section does not at all warrant such a construction and it cannot seriously be suggested that the word " practise ",.must in all cases be confined to pleading only. The result of such a construction would be to extend the dual system which is at present confined to the Original Sides of the Calcutta and the Bombay High Courts to all the High Courts in India, in all their jurisdictions and to the subordinate courts as well a possibility which the legislature could never have contemplated. To me it seems that when section 2 speaks of a Supreme Court Advocate being entitled as of right to practise in any High Court, what it actually means is 38 that he would, be clothed by reason of this statutory provision with all the rights which are enjoyed by an Advocate of that Court and his right to plead or to act would depend upon. the provisions of the Bar Councils Act and the rules validly framed by the said Court, subject to this that no rule or provision of law would be binding, which would affect in any way his statutory right to practise in that Court solely by reason of his being enrolled as an Advocate of the Supreme Court. It is suggested that if this was the intention of the legislature, nothing could have been easier for it than to state explicitly that a Supreme Court Advocate would have the right to practise in any High Court in the same way as an Advocate of that Court. In my opinion, that is the implication of the general word It practise " that has been used. As said already, the practice of an Advocate must always have reference to a court and it must imply the carrying of the profession according to the rules which. are binding that court, except to the extent that the rules themselves are invalidated expressly or by necessary implication. If the legislature had expressly stated that an Advocate qualified under section 2 of the Act would have the right of both pleading and acting in any High Court in India or if that was the clear intendment. and implication of the language used, any rule conflicting with that provision could certainly have been held to be invalid; but I am unable to say that the use of the word " practise " which has only a general import, by itself, would have that effect. Looked at from this standpoint, the third view indicated above, which has been pressed vehemently behalf of the petitioner, cannot certainly be supported. So long as the rules relating to pleading and acting in particular jurisdictions of specified High Courts are allowed to remain valid and binding, no intention can be imputed to the legislature, without clear words to that effect, of abrogating these rules with regard to the few persons who happen to be enrolled as Advocatess of the Supreme Court. Far 39 from achieving uniformity in any sense of the word, such step would lead to serious anomaly and practical difficulties of an enormous character. the original jurisdictions of the Calcutta and the Bombay High Courts, where the dual system subsists, there are elaborate rules regarding the functions of the Solicitors who alone are competent to act that side, both in 'relation to the courts and to the litigants. The whole procedure is of a different type, dissimilar in many respects to that which is laid down in the Civil Procedure Code. It would be difficult, if not impossible, for an Advocate of the Supreme Court, who chooses to act the Original Side of the Calcutta or the Bombay High Court, to fit himself within the framework of these rules. He cannot possibly carry unless a fresh set of rules is prepared and the framing of new rules, which must exist side by side with the old rules, would lead to further complications and diversities. The position would certainly have been understandable if it could be held that the legislature wanted to do away with the dual system altogether and introduce one set of rules which would apply uniformly to all classes of lawyers. Speaking for myself, I would consider that to be an extremely desirable change; but I look in vain for expression of any such legislative intent either in the enactment itself or even in its historical background. The object of the legislation is quite simple. It is only to allow Advocates of the Supreme Court the right to practise in all the High Courts in India irrespective of the rules framed by them imposing restrictions the right of Advocates whose names do not appear their rolls. From the mere use of the word it practise ", the connotation of which is not at all definite, I am unable to hold that it was the intention of the legislature to introduce such sweeping changes in the existing rules which the acceptance of this view would imply. This leads me to an examination of the other parts of section 2 of the Act to discover, what light, if any, they throw upon the present question. 40 It is one of the settled rules of construction that to ascertain the legislative intent, all the constituent parts of a statute are to be taken together and each word, phrase or sentence is to be considered in the light of the general purpose and object of the Act itself. Mr. Justice Chakravartti of the Calcutta High Court laid very great stress the opening clause of section 2 of the Act which excludes the operation of certain statutory provisions, and this negative part of the section constitutes, according to the learned Judge, the measure and criterion of the right which the positive part formulates. The first question is, to what extent the provisions of any existing law have been eliminated by the opening clause of section 2 The language of the clause is as follows: " Notwithstanding anything contained in the Bar Councils Act (XXXVIII of 1926), or in any other law regulating the conditions subject to which a person not entered in the roll of Advocates of a High Court may be permitted to practise in that High Court. . . . ." Mr. Justice Chakravartti is of opinion that this clause purports to remove all those provisions of the Bar Councils Act or of any other law which imposed restrictions upon persons not enrolled as Advocates of a particular court in the matter of practising in that court. The exclusion is to this extent and no further; and consequently all the other provisions contained in the Bar Councils Act or other statutes which lay down the conditions 'under which an Ad vocate enrolled in a High Court is entitled to practise in the Original Side of that Court, stand unaffected by that clause. If these provisions remain valid and effective, it is quite reasonable to hold that the word "practise " in the section must mean " practise " in accordance with these rules and not in supersession of them. The contention of Mr. Ghosh is that a proper construction of the language of the claue the whole of the Bar Councils Act and not merely those provisions in it, which relate to disabilities attaching to 41 Advocates of other High Courts, must be deemed to be eliminated, so that the right of practising that is conferred by the section is to be exercised without the restrictions or limitations flowing from any of the provisions of the Bar Councils Act. In support of his contention that the whole of the Bar Councils Act is excluded by the opening clause, Mr. Ghosh lays great stress a comma, which separated the Bar Councils Act and the figures and words that follow, from the expression " or in any other law " which comes immediately after that. He says further that under the ordinary rules of interpretation the adjectival phrase " regarding the conditions etc." should be taken to apply to the word or phrase immediately preceding it and not to the remoter antecedent term or expression. These arguments, though they have an air of plausibility about them, do not impress me much, Punctuation is after all a minor element in the construction of a statute, and very little attention is paid to it by English, courts. Cockburn C.J. said. in Stephenson vs Taylor (1) : " the Parliament Roll there is no punctuation and we therefore are not bound by that in the printed copies". It seems, however, that in the Vellum copies printed since 1850 there are some cases of punctuation, and when they occur they can be looked upon as a sort of contemporanea expositio(2). When a statute is carefully punctuated and there is doubt about its meaning, a weight should undoubtedly be given to the punctuation(1). I need not deny that punctuation may have its uses in some cases, but it cannot certainly be regarded as a controlling element and cannot be allowed to control the plain meaning of a text(4). Similarly, although a relative or a qualifying phrase is normally taken with the immediately. preceding term or expression, yet this rule has got to be discarded if it is against common sense and natural (i) (i861) 1 B. & section page 101. (2) See Craies Statute Law, page 185. (3) Vide Crawford Statutory Construction, Page 343. (4) lbid. 42 meaning of the words and the expressions used. I find considerable force in the opinion expressed by Chakravartti J. that in the present case the effect. of the position of the comma or the particular array of ,words in the sentence has been completely neutralised I by the use of the word " other " occurring in the #phrase " or in any other law ". The result is, as the learned Judge has said, that the Bar Councils Act has been posited as an alternative to other laws and both have been subjected to the qualification contained in the qualifying clause. Assuming, however, for argument 's sake that Mr. Ghosh is right and that the whole of the Bar Councils Act is eliminated by the opening clause of the section, I do not think that even then it really improves his position. The Bar Councils Act itself does not make any provision relating to the rights of pleading and acting in the Original Side of any High Court. Sections 9(4) and 14(3) of the Act save only the rights of the High Courts of Calcutta and Bombay to make rules in relation thereto ; and these rules are made by these courts in the exercise of their powers under the Letters Patent. Section 19(2) of the Bar Councils Act lays down as follows: " When sections 8 to 16 come into force in respect of any High Court of Judicature established by Letters Patent, this Act shall have effect in respect of such Court notwithstanding anything contained in such Letters Patent, and such Letters Patent shall, in so far as they are inconsistent with this Act or any rules made there under, be deemed to have been repealed. " If the entire Bar Councils Act is excluded for purposes of section 2 of Act XVIII of 1951, the rules framed by the High Courts of Calcutta and Bombay under the Letters Patent would remain valid and effective of their own force even without the saving provision contained in the above mentioned section of the Bar Councils Act, and section 19(2) of the Act being out of the picture, the Letters Patent would 43 also remain fully alive. The result will be that Rule 37, Chapter I, of the Original Side Rules of the Calcutta High Court or Rule 40(2) of Chapter II of the Bombay High Court Rules, under which no Advocate can appear in the Original Side of these courts unless instructed by an Attorney, would not come within the purview of the opening clause of Section 2, as they do not relate to matters regulating the conditions of outside Advocates. Rule 6, Chapter I, of the Bombay High Court Rules, to which our attention was drawn by the learned Attorney General, lays down that an Advocate of any other High Court may appear in a particular case, with the permission of the Chief Justice, the Original Side of the Court, provided he is instructed by an Attorney, and an Advocate of the Bombay High Court appears along with him. In my opinion, the whole of this provision must be deemed to be invalid for purposes of section 2 of Act XVIII of 1951, and a Supreme Court Advocate,, who wants to appear and plead in a case in the Original Side of the Bombay High Court, has neither to take the permission of the Chief Justice nor is it necessary that he should have along with him an Advocate of that court. He should certainly be instructed by an Attorney, but that is because of the other provisions, which I have already mentioned, and which apply to the Advocates of the Bombay High Court itself. I would be quite prepared to hold that what has been excluded by the opening clause of section 2 of the Act may not be the exact measure of the new right that the section purports to create. In my opinion, the section its negative side eliminates so far as the Supreme, Court Advocates are concerned, all disabling provisions existing under any law in regard to persons who are not enrolled as .Advocates of any particular High Court. the positive Side, the section confers Supreme Court Advocates the statutory privilege of practising as of right, in any High Court in India, no matter whether he is enrolled as an Advocate of that court or not. 44 It is this positive aspect that has been emphasised by the words "whether or not he is an Advocate of that court" which occur at the conclusion of the section. It may not be strictly correct to say that these words are altogether inappropriate, for the section aims at conferring, though indirectly, ' certain privileges those who are enrolled as Advocates of the particular High Court as well. Section 9 (4) of the Bar Councils Act lays down: "Nothing in this section or in any other provision of this Act shall be deemed to limit or, in any way affect the powers of the High Courts of Judicature at Fort William in Bengal and at Bombay to prescribe the qualifications to be possessed by persons applying to practise in those High Courts respectively in the exercise of their original jurisdiction or the powers of those High Courts to grant or refuse, as they think fit, any such application (or to prescribe the conditions under which such persons shall be entitled to practise or plead). " Provisions of this type are to be found in the Rules of both the Bombay and the Calcutta High Courts. Under Rule 1, Chapter I, of the Calcutta, Original Side Rules, even an Advocate of that court has to make an application for being entitled to appear and plead the Original Side and he can exercise that right only after that permission is granted. Such rules would have no effect after the passing of Act XVIII of 1951 and an Advocate of the Supreme Court will be entitled to plead in the Original Side of the Calcutta High Court as a matter of right and without complying with any of the formalities that may be prescribed by the rules of that court. Mr. Justice Chakravartti expressed doubt as to whether an Advocate of the Supreme Court, who presumably is not an Advocate of the Calcutta High Court, can, as such, plead in the Original Side of the Calcutta High Court. In my opinion, there is no room for doubt this point at all. He is entitled to appear and plead as a matter of right under the express provision of section 2 of the, Act, 45 Mr. Ghose finally attempts to support his Contention that the intention of the legislature was to confer upon the Supreme Court Advocates the right to plead as well as to act in all High Courts in India by calling in aid three other facts. It is said first of all that in the statement of objects and reasons which accompanied the original bill, the right to practise was expressly stated to include both pleading and acting. In the second place it is pointed out that proviso (a) to section 2 which occurred in the original bill and which excluded the right of both pleading and act ing in the Original Side of the High Courts from the operation of section 2 was dropped altogether and the Act was passed without that proviso. Lastly it is urged that the expression "practise", which has been employed in the existing proviso to the section, obviously means both pleading and acting, and it is against sound rules of construction to attach different meanings to the same word used in, two parts of the same section. There are weighty pronouncements of English courts as well as of the Judicial Committee of the Privy Council which lay down that in construing a statute all negotiation previous to the Act or the original form of the bill must be dismissed from consideration. "We cannot interpret the Act" said Lord Halsbury, "by any reference to the bill, nor can we determine its construction by any reference to its original form"(1). It is not permissible to ascertain the meaning of the word used in an Act by reference to the proceedings in the Legislative Council, and the language of a "Minister of the Crown" in proposing a measure in Parliament which eventually becomes law is inadmissible(2). In a, Calcutta case the learned Judges refused to look into the statement of objects and reasons accompanying an enactment as an aid to its construction(3). The (i)Vida Herron V. Rathmins (1802] A.C. 492 at 5o2. (2)Vida Krishna Ayyangar vs Nellaperumal[1920] 47 I.A 33; Assam. Railway & Trading Co. Ltd. vs Inland Revenue Commissioners (1935] A.C, 443; Administrator General of Bengal vs Premlal [1895] 12 I.A. 107 (3) Vida Debendra vs Jogendru, A.I.R. 1936 Cal. 46 judicial opinion this point is certainly not quite uniform and there are American decisions to the effect that the general history of a statute, and the various steps leading up to an enactment including amendments or modifications of the original bill and reports of Legislative Committees can be, looked at for ascertaining the intention, of the legislature where it is in doubt; but they hold definitely that the legislative history is inadmissible when there is no obscurity in the meaning of the statute(1). Even assuming that the latter view is correct, it does not appear to me that the first and the second contentions of the petitioner indicated above are really of any assistance to him. It is true that in the statement of, objects and reasons which was circulated ' along with the original bill, the word "practise" was said to include both Pleading and acting; but at the same time the original bill did not purport to confer at all upon the Supreme Court Advocates, the ' right either of pleading or of acting in any High Court in the exercise of its original jurisdiction. This was expressly laid down in the original proviso (a) to section 2 and the concluding portion of the statement of objects and reasons stood thus: "The present bill is intended to achieve such unanimity by providing that every Advocate of the Supreme Court shall be entitled to practise as of right, in any High Court otherwise than its Original Side." Conceding that Mr. Ghosh is entitled to rely the fact that the first; proviso, which excluded the original jurisdiction of the High Courts from the purview of section 2 was subsequently dropped the dropping of the proviso by itself proves nothing. What the proviso intended was to confine the right of practising which section 2 of the Act conferred Supreme Court ' Advocates exclusively to the appellate jurisdiction of the High Courts. A Supreme Court Advocate as such was not entitled under the proviso to act or plead in the Original Side of any (1) Vide Crawford Oil statutory Construction page 383 47 High Court in India. It is to be noted that this prohi bition had nothing to do with the dual system that exists in the original jurisdiction of the Calcutta and the Bombay High Courts and it was totally unconnected with the provisions of the Bar Councils Act, or the rules of the Calcutta and the Bombay High it Courts in relation thereto. the other hand, if, as I have already stated, section 2 of the Act purported to confer the Supreme Court Advocates the right of practice in the different High Courts in India in the same way as the Advocates enrolled in those, courts are entitled to do, the original proviso (a) purported to cut down that right to a considerable extent. Under this proviso the, Supreme Court Advocates were denied the right of pleading the Original Side of the Calcutta and the Bombay High Courts and they could neither act nor plead the Original Side of the Madras High Court, although they would have those rights under the Bar Councils Act. The dropping of the proviso might mean nothing else than this that this restriction was withdrawn and the rights created by the section without the proviso stood intact. Be that as it may, it is, in my opinion, a most risky thing to attempt to construe the meaning of a word in a statute with the aid of a nonexistent provision. We do not know the reasons why the legislature deleted this clause and it is not permissible for us to speculate these matters. A reference to the legislative debates or the speeches that were actually delivered in the floor of the House is, in my opinion, inadmissible to ascertain the meaning of the words used in the enactment. The use of the word "practise" in the, proviso to section 2, as it now stands, is also a matter of no im portance. Section 2 confers certain additional rights upon the Supreme Court Advocates and they have the right of practising in all the High Courts in India subject, as I have said, to the rules and regulations binding the Advocates in each one of them. The proviso makes an exception to this rule, and in case 48 an Advocate of an particular High Court, who became a Judge of that court, gave an undertaking at the time when he assumed his office that he would not practise in that court after he ceased to be a Judge, the provision in the section could not be availed of by him in the face of his undertaking. This is the plain meaning of the proviso. Apparently the legislature was not in the least concerned when it enacted this proviso with the extent of right which such Advocate possessed when be became a Judge; and the extent of the right would certainly depend upon the rules and regulations of the High Court in which he carried his practice. My conclusion is that the view taken by the Calcutta High Court is the right and proper view to take and this application must fail. I make no order as to costs. DAS J. The present proceedings before us have been initiated a petition by two petitioners. The first petitioner is 'Sri Aswini ' Kumar Ghosh who is an advocate of the Calcutta High Court enrolled the Original Side as well as the Appellate Side of that Court. As such advocate of the Calcutta High Court, he is entitled to act and plead the Appellate Side, but only to plead the Original Side. He has since been enrolled also in this Court as an advocate which term is defined in Order ' 1, rule 2, of the Rules of this Court as meaning a person entitled to appear and plead before the Supreme Court. May 26, 1951, petitioner Aswini Kumar Ghosh served notices the Registrars of the Original Side as well as of the Appellate Side of the Calcutta High Court intimating that, in exercise of the right conferred by the Supreme Court Advocates (Practice in the High Courts) Act, 1951, he, would thenceforth "practise, i.e., act and plead", in the said High Court at Calcutta also as a Supreme Court advocate. July 14, 1951, petitioner Aswini Kumar Ghosh, as a Supreme Court advocate, tendered what he calls a warrant of appearance under rule 58 of the Indian Companies Rules framed by the Calcutta High "Court in the matter of 49 a winding up petition regarding a company. That "warrant of appearance" was returned by the Registrar evidently because rule 58 requires a person who intends to appear the hearing of the winding up petition to leave with or sent to the petitioner or to his attorney a notice of such intention signed 'by him or by his attorney" and does not authorise the filing of a notice signed by an advocate. The second petitioner is one Sri Jnanendra Nath Chatterjee who is the defendant in Suit No. 2270 of 1951 pending the Original Side of the Calcutta High Court. July 18, 1951, petitioner Jnanendra Nath Chatterjee as defendant in the said Suit No. 2770 of 1951 executed a "warrant of appearance and power" in the said suit in favour of the petitioner Aswini Kumar Ghosh. The petitioner Aswini Kumar Ghosh as advocate for the petitioner Jnanendra Nath Chatterjee 'filed the warrant with the Assistant in charge of the Suit Registry Department of the Original Side. This was, clearly done in purported compliance with the provi sions of Chapter 8, rule 15, of the Original Side Rules. That rule, however, requires the defendant to enter his appearance to a writ of summons by filing a memorandum in writing containing the name and place of business of the defendant 's attorney or stating that the defendant defends in person and containing his name and place of business. That rule does not in terms contemplate an advocate acting for a defendant. It is, therefore, not surprising at all that July 27, '1951, the "warrant of appearance" was returned by the respondent Arabinda Bose, the Assistant in the Suit Registry ]Department of the Original Side of the Calcutta High Court, with the endorsament that "the warrant must be filed by an attorney of this Court under High Court Rules and Orders, Original Side, and not by an Advocate". The petitioner Jnanendra Nath Chatterjee thereupon entered appearance in person July 30, 1951, and has been defending the suit in person. The two petitioners, however, moved the Calcutta High Court under article 226 of the Constitution 50 and obtained a Rule calling upon the two respondents Sri Arabinda Bose, the Departmental Assistant, and Sri section N. Banerjee, the Registrar of the Original Side, to show cause why an order or direction in the nature of an appropriate writ should not be issued for the enforcement of the fundamental right of the petitioner Aswini Kumar Ghosh "to practise, i.e., to act and plead the Original Side of this Court", as conferred him by Act XVIII of 1951 and guaranteed by article 19 (1) (g) of the Constitution of India and why consequential orders therein mentioned should not be made. The Rule was heard by a Special Bench of the Calcutta High Court consisting of Harries C.J. and Chakravartti and Banerjee JJ. who discharged the Rule December 21, 1961, and dismissed the petition. As will appear from the judgment of the High Court ' the argument addressed to it "made no reference to the alleged fundamental right and that the petitioner confined his argument to the provisions of the Supreme Court Advocates ( Practice in the High Courts) Act, 1951. " The powers of the High Court under article 226 not being confined to the enforcement of fundamental rights it was possible for the petitioner to rely the rights under the last mentioned Act. The petitioners did not apply for or obtain the leave of the High Court to appeal to this Court. Long after the time fixed by the rules for applying for special, leave to apppal to this Court had expired the petitioners filed the present petition against the same respondents. The. petition is intituled as an application under articles 22 (1), 32 (1) and (2), 135 and 136 (1) of the Constitution of India. In the prayer portion of the petition, the petitioners ask for directions, orders or appropriate writs the respondents for the enforcement of their fundamental rights guaranteed under articles 19 (1) (g) and 22 (1) of the Constitution, an order declaring the right of the petitioner Aswini Kumar, Ghosh act behalf of his clients the Original Side of all, High Courts in India including Calcutta, an order upholding the 51 right of the petitioner Jnanendra Nath Chatterjee to be defended in the said suit by the petitioner Aswini Kumar Ghosh and other consequential reliefs. There is an alternative prayer asking this Court to treat the petition as an application, under article 136, for special leave to appeal against the judgment and order of, the Special, Bench of the Calcutta High Court dismissing the petitioners ' application, under article 226 of the Constitution and for condonation of the delay in presenting the present petition. At the hearing before us it has not been seriously suggested that the rights of the petitioner Jnanendra Nath Chatterjee, fundamental or otherwise, have in any way been infringed. Nor was the petition presented before us as one for the enforcement of any fundamental right of the petitioner Aswini Kumar Ghosh guaranteed by article 19 of the Constitution. What Was pressed before us by the petitioner Aswini Kumar Ghosh, who appeared in, person, was the right said to have been conferred him as an advocate of this Court by section 2 of the Supreme Court Advocates (Practice in the High Courts) Act (Act XVII of 1951) hereinafter in this judgment referred to as "the Act". In the circumstances the petition has not seriously been presented before us as one under article 32 of the Constitution and it is not necessary for me to express any opinion as to whether a petitioner whose application for enforcement of an alleged fundamental right under article 226 has been rejected by the High Court can maintain an application under article 32 to this Court for the same relief based precisely the same facts and grounds. The petition, however,. has been presented before us as an application under article 136 of the Constitution for special leave to appeal from the judgment of the Special Bench of the Calcutta High Court. We have been pressed to proceed with the matter the footing as if special leave to appeal has been given and the delay in the presentation thereof has been condoned by this Court. I deprecate this suggestion ' for I do not desire to encourage the belief that an intending 52 appellant who has not applied for or obtained, the ,leave of the High Court and who does not say a word by way of explanation in the petition as to why be did not apply to the High Court and as to why there ' has been such delay in applying to this Court should nevertheless get special leave from this Court for the mere asking. As, however, the matter has been proceeded with as an appeal, I express my views the questions that have been canvassed before us. There is no dispute that the Act has conferred some new rights the Supreme Court Advocates. The controversy is as to the ambit and scope of the. right so conferred and it has centred round the expression "to practise" used in section 2 of the Act. In order to resolve that controversy we have to ascertain the true meaning of that expression as used in the Act. The provisions of the Act quite clearly apply to and affect all High Courts in India. It is, therefore, necessary to bear in mind the status and position of advocates as they prevail in the different High Courts. The Indian High Courts Act, 1861 (24 & 25 Vic. C. 104) by section I authorised Her Majesty, by Letters Patent, to erect and establish High Courts for the three Presidencies of Bengal, Madras and Bombay. Section 9 of that statute provided that each of the High Courts to be so established should have and exercise civil, criminal and other jurisdiction, original and appellate, as therein mentioned and all such powers and authority for and in relation to the administration of justice in the presidency for which it is established, "as Her Majesty may by such Letters Patent as aforesaid grant and direct. " Section 16 of that statute also empowered Her Majesty to establish a High Court in and for any portion of the territories within Her Majesty 's dominions in India, not included within the limits of the local jurisdiction of another High Court. Pursuant to this authority High Courts were established by Letters Patent at Fort William in Bengal, Madras and Bombay. Clause 9 of the Letters Patent of each of the three Presidency High 53 Courts authorised and empowered each of the said High Courts: "to approve, admit, and enrol such and so many Advocates, Vakils, and Attorneys as to the said High Court shall seem meet; and such Advocates, Vakils and Attorneys shall be and are here by authorised to appear for the suitors of the said High Court, and to plead or to act, or to plead and act, for the said suitors, according as the said High Court may by its rules and directions determine, and subject to such rules and directions. Subsequently other, High Courts were established from time to time by Letters Patent at different places, e.g. Allahabad, Patna,, Lahore and Nagpur, and similar power was, by clause 7 of the respective Letters Patent, conferred each of the said High Courts to make similar,rules. It is well known that each of the High Courts actually framed rules for the admission of advocates, vakils and attorneys. The High Courts of Calcutta, Madras and Bombay divided their jurisdictions into two broad categories, namely, ,original jurisdiction and appellate jurisdiction, and by their Rules made an 'internal classification of the advocates, vakils and attorneys. Thus the advocates or vakils enrolled the Appellate Side were empowered "to appear, act and plead" but the advocates enrolled the Original Side were permitted only "to appear and plead", the "acting" the Original Side being reserved for the attorneys for whom a separate roll was maintained. The, Madras High Court has, however, done away with this internal classification and advocates of that High Court may now appear, act and plead/ the Original Side as well as the Appellate Side. The Calcutta and Bombay High Courts, however, maintained the distinction. Chapter I , rule 37, of the Rules of the Original Side of the Cal cutta High Court provides that persons to whom the rules contained in that chapter are applicable may not appear unless instructed by an attorney. Chapter I. rule 40, of the Rules of the Original Side :of the 54 Bombay High Court is the same lines. Although the remaining Letters Patent High Courts in India have extraordinary original jurisdiction, both civil and criminal, they did not make any distinction between original and appellate jurisdiction as in Calcutta and Bombay and the advocates enrolled in those High Courts were and are permitted "to appear, act and plead" in all their jurisdictions. Apart from the several Letters Patent High Courts other High Courts, e.g., the High Courts of Assam and Orissa, and the High Courts of Part B States, also have framed rules of their own for admission of advocates and according to those rules the advocates of all these High Courts can ((appear, act and plead". The position, therefore, was that, at the date of the Act, all advocates of all High Courts including those of the Appellate Side of Calcutta and Bombay High Courts but excluding only the Original Side advocates of Calcutta and Bombay could "appear, act and plead" in their own High Courts in all jurisdictions but the advocates of the Original Side of those two High Courts could only "appear and plead" the Original Side. Apart from the bar against acting imposed by the High Courts of Calcutta and Bombay their own Original Side advocates, all the High Courts, by their respective rules, prescribed certain conditions subject to which alone an advocate who was not their rolls could "appear and plead" in such High Courts. Chapter I, rule 38, of the Original Side of the Calcutta High Court provides as follows: "An Advocate of any other High Court or Chief Court may with the permission of the Chief Justice appear and plead for parties in matters arising in or out of the original jurisdiction, or in or out of appeals therefrom, provided he is a member of the Bar of England or of Northern Ireland, or a member of the Faculty of Advocates in Scotland, or a person entitled to appear and plead the Original Side of the High Court of Judicature at Bombay, and that he is properly instructed by an Attorney " 55 There is also a rule framed under section 15 (b) of the which applies to the Appellate Side of the Calcutta High Court prescribing that an advocate of another High Court can "appear and plead" the Appellate Side of the Calcutta High Court in a particular case or cases only with the previous permission of the Chief Justice. Reference may in this connection be made to Chapter I, rule 6, of the Bombay Rules applicable to the Original Side and the rule framed under the which applies to the Appellate Side of Bombay High Court and is set out in Schedule II of of the Appellate Side Rules. There is no dispute that each of the other High Courts have rules in pari materia imposing conditions advocates not its roll in the matter of their appearing and pleading in such High Court. Thus it is clear that an advocate not the rolls of a particular High Court could not as of right "appear and plead" in that High Court. He had to satisfy the conditions laid down by that High Court before he could "appear and plead" in that High Court. It should be particularly noticed that under these rules foreign advocates who satisfied the conditions were permitted only to "appear and plead". There never was any question or claim of a foreign advocate being permitted to "act" in a High Court of which, he was not an advocate. The legislature which enacted the Act now under our consideration had full knowledge of the internal classification of the advocates of the Calcutta and Bombay High Courts into Original Side advocates and Appellate Side advocates, the disability of the Original Side advocates of those two High Courts, namely, that they were not permitted "to act" the Original Side and could only ', 'appear and plead", the instruction of an attorney and that the attorneys alone were permitted "to act" that side of those two High Courts. Further the legislature was well aware of the bar imposed foreign advocates, i.e., advocates not the roll of a High Court in the matter of their appearing and pleading in that High 56 Court and the fact that eminent advocates of one High Court were not, many occasions in the past, given permission "to a ' pear and plead" in another High Court. The legislature knew that under Order I, rule 2, of the Supreme Court Rules an advocate had been defined as a person entitled "to appear and plead" before the Supreme Court and that Order IV, rule 30, precluded an advocate from acting as agent and an agent as advocate in any circumstances whatsoever. Finally, the legislature was cognisant of the fact that a Supreme Court advocate was a, foreign advocate in all High Courts other than the one, where he was enrolled and as such was not entitled as of right "to appear and plead" in those High Courts. With knowledge of all these facts and circumstances the legislature proceeded to enact this Act and, therefore, the provisions of the Act have to be considered in the light of these prevailing circumstances which undoubtedly form the background ' of this enactment and which cannot be overlooked or ignored. Turning now to the text of the Act, one cannot but be impressed at once with 'the wording of the full title of the Act. Although there are observations in earlier English cases that the title is not a part of the statute and is, therefore, to be excluded from consideration in construing the statute, it is now settled law that the title of a statute is an important part of the Act and may be referred to for the purpose of ascertaining its general scope and of throwing light its construction, although it cannot override the clear meaning of the enactment. (See Maxwell the Interpretation of Statutes, 9th Edn. P. 44 and the cases cited therein). The full title 'of the Act now under consideration runs thus: "An Act to authorise Advocates of the Supreme Court to practise as of right in any High Court. " One cannot fail to note the words " as of right and the words " in any High Court " which follow immediately. Those two sets of words at once convey 57 to my mind that the act is directly and intimately concerned with the disability imposed by a High Court advocates not its roll in the way of their appearing and pleading in such High Court without the permission of the Chief Justice and without satisfying other conditions if any, and that their purpose is to remove and supersede that disability, so far as the Supreme Court advocates are concerned, by authorising them to do so as of right. The words " as of right " are quite clearly indicative of an independent statutory right as opposed to the conditional right dependent the sweet will of the Chief Justice concerned. Those words are used byway of antithesis and bring out prominently the object of the Act. In view of that well known disability which naturally was irksome, those words cannot fail to convey to one 's mind the conviction that the purpose of the Act, as indicated by its title, is to confer the advocates of the Supreme Court a right which was denied to them by the Rules of the High Courts referred to above. The language in which the title of the Act has been, expressed appears to me to be a good and cogent means of finding out the true meaning and import of the Act, and, as it were, a key to the understanding of it. The matter, however, does not rest the title of the Act alone and I pass to section 2 of the Act which is expressed in the following terms: " Notwithstanding anything contained in the ' (XXXVIII of 1926), or in any other,law regulating the conditions subject to which a person not entered in the roll of Advocates of a High Court may be permitted to practise in that High Court every Advocate. of the Supreme Court shall be entitled as of right to practise in any High Court whether or not he is an Advocate of that High Court. Provided that nothing in this section shall be deemed to entitle 'any person merely by reason of his being all Advocate of the Supreme Court to practise 58 in a High Court of which he was at any time a Judge, if he had given an undertaking not 'to practise therein after ceasing to hold office as such Judge. " It will be noticed that the main body of the section consists of two parts, namely, a non obstante clause beginning with the words " Notwithstanding anything" and ending with the words "permitted to practise in that High Court " and a positive part beginning with the words " every Advocate of the Supreme Court " and ending with the words " of that High Court. " To clear the ground it will be useful, at the outset, to ascertain the 'scope and ambit of the non obstante clause. The controversy this clause has raged round the question whether the adjectival clause, namely, "regulating the conditions subject to which a person not entered in the roll of Advocates of a High Court may be permitted. to practise in that High Court " governs the words " the " as well as the words "any other law" which immediately precede that clause. If that clause also attaches to and qualifies the words "the " then there can remain no manner of doubt that the ambit, scope and purpose of the non obstante clause are to supersede, not the whole of the but, only that part of it which regulates the conditions subject to which a person not entered in the roll of Advocates of a High Court may be permitted to practise in that High Court, that is to say, that the supersession of the Indian Bar Councils. Act is only to the same extent to which that adjectival clause supersedes "any other law". Conscious that such a construction will run counter to his contention, it has been the endeavour of the petitioner Aswini Kumar Ghosh to keep the adjectival clause separated from the words "". For this purpose he fastens the comma appearing after the bracket and before the word "or" and contends that the comma indicates that the qualifying clause does not govern the . 59 The High Court has rejected the contention of the petitioner Aswini Kumar Ghosh two grounds. In the first place it has been said that the comma was no part of the Act. That the orthodox view of earlier English Judges was that punctuation formed no part of the statute appears quite clearly from the observations of Willes J. in Claydon vs Green(1). Vigorous expression was given to this view also by Lord Esher, M. R. in Duke of Devonshire vs Connor(1) where he said In an Act of Parliament there are no such things as brackets any more than there are such things as stops. " This view was also adopted by the Privy Council in the matter of interpretation of Indian statutes as will appear from the observations of Lord Hobhouse in Maharani of Burdwan vs Murtunjoy Singh(1), namely, that " it is an error to rely punctuation in construing Acts of the Legislature. " Same opinion was expressed by the Privy Council in Pugh vs Ashutosh Sen(4). If, however, the rule regarding the rejection of punctuation for the purposes of interpretation is to be regarded as of imperfect obligation and punctuation is to be taken at least as contemporanea expositio, it will nevertheless have to be disregarded if it is contrary to the plain meaning of the statute. If punctuation is without sense or conflicts with the plain meaning of the words, the Court will not allow it to cause a meaning to be placed upon the words which they otherwise would not have. This leads me to the second ground which mainly the High Court rejected the plea of the petitioner Aswini Kumar Ghosh, namely, that the Word "other" in the phrase "any other law" quite clearly connects the with other laws as alternatives and subjects both to the qualification contained in the adjectival clause. I find myself in complete (1) at P. 522. (2) (1890) L.R.Q.13.D 468. (3) (1886) L.R. 14 I.A. 30 at P. 35. (4) (1928) L.R. 56 I.A. 93 at p. zoo, 60 agreement with the High Court this point. If the intention wag that the adjectival clause should not qualify the , then the use of the word "other" was wholly inapposite and unnecessary. The use of that word 'unmistakably leads to the conclusion that the adjectival clause also qualifles something other than "other law". If the intention were that the should remain unaffected by the qualifying phrase and should be superseded in toto for the purposes of this Act the legislature would have said "or in any law regulating the conditions etc. " It would have been yet simpler not to refer to the at all and to drop the adjectival clause and to simply say "Not withstanding anything contained in any law". In the light of the true meaning of the title of the Act as I have explained above and having regard to the use of the word " other " I have, no hesitation in holding, in agreement with the High Court, that what the non obstante clause intended to exclude or supersede was not the whole of the Indian Bar, Councils Act but to exclude or supersede that Act and any other law only in so far as they or either of them purported to regulate the conditions subject to which a person not entered in the roll of advocates of a High Court might be permitted to practise in that High Court and that the comma, if it may at all be looked at,, must be disregarded as being contrary to this plain meaning of the statute. Assuming, however, that the qualifying clause does not attach to the words "", that circumstance will, nevertheless, make no difference in the legal position. 'Section 8(1) of the Indian. Bar Councils A et provides as follows: "No person shall be entitled as of right to practise in auy HighCourt,unless his name is entered in the roll of the advocates of the High Court maintained under this Act: Provided that nothing in this sub section shall apply to any attorney of the High Court. " 61 Section 14(2) runs thus: "Where rules have been made by any High Court within the meaning of clause (24) of section 3 of the , or in the case of a High Court for which a Bar Council has been constituted under this Act, by such Bar Council under section 15, regulating the conditions subject to which advocates of other High Courts may be permitted to practise in the High Court, such advocates shall no be entitled to practise therein otherwise than subject to such conditions." Section 15(b) authorises the Bar Council, with the previous sanction of the High Court, to make rules to provide for and regulate "the conditions subject to which advocates of other High Courts may be permitted to practise in the High Court". As already stated, a rule has been framed under this section by the Calcutta Bar Council as well as by the Bombay Bar Council. These three provisions are the only provisions of the or the rules thereunder which place a bar against an advocate, not the roll of a Hiah Court, from practising in such High Court. It is interesting to note that the nonobstante clause in section 2 of the Act we are construing is couched in language which has unmistakably been taken from sections 14 (2) and 15 (b). There can be no question that a supersession of the will supersede those provisions of that Act and the rules thereunder which " 'regulate the conditions subject to which advocates of other High Courts may be permitted to practise in the High Court". Apart from this I find nothing in the which has any direct bearing section 2 of the Act we are construing or whose supersession is necessary to give effect to it. It is said that the rules of the Calcutta and Bombay High Courts do prescribe the qualifications to be possessed by persona applying to practise in those Courts and the conditions under which such persons will be entitled to practise and reserve to those Courts the right to grant. ' 62 or refuse any application for enrolment. It is also pointed out that the rules of the Original Sides of ' those two High Courts do determine the persons who shall respectively plead and act in those High Courts in the exercise of their original jurisdictions. It is next pointed out that sections 9 (4) and 14 (3) of the preserve these rules and it is contended that a supersession of the in its entirety will do away with sections 9(4) and 14(3) and the protection of those sections having been withdrawn, those rules will con sequently stand abrogated, so as to facilitate the operation of the provisions of section 2 of the Act under review. I am unable to accept, this argument as sound. Sections 9(4) and 14(3) do not purport to give any fresh validity to the rules of the Calcutta and Bombay High Courts. All that those sections do is to declare that nothing in the shall be deemed to limit or affect the powers of those two High Courts which exist in dependently of those two. sections and flow from their respective Letters Patent. Therefore, if the whole of the including sections 9(4) and 14(3) stand abrogated such abrogation will not affect the existence or validity of the rules of those High Courts which will, nevertheless, continue in full force the strength of the Letters Patent of those High Courts. It is clear, therefore, that even if the adjectival clause does not qualify the and if, consequently, the nonobstante clause under review is taken to supersede the whole of the , the effect of such supersession will, for the purposes of section 2, be only to do away with the provisions of sections 8(1) and 14(2) and the rule made under section 16(b) of the in so far as they "regulate the conditions subject to which advocates of other High Courts may be permitted to practise in the High Court" just as it will abrogate all other laws in so far as they regulate those very conditions. The supersession of the whole of the Indian Bar Councils 63 Act will not, therefore, affect the validity of the rules framed by the High Courts under their respective Letters Patent determining the persons who will act and who will plead or who will act and plead and those rules will prevail their own strength and efficacy, although the rules regulating the conditions subject to which foreign advocates can be permitted to appear and plead will stand abrogated by reason of the non obstante clause. In the premises, the result of the construction sought to be founded by the petitioner Aswini Kumar, Ghosh the existence of the comma in the non obstante clause will be precisely the same as it would have been if the comma had not been there and the adjectival clause "regulating the conditions etc." also attached to and qualified the words "Indian Bar, Councils Act. " In short, there is no escape from the, conclusion that the ambit, scope and effect of the non obstante clause are, to supersede the and any other Act only in so far as they regulate the conditions referred to therein. I again emphasise that the rules of the different High Courts regulated the conditions subject to which a foreign advocate would be permitted "to appear and plead. " There was no question of the foreign advocate "acting" in a High Court of which he was not an advocate. The purpose of the non obstante clause is to supersede only the provisions of the and the rules which regulated those, identical conditions. It is not seriously disputed that the legislature in passing the non obstante clause had only those conditions in mind. There can be no manner of doubt, therefore, that the words "to practise" in the non obstante clause mean, in the context, "to appear and plead". The petitioner Aswini Kumar Ghosh then falls back on a second line of reasoning. He urges that whatever may be the meaning, scope and effect of the non obstante clause, it cannot possibly cut down the meaning of the positive words in the operative part of the section. His contention is that the High Court war, wrong in holding that the non obstante clause was 64 coextensive with the operative part. While it may be true that the non obstante clause need not necessarily be coextensive with the operative part, there can be no doubt and the petitioner and Dr. N. C. Sen Gupta appearing for the Calcutta Bar Association and supporting the petitioner do not dispute that ordinarily there should be a close approximation between the two. What he urges is that the Court should not create an ambiguity in the operative part and then use the non obstante clause to cut down the meaning of the plain words used in the operative part of the section. The argument is that the words "to practise" cover both acting and pleading and that, therefore, the operative part of the section authorises the advocate of the Supreme Court as of right "to practise", that is, "to act and plead", in any High Court. The whole case of the petitioner is founded this plea. It is necessary, therefore, to consider whether the critical words have that invariable and fixed meaning when used in relation to an advocate. The verb "practise" according to the Oxford English Dictionary, Vol. VIII, p. 1220, means : to work at, exercise, pursue (an occupation, pro fession or art) ; to exercise the profession of law or of medicine. Similar meaning is to be found assigned to the word in Dr. Annandale 's New Gresham Dictionary. According to this meaning doctors "practise", consulting architects "practise" as well as lawyers "practise" but we know that each of them does different things. Coming to lawyers we find that there are different categories of lawyers all of whom "practise", although all of them do not do the same thing. Thus attorneys "practise" in the Original Sides of the High Courts of Calcutta and Bombay and the agents "practise" in the Supreme Court but we know that under the rules of those Courts the attorneys, and agents only "act". The advocates also, "Practise" but we know that all of them do not perform the same functions. The advocates of all High Courts including those of the Appellate Sides of the Calcutta and 65 Bombay High Courts , under the rules of their respective High Courts, "act and plead" and, as the ambit of the profession of such advocates extends to acting and pleading, the words "to practise" in their application to those advocates undoubtedly mean "to act and plead". The advocates of the Original Sides of those two High Courts can, under the rules, 'only " plead". the Original Side and the ambit and scope of the profession of these Original Side advocates being limited only to pleading, the words "to practise" used in reference to these advocates must mean "to plead" only. There are thus different species of lawyers, some of whom, e.g., attorneys of the Original Sides of Calcutta and Bombay High Courts and agents of this Court, only "act", some others of whom, e.g., the Original Side advocates of those two High Courts and of this Court, only "plead" and all the remaining advocates of all the High Courts both "act and plead". The scope of the professional activities of the different categories of lawyers thus varies but, nevertheless, they are all said "to practise". These words, therefore, connote the general idea of exercising the legal profession, which is their dictionary meaning, and in that general sense apply to all lawyers as a class or genus but at the same time they are capable, in their application to particular species or categories of lawyers, to connote the different professional attributes of those different categories or species. Turning to the we find that the expression "to practise" has been used in various sections in the generic sense I have mentioned. Let me illustrate my meaning by reference to a few sections. Section 4 of that Act deals with the composition of Bar Councils. Sub section (1) provides that every Bar Council shall consist of 15 members, of which 10 shall be elected by the advocates. Sub section (2) then provides : "(2) , Of the elected members of every Bar Council not less than five shall be persons who have for not less than ton years been entitled as of right to 66 practise in the High Court for which the Bar Council has been constituted . " If we give the general dictionary meaning to the words "to practise" used in this sub section then this sub section becomes easily intelligible, but if we say that they mean "to act and plead" then the eligibility will be confined to the advocates who, under the rules, can "act and plead", i.e., to the Appellate Side advocates, and the result of that construction will be that the advocates of the Original Sides of Calcutta and Bombay High Courts even though they are of ten years ' standing will not be eligible for election, for, such advocates do not and indeed cannot, under the rules, "act and plead". Such surely cannot be the case. It follows, therefore, that the words "to practise" in this sub section have been used in their generic sense although they connote different things when applied to different categories of advocates all of whom are within the subsection. Sub section (3) rung thus: (3). Of the elected members of the Bar Councils to be constituted for the High Courts of Judicature at Fort William in Bengal and at Bombay such proportion as the High Court may direct in each case shall be persons who have for such minimum. period as the High Court may determine, been entitled to practice in the High Court in the exercise of its original jurisdiction, and such number as may be fixed by the High Court out of the said proportion shall be barristers of England or Ireland or members of the Faculty of Advocates in Scotland. " If we give the words "to practise" their ordinary dictionary meaning,then the sub section will be quite easy of comprehension but if we say that those words mean "to act and plead " then the sub section will become meaningless, for those words in that sub section refer to the practice of the Original Side advocates only who do not and indeed under the rules cannot at all act on the Original side. It is, there 'fore, clear that the words " to practise " have been used in both sub sections in their generic meaning which is also their dictionary meaning, namely, " to 67 exercise their profession", although in their application to the different species who are within the sub , sections they mean different professional attributes. Thus, in sub section (3) which applies to Original Side advocates only they must mean "to plead" whereas in sub section (2) which applies to all categories of advocates the words have different meanings, that is to say, in relation to advocates other than Original Side advocates they mean "to act and plead" and in relation to the Original Side advocates they mean only "to plead". Same remarks apply to section 5 (1). It will be futile to refer to the principle that the same word should be given the same meaning wherever it occurs in the Act, for the context excludes the application of that principle. Take section 8 (2) of the which provides: "8. (1). . . . (2) The High Court shall prepare and maintain a roll of advocates of the High Court in which shall be entered the names of ' (a) all persons who were, as advocates, vakils or pleaders, entitled as of right to practise in the High Court immediately before the date which this section comes into force in respect thereof;. . . It we do not give to the words "to practise ' in clause (a) their dictionary meaning but read them as meaning "to act and plead" the advocates practising, i.e., only pleading the Original Sides of the Calcutta and Bombay High Courts, will not find their names in the rolls maintained by their respective High Courts under this section. That exclusion is certainly not the purpose of this subsection. Therefore, in this sub section also the words "to practise", means "to exercise their profession". Same remarks apply to the proviso to section 8 (3) (b). I come next to section 14 which provides inter alia: "14. (1) An Advocate shall be entitled as of right to practise (9) subject to the provisions of sub section (4) of section 9, in the High Court of which he is an Advocate;. . 68 By sub section (3) nothing in this section shall be deemed to limit or affect the power of the Calcutta and Bombay High Courts to make rules determining the persons who are respectively to plead and to act the Original Sides of those High Courts. Both those High Courts have made rules under which an Original Side advocate can only "plead", the acting having been reserved exclusively for the attorneys. In the light of the context what is the meaning of the words "to practise" in sub section (1) above ? If we put the ordinary dictionary meaning the words "to practise", namely, "to exercise his profession", the section will be found to be quite intelligible and workable; but if we take them to mean only "to act and plead" then the Original Side advocates who do not "act" but only "plead" will not, strictly speaking, be within the section and consequently will not be able to avail themselves of the protection of section 14 (1) (a). Can it, for a moment, be said that the section gives protection and security to all advocates other than the Original Side advocates and that the latter are not entitled as of right "to practise", i.e., "to plead", in the High Court of which he is an advocate? That cannot be so. The very fact that the right is subject to the provisions of section 9 (4) and that the rule making power of the two High Courts is not affected by virtue of section 14 (3) quite clearly show that the Original Side advocates who cannot act the Original Side are intended also to be included in the term advocate used in sub section (1). If, therefore, this section is to give any security ' to the Original Side advocates, as it does to the Appellate Side advocates, then we must read the words "to practise" in their ordinary dictionary meaning, namely "to exercise his profession". It is thus clear that the words "to practise" have been used throughout the in their general dictionary meaning mentioned above except at the end of section 9 (4). In the same way the word "practising" has been used in Order IV, rule 31, of the Supreme Court Rules in the same generic sense and being used in relation to 69 advocates of this Court it must mean appearing and pleading". In the next following rule the same word has been used in its dictionary meaning although having been used in relation to agents of this Court it must mean "acting". The same ' generic meaning given to the words to practise" will make, section 4 of the easily intelligible and workable The petitioner Aswini Kumar Ghosh, the other hand, relies article 220 of the Constitution and points out that while the words used in the body of the article forbid judges "to plead or act" the marginal note to the article describes the subject matter of the article as "prohibition of practising" and concludes that " to practise " means "to act and plead". In agreement with the High Court I am unable to accept this reasoning., Even assuming that the marginal note may by looked at in considering the article it only means that the draftsman of the marginal note considered that the single word " practise " would be a compendious one. Nobody disputes that the words "to practise" may, in a particular context, mean "to plead or act" but it does not follow that it invariably has that meaning. Further it is clear, as the High Court points out, that what the draftsman did was to find a word which would cover both acting and pleading without attempting to bring out the technical distinction between the two. Nor do I think, for reasons stated by the High Court, that entry 78 of List I in the Seventh Schedule lends any support to the petitioner 's contentions The petitioner then refers us to the decision in Laurentius Ekka vs Dhuk Koeri(1) in support of his contention that the judicial accepted meaning of words "to practise" is "to appear, act and plead" In that case the question was whether an advocate the roll.of the Patna High Court, could present and move a review petition in a subordinate court unless he filed 'a Vakalatnama or was instructed by a pleader (1) (1925) I.L.R. 4 Pat. 766 19 70 of the subordinate court. It was held that an advocate of the High Court, unlike a pleader, aid not need to be appointed in writing to act behalf of his client and even when verbally appointed he could under Order III, rule 1, of the Code of Civil Procedure appear, plead and act behalf of his client and, therefore, when section 4 of the , provided that every person entered as an advocate or vakil the role of any High Court under the Letters Patent should be entitled to "practise" in all Courts subordinate to such High Court, the word " practise" as applied to an advocate of the Patna High Court meant "appear, plead and act". The ratio of the decision is obvious. The scope and ambit of the Patna High Court advocate 's profession covered acting and pleading, and when such an advocate was given the right to practise" in the subordinate court be was authorised to exercise his profession in full, i.e., to act and plead in the subordinate court. In short, the advocate carried the attributes of his profession with him even when he went to exercise his profesSion in the lower court. This decision is no authority for the proposition that the words "to practise" have a fixed and invariable meaning comprising acting and pleading in all cases. The petitioner Aswini Kumar Ghosh then referred us to the case of In re Powers of Advocates(1). , In Madras the High Court in exercise of its powers under clause 9 of the Letters Patent framed a rule empowering advocates to appear, act and plead the Original Side. That rule was held to have been validly made in two earlier decisions. But Rules 128 and 129 of the Insolvency Rules permitted an advocate only to " appear and plead" in 'the Insolvency Jurisdiction and the attorney to act there. In these circumstances the question arose in the Madras case whether advocates enrolled under the , were entitled to "act" in the Insolvency jurisdiction of the Madras High Court,notwithstanding that under the rules framed by the High Court they were (2) Mad. 71 only entitled to "plead" and the Full Bench answered the question in the affirmative. The reasoning underlying this decision, as I understand it, was that the general ambit and scope of the profession of a Madras High Court advocate being, according to its rule, "to appear, act and plead" in the Original Side, the words "to practise" used in section 8 (1) and section 14(1) of the must, in relation to him, mean "to appear, act and plead". Rules 128 and 129, however, said that he could only appear and plead but not act. There being no saving of the power of the Madras High Court as there was of that of the Calcutta and Bombay High Courts by section 9 (4) and section 14 (3) and those insolvency rules being inconsistent with the provisions of sections 8(1) and 14(1) as construed by the Full Bench, that rule should, under sections 19(2) be deemed to have been repealed. I am unable to accept the correctness of this reasoning. The combined effect of the two sets of rules was that & Madras advocate was entitled to act and plead throughout the Original Side except in Insolvency Court which was also a part of the Original Side. It was, therefore, not correct to say that the Madras advocate was entitled to act and plead in the Original Side. The passage in the judgment of Kumaraswami Sastri J. at p. 103, namely that "the word 'practise ' ordinarily means 'appear, act and plead ', unless there is anything in the subject or context to limit its meaning" is not supported by any authority and appears ,to me to be too wide. Indeed, the learned Judge himself recognised this, for throughout the judgment it was emphasised that the word "practise", when applied to a Madras Advocate, meant "to appear, act and plead". It is clear from, that judgment that, according to the learned ' Judge, the words had not that wide meaning in their application to the Original Side Advocates of the Calcutta and Bombay High Courts. In any event, that passage should, in the context,, be limited in its application to the Madras High Court advocates and all advocates of all other High Courts who, by their rule6, are permitted to act 72 Pand plead, for it cannot possibly have that meaning in relation to an Original Side,advocate who is permittad only to plead. This passage in the Madras decision could not have been intended as an enumeration of the professional activities of an advocate as forming the invariable contents of the words "to practise" or as an enunciation of a fixed meaning of general application. In this country where there exists, as a historical fact, a clear division of legal practitioners into three separate classes, namely, those who act only, those who only plead and those who do both act and plead such a definition will be wholly inaccurate. It is necessary, therefore, to give to those words their generic meaning I have mentioned. In this view of the matter, I agree with the High Court that the ,petitioner can derive no support for his contention from either of these two decisions. My attention has also been drawn to the case of The Queen Doutre(1) where it was held that in Canada ,where. the functions of Barristers, and Solicitors are united in the same person, the rules of English law which precludes a Barrister to sue for his fees do not apply and that a Quebec advocate could sue for his remuneration a quantum meruit basis. I do not see how that case throws any light the problem before us. In Queen all advocates "act and plead" and as regards Quebec advocates the critical words may cover both acting and pleading, but how can that circumstance assist us in ascertaining the meaning of those words in enactments of our country where we bave a clear division, of the legal practitioners into three categories I have, mentioned ? The result of the foregoing discussion as to the meaning of the words "to practise" appears to me to be that in relation to lawyers as a class they mean "to exercise their profession" which is their dictionary meaning and which is wide enongh, to cover the activities of the entire genus of lawyers. They are words of indeterminate import and have no fixed connotation or content. In their application to particular (1) 73 species of lawyers their meaning varies according to the scope and ambit of the profession of that particular species in relation to whom they may be used, and such meaning has to be ascertained by reference to the subject or context. Further, the Legislative technique, as is evident from the , the and the Rules of the Supreme Court to which reference has been made, is to use these neuter words in a generic sense although in their application to specific categories or species of lawyers they have different connotations which are to. be ascertained from the context in which they are used. The question, therefore, at once arises: What in the context and a true construction of the Act we are considering, is the meaning of the words "to practise"? The petitioner Aswini Kumar Ghosh urges that the words "to practise," in relation to all advocates of all the 20 High Courts, except the Original Side advocates of the Calcutta and Bombay High Courts only, mean "to act and plead" and seeing that this is the meaning applicable to the vast majority of advocates, those words must be given that meaning. Am I to apply the rule of majority in construing a statute? Am I to assume that the Legislature had forgotten or deliberately ignored the hard historical fact that there exists a large body of advocates,of not inconsiderable importance who "practise", that is only "plead" the Original Side of two premier High Courts in India? Or am I to assume that the Legislature intended, by the use of a dubious expression of indefinite import, to swamp one whole class of legal practitioners, namely, the Attorneys of those two High Courts? I find not the slightest indication of such intention anywhere in this Act. the contrary, the title of the Act and the non obstante clause of section 2 itself run counter to such contention. I have already pointed out that the words "to practise" have been used in the non obstante clause in the sense of "appearing and pleading" only and that nobody can for a moment doubt that in 'the non obstante clause the 74 Legislature had in mind the provisions of the and the rules of the High Courts regulating the conditions subject to which a foreign advocate was permitted "to appear and plead" in a High Court of which he was not an advocate. If that be so, it is legitimate to infer that the Legislature in the operative part of the section gave expression and effect to what it had in its mind when enacting the non obstante clause. If the intention of the legislature were otherwise, why did not the Legislature say openly and in a straightforward way that it gave the Supreme Court advocate the right "to act and plead" in any High Court ? Why did it use the dubious words "to practise" ? It is not correct to say that those words have been used in the only in the sense of "acting and pleading". As already explained, those words have been used in their ordinary dictionary meaning, namely, "to exercise his or their profession" so as to cover the entire genus or class of Advocates, although in their application to different categories or species they have different connotations as explained above. Seeing that the legislative practice is to use those words in their general dictionary meaning, there is no reason to suppose that the Legislature intended to depart from this practice while enacting this piece of legislation. It is asked: why did not the Legislature then insert in this Act a saving clause like sections 9(4) and 14(3) of the ? The argument is that the absence of such a saving clause in this Act constitutes a departure from the legislative practice followed in the and, therefore, the words "to practise" in the operative part of section 2 must have their widest meaning. A little reflection will show that this argument is not sound. The rule making power of the High Courts under clause 9 of the Letters Patent was and is with respect to advocates, vakils and attorneys admitted and enrolled by the, High Courts. The dealt with advocates enrolled by the High Courts and, ' therefore, it was 75 considered safer to provide that nothing in th a Act should affect or limit the rule making powers of the High Court. Indeed, if the critical words were, as I think, used in a generic sense, the saving clauses must have been inserted ex abundanti cautela. Be that as it may, as the High Courts ' power to make rules under clause 9 extended only to the advocates, vakils and attorneys enrolled by them and as the also dealt with advocates enrolled by the High Courts, the insertion of the saving clauses in the last mentioned Act is intelligible. But a saving of the rule making powers of High Courts over their own advocates etc., is entirely out of place ' in an Act which is concerned not with High Court advocates but with Supreme Court advocates only ' The High Courts have no power under clause 9 of the Letters Patent to make any rule to govern the conduct and activities of the Supreme Court advoCates and this Act only deals with Supreme Court advocate and confers a new right them. Therefore a saving of the High Courts ' rule making power over their advocates would have been wholly meaningless and inappropriate, for such saving clause would not have given the High Courts any power to make any rules with respect to the Supreme Court advocates There was, therefore, no necessity or occasion for inserting any saving clause the lines of sections 9 (4) and 14 (3) of the . NO , thing can, therefore, be founded the absence of a saving clause the lines of that Act. The petitioner Aswini Kumar Ghosh argues that the text of the original Bill, the statement of objects and reasons over the signature of the Law Minister attached thereto and the debates in the Legislature resulting in the deletion of what was clause (a) of the proviso as it existed in the original Bill will clearly show what the intention of the Legislature was. In the original Bill as introduced in the Legislature there was a proviso to section 2 which ran thus: "Provided that nothing in this section shall be deemed to entitle any person, merely by reason of his being an Advocate of the Supreme Court 76 (a) to plead or to act in any High Court in the exercise of its original jurisdiction ; or (b) to practise in a High Court of which he was at any time a Judge, if he had given an undertaking not to practise therein after ceasing to hold office as such Judge. " The argument is that the objects and reasons clearly show that the intention was that section 2 should not affect the Original Sides of the two High Courts, and clause (a) was inserted in the proviso in order to achieve that purpose. This shows that if clause (a) was not there, section 2 would have, entitled the Supreme Court advocate "to practise", i.e., "to appear, act and plead" in all High Courts in all their several jurisdictions. This conclusively shows that the words 'to practise" were used in that larger sense. Indeed in the objects and reasons those words were expressly stated to be synonymous with "to act and plead". The argument is apparently formidable but reflecttion will be found to be devoid of any substance. There is authority for the proposition that the proceedings of the Legislative Council are to be excluded from consideration in the judicial construction of an Act and that the debates in the Legislative Council, reports of select committees and statements of objects and reasons annexed to a Bill may not be referred to: Administrator General of Bengal vs Prom Lal(1). When construing section 68 of the Indian Companies Act, 1,882, the Privy Council in Krishna Ayyangar vs Nella Perumal(2) observed that no statement made the introduction of the measure or its discussion can be looked at as affording any guidance is to the meaning of the words. It is neither necessary nor profitable to go into the numerous decisions all of which it may be difficult to reconcile but it is quite clear from the decision of this Court in the case of A. E. Gopalan vs The State of Madras(3) that the debates and speeches in the Legislature which, reflect the individual opinion of the speaker cannot (1) (1895) 22 I.A. 107. (3) ; , (1920) 17 33. 77 be referred to for the purpose of construing the Act as it finally emerged from the Legislature and so the debates must be left out of consideration. The statement of objects and reasons attached to the Bill only depicts the object which the sponsor of the Bill had in mind, but it throws no light the object which the Legislature as a body had in mind when passing the Bill into an Act. If I may borrow and adapt the felicitous language used by my Lord the present Chief Justice in that case those objects and reasons may at best be indicative of the subjective intention of the Law Minister who sponsored the Bill but they could not reflect the inarticulate mental processes lying behind the majority vote which carried the Bill. Nor is it reasonable to assume that the minds of all those legislators were in accord. The first Privy Council decision referred to above rejected any reference to the debates or the objects and reasons. So did M. N. Mukherji J. in Debendra Narain Roy vs Jogendra Narain Deb(1). Reference may also be made to Craies Interpretation of Statutes, 5th Edn., at p. 123, regarding the memoranda attached to the Bill. In my opinion it is safer to follow the orthodox English view and leave the objects and reasons out of consideration. The petitioner Aswini Kumar Ghosh points out that in Gopalan 's case (supra) this Court did look at the original draft of what eventually became article 21 of the Constitution as throwing some light the construction of that article and urges that we should look at the original Bill and draw appropriate inferences from the fact of the omission of clause (a) of the proviso from the Act. What was looked at in that case was the Report of the Drafting Committee appointed by the Constituent Assembly. That Report was akin to a Report of a Select Committee made after consideration of a Bill referred to it by the Legislature for consideration. In that Report the Drafting Committee recommended the substitution of the expression "except according to procedure established (1936) A.I. R. at p. 619. 78 by law" taken from the Japanese Constitution for the words "without due process of law" which occurred in the original draft "as the former is more specific." The Drafting Committee further explained that they had attempted to make the fundamental rights conferred by the article in question and the limitations to which they must necessarily be subject as definite as possible since the Courts may have to pronounce upon them. The Constitution as it was finally adopted showed that the Constituent Assembly had accepted the amendment suggested by the Drafting Committee. The fact that the Drafting Committee was, in a sense, the agent of the Constituent Assembly, and that the amendment proposed by the Drafting Committee was in fact adopted by the Constituent Assembly, may conceivably lead to the inference that the reasons given by the Drafting Committee were also accepted by the Constituent Assembly and that the intention of the agent, the Drafting Committee, reflected the intention of the principal, the Constituent Assembly. This, I apprehend, was the underlying reason why the majority of this Court expressed the view that the Report of the Drafting Committee could be looked at as historical material throwing some light the question of construction of the article 21. That underlying reasoning does not, however, apply to the present case. This Court, consistently with the principles laid down in numerous judicial decisions, some of which I have cited above, held that recourse could not be had to the debates in the Legislature in construing the Act. ' To keep out the debates which may, in some degree, have disclosed the considerations operating the minds of the vocal section of the Legislature and the intention with which they moved the amendment and then to refer to the text of the original Bill and the fact that some words or clauses thereof do not find a place in the Act as eventually passed in order to ascertain the state of mind of the members of the Legislature who passed the Act will, to my mind, be indicative of a mental process which can hardly be 79 for my learned colleagues who had pronounced upon the admissibility of the Report of the Drafting Committee, I feel pressed to adhere to and abide by the views expressed by them that point, I am certainly not prepared to go further and to extend the principle of that decision that question by permitting a reference to the original Bill. Assuming that the reasoning of the decision in Gopalan 's case(1) regarding admissibility of the Report as an aid to construction may, in certain circumstances, be applicable to the original Bill, we have yet to consider whether in the case now before us the original Bill should be referred to. In Gopalan 's case(1) Kania C. J. said at p. 110: " The report may be read not to control the meaning of the articles, but may be seen in case of ambiguity." Again at p. 111 the learned Chief Justice stated:"Resort may be had to these sources with great cautiou and only when latent ambiguities are to be resolved." In point of fact the learned Chief Justice did not find the words of article 21 to be ambiguous so as to require recourse to the Report of the Drafting Committee to ascertain the intention of the Constituent Assembly. My Lord the present Chief Justice and Fazl Ali J. and Mukherjea J. did refer to the Report. In the view taken by Mahajan J. it was not necessary for him to express any opinion this instant problem. I did not refer to the debates or to the Report of the Drafting Committee and stated at p. 297 and at p. 323 that I would express no opinion as to the admissibility of the Report or the debates. It is, however, clear from the passages I have quoted, from the judgment of the late Chief Justice that the Report of the Drafting Committee could be looked at only to resolve ambiguity and not to control the meaning of the article if it was otherwise plain, for the intention of the Constituent Assembly was to be gathered primarily ' from (1) ; 80 the words used in the Constitution. The question at once arises: is there any ambiguity in section 2 as it now stands which requires a reference to the original Bill for its solution ? Having regard to the state of the law as it existed before this Act was passed, namely, that by the rules of all High Courts an advocate of one High Court could only "appear and plead" in another High Court if he could obtain the permission of the Chief Justice ' of the latter Court the mischief that followed from these rules and was unprovided for, namely, that even eminent advocates were. not accorded such permission for no apparent reason and. the fact that the object of this Act, as indicated in the full title and the non obstante clause in section 2 was undoubtedly to remedy this defect. So far as the Supreme Court advocates were concerned all which circumstances are to be taken into consideration in construing an Act as stated in Heydon 's case (1) and finally the legislative practice of using the words "to practise" in their ordinary dictionary meaning, as I have explained already, I find no ambiguity whatever in the operative part of section 2. The meaning and intent of the section appear to me reasonably plain and I do not consider it necessary to have recourse to the original Bill at all to ascertain the meaning and intent of the words used in the section. It is wrong to imagine or create ambiguity and then to call in aid the original Bill and to speculate as to the intention of the Legislature. Again, assuming that the original Bill has to be looked at in ascertaining the meaning of section 2, I do not derive any assistance from the mere circumstance that clause (a) of the proviso which appeared in the original Bill does not find a place in the Act as it finally emerged from the legislative anvil. The mere fact that that proviso was omitted from the Act as finally passed does not by any means lead us to the conclusion that the construction put upon the section by the petitioner Aswini Kumar Ghosh must be correct. There is no reason to assume that the (1) ; 81 legislators read the words"to Practise" as meaning "to appear, act and plead" If they read the words to mean " to appear and plead only, which is the ambit and scope of the profession of Supreme Court advocates under the rules of this Court and of the Original Side advocates of those two High Courts then, in so far as the proviso purported not to extend the application of the section to " 'acting" the Original Side it was wholly unnecessary and may have accordingly been deleted as not being necessary. Further, if the intention was to give the Supreme Court advocates a right to appear and plead only in any High Court in any of its jurisdictions, then the proviso, in so far as it purported not to extend the section to pleading the Original Side of those two High Courts, could not be retained. If, therefore, the intention of the operative part of the section was that the Supreme Court advocate would have the right only "to appear and plead", which is consonant with the functions of a Supreme Court advocate and also co extensive with the rights of the Original Side advocates of the Calcutta and Bombay High Courts under the rules, the proviso had to be deleted in full and, therefore, no argument can be founded the fact of such deletion. We have, therefore, to construe the operative part of the section by reference to the intention we can gather primarily from the language used in the section and other parts of the Act itself. The Legislature which enacted the statute was well aware of the state of the law as embodied in the rules of different High Courts preventing an advocate of one High Court from, as of right, " appearing and pleading " in another High Court of which he Was not an advocate. The mischief of withholding of the permission by the Chief Justices no better ground than the absence of reciprocity between the High Courts was notorious. The Act set out to remedy that mischief as is obvious from the full title and the non obstante clause in section 2 of the Act as I have herein before explained. It was known to the Legislature that an advocate was by Order 1, rule 2, of the Supreme 82 Court Rules defined as a person entitled only "to appear and plead" before the Supreme Court, that under Order IV,rule 11, no person could appear as an advocate unless instructed by an agent and that under Order IV, rule 30, such an advocate could in no circumstances "act" as an agent, In short, the Legislature knew that the scope or ambit of the Supreme Court advocate 's profession was only "to appear and plead". With all this knowledge the Legislature enacted section 2 authorising every advocate of the Supreme Court "to practise as of right in any High Court". Applying the dictionary meaning to the word "practise," the section authorises every Supreme Court advocate "to exercise his profession as of right in any High Court". The scope and ambit of the Supreme Court advocate 's profession being only "to appear and plead" there can be no escape from the conclusion that the section authorises the Supreme Court advocate only "to appear and plead" in any High Court. The reasoning is the same as that adopted or involved in the Patna case referred to above. An advocate of the Patna High Court was, under its rules, entitled "to appear, act and plead" in that High Court. When section 4 of the authorised such advocate "to practise" in the subordinate Court it was held in the Patna case to mean that the advocate could do all that he could do in the High Court, namely, "appear, act and plead". The words "to practise" were held to cover all these activities not because those words had that invariable ,meaning but because those words had that meaning only in relation to advocates who by the rule of the High Courts were entitled "to appear, act and plead In short, the content of those words varies with the ambit and scope of the profession of the advocate with regard to whom they are use a parity of reasoning, the Supreme Court advocate being entitled only "to appear and plead", when section 2 authorised him "to practise" in any High Court, it must be taken to have meant that he was authorised to do in the High Courts all that he was entitled to do in the 83 Supreme Court, namely, "to appear and plead" only. This construction appears to me to be quite logical and calculated to give effect to the object of the Act. It brings about a close approximation between the non obstante clause and the operative part of the section which should be the aim of every well drawn statute. It is asked: bow can a Supreme Court advocate who can only "appear and plead" when he is instructed by an agent, "appear and plead" in any High Court where there are no Supreme Court agents to instruct him ? This, in my opinion, is taking an extremely narrow view of the matter. The Supreme Court advocate 's profession being confined only to appearing and pleading, when he is authorised "to practise", i.e., to exercise his profession in any High Court, he must carry with him his professional limitations but must be governed by those rules of High Courts which regulate the practice of advocates who can only " appear and plead" ' in the High Courts, for he cannot practise in vacuo. Seeing that there are persons authorised "to act" in every High Court who may instruct another advocate, no practical difficulty can arise in the way of the Supreme Court advocate appearing and pleading in the High Court. Under Ch. I, rule 38, of the Calcutta Original Side Rules a Barrister advocate of any other High Court or an Original Side advocate of Bombay is permitted to "appear and plead" in the Original Side of the Calcutta High Court with the permission of the Chief Justice. Surely, nobody has ever suggested that such a foreign advocate must carry with him an instructing advocate or attorney of his own court who is competent to act in order to instruct him when he appears and pleads in the Calcutta High Court. He is instructed by an attorney of the Original Side of the Calcutta High Court without any difficulty. Same remarks apply when an Original Side advocate of Calcutta goes to appear and plead the Original Side of Bombay under Ch. I, rule 6, of the Bombay rules, for surely such an advocate does not carry a Calcutta attorney with him but is quite satisfactorily 84 instructed by a Bombay attorney. An Original Side advocate of the Calcutta or Bombay High Court who cannot appear the Original Side unless instructed by an attorney can and frequently does appear and plead the Appellate Side the instruction of an advocate of the Appellate Side who being entitled to act can instruct the Original Side advocate to appear and plead. If we adopt this construction, the Act becomes workable, but if we adopt the construction suggested by the petitioner, then the Supreme Court advocates practising in High Courts by virtue of the Act will become freelances creating chaos and confusion as I shall hereinafter more fully explain. In my opinion there is no substance at all in this objection of the petitioners. It is next pointed out that the result of this construction will be to make the new right illusory in that a Supreme Court advocate will not be entitled to "act" even the Appellate Side of a High Court where he is not enrolled and such a resuIt will militate against the principle of the unification of the Indian Bar. This objection is obviously based the assumption that the object of this Act is to bring about such a drastic and far reaching result. There is no warrant which I can see for any such assumption. I have already mentioned that the point of controversy this subject was that an advocate the roll of one High Court could not as of right "appear and plead" in other High Courts but had to depend the good graces of the Chief Justices of such other High Courts who frequently. withheld the requisite permission even to very. eminent advocates. There was hardly ever any claim made by an advocate of one High Court "to act" as an advocate of another High Court of which he was not an advocate. The limited object of this Act appearing from its full title and the non obstante clause as explained above was to remedy only this particular defect by providing that an advocate of the Supreme Court would be entitled as of right "to practise", i.e., exercise his profession, i.e., "to appear and plead", in any High Court even though 85 he was not ' the roll of that High Court. This certainly was an important step in the process of bringing about uniformity in the Indian Bar, for it did bring into,: being a category of advocates who might "appear and plead" in all Court 's throughout India and form the nucleus of an all India Bar. More than this was not within the scope and object of this Act as I apprehend it. To adopt a construction which will permit a Supreme Court advocate who is also enrolled in the High Court of, say Travancore Cochin in the south or off the State popularly called Pepsu in the north, to go and "act" in the Original Sides of the High Court of Calcutta or Bombay which the advocates of those High Courts cannot do, will lead to no end of confusion as will be explained more fully hereafter and that consideration alone should induice me to discard the petitioners ' construction and adopt a construction which will not give rise to practical inconvenience. It is pointed out that while this construction may bring about a perfect approximation between the non obstante clause and the operative part of section 2 by entitling only foreign Supreme Court advocates "to appear and plead" in any High Court as of right,, it runs counter to the concluding words of the operative part of section 2, namely, "whether or not he is an Advocate of that High Court", for, it is urged, those words clearly indicate that the section purports to confer a Supreme Court advocate the right to practise not only in a High Court of which he is not an advocate, but also to give him some right in rela tion to his own High Court. The Court below has held that the words "whether or not" are not quite apposite and that what was meant was that a right was given to every Supreme Court advocate "to practise" in any High Court even if he was not an advocate of that High Court. In other words, the Act itself gives a right to the Supreme Court advocate to practise as of right in any High Court and that being so it was immaterial to consider whether he was an advocate of a particular High Court or not, i.e., 86 irrespective of his being or not being an advocate of that High Court. I am inclined to agree with this view. Let me, however, test the soundness of the view propounded by the petitioner the strength of the words "whether or not etc. " Take the case of an advocate of the Madras High Court. Under the rules of the Madras High Court be is entitled "to appear, act and plead" in all its jurisdictions. When such an advocate is enrolled as an advocate of the Supreme Court, section 2 of the Act, as construed by the petitioner, really gives him no additional right in relation to his own High Court, for already he is entitled "to appear, act and plead" there. That is the position also with regard to the advocates of all High Courts, other than the High Courts of Calcutta and Bombay in the matter of their right to practise in their respective High Courts. Seeing that the advocates of 18 High Courts did not in fact get any new right in their respective High Courts, it cannot reasonably be said that the object of the Act was to give any right to an advocate of a particular High Court in respect of his own High Court. It is pointed out that an advocate enrolled the Appellate Sides of the Bombay and Calcutta High Courts is not, as of right, entitled to appear, act and plead the Original Side and the object of the Act was to give those Appellate Side advocates of the Calcutta and Bombay High Courts some additional rights in the Original Side of their own High Courts. In view of the fact that the Act gives no additional right to the advocates of any of the 18 High Courts in relation to their respective High ' Courts it is difficult to imagine that the object of the Act was to bestow some special favours only the. advocates of the Appellate Sides of the Calcutta and Bombay High Courts. Therefore, it appears to me that the words "whether or not etc." read in the light of the purpose of the Act appearing from the full title and the non obstante clause only emphasise that the object was to give the Supreme Court advocate a statutory right to practise in any High Court 87 of which he was not an advocate, irrespective of his other rights, if any. It is a new right given by the Act proprio vigore to a class of foreign advocates. Further, if the use of the words "whether or not etc." must necessarily mean that the object of the Act was to give a special right to an Appellate Side advocate of the Calcutta and Bombay High Courts in relation to his own High Court it does not necessarily follow ' that the words "to practise" must be given such a wide meaning as would also cover acting, for if the words ' "to practise" are read as extending only to appearing and pleading, even then the Appellate Side advocates of the Calcutta and Bombay High Courts would get some additional right in their own High Courts in that they become entitled by virtue of their position as Supreme Court advocates "to appear and plead" the Original Side without having to take steps under the respective rules of those High Courts to entitle them to appear and plead the Original Side. In this view of the matter also the con cluding words "whether or not etc. " cannot affect the construction put by me the operative part of the section. Even if I am wrong in adopting the foregoing line of reasoning, the petitioner will yet have to meet an alternative construction which has commended itself to the learned Judges of the High Court and my learned brother Mukherjea, and which I am also prepared to accept as a cogent alternative. The Act authorises every advocate of the Supreme Court as of right " to practise " in any High Court. The use of the words "to practise " in relation to an advocate clearly indicates that he is to exercise the profession of an advocate. To exercise the profession of an advocate in a High Court must involve the observance of the rules of practice of 'that High Court. It is urged that this construction amounts, in reality, to adding words to the section, namely, as an advocate of that Court" or "according to the rules of that Court. " This contention is founded a clear misaprehension, for I am really not adding anything at 88 all but I am only stating what is implicit in the section as it stands. , In other words, I am construing the words of the section and ascertaining its true meaning and import. The necessary implication of the fact that the Supreme Court advocate is to exercise his profession in any High Court may well be that he becomes entitled to do whatever an advocate (if that particular High Court can do under the, rules of practice of that High Court. Thus when the Supreme Court advocate goes to practise in the, Appellate Side be will be entitled to act and plead as an Appellate Side advocate does and when he goes to practise in the Original Side he will only plead as an Original Side advocate does and in either case be must abide by the relevant rules, for he must practise. as an advocate of the particular High Court does, namely, under and subject to the rules. Nobody has ever suggested that an advocate or vakil authorised to practise in subordinate courts or in any other High Court under section 4 of the was not bound by the rules of the Court where he went to practise. It is argued that the rules of the High Courts of which the Supreme Court advocate is not an advocate cannot in terms apply to him when he chooses to exercise the right given to him by the Act, for those rules apply to the advocates of those High Courts. This again, I conceive, is taking a narrow view of the matter. The rules of the High Court certainly apply to the advocates entitled to practise in that High Court and when an Act invests an advocate, who is not an advocate of a particular High Court, with the right to practise in that High Court, for all intents and purposes such an advocate becomes, as it were, a statutory advocate of that High Court and as such becomes invested with the rights as well as the obligations of an advocate of that, Court. In other words, the Act proprio vigore makes him a person entitled to practise in that Court and as such amenable to and governed by all the rules applicable to and regulating the practice of persons entitled 'to 89 practise in that Court, except, of course, such of the rules as are contrary to, i.e., destructive of this new statutory right and which must, therefore, as regards him, be deemed to be inoperative. Surely the Supreme Court advocate cannot practise in vacuo. To accede to the contention of the petitioner is to say that a body of professional men, namely, the Supreme Court advocates, have been let loose "to practise", i.e., to "act and plead" ' in all High Courts in all their jurisdictions untramelled by any rules of practice a proposition which, in my opinion, ha , only to be stated to be rejected. It is fraught with grave dangers and, at any rate, will inevitably lead to practical inconvenience and to no end of utter confusion. If that view were accepted the Supreme Court advocate will be entitled to walk in and walk out of the High Court in any costume that his fancy may choose. He may throw to the winds the rules of precedence of advocates including that of the Advocate General. According to the rules of the Original Side of Calcutta an attorney is authorised to cause service of notice of motion and chamber summons but the opposite party will not be bound to accept service from the Supreme Court advocate who is not so authorised. According to the Calcutta Original Side rules an attorney is personally responsible for the requisition fees, deposition fees etc. , but a Supreme Court advocate acting in the Original Side will not be so responsible at all. Nor will the High Court be able to get at the Supreme Court advocate to realise the fees if he is not to be governed by the rules governing the conduct of persons who act the Original Side. ' The attorneys acting in the Original Side cannot charge the client with a pice over and above the fees prescribed in the rules of taxation as between attorney and client but a Supreme Court advocate acting in the Original Side, not being in terms bound by the taxation rules, will be free to fleece the client to any extent he can. The attorneys being officers of the Court are under the rules and the Letters Patent amenable to the disciplinary jurisdiction of the High 90 Court but a Supreme Court advocate may with impunity snap his fingers at the High Court, for under no provision of law as it exists except section 2 of the Act can the High Court exercise disciplinary jurisdiction such advocates. It is unnecessary to multiply instances of confusion. This one consideration of inconvenience and confusion is enough to discard the construction sponsored by the petitioners ' for the true rule of construction is that if two constructions are possible, that which leads to absurdity and brings about practical inconvenience and encourages confusion and chaos must be eschewed. Neither of the two constructions suggested by me will have any such consequence and either of them will make the section workable in practice and at the same time accomplish a considerable measure of unification of the Indian Bar. The petitioners see the difficulty and to get over it suggest that the Supreme Court advocate practising in a High Court will and can be bound by the existing ordinary rules of practice except those that prevent him from acting and pleading or that the High Court may frame separate rules for the Supreme Court advocates practising before them. This very concession at once gives away the whole case of the petitioners. As I have already stated clause 9 of the Letters Patent empowers the High Courts to approve, admit and enrol advocates, vakils and attorneys and such advocates, vakils and attorneys I emphasise the word " such "are authorised to appear in the High Courts and to plead or to act or to do both according to the rules made by the High Courts. The High Courts ' rule making power as to enrolment of advocates, vakils and attorneys and their respective functions and powers is thus quite clearly confined to advocates, vakils and attorneys admitted and enrolled by them and does not and cannot extend to Supreme Court advocates who are not their rolls. Section 119 of the Code of Civil Procedure excludes the application of the rules of practice relating to advocates and pleaders from Original Side of High Courts unless adopted by them by rules framed 91 under the Letters Patent which,as already stated, governs only their own advocates. The Supreme Court of India, under article 145, can only make rules for regulating generally the practice and procedure of the Supreme Court including rules as to the persons practising before it. That article does not authorise the Supreme Court to make rules regulat ing the practice and procedure of High Courts or the conditions subject to which the Supreme Court advocates may practise before the High Courts. The Act we are considering does not confer any power the High Courts to frame rules subject to which the Supreme Court advocates shall exercise in the High Court their newly acquired statutory right under this Act. The Bar Councils ' rule making power under section 15 is limited only to High Court advocates, clause (b) having been superseded by, section 2 of this Act. There is, therefore, no provision of law except section 2 itself which will enable the High Courts to prescribe any rules of conduct 'for the Supreme Court advocates or to oblige them to conform to any rule of practice when they go to practise in any High Court. Therefore, if we accept either of the two constructions suggested by me it will prevent this absurd and undesirable result, for then the Supreme Court advocates when they go 'to practise in any High Court will appear and plead or, alternatively, do what an. advocate of the High Court can do, and in either case be subject to the relevant rules by which the advocates of the particular High Court are bound. If that were not the meaning of section 2, then the Supreme Court advocates will be untrammelled by any rule of practice at all. Further, the petitioners ' construction, even if the High Courts have power to make rules with regard to Supreme Court advocates practising before them, any the least obligation or restriction imposed by such rules the Supreme Court advocates by way of making them personally liable for any fees etc., or bringing them under the disciplinary jurisdiction or the High Courts will certainly be 92 challenged as a fetter placed their statutory right to practise, in the High Court and as such not binding ton them. Finally there will be two sets of rules, namely, the existing rules governing the attorneys who act the original Side and some new rules to be made for the supreme Court advocates who may choose to act the Original Side. The resulting creation of a now and distinct class of actors in the Original Sides of the two High Courts will indeed be a sad commentary the supposed intention of the Legislature to achieve uniformity and unification of the Indian Bar. The petitioners ' construction must, therefore, be rejected. It is next said that this alternative construction the rights of a Supreme Court advocate will vary from High Court to High Court and that will not be con sistent with the policy of uniformity underlying the Act. In the first place it is an assumption, without any warrant, that the Act was out to achieve perfect symmetry and uniformity of the kind which we may consider desirable. Secondly,no serious inconvenience will follow if the rights of a Supreme Court advocate vary from High Court to High Court. The status and rights of advocates of different High Courts do vary under their respective rules and such variation has existed of or long time without any inconvenience. This Act does not at all purport to eliminate those differences amongst the advocates of the different High Courts which will yet continue. The construction sought to be put the section by the petitioner Aswini Kumar Ghosh will, therefore, only create fresh differences by bringing into being a new variety of practitioners who will have yet different rights in all the High Courts. the other hand, the construction suggested above will cause the least possible inconvenience and at the same time remedy the long , standing grievance of advocates of High Courts account of the bar against their " appearing and pleading" in High Courts of which they are not advocates by authorising them, after being enrolled as Supreme Court advocates to do so as of right and 93 without the necessity of their obtaining the sanction of the Chief Justices of the High Courts concerned. The Act permits a well defined body of professional men, namely, the Supreme Court advocates, to exercise the profession of an advocate in any High Court. That this certainly was a forward step in achieving uniformity cannot possibly be denied. Nothing more was within the purview of the Act as expressed in its full title and the non obstante clause. Finally, reference is made to the proviso as it now appears in section 2 and it is claimed that the word "practise" in the operative part of the section must mean "appear, act and plead" because that word as appearing in the proviso obviously has that meaning, and reliance is placed the rule of construction that the same word should be given the same meaning wherever it occurs in the Act. All that this proviso says is that nothing in this section shall be deemed to entitle a post Constitution Judge who might be an advocate of the Supreme Court to practise in a High Court of which he was at any time a Judge, if he had given an undertaking not to practise there after ceasing to hold office as such Judge. In other words, all that the proviso does is to say that the right created by the section shall not extend to a Tudge if he had given an undertaking not to practise in that Court. In the first place this proviso was wholly redundant in view of the constitutional prohibition contained in article 220. Further, the language of the proviso is inept in that it seems to suggest that if such a Judge had not given an undertaking he would be free to practise which certainly is contrary to article 220. Finally there is no difficulty in giving to the word "practise" occurring in the proviso the same general meaning given to that word in the operative part of the section, namely, "to exercise the profession". It is said that if the words "to practise" mean only "to plead", then a post Constitution Judge after his retirement would be entitled "to act" in the High Court of which he was at any time a Judge. There is no force in this argument because such lb Judge 94 will be prevented from acting and pleading anywhere by virtue of the provisions of article 220 of the Constitution. It is, therefore, not necessary to give the word "practise" the wider meaning contended for by the petitioner Aswini Kumar Ghosh. We must also remember that the general rule relied upon may be excluded by the subject,or context. For reasons stated above, whether we adopt one or the other method of construction suggested above, in my opinion,, this petition cannot succeed and must be dismissed. Appeal allowed. Agent for Intervener No. 1 : P. K. Mukherjee. Agent for Intervener No. 2: Sukumar Ghose. Agent for Intervener No. 3: I N. Shroff, for P. K. Bose. Agent for Intervener No 4: Bajinder Narain.

Section 2 of the Supreme Court Advocates (Practice in High Courts) Act, 1951, provided that "notwithstanding anything contained in the (XXVIII of 1926), or any other law regulating the conditions subject to which a person not entered in the roll of advocates of a High Court may be permitted to practise in that High Court every advocate of the Supreme Court shall be entitled as of right to practise in any High Court whether or not he is an advocate of that High Court " : Held by the Court (PATANJALI SASTRI C.J., VlvIAN BosE, and GHULAM HASAN JJ. MUKHERJEA and DAS JJ. dissenting) The practice of law in India generally involves the exercise of both the functions of acting and pleading behalf of litigant parties, and when section 2 of the abovesaid Act conferred upon an advocate of the Supreme Court the right to " practise " in any High Court, it is legitimate to understand that expression as authorising him to appear and plead as well as to act behalf of suitors in all the High Courts including the Original Side thereof. It is fallacious to relate that expression as applied to an advocate either, the one band, to the court in which the advocate is enrolled, or,, the other, to the court in which he seeks to exercise the statutory right conferred him. It must be related to the general constitution of the Bar in India as a single agency in dealing with the litigant public. A rule made by a High Court which denies to an ' advocate the right; to exercise an essential part of his function by insisting a dual agency the Original Side is much more than, a rule of practice and constitutes a serious invasion of his statutory right to practise, and the power of making such a rule, Unless expressly reserved (as it 'was reserved by the Bar Councils Act) would be repugnant, to the right conferred by section 2; and as the, Act does not reserve any such power, the statutory right, of a Supreme Court advocate under section 2 to plead as well as 'to act in the High Courts of Calcutta, and Bombay in the exercise 2 of their Original Jurisdiction can not be taken away or curtailed by the rules of those courts, and any rule which the Calcutta High Court may have made in the past purporting to exclude any advocate from practising the Original Side or from appearing and pleading unless he is instructed by an attorney cannot affect such right. MUKHERJEA J. The word " practise" when used with reference to an advocate is an elastic expression having no rigid or fixed connotation and the precise ambit of its contents can be ascertained only by reference to the rules of the particular forum in which the profession is exercised. When a. 2 of the Supreme Court Advocates (Practice in High Courts) Act, 1951, speaks of a Supreme Court advocate being entitled as of right to practise in any High Court, what it actually means is that he would be clothed by reason of this statutory provision with all the rights which are enjoyed by an advocate of that court, and his right to plead and to act would depend the Bar Councils Act and the rules validly framed by that court, subject to this that no rule or provision of law would be binding which would affect in any way his statutory right to practise in that court solely by reason of his being enrolled as an advocate of the Supreme Court. DAS J. The words "to practise", used in relation to lawyers as a class, mean "to exercise their profession" which is their dictionary meaning and which is wide enough to cover the activities of the entire genus of lawyers. They are words of indeterminate import and have no fixed connotation or content. In their application to particular species of lawyers their meaning varies according to the scope and ambit of the profession of the particular species in relation to whom they may be used and such meaning has to be ascertained by reference to the subject or context. A Supreme Court advocate being entitled only,"to appear and plead" in that court, when section 2 autborised him to practise" in any High Court it must be taken, to have meant that he was authorised to do in the High Courts all that he was entitled to do in the Supreme Court, namely, to appear and plead only. Alternatively the section must be taken to authorise every Supreme Court advocate to practise as of right in any High Court as advocates of that High Court do and the exercise of the profession of an advocate in a High Court by a Supreme Court advocate must involve the observance of the rules of practice of that High Court except to the extent they are abrogated by section 2. That sec tion has made the Supreme Court advocate a statutory advocate ' of the High Court where he goes to practise and as such he is bound by the rules of such High Court except, such of them as are contrary to this new statutory right. Whichever of the two constructions is adopted, a Supreme Court advocate cannot appear in the Original Side of the Calcutta or Bombay High Courts unless he is instructed by an attorney. Queen vs Doutre (L.R. 9 App. Cas. 745), Powers of Advocates, ln re (I.L.R. and Laurentius Ekka vs Dukhi Koeri (I.L.R. 4 Pat. 766) referred to. 3 Per PATANJALI SASTRI C.J., VIVIAN BOSE, and GHULAM HASAN JJ. The non obstante clause in section 2 can reasonably be read as overriding "anything contained" in any relevant existing law which is inconsistent with the new enactment. Sections 9(4) and 14(3) of the Bar Councils Act and section 2 of the new Act cannot stand together. Whether by force of the non obstante clause liberally construed or of the well established maxim of construction that the enacting part of an Act must, when it is clear, control the non obstante clause when both cannot be read harmoniously, the new Act must have the effect of abrogating the powers reserved and continued in the High Courts by sections 9(4) and 14(3) of the Bar Councils Act . MUKHERJEA and DAS JJ. The non obstante clause in section 2 of the said Act removes only those provisions contained in the Bar Councils Act, 1926, and in any other law, which regulate the conditions subject to which a person not entered in the roll of advocates of a High Court may be permitted to practise in that High Court. Other provisions contained in the Bar Councils Act or other statutes, which lay down the conditions under which an advocate enrolled in the High Court is entitled to practise in the Original Side of that court stand unaffected by the Act. Even if the entire Bar Councils Act is excluded for the purpose of section 2, the rules framed by the Calcutta and Bombay High Courts under their Letters Patent would remain valid and effective of their own force even without the saving provision contained in the Bar Councils Act and the Letters Patent would also remain in full force. Per PATANJALI SASTRI C. J., MUKHERJEA, DAB, VIVIAN BosE, and GHULAM HASAN JJ. Speeches made by members of the House of Parliament the floor of the House are not admissible as extrinsic aids to the interpretation of statutory provisions. State of Travancore Cochin and Another vs Bombay Co. Ltd. etc, ([1952] S.C.R. 1112), Administrator General of Bengal vs Prem Lal ( [1895] 22 I.A. 107), Krishna Aiyangar vs Nella Perumal ( [1920] 47 I.A. 33), A.K. Go`alan vs The State of Madras ( ; and Debendra Narain Roy vs Jogesh Chandra Deb (A.I.R. referred to. Held per PATANJALI SASTRI C.J., DAs, VIVIAN BOSE and GHULAM HASAN JJ. The statement of objects and reasons annexed to a Bill, the form of the original Bill and the fact that certain words: or phrases were added to or omitted from the original Bill are also not admissible as aids to the construction of a, statute. MUKHERJEA J. Judicial opinion the point whether in construing a statute the, statement of objects and reasons or the original form of the Bill or reports of committees can be referred to is not uniform. English Courts and the Privy Council have laid down that such extrinsic aids must be dismissed from consideration. But there are American decisions to the effect that the general history of a statute and the various steps leading up to an enactment including amendments or modifications of the original Bill and reports of Legislative Committees can, be looked I at for 4 ascertaining the intention of the legislature where it is in doubt. The legislative history is, however, clearly inadmissible where there is no obscurity in the meaning of a statute. Per MUKHERJEA and DAS JJ. Punctuation is after all a minor element in the construction of a statute, and even if the orthodox view that it forms no part of the statute is to be regarded as of imperfect obligation and it can be looked at as contemporanea, expositio, it is clear that it cannot be allowed to control the plain meaning of a text. Stephenson vs Taylor ( [1861] 1 B.S. 101), Clawdon V. Green , Duke of Devonsshire vs Conor (L.R. , Maharani of Burdwan vs Murtanjoy Singh ([1886] 14 I.A. 30), Pugh vs Ashutosh Sen ( (1928]55 I.A. 63) referred to. Judgment of the Calcutta High Court reversed.

In a petition under article 32 of the Constitution the petitioner detenu complained that though the grounds of detention were served on the detenu on the date of arrest (October 20, 1980) the materials and documents on which the order of detention was based were not supplied to him till November 5, 1980 and that his representation dated November 18, 1980 was disposed of nearly a month later (December 15, 1980) and that the failure on the part of the detaining authority to supply the requisite documents and materials and the unexplained delay in the disposal of the representation constituted violation of the safeguards contained in Art, 22(5) of the Constitution which vitiated the order of detention. Allowing the petition, ^ HELD: It is well settled that the law of preventive detention has to satisfy a two fold test: (1) that the protection and the guarantee afforded under article 22(5) of the Constitution are complied with, and (2) that the procedure is just and reasonable. [463G] Before an "effective representation" could be made by the detenu he must be supplied with the documents and materials which form the basis of the grounds of detention and unless this is done there could be no question of making any representation, much less an "effective representation" against the order of detention. The documents and materials relied upon in the order of detention form an integral part of the grounds and must be supplied to the detenu pari passu the grounds of detention. [461B] Smt. Icchu Devi Choraria vs Union of India & Ors. ; and Smt. Shalini Soni & Ors. vs Union of India & Ors. ; referred to. If procedure under article 21 has to be reasonable, fair and just, then the words 'effective representation ' appearing in article 22(5) must be construed so as to provide a real and meaningful opportunity to the detenu to explain his case to the detaining authority in his representation. If the words 'effective representation ' are interpreted in an artificial or fanciful manner, then it would defeat the very object not only of article 22(5) but also of article 21 of the Constitution. It is settled law that it is of the utmost importance that all the necessary safeguards laid down by the Constitution under article 21 or article 22(5) should be complied with fully and strictly and any departure from any of the safeguards would vitiate the order of detention. [463E F] Maneka Gandhi vs Union of India [1978] 2 SCR 621 referred to. 460 In the instant case not only were the documents and materials not supplied to the detenu alongwith the order of detention but there had been an unexplained delay of about 25 days in disposing of the representation of the detenu. [465B] [Despite repeated warnings by this Court the detaining authorities do not care to comply with the spirit and tenor of the safeguards contained in article 22(5) of the Constitution. There should be no difficulty in keeping copies of the documents and materials referred to in the order of detention and supplying them to the detenu along with the order of detention. This dereliction on the part of the detaining authorities results in the release of persons indulging in such anti national activities as smuggling though on merits the detentions in suitable cases may be justified.]

The property of the respondent was acquired under the U. P. Land Acquisition (Rehabilitation of Refugees) Act, 1948. The respondent challenged the constitutionality of the Act by way of a writ petition and though the High Court dismissed the petition it held that the two provisos to s.11 of the Act were invalid as they offended section 299(2) of the Government of India Act. Subsequently the Constitution (Fourth Amendment) Act, 1955, included the U. P. Act in the Ninth Schedule as item NO. 15. The appellant contended that the inclusion of the Act in the Ninth Schedule protected it under article 31 B of the Constitution from any challenge under section 299(2) of the Government of India Act. Held, that the U. P. Act could not be assailed on the ground of unconstitutionality based on a contravention of section 299 of the Government of India Act. The provisions of the Act having been specifically saved by article 31 B read with the Ninth Schedule, the Act could not be deemed to be void or to ever have become void on the ground of its having contravened the provisions of the Government of India Act. Dhirubha Devisingh Gohil vs The State of Bombay, ; , relied on. Saghir Ahmad vs The State of U. P., ; , not applicable.

The appellant, a working journalist who was appointed on November, 1961 as a Staff Correspondent in the Calcutta Office of the respondent company while working as such at Calcutta, applied on 29 April, 1975 to the Government of West Bengal under sub section (1) of section 17 of the Working Jour nalists and Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955 for recovery of the unpaid portion of his wages relating to the period April 1968 to February 1973. While the conciliation proceedings were on, he was promoted and transferred to Pune on 16 February, 1976. The Conciliation Officer reported the fail ure of the proceedings before him on 16 November, 1976 and the Government of West Bengal made a reference under sub section (2) of section 17 of the Act to the First Labour Court, West Bengal on 23 August, 1977 for the adjudication of the dis pute between the parties. The preliminary objection raised by the respondent company that the Government of West Bengal was not competent to make the reference was rejected by the Labour Court. The respondent company 's writ petition chal lenging 'the order of the Labour Court was allowed by a Single Judge whose decision was affirmed in appeal by the Division Bench of the High Court. Allowing the appeal by special leave and dismissing the writ petition of the respondent company, this Court. HELD: (i) Sub section (1) ors. 17 of the Act requires that an application by the newspaper employee complaining that an amount due to him has remained unpaid by the employer should be made to the State Government. Which is the State Govern ment to which such application lies is 476 indicated by r: 36 of the Rules made under the Act and that rule provides that an application under section 17 of the Act shall be made to the Government of the State where the central office or the branch office of the newspaper estab lishment in which the newspaper employee is employed is situated. It is the location of the central office or the branch office in which the newspaper employee is employed which determines which State Government it will be. The rule works in favour of the convenience of the newspaper employ ee. [478C E] (ii) Sub section (2) of section 17 provides that if any question arises as to the amount due under the Act to a newspaper employee from his employer, the State Government may refer the question to any Labour Court, constituted by it under the or under any corresponding law relating to investigation and settlement of industrial disputes in force in the State. If a question arises as to the amount due, it is a question which arises on the appli cation made by the newspaper employee, and the application having been made before the appropriate State Government, it is that State Government which will call for an adjudication of the dispute by referring the question to a Labour Court. The State Government before whom the application for recov ery is made is the. State Government which will refer the question as to the amount due to a Labour Court. [478F G; 479C D] In this case, the appellant was employed at the Calcutta branch of the respondent company. He made the application to the Labour Department of the Government of West Bengal for recovery of the unpaid portion of his wages. When the ques tion arose as to the amount due to the appellant, the Gov ernment of West Bengal made the reference for adjudication to the First Labour Court, West Bengal. Upon the construc tion of sub section (2) of section 17 as indicated at (ii) above, it is beyond dispute that the Government of West Bengal is competent to make the reference. The High Court erred in holding that the reference was without jurisdiction and that it was the State of Maharashtra which was competent to make the reference. [479E G]

Dismissing the appeal by certificate, the Court ^ HELD: (1) The trichotomy originating with the Government of India (High Court Judges) Order, 1937, continued under section 10(2) of the Independence Act, 1947 and finally adopted by the does not suffer from any legal or constitutional infirmity and, on the other hand, has the sanction of the Constitution itself. [612 F] (2) The trichotomy is good not only because it was adopted by the Constitution till legislation was enacted under Article 221(2) thereof, but also because it was necessitated by reason of High Court Judges being drawn from three different sources, namely, Indian Civil Service, State Judicial Services and directly from the Bar. All the High Court Judges though holding equivalent posts are thus not similarly situated, particularly in regard to the payment of pension and other retirement benefits. The classification so made is a reasonable classification based on intelligible differentia having a proper nexus to the object to be achieved and there is thus no question of any violation of Articles 14, 221 and 314 of the Constitution. [610 H 611 A, C; 612F] (3) It is a cardinal principle of interpretation of statutes that the legislature does not use meaningless language and that every word used by it must be presumed to have some meaning even though the phraseology employed may sometimes be obscure or ambiguous. [608 F] The expression "who is a member of the Indian Civil Service" appearing in clause (a) of section 15 of the 1954 Act cannot be just ignored as being inapplicable to an existing situation and thus rendered otiose. What was meant was to describe as a class High Court Judges who had earlier been members of the Indian Civil Service so that they could be distinguished from High Court Judges who had not been such members. Although the Indian Civil Service ceased to function as a Service of the Secretary of State for India after the 15th of August 1947 when the 1947 Act was enforced, its members were automatically appointed to corresponding posts under the Crown in connection with the affairs of the Dominion of India or of a Province by virtue of the provisions of sub clause (1) of clause 7 of the India (Provisional Constitution) Order, 600 1947. The Indian Civil Service was not abolished in so many words and on the other hand, its members were given the right to continue in service on and after the 15th August, 1947 under the same conditions of service as were applicable to them immediately before that date as made out by sub sections (1) and (2) of section 10 of the 1947 Act. [608 G 609A, C D] All that sub section (1) enacted was that the provisions of the Government of India Act, 1935 ceased to operate in relation to appointments to the civil services of, and civil posts under, the Crown in India, by the Secretary of State but sub section (2) fully preserved the rights of and conditions of service applicable to holders of appointments already made by the Secretary of State, the only difference being that in place of the Secretary of State the employers of the incumbents became the respective Governments concerned. [610 B C] (4) The second proviso to section 14 of the 1954 Act has no application to the appellant inasmuch as he was not in actual receipt of a pension for his services in the Indian Civil Service under proviso to para 10 of Part D of second Schedule to the Constitution as added by the Constitution (Seventh Amendment) Act, 1956. The appellant having accepted appointment as a High Court Judge in continuation of his service as a District Judge, he never became entitled to pension for the period preceding his elevation to the Bench. Further he did not claim such a pension until the Accountant General requested him to indicate his option in accordance with the proviso to section 15 of the 1954 Act. The claim to two pensions, therefore, is inadmissible. [611E, H, 612D]

Pursuant to the Indo Pakistan Agreement, 1958, and after this Court 'section Advisory opinion in In re the Berubari Union and Exchange and Enclaves, , Parliament enacted the Constitution (Ninth Amendment) Act, 1960 for cession of part of the territory of India to Pakistan. In order to implement the provisions of the Act a physical demarcation of the portion that had to be ceaded was necessary. The respondents filed a petition under article 226 of the Constitution before the High Court challenging the validity of the proposed demarcation principally on the ground that they would be deprived of their property without compensation. A single Judge of the High Court held that the cession of the territory involved transfer of ownership and other private property rights to Pakistan through the Union of India, which, though outside cl 2A of article 31 was compulsory acquisition within the meaning of article 31(2). The single Judge granted a certificate under article 132(1) for appeal to this Court. HELD:(i) No question of acquisition within the meaning of Article 31(2) is involved in the present case. The Constitution (Fourth Amendment) Act, 1955, makes it clear that mere deprivation of property unless it is acquisition or requisitioning within the meaning of cl. 2A will not attract cl. (2) and no obligation to pay compensation will arise thereunder and it is essential under clause (2) that in order to constitute acquisition or requisitioning there must be transfer of the ownership or right to possession of the property to the State or to a corporation owned or controlled by the State. Cession indisputably involves transference of sovereignty from one sovereign State to another. But, there is no transference of ownership or right to possession in the properties of the inhabitants of the territory ceded to the ceding State itself. The effect of the Constitution (Ninth Amendment) Act, 1960, can by no stretch of reasoning be regarded as transfer of the ownership or right to possession of any property of the respondents to the "State" within the meaning of Article 12 of the Constitution. [202C F, H] Charanjit Lal Chowdhury vs Union of India, [1950] S.C.R. 869, 902, State of West Bengal vs Subodh Gopal Bose & Ors. ; , Dwarkadas Shrinivas of Bombay vs Sholapur Spinning & Weaving Co. Ltd. & Ors. ; , Saghir Ahmed vs State of Uttar Pradesh, ; and Gullapalli Nageswara Rao & Ors. vs Andhra Pradesh State Road Transport Corporation & Anr. [1959] Supp. 1 S.C.R. 319, referred to. 245 (ii) This Court has on earlier occasions, observed that the practice of single Judge deciding the case and giving a certificate under Article 132 (1) for appeal to this Court, although technically correct, was an improper practice and that such a certificate should be given only in very exceptional cases where a direct appeal was necessary. The present case may be of an exceptional kind; but this Court has been deprived of the benefit of the judgment of a larger Bench of the High Court on points which are of substantial importance. [246B] R.D. Agarwala. & Anr. vs Union of India & Ors. C.A. Nos. 2634/69 etc. dt. 23 2 1970 and Union of India vs J. P. Mitter; , , referred to.

Through this petition filed under Article 32 of the Constitution the petitioner prayed for the issue of a writ in the nature of quo worranto to the respondent K.P. Tewari who had been appointed in November, 1984 as a Minister of the Government of Uttar Pradesh under Article 164(1) of the Constitution by the Governor of the State of Uttar Pradesh even though Shri Tewari was not a member of either House of the State Legislature. The petitioner contended (i) that in the judgment of Har Sharan Verma vs Shri Tribhuvan Narain Singh, Chief Minister of U.P. and Anr., (AIR where it had been held that the appointment of a person as Chief Minister could not be challenged on the ground that he was not a member of the Legislature of a State at the time of appointment, this Court had not considered the effect of the amendment of Article 173 (a) of the Constitution by the Constitution (Sixteenth) Amendment Act, 1963; (ii) that after the amendment of Article 173 of the Constitution by the Constitution (Sixteenth) Amendment Act, 1963 it was not open to the Governor to appoint a person who was not a member of the Legislature of the State as a Minister and that Article 164(4) of the Constitution would only be applicable to a person who had been a Minister but who ceased to be a member of the Legislature for some reason such as the setting aside of his election in any election petition; and (iii) that the debates of the Constituent Assembly suggested that a person should be a member of the Legislature at the time of his being chosen as a Minister. Dismissing the petition, ^ HELD: (I) By the Sixteenth Amendment clause (a) of Article 173 of the Constitution is amended by the addition of a clause which requires a candidate at an election to the Legislature to make and subscribe before some person authorised in that behalf by the Election Commission an oath or affirmation 548 according to the form set out for the purpose in the Third Schedule to the Constitution. Earlier it was only after a person was elected or nominated as a member of the Legislature of a State that he was required by Article 188 of the Constitution to make and subscribe an oath or affirmation before taking his seat as such member in the form mentioned in the Third Schedule to the Constitution. The above requirement has to be complied with by an elected or nominated member of the State Legislature even after the Sixteenth Amendment. [550H; 551A; E;H] (2) The object of introducing the amendment in clause (a) of Article 173 of the Constitution was to provide that not only before taking his seat shall a member of the Legislature take the oath prescribed by the Third Schedule as required by Article 188 of the Constitution but that even before standing for election, a candidate must take the same oath. This is to ensure that only a person having allegiance to India shall be eligible for membership of the Legislature. [552C D] (3) Article 177, ensures the implementation of the constitutional principle contained in clause (2) of Article 164 of the Constitution which provides that the Council of Ministers shall be collectively responsible to the Legislative Assembly of the State. A Minister in a State under our Constitution discharges that responsibility by virtue of the provisions contained in Article 177 of the Constitution which enables him to participate in the proceedings of the Legislative Assembly even though he may not be its member with the right to vote.[553F;G] (4) It does not appear that the debates of the constituent Assembly suggest that a person shall be a member of the Legislature at the time of his being chosen as a Minister. An amendment was proposed to that effect in the Constituent Assembly to the draft Constitution but was not accepted: [553H; 554A C] (5) The fear expressed by the petitioner that a person who does not owe his allegiance to the Constitution and is not willing to uphold the sovereignty and integrity of India would have an opportunity to become a Minister if he is not required to become a member of the Legislature after having made and subscribed an oath or affirmation as prescribed by Article 173(a) of the Constitution is not well founded because under clause (3) of Article 164 of the Constitution a Minister for a State is required to take an oath of allegiance to the Constitution and to undertake to uphold his office in the from prescribed in the Third Schedule. [554C E] (6) No material change has been brought about by reason of the amendment of Article 173(a) of the Constitution in the legal position that a person who is not a member of the State Legislature may be appointed as a Minister subject, of course, to clause (4) of Article 164 of the Constitution according to which a Minister who for any period of six consecutive months is not a member of the Legislature of the State shall at the expiration of that period cease to be a Minister. [554H; 555A] (7) By enacting Article 164(4) of the Constitution the makers of the Constitution provided for a situation where a Minister may lose a seat in the 549 Legislature after appointment as the result of an election petition for example A Or may not be a member when he is appointed.[555B C] Har Sharan Verma vs Shri Tribhuvan Narain Singh, Chief Minister of U.P. and Anr., ; , Constitution Assembly Debates dated June 1 1949, Vol. VIII at p. 521 and Har Sharan Verma vs Chandra Bhan Gupta & Ors. , A.l.R. 1962 Allahabad 30], referred to.

In respect of its business as a middleman relating mainly to sales of coal and coke in the course of inter State trade, the appellant firm was assessed to Central sales tax under section 8(2) of the , by the Commercial Tax officer. The appellant without availing itself of the remedies under the Act, applied for and obtained special leave to appeal under article 136 of the Constitution of India directly against the order of assessment When the appeal was taken up for hearing, the question was raised as to whether it should be entertained, when even the facts had not been finally determined by the final fact finding authority under the Act, nor had the jurisdiction of the High Court been invoked to exercise its powers under the Act. Held, that an assessee is not entitled ordinarily to come up to the Supreme Court directly against the judgment of the Assessing Authority and invoke the Court 's jurisdiction under article 136 of the Constitution without first exhausting the remedies provided by the taxing statutes. Mahadayal Premchandras vs Commercial Tax Officer Calcutta, and The State of Bombay vs M/s. Ratilal Vedilal, [1961] 2 section C. R. 367, explained. Chandi Prasad Chokhani vs The State of Bihar, [1962] 2 section G. R. 276 and Kanhaiyalal Lohia v, Commissioner of Income Tax Bengal, [1962] 2 section C. R. 839, followed. ^ Held, further, that in the present case, in which there, were no special circumstances and in which the facts had not yet been finally determined, the appeal must be considered to be incompetent.

Appeal No. 243 of 1959. Appeal by special leave from the judgment and order dated April 24, 1958, of the Bombay High Court in Special Civil Application No. 874 of 1958. M. C. Setalvad, Attorney General for India, G. P. Vyas and I. N. Shroff, for the appellant Vithalbhai Patel, section section Shukla, C. T. Daru and E. Udayarathnam, for the respondent No. 1. 1960. December 12. The Judgment of the Court was delivered by GAJENDRAGADKAR, J. The principal question which this appeal by special leave raises for our decision relates to the nature and extent of the jurisdiction conferred on the authority by section 15 of the 223 (Act 4 of 1936) (hereafter called the Act). This question arises in this way. The appellant Shri Ambica Mills Co. Ltd., is a textile mill ' working at Ahmedabad. Three of its employees named Punamchand, Shamaldas and Vishnuprasad made an application to the authority under section 16 of the Act and prayed for an order against the appellant to pay them their delayed wages. In order to appreciate the( contentions raised by the appellant disputing the validity of the respondents ' claim it is necessary to set out the background of the dispute in some detail. It appears that an award called the Standardisation Award which covered the mill industry in Ahmedabad was pronounced by the Industrial Tribunal on April 21, 1948, in Industrial Reference No. 18 of 1947. This award fixed the wages for different categories of workers working in the textile mills at Ahmedabad, but left over the question of clerks for future decision. Amongst the operatives whose wages were determined by the award the case of hand folders was specifically argued before the Industrial Tribunal. The Labour Association urged that the rate of Rs. 36 9 0 awarded to them was too low and it was pointed out on their behalf that they did the same work as cut lookers did in Bombay where a head cut looker was given Rs. 52 and a cut looker Rs. 42 4 0. On the other hand the mill owners contended that the rate should have been fixed at Rs. 34 2 0 instead of Rs. 36 9 0. The Tribunal found it difficult to decide the point because enough evidence had not been produced before it to show the kind of work that hand folders were doing at Ahmedabad; that is why the Tribunal was unable to raise the wage of hand folders to that of out lookers in Bombay. However, it made a significant direction in that behalf in these words: "At the same time", it was observed, "we desire to make it clear that if there are persons who are doing cut looking as well as folding, they should be paid the rate earned by the out lookers in Bombay". This question has been considered by the Tribunal in paragraph 16 of its award. The question of clerks, the decision of which had been adjourned by the Tribunal was later considered 224 by it and an award pronounced in that behalf. However, the said award was later terminated by the clerks in 1949, and that led to an agreement between the Ahmedabad Mill Owners ' Association and the Textile Labour Association in the matter of wages payable to clerks. This agreement was reached on June 22, 1949. Clauses 2 and 5 of this agreement are material for the purpose of this appeal. Let us therefore read the two clauses: "2. That this agreement shall apply to all the Clerks employed in the local mills, i.e., persons doing clerical work, that is those who do routine work of writing, copying or making calculations and shall also include compounders and assistant compounders who are qualified and who are employed in the local mills. A separate scale for those of the employees who occupy the position lower than that of a full fledged Clerk but higher than that of an operative will be provided as under: Rs. 40 3 70 EB 4 90 5 105. This scale will be applicable in case of ticket boy, ticket checker, coupons seller, talley boy, scale boy, production checker, thread counter, cloth measurer or yard counter, fine reporter, cloth/yarn examiner, department store man, cut looker and those others who have not been included above but who can properly fall under the above category." After this agreement was thus reached persons doing the work of cut lookers began to feel that they were entitled to the benefit of cl. 5 and some claims were put forth on that basis against the employers. Vishnuprasad and Punamchand applied before the authority (Applications Nos. 39 and 40 of 1954) and claimed delayed wages against the appellant on the ground that they were entitled to higher wages under paragraph 16 of the award in Reference No. 18 of 1947. This claim was resisted by the appellant. The appellant urged that the applications were not maintainable under the Act, that they were barred in view of an arbitration award which was then in operation and that on the merits the applicants were not doing 225 the work of cut looking. All these contentions were rejected by the authority. It examined the duties performed by the applicants, and it came to the conclusion that both the applicants were folders doing cut looking, and consequently they were entitled each to Rs. 42 4 0 per month; in other words, the authority came to the conclusion that the applicants properly, fell under the category specified in paragraph 16 of the award referred to above and as such they were entitled to recover the difference between Rs. 36 9 0 per month which was paid to each one of them and Rs. 42 4 0 which was due to each one of them. This decision was announced on September 2, 1954. On July 11, 1955, the present respondents moved the authority under section 16 of the Act. They urged that they were semi clerks and occupied a position lower than that of a full fledged clerk and higher than that of an operative, and as such they were governed by cl. 5 of the agreement and were entitled to increment provided by the said clause. This claim was resisted by the appellant on several grounds. It was urged that the present applications were barred by res judicata, that the authority had no jurisdiction to entertain the applications, and that on the merits the respondents were not semi clerks as contemplated by cl. 5 of the agreement. On these contentions the authority raised four issues. It held against the respondents and in favour of the appellant on issues 1 and 2 which related to the plea of res judicata and the status of the respondents. In view of the said findings it thought it unnecessary to decide the two remaining issues which dealt with the quantum of amount claimed by the respondents. It appears that the question of jurisdiction, though urged in its pleading by the appellant, was not raised as an issue and has not been considered by the authority. The finding of res judicata was recorded against Punamchand and Vishnuprasad. Shamaldas had not made any previous application and so no question of res judicata arose against his application. His application was dismissed only on the ground that he could not claim the status of a 29 226 semi clerk. The same finding was recorded against the two other respondents. It appears that at the trial before the authority the parties filed a joint Pursis which enumerated the duties performed by the respondents in paragraphs 2 to 7. The authority took the view that "the duties performed by them cannot be said to be the duties of persons doing the routine work of writing, copying and making calculations". In the result it was held that the respondents were governed by the Standardisation Award and did not fall under the subsequent agreement. This decision was challenged by the respondents before the District Judge who was the appellate authority under the Act. The appellate authority also was asked to consider the question of jurisdiction. It examined the relevant provisions of the Act and held that the authority had jurisdiction to entertain the applications made before it by the respondents. On the question of res judicata it agreed with the finding of the authority, and held that the claims made by Punamchand and Vishnuprasad were barred by res judicata. Similarly, on the question of the status of the respondents it agreed that they were not semi clerks. It is clear from the judgment of the appellate authority that in determining the status of the respondents, the appellate authority applied the same test as was invoked by the authority, and it considered the question as to whether the duties performed by the respondents were similar to the duties performed by clerks. It is obvious that the tests applied are tests relevant to the employees falling under cl. 2 of the agreement, and since the application of the said tests led to the conclusion that the respondents did not fall under el. 2 the appellate authority held that el. 5 was inapplicable to them; in other words, the judgments of both the authority and the appellate authority clearly show that they took the view that el. 2 was wholly determinative of the issue, and that unless an. employee fell under cl. 2 he cannot claim to be covered by any part of the agreement including el. 5. That is why the appeals preferred by 227 the respondents were dismissed by the appellate authority on September 2, 1954. These appellate decisions were challenged by the respondents by filing a writ petition under articles 226 and 227 of the Constitution before the Bombay High Court. The Bombay High Court has held that the decision of the appellate authority was patently erroneous in law in that it proceeded on the assumption that unless cl. 2 of the agreement was satisfied cl. 5 would be inapplicable. It also held that the finding concurrently recorded by the authorities below on the question of res judicata against two of the respondents was manifestly erroneous. On these findings the High Court allowed the writ petition filed by the respondents, set aside the orders of the authorities below and sent the case back to the authority for dealing with it in accordance with law in the light of the judgment delivered by the High Court. It is against this decision that the appellant has preferred the present appeal by special leave. The first contention which the learned Attorney General has raised before us on behalf of the appellant is that the High Court has exceeded its jurisdiction under articles 226 and 227 in interfering with the decision of the appellate authority. He 'contends that at the highest the error committed by the appellate authority is one of law but it is not an error apparent on the face of the record, and he argues that it was not within the competence of the High Court to sit in appeal over the judgment of the appellate authority and examine meticulously the correctness or the propriety of the conclusions reached by it. The question about the nature and extent of the jurisdiction of the High Courts in issuing a writ of certiorari under article 226 has been the subject matter of several decisions of this Court. It is now well settled that the said writ can be issued not only in case,% of illegal exercise of jurisdiction but also to correct errors of law apparent on the face of the record. In this connection it may be pertinent to refer to the observations made by Denning, L.J., in Rex vs Northumberland Compensation Appeal Tribunal The (1) ; 228 writ has been supposed to be confined to the correction of excess of jurisdiction", observed Lord Justice Denning, "and not to extend to the correction of errors of law; and several judges have said as much. But the Lord Chief Justice has, in the present case, restored certiorari to its rightful position and shown that it can be used to correct errors of law which appear on the face of the record even though they do not go to jurisdiction". There is no doubt that it is only errors of law which are apparent on the face of the record that can be corrected, and errors of fact, though they may be apparent on the face of the record, cannot be corrected [Vide: Nagendra Nath Bora vs The Commissioner of Hills Division and Appeals, Assam (1)]. It is unnecessary for us to consider in the present appeal whether or not a certiorari can issue to correct an error of fact on the ground that the impugned finding of fact is not supported by any legal evidence. Thus it would be seen that the true legal position in regard to the extent of the Court 's jurisdiction to issue a writ of certiorari can be stated without much difficulty. Difficulty, however, arises when it is attempted to lay down tests for determining when an error of law can be said to be an error apparent on the face of the record. Sometimes it is said that it is only errors which are self evident, that is to say, which are evident without any elaborate examination of the merits that can be corrected, and not those which can be discovered only after an elaborate argument. In a sense it would be correct to say that an error of law which can be corrected by a writ of certiorari must be self evident; that is what is meant by saying it is an error apparent on the face of the record, and from that point of view, the test that the error should be self evident and should not need an elaborate examination of the record may be satisfactory as a working test in a large majority of cases; but,, as observed by Venkatarama Ayyar, J., in Hari Vishnu Kamath vs Syed Ahmad Ishaque, (2) "there must be cases in which even this test might break down because judicial opinions also differ, and an error that may be considered by one (1) ; (2) ; , 1123. 229 judge as self evident might not be so considered by another". Judicial experience, however, shows that, though it cannot be easy to lay down an unfailing test of general application it is usually not difficult to decide whether the impugned error of law is apparent. on the face of the record or not. What then is the error apparent on the face of the( record which the High Court has corrected by issuing a writ of certiorari in the present case? According to the High Court the construction placed by the appellate authority on cls. 2 and 5 of the agreement is patently and manifestly erroneous. The appellate authority held on a construction of the said two clauses that cl. 2 was the determinative clause, and that unless an employee satisfied the requirements of the said clause he could not claim the benefit of cl. 5. In deciding whether the High Court should have issued the writ or not it is necessary to examine the said two clauses. On looking at the two clauses it seems to us that the conclusion is inescapable that the error committed by the appellate authority is manifest and obvious. Clause 2 applies to clerks employed in the local mills, and as such it describes the nature of the work which is required to be done by persons falling under that clause. Clause 5, on the other hand, obviously provides for a separate scale for those employees who are not clerks nor operatives; these em ployees occupied a position higher than that of an operative and below that of a full fledged clerk. Therefore there is no doubt that persons falling under cl. 5 cannot fall under el. 2, and should not therefore be expected to satisfy the test prescribed by the said clause. A bare perusal of the list of employees specified by designation as falling under el. 5 will show that the application of the test which is relevant under el. 2 would in their case be wholly inappropriate and irrelevant. Therefore, in our opinion, the error committed by the appellate authority was of such a manifest character that the High Court was justified in correcting the said error by the issue of a writ of certiorari. The question involved in the decision of the dispute is not so much of construction of the document as of giving effect to the plain terms of the 230 document. If el. 5 expressly provides for employees ,,not falling under el. 2, and if that intention is clarified by the list of designations which fall under el. 5 and yet the appellate authority reads that clause as subject to cl. 2, that must be regarded as an error patent on the face of the record. It is not a case where two alternative conclusions are possible; it is a case of plain misreading of the two provisions ignoring altogether the very object with which the two separate provisions were made. In our opinion, therefore, the contention raised by the learned Attorney General that by issuing the writ the High Court has exceeded its jurisdiction is not well founded. That takes us to the second, and in fact the principal, contention which has been seriously argued before us by the learned Attorney General. He urged that the applications made by the respondents ' Union on behalf of the three employees were incompetent under section 15 of the Act and the authority exceeded its jurisdiction in entertaining them. It is true that this point was not specifically urged before the authority, but it appears to have been argued before the appellate authority and the High Court, and it is this contention which raises the problem of construing section 15 of the Act. The case for the appellant is that the jurisdiction conferred on the authority under section 15 is a limited jurisdiction, and it would be unreasonable to extend it on any inferential ground or by implication. The scheme of the Act is clear. The Act was intended to regulate the payment of wages to certain classes of persons employed in industry, and its object is to provide for a speedy and effective remedy to the employees in respect of their claims arising out. of illegal deductions or unjustified delay made in paying wages to them. With that object section 2(vi) of the Act has defined wages. Section 4 fixes the wage period. Section 5 prescribes the time of payment of wages; and section 7 allows certain specified deductions to be made. Section 15 confers jurisdiction on the authority appointed under the said section to hear and decide for any specified area claims arising out of deductions 231 from wages, or delay in payment of wages, of persons employed or paid in that area. It is thus clear that the only claims which can be entertained by the authority are claims arising out of deductions or delay made in payment of wages. The jurisdiction thus conferred on the authority to deal with these two categories of claims is exclusive; for section 22 of the Act provides that matters which lie within the jurisdiction ' of the authority are excluded from the jurisdiction of ordinary civil courts. Thus in one sense the jurisdiction conferred on the authority is limited by section 15, and in another sense it is exclusive as prescribed by section 22. In dealing with claims arising out of deductions or delay made in payment of wages the authority inevitably would have to consider questions incidental to the said matters. In determining the scope of these incidental questions care must be taken to see that under the guise of deciding incidental matters the limited jurisdiction is not unreasonably or unduly extended. Care must also be taken to see that the scope of these incidental questions is not unduly limited so as to affect or impair the limited jurisdiction conferred on the authority. While considering the question as to what could be reasonably regarded as incidental questions let us revert to the definition of wages prescribed by section 2(vi). Section 2(vi) as it then stood provided, inter alia, that 'wages ' means all remuneration capable of being expressed in terms of money which would, if the terms of the contract of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, and it includes any bonus or other additional remuneration of the nature aforesaid which would be so payable and any sum payable to such person by reason of the termination of his employment. It also provided that the word "wages" did not include five kinds of payments specified in clauses (a) to (e). Now, if a claim is made by an employee on the ground of alleged illegal deduction or alleged delay in payment of wages several relevant facts would fall to be considered. Is the applicant an employee of the opponent?; 232 and that refers to the subsistence of the relation between the employer and the employee. If the said fact is admitted, then the next question would be: what are the terms of employment? Is there any contract of employment in writing or is the contract oral? If that is not a point of dispute between the parties then it would be necessary to enquire what are the terms of the admitted contract. In some cases a question may arise whether the contract which was subsisting at one time had ceased to subsist and the relationship of employer and employee had come to an end at the relevant period. In regard to an illegal deduction a question may arise whether the lock out declared by the employer is legal or illegal. In regard to contracts of service some times parties may be at variance and may set up rival contracts, and in such a case it may be necessary to enquire which contract was in existence at the relevant time. Some of these questions have in fact been the subject matter of judicial decisions. (Vide: A. R. Sarin vs B. C. Patil (1), Vishwanath Tukaram vs The General Manager, Central Railway, V. T. Bombay (2); and Maharaja Sri Umaid Mills, Ltd. vs Collector of Pali (5)); but we do not propose to consider these possible questions in the present appeal, because, in our opinion, it would be inexpedient to lay down any hard and fast or general rule which would afford a determining test to demarcate the field of incidental facts which can be legitimately considered by the authority and those which cannot be so considered. We propose to confine our decision to the facts in the present case. What are the facts in the present case? The relationship of employer and employee is not in dispute. It is admitted that the three workmen are employed by the appellant, and do the work of bleach folders. These folders are classified into Uttarnars and Chadhavnars. Indeed, the items of work assigned to these categories of folders are admitted. The appellant contends that the employment of the three workmen is governed by the Award which is in operation, (1) (2) (3) 233 whereas the respondent Union contends that they are governed by cl. 5 of the subsequent agreement. It is common ground that both the Award and the agreement are in operation in respect of the persons governed respectively by them, so that it is not disputed by the appellant that the persons who are specified by their designation under cl. 5 would be entitled to, the benefit of the said clause and would not be governed by the Award. If an employee is called a cut looker by any mill he would naturally fall under cl. 5; in other words, all the specified categories of employees named by designation in that clause would not be governed by the Award though at one stage they were treated as operatives but they would be governed by cl. 5 of the agreement; and if a person bearing that designation applied under section 15 of the Act his application would be competent. The appellant 's argument, however, is that when the last part of el. 5 refers to other employees "who have not been included above but who can properly fall under the above category" no designation is attached to that class, and in such a case it would be necessary to enquire whether a particular employee can properly fall under the said category, and that, it is urged, means that such an employee cannot apply under section 15 but must go to the industrial court under the ordinary industrial law. Thus the controversy between the parties lies within a very narrow compass. An employee designated as a cut looker can apply under section 15 and obtain relief from the authority; an employee not so designated but falling under the said category by virtue of the work assigned to him, it is said, cannot apply under section 15 because the authority cannot deal with the question as to whether the said employee properly falls under the said category or not. In our opinion, on these facts, the question as to whether a particular employee is an operative falling under the Award or one who is above an operative and below the clerk falling under cl. 5 is a question which is so intimately and integrally connected with the problem of wages as defined under section 2(vi) that it would be unreasonable 30 234 to exclude the decision of such a question from the jurisdiction of the authority under section 15. If a contract of employment is admitted and there is a dispute about the construction of its terms, that obviously falls within section 15 of the Act. If that is so, what is the difference in principle where a contract is admitted, its terms are not in dispute, and the only point in dispute is which of the two subsisting contracts applies to the particular employee in question. If the appellant 's argument were to prevail it would lead to this anomalous position that if a general contract of employment provides for payment of wages to different categories of employees and describes the said categories by reference to the duties discharged by them, none of the employees can ever avail himself of the speedy remedy provided by section 15 of the Act. In such a case every time a dispute may arise about the duties assigned to a particular employee before his wages are determined. In our opinion, to place such an artificial limitation on the limits of the jurisdiction conferred on the authority by section 15 is wholly unreasonable. That is the view taken by the High Court in the present case and we see no reason to differ from it. The question about the nature and scope of the limited jurisdiction conferred on the authority under section 15 has been considered by this Court in the case of A. V. D 'Costa vs B. C. Patel (1). In that case the scheme of the Act has been examined by Sinha, J., as he then was, who spoke for the majority view, and it has been held that "if an employee were to say that his wages were Rs. 100 per month which he actually received as and when they fell due but that he would be entitled to higher wages if his claims to be placed on the higher wages scheme had been recognised and given effect to, that would not be a matter within the ambit of the authority 's jurisdiction. The authority has the jurisdiction to decide what actually the terms of the contract between the parties were, that is to say, to determine the actual wages; but the authority has no jurisdiction to determine the question of potential wages". The Court took the view that the employee 's (1) ; 235 complaint in that case fell within the latter illustration. It would thus be seen that according to this, decision the authority has jurisdiction to determine what the terms of contract between the parties are, and if the terms of the contract are, admitted and the only dispute is whether or not a particular employee falls within one category or another, that would be( incidental to the decision of the main question as to what the terms of the contract are, and that precisely is the nature of the dispute between the parties in the present case. The learned Attorney General has relied very strongly on the decision of the Bombay High Court in Anthony Sabastin Almeda vs R. M. T. Taylor(1). In that case the employer and the employee went before the Court on the basis of different contracts and the Court held that it was not within the jurisdiction of the authority to decide which of the two contracts held the field, which of them was subsisting, and under which of them the employer was liable to pay wages. It would be clear from the facts in that case that two rival contract,% were pleaded by the parties, according to whom only one contract was subsisting and not the other, and so the question for decision was which contract was really subsisting. We do not propose to express any opinion on the correctness of the view taken by the Bombay High Court on this question. All we are concerned to point out is that in the present appeal the dispute is substantially different. Both contracts admittedly are subsisting. The only point of dispute is: do the three workmen fall within the category of cut lookers or do they not If they do then cl. 5 applies; if they do not the Award will come into operation. That being so, we do not see how the decision in Almeda 's case (1) can really assist the appellant. In this connection we may point out that it is common ground that in Ahmedabad textile mills do not have a class of employees called cut lookers as in Bombay. The work of cut looking along with other kind of work is done by bleach folders and other (1) 236 folders. That was the finding made by the authority on an earlier occasion when Punamchand and Vishnuprasad had moved the authority under section 15 of the Act. The learned Attorney General has strenuously contended that it is unfair to give the same pay to the three workmen who are doing the work of cut lookers only for a part of the time and were substantially doing the work of bleach folders; that, however, has no relevance in determining the present dispute. The only point which calls for decision is whether or not the work done by the three respondents takes them within the category of cut lookers specified under cl. 5, and as we have already pointed out, on an earlier occasion the authority has found in favour of two of the three respondents when it held that they were folders doing cut looking. If the said finding amounts to res judicata it is in favour of the two respondents and not in favour of the appellant; that is why the learned Attorney General did not seriously dispute the correctness of the decision of the High Court on the question of res judicata. In the result the appeal fails and is dismissed with costs. Appeal dismissed.

An award, called the Standardisation Award, fixing the wages for different categories of workers in the textile mills at Ahmedabad was made by the Industrial Tribunal. The wages of clerks were, however, settled by a subsequent agreement bet ween the Ahmedabad Mill Owners ' Association and the Textile 221 Labour Association. Clauses 2 and 5 of the said agreement were as follows, " 2. That this agreement shall apply to all the Clerks employed in the local mills, i. e., persons doing clerical work, that is those who do routine work of writing, copying or making calculations and shall also include compounders and assistant compounders who are qualified and who are employed in the local mills. A separate scale for those of the employees who occupy the position lower than that of a full fledged Clerk but higher than that of an operative will be provided as under: Rs. 40 3 70 EB 4 90 5 105 This scale will be applicable in case of ticket checker, coupons seller, tally boy, scale boy, production checker, third counter, cloth measurer or yard counter, fine reporter, cloth/ yarn examiner, department store man, cut looker and those others who have not been included above but who can properly fall under the above category. " The respondents moved the Authority under section 16 of the (4 of 1936), for an order against the appellant for payment of. their delayed wages. They claimed to be semi clerks, lower than full fledged clerks but higher than operatives, and as such governed by cl. 5 of the agreement. The Authority held against them and the appellate Authority affirmed its decision holding that Cl. 2 Of the agreement determined the applicability of cl. 5 and since the respondents did not come within Cl. 2 they could not maintain their claim under cl. 5. The High Court, on an application under article 226 and article 227 of the Constitution, took a contrary view and set aside the orders of the Authorities and directed a rehearing. In this Court the appellant mills urged that (1) the High Court had exceeded its jurisdiction under articles 226 and 227 in setting aside the order of the appellate Authority and (2) the Authority had itself exceeded its jurisdiction under section 15 of the Act in entertaining the applications of the respondents made under section 16 of the Act. Held, that both the contentions must be negatived. The High Court has power under article 226 of the Constitution to issue a writ of certiorari not only in cases of illegal exercise of jurisdiction but also to correct errors of law apparent on the face of the record, although not errors of fact even though so apparent. No unfailing test can, however, be laid down when an error of law is an error apparent on the face of the record and the rule that it must be self evident, requiring no elaborate examination of the record, is a satisfactory practical test in a large majority of cases. Rex vs Northumberland Compensation Appeal Tribunal, ; and Nagendra Nath Bora V. Commissioner of Hills Division and Appeals, Assam, ; , referred to. 222 Viswanath Tukaram vs The General Manager, Central Railway, V. T., Bombay, , considered. A look at the two clauses is enough to show that the appel late Authority in construing them in the way it did committed an obvious and manifest error of law. It was clear that the two clauses applied to two distinct categories of persons and persons falling under cl. 5 could not be governed by cl. 2 and were not expected to satisfy the test prescribed by it. Under section 15 of the , the Authority in exercising its jurisdiction, made exclusive by section 22 of the Act, has necessarily to consider various questions incidental to the claims falling thereunder and, although it would be inexpedient to lay down any hard and fast rule for determining the scope of such questions, care should be taken not to unduly extend or curtail its jurisdiction. Whether a particular employee was an operative or one above the rank of an operative and below that of clerk arid, therefore within cl. 5 of the agreement, was a question intimately and integrally connected with wages as defined by the Act and as such fell within the jurisdiction of the Authority under section 15 of the Act. There could, therefore, be no substance in the contention that an employee falling within the category of those others mentioned in the last part of cl. 5, to whom no designation was attached, could not apply under section 15 of the Act. A. V. D 'Costa vs B. C. Patel, ; , referred to. Anthony Sabastin Almeda vs R. M. T. Taylor, (1956) 58 Bom. L.R. 899, distinguished.

This appeal by special leave was confined solely to the question of entitlement of interest on the amount awarded by the Arbitrator for the requisition of the premises under the . Disposing of the appeal, the Court, HELD: The principles upon which the compensation on this aspect is payable are by now well settled. This Court reit erated the principles in Satinder Singh and Ors. vs Amrao Singh and Ors., ; at 694; National Insurance Co. Ltd. Calcutta vs Life Insurance Corporation of India [1963] Supp. 2 SCR 971 at 992 and Hirachand Kothari (dead) through Lrs. vs State of Rajasthan & Anr., [1985] Suppl.1 SCR 644 at 655. [1046F; 1048C] In the light of the aforesaid decisions, the Court was of the opinion that the appellants herein were entitled to the interest for the period from March 1975 to the 31st July, 1987, when the principal amount of compensation had been paid and/or when the premises in question had been de requisitioned and handed back to the owner, on the amount awarded. The Court was of the opinion that for the period from March 7, 1975 to February 28, 1985 being the date on which the judgment of the High Court was pronounced in this case, the appellants were entitled to the interest on the amount awarded at the rate of 6 per cent per annum, and for the period from August 8, 1985 to July 31, 1987 for that period only at the rate of 12 per cent per annum. The interest would be payable only on the balance amount which remained to be paid to the appellants i.e. the amount due minus what had been paid from the respective dates. The Court directed that the amount be paid by the respondents within three months from the date of this judgment, and that in case there was any difficulty in calculating the amount, the 1046 parties would be at liberty to apply to the High Court. [1048C H] Satinder Singh & Ors. vs Amrao Singh & Ors., ; ; National Insurance Co. Ltd. Calcutta vs Life Insurance Corporation of India, [1963] Supp. 2 S.C.R. 971 at 992; Hirachand Kothari (dead) through Lrs. vs State of Rajasthan & Ors., [1985] Supp. 1 S.C.R. 644 and Inglewood Pulp and Paper Co. Ltd. vs New Burnswick Electric Power Commission, A.I.R. 1928 Privy Council 287, referred tO.

The appellant, an employee of the respondent Sahkari Bank was put under suspension and served with a chargesheet during the pendency of the reference under section 4K of the U.P. It was followed by a domestic inquiry leading to his dismissal. Thereupon he filed a complaint under section 6 F of the Act before the Industrial Tribunal and the same was treated as a dispute referred to it. The Tribunal found that principles of natural justice had not been followed in the domestic inquiry. However, proceeding further it asked the management to justify the order of punishment on merits. The parties led their evi dence and the Tribunal recorded a finding that charges levelled were established. The High Court dismissed the writ petition challenging the award. In the appeal by special leave, it was contended for the appellant that after the conclusion reached by the Tribunal that the domestic inquiry held by the employer was illegal, question of justification of the punishment by fresh materi als could arise only if the management had applied for permission to justify the punishment and, in the absence of such a prayer the Tribunal did not have the power to call upon the employer to do so, and that in any event the appel lant was entitled to his salary from the date of his dis missal to the date of the award. Allowing the appeal in part, the Court, HELD: 1. By asking the respondent to justify the punish ment by adducing additional evidence the Tribunal merely reminded the employer of his rights. There was no illegality in the course adopted which could vitiate the award. [225F] 412 Shankar Chakravarti vs Britannia Biscuit Co., [1979] 3SCR 1165, distinguished. If the order of punishment passed by the management is declared illegal and the punishment is upheld subsequent ly by a labour tribunal, the date of dismissal cannot relate back to the date of the illegal order of the employer. [225H] In the instant case, the Tribunal had initially found that the domestic inquiry was vitiated on account of viola tion of principles of natural justice. The appellant was, therefore, entitled to his salary from the date of his dismissal, to the date of the award. [225D & H] Gujarat Steel Tubes Ltd. vs Gujarat Steel Tubes Mazdoor Sabha, ; , applied.

An Industrial Dispute arose between the appellant and its workmen in respect of the claim made by the workmen (respondents) for bonus for the year 1959. The respondents claimed that they were entitled to get bonus equivalent to three months ' salary including dearness allowance, The appellant claimed deductions on the basis of the Full Bench 16 Formula. The appellant claimed deduction of Rs. 60,000 by way of notional remuneration for Mr. K. R. Podar, one of the Directors of the company. According to the appellant K. R. Podar devoted the whole of his time to the supervision and management of the appellant concern, and so, he was entitled to charge remuneration at the rate of Rs. 5,000 a month. The appellant also made a claim for rehabilitation. On these facts the Tribunal directed the appellant to pay to the respondents bonus at the rate of half month 's basic wages excluding allowances and overtime for the said year. It is against this award that the appellant has come to this Court. Held:(i) that in a concern like the appellant 's if one of the Directors spends his time in supervising and managing the affairs of the concern, he would be entitled to charge a reasonable remuneration. But in the present case Mr. Podar did not actually charge any remuneration. The working of the Full Bench Formula is no doubt notional in some respects, but it would not be permissible for the employer to make it still more notional by introducing claims for prior charges on purely hypothetical and almost fictional basis. The Tribunal did not feel justified in allowing the claim for deduction made by the appellant in regard to the notional remuneration of Mr. Podar on the ground that Mr. Podar had not been paid remuneration regularly and it had not been duly shown in the books of account. Gujarat Engineering Co. vs Ahmedabad Misc. Industrial Workers ' Union, and Kodaneri Estate vs Its Work men, , relied on. (ii)It is not the correct legal position that a second hand machinery should be rehabilitated only by second hand machinery. But in the present case the finding of the Tribunal in respect of the claim for rehabilitation is based on its appreciation of the evidence led by the appellant and that cannot be disturbed having regard to the material which is available on the record. SouthIndia Millowners"Association vs Coimbatore District Textile Workers 'Union, , relied on. (iii)It would be erroneous to assume that this Court approved of or affirmedthe ad hoc basis adopted by the Tribunal in the case of South India Millowners ' Association. (iv)It would be unreasonable to suggest that if the employer does not adduce sufficient evidence to justify his claim for rehabilitation and the Tribunal is inclined to reject the evidence which has been adduced, the Tribunal must nevertheless award some rehabilitation on a purely hypothetical and imaginary ad hoc basis. In the present case the employer adduced evidence for rehabilitation and that was rejected by the Tribunal. (v)It has been consistently held by this Court that in bonus calculations the employer is entitled to claim a deduction of the Income tax as well as wealth tax; but in the present case, there is, no material 17 to determine what the amount of wealth tax charged or paid is, and so, no relief can be granted to the appellant on that account.

Section 17(1) of the , makes it obligatory on the appropriate Government to publish the award received by it from the Industrial Tribunal; but, the provision in the section as to time, that the Government shall publish it within a period of thirty days from the date of its receipt, is merely directory and not mandatory. Therefore, where the Government received the award on 14th October 1966 and published it in the Gazette on the 15th November 1966, the award did not cease to be enforceable. [166F G] Observations in The Sirsilk Ltd. vs Government of Andhra Pradesh, ; , 452, explained. The State of Uttar Pradesh & Others vs Babu Ram Upadhya, ; , 710, followed. Erumeli Estate V. Industrial Tribunal, [1962] II L.L.J. 144, referred to.

Aggrieved by an Award of 195, the employees placed before the Company a fresh charter of demands which was mutually settled by a written agreement which provided, inter alia, that the existing rate of dearness allowance should prevail which was adjustable to any future substantial change in the cost of living index of the working class. As the cost of living increased disputes arose, and in spite of the said Award of 1951, 137 which was not terminated according to law, the dispute arising out of the said written agreement was referred for adjudication by the Government to the Second Industrial Tribunal, Calcutta, in September, 1956. In April 1957, the Government transferred the dispute from the Second Industrial Tribunal to the Fifth Industrial Tribunal. The Company, inter alia, contended that the Government had no power to transfer the dispute from one Tribunal to another and that the reference was bad as the 1951 Award had not been duly terminated. The Industrial Disputes (Amendment and Miscellaneous Provisions) Act (36 of 1956) amending the Industrial Disputes Act (14 Of 1947) came into force on August 28, 1956, giving authority to the Government to transfer a reference from one Tribunal to another, which was followed by a further amending Act, being Industrial Disputes (Amendment) Act (18 of 1957) whereunder among other things a new definition of 'Tribunal ' was given, whereby the Industrial Tribunal constituted prior to March 10, 1957, under section 7A of Act 14 Of 1947 was included. Held, that as a result of the amendments to the , the Government had authority to transfer a case from one Tribunal to another. 'Tribunal ' as defined by section 2(r) of the , as amended by Act 36 of 1956, read with amending Act 18 of 1957, empowers the Government to transfer a reference from one Tribunal to another. Where, in spite of a previous award, the employees after raising fresh demands entered into a new agreement with the employer which started a fresh chapter regulating the relationship of the parties, the previous award, though not terminated in accordance with the provisions of law, must be deemed to have been superseded. Held, further, that though article 136 of the Constitution is couched in the widest terms and confers a discretionary power, (which cannot exhaustively be defined) on the Supreme Court to grant special leave to appeal from the order of a tribunal, but it is necessary for the Supreme Court to exercise its said discretionary jurisdiction only in cases (a) where there is a violation of the principle of natural justice, (b) raises an important principle of industrial law requiring elucidation and final decision by the Supreme Court, or (c) discloses such other exceptional or special circumstances which merit the final decision by the Supreme Court. Such discretionary reserve power cannot obviously be so construed as to confer a right of appeal to any party from the decision of a Tribunal, where he has none under the law. is intended to be a self contained one and it seeks to achieve social justice on the basis of collective bargaining, conciliation and arbitration. Awards are given on circumstances peculiar to each dispute and the Tribunals are to a 18 138 large extent free from restrictions of technical considerations imposed on courts. A free and liberal exercise of the discretionary powers by the Supreme Court may materially affect the fundamental basis of the decision, namely, quick solution to such disputes to achieve industrial peace. Where an Industrial Tribunal on the consideration of the entire material placed before it and having regard to the overall picture, came to a conclusion of facts, the Supreme Court will not interfere with such finding of fact nor will it be justified to allow to make a new case for the first time before it. Pritam Singh vs State of Madras, ; ; Hem Raj vs State of Ajmer, and Sadhu Singh vs State of PEPSU, A.I.R. 1954 S.C. 272, referred to.

The appellant company, carrying on business in manufacturing and selling textiles at Baroda, received in the assessment years 1942 43 and 1943 44 payments in cheques from the Government of India for the supply of such goods on bills submitted, as agreed upon in prescribed printed forms which provided that the Government should pay the amount due to the appellant by cheque. The appellant, however, did not request or write to the Government indicating in what way the payment by cheque was 237 to be made. The Government sent the cheques from Delhi by post to the appellant at Baroda and it received and accepted them in Baroda in full and unconditional satisfaction of its claim and cashed them through its bank accounts in Bombay and Ahmedabad. The question was whether the amounts of the cheques were income, profits and gains received by the appellant in the taxable territories and were as such liable to tax under section 4(1)(a) of the Indian Income tax Act. The Income tax Officer held that the amounts were received in British India as the cheques were drawn on banks in British India and the Appellate Assistant Commissioner on appeal affirmed his order. The Income tax Appellate Tribunal on appeal held that even though the appellant did not ask the Government to send the cheques by post, there was an implied request to do so and following the decision of this Court in Commissioner of Income tax, Bombay South vs Messrs. Ogale Glass Works Ltd. [1955] I S.C.R. 185, held that the amounts of the cheques were received in the taxable territories and as such the appellant was liable to tax under section 4(1)(a) of the Act. Hence these appeals by special leave. The question for decision was whether in the facts and circumstances of the case the stipulation that payments should be made by cheques implied a request by the appellant to the Government to send the cheques by post so as to constitute the Post Office its agent for receiving such payments. Held, that regard being had to the general course of business usage which was followed in this case, there could be no doubt that the parties intended that the cheques should be sent by post which was the normal agency for transmission of such articles and, consequently, there was an implied request by the appellant to the Government to send the cheques by post so as to constitute the Post Office its agent for the purpose of receiving those payments. Commissioner of Income tax, Bombay South vs Messrs. Ogale Glass Works Ltd. [1955] I S.C.R. 185 and Norman vs Rickets, , applied. Pennington vs Crossley and Sons (Limited), [1879] 13 T.L.R. 513, considered. Thorappa vs Umedmalji and Exparte Cote In ye Deveza, , distinguished.

This appeal to the Supreme Court was from a reversing decree of the Bombay High Court in a suit for possession of certain immovable properties. The suit was dismissed by the trial court on 20 12 1946, the value of properties being found to be over Rs. 10,000. The decree of the High Court allowing the plaintiff 's claim was passed on the 8th November 1949. The defendants applied to the High Court for leave to appeal to the Federal Court on 6 1 1950 which was granted on 1 10 1951. One of the questions for determination was whether article 133 of the Constitution applied to the case and the appeal was competent to the Supreme Court. Held, that article 133 did not apply as it relates expressly to appeals against any judgment, decree or final order in a civil proceeding of a High Court in the "territory of India". Held further that on the date of the decree of the High Court, the defendants had a vested right of appeal to the Federal Court as the properties were of the requisite value and on 6 1 1950 a certificate of leave to appeal was bound to be granted. Held also that the appeal was competent to the Supreme Court by virtue of the provisions of article 135 of the Constitution as the jurisdiction and powers in relation to the matter in dispute were exercisable by the Federal Court immediately before the commencement of the Constitution under an existing law inasmuch as the Federal Court had jurisdiction to entertain and hear appeals from a decree of a High Court which reversed the lower court 's decree as regards properties of the value of more than Rs. 10,000. The construction contended for by the respondent that the jurisdiction was exercisable under article 135 by the Federal Court only if the matter was actually pending before the Federal Court and that it could not be said to be pending until the appeal is declared admitted under Order XLV of the Civil Procedure Code is 873 too narrow and does not give full and proper scope to the meaning of the word 'exercisable ' in the Article.

Appeal No. 279 of 1959. Appeal by special leave from the judgment and order dated November 18, 1957, of the Kerala High Court in O. P. No. 87 of 1956. A. V. Sayed Muhammad, for the appellants. The respondents did not appear. 182 1960. December 12. The Judgment of the Court was delivered by HIDAYATULLAH, J. This is an appeal with the special leave of this Court against the judgment of the High Court of Kerala dated November 18, 1957, passed in a petition for writ of prohibition under article 226 of the Constitution. The State of Kerala and the Tahsildars of Kottayam and Kanjirappally Taluks are the appellants, and C.M. Francis & Co., a partnership firm, is the first respondent, and the partners of the firm are the remaining respondents. The respondents were doing business in hill produce like pepper, ginger, betelnuts etc., and were assessed to sales tax under the Travancore Cochin General Sales Tax Act XI of 1125 (referred to as the Act), for the years 1950 to 1954. The respondents have to pay a sum of Rs. 1,01,716 4 3 as tax. In 1954, proceedings were started against them under section 13 of the Act, which provides that if the tax is not paid as laid down in that section, the whole of the amount or such part thereof as remains due, may be recovered as if it were an arrears of land revenue. It appears that the pro ceedings were not fruitful, and a prosecution under section 19 of the Act was instituted against the partners in the Court of the First Class Magistrate, Ponkunnam. Respondents 2 to 5 pleaded guilty, and the Magistrate passed an order on October 18, 1955 as follows: "The sentence or other final order: A 1 to 4 sentenced to pay a fine of Rs. 50/ each and in default to undergo section 1. for one month each. A 1 to 4 admit that they failed to pay on demand by the competent authority, a sum of Rs. 1,01,716 4 3 due from them as sales tax for the years 1950 to 1954. This amount will be realised from A 1 to 4, jointly or severally, individually or collectively under the provisions of the Cr. P.C. for realisation of criminal fines, as if it were a fine imposed by this court on each accused individually and all of them together. Take steps for the realisation. " Warrants under section 386 (1) (b) of the Code of Criminal Procedure were issued to the Collector of Kottayam District for recovery of the arrears of sales tax. 183 The authorities, however, started proceedings again under section 13 of the Act read with the provisions of the Travancore Cochin Revenue Recovery Act, 1951 (VII of 1951), to recover the amount as arrears of land revenue, and attached some properties belonging to the respondents within the jurisdiction of the second and third appellants, the Tahsildars of Kottayam and Kanjirappally Taluks. The firm thereupon filed the petition under article 226 of the Constitution for a writ of prohibition or other order or direction to the effect that the proceedings for realisation of the arrears under the Revenue Recovery Act be quashed. In the petition, the respondents urged that inasmuch as they were prosecuted under section 19 of the Act and the Magistrate had issued warrants, the procedure for recovery under section 13 was not available. They contended that under section 386 of the Code of Criminal Procedure the warrant is to be deemed to be a decree and has to be executed according to civil process applicable to the execution of decrees under the Code of Civil Procedure. They, therefore, submitted that the procedure under section 19 of the Act was no longer open, and could not be proceeded with. Section 19 of the Act, so far as it is material, reads as follows: "Any person who. . . . (b) fails to pay within the time allowed, any tax assessed on him under this Act, or (d)fraudulently evades the payment of any tax assessed on him. . shall on conviction by a Magistrate of the first class, be liable to a fine which may extend to one thousand rupees and in the case of a conviction under clause (b), (d) the Magistrate shall specify in the order the tax which the person convicted has failed or evaded to pay and the tax so specified shall be recoverable as if it were a fine under the Code of Criminal Procedure for the timebeing in force. " In dealing with the question, the learned Judges of the High Court felt that section 13 of the Act was in the 184 nature of a general law, over which the special procedure prescribed by section 19 of the Act read with section 386 of the Code of Criminal Procedure was to prevail. They, however, thought that, since all the processes available under section 19 of the Act were also available under section 386 of the Code of Criminal Procedure, it was not necessary to decide what would happen if the proceedings under section 386 came to nothing. They observed that if the question arose, they would consider it. The writ of prohibition was granted by the High Court. The respondents did not appear in this Court. We have heard learned counsel for the appellants, who has drawn our attention to all the relevant provisions of the law. The question which arises is whether section 19 must be taken to prevail over section 13 of the Act. Both the sections lay down the mode for recovery of arrears of tax, and, as has already been noticed by the High Court, lead to the application of the process for recovery by attachment and sale of movable and immovable properties, belonging to the tax evader. It cannot be said that one proceeding is more general than the other, because there is much that is common between them, in so far as the mode of recovery is concerned. Section 19, in addition to recovery of the amount, gives the power to the Magistrate to convict and sentence the offender to fine or in default of payment of fine, to imprisonment. In our opinion, neither of the remedies for recovery is destructive of the other, because if two remedies are open, both can be resorted to, at the option of the authorities recovering the amount. It was observed by Mahmood, J. in Shankar Sahai vs Din Dial (1) that where the law provides two or more remedies, there is no reason to think that one debars the other and therefore both must be understood to remain open to him, who claims a remedy. Unless the statute in express words or by necessary implication laid down that one remedy was to the exclusion of the other, the observations of Mahmood, J. quoted above must apply. In our opinion, in the absence of any such provision in the (1) I.L.R. (1889) 12 All 409 (F.B.), 418. 185 Act,, both the remedies were open to the authorities, and they could resort to any one of them at their option. The appeal is allowed, and the judgment of the High Court set aside. Though the respondents did not appear, in the circumstances of the case we think we should make an order that the costs shall be paid by them both here and in the High Court. Appeal allowed.

The respondents were assessed to sales tax under the Travancore Cochin General Sales Tax Act and proceedings were started against them under section 13 of the Act for the recovery of the arrears of Sales Tax as if they were arrears of land revenue. The proceedings were not fruitful. Thereafter a prosecution under section 19 of the Act was instituted against the partners who pleaded guilty and the magistrate issued warrants under section 386(1)(b) of the Code of Criminal Procedure to the Collector of the District for the recovery of the arrears of sales tax as if they were a fine imposed by that court. The authorities again started proceedings under section 13 of the Act read with Travancore Cochin Revenue Recovery Act, 1951, and certain properties were attached. The respondents urged that in as much as they were prosecuted under section 19 of the Act and the magistrate had issued warrants, the procedure for recovery under section 13 of the Act was not available. The question was whether section 19 was to be taken to prevail over section 13 of the Act. Held, that neither of the remedies for recovery of arrears of tax as laid down by sections 13 and 19 of the Travancore Cochin General Sales Tax Act was destructive of each other and unless the statute laid down in express words or by necessary implication that one remedy was to the exclusion of the other, both the remedies were open to the authorities and they could resort to any one of them at their option. Shankar Sabai vs Din Dial, I.L.R. [1889] 12 All. 409 (F.B.), 418,approved.

The Settlement Officer under the Madras Estates (Abolition and Conversion into Ryotwari) Act, 1948 suo motu made an inquiry as to whether a particular village notified by the State Government was an estate or not within the contemplation of section 9(2) of the Act and held that it was not an "inam estate" within the meaning of section 2(7) of the Abolition Act but that the village became an estate by virtue of Madras Estates Land (3rd Amendment) Act, 1936. Ther appellants unsuccessfully appealed to the Estate Abolition Tribunal. The appellant then instituted a suit (O.S. 47 of 1953) against the State Government for a declaration that the village was not an "estate" under section 3(2)(d) of them Madras Estates Land Act, 1908 and consequently Madras Estate (Reduction of Rent) Act, 1947 and the Abolition Act were not applicable to it. The trial court decreed the suit. The State Preferred an appeal. During the pendency of the appeal the appellant filed a suit (O.S. No. 101 of 1954) against the respondents for recovery of certain amount as rent or damages in respect of lands cultivated by them in the village in dispute. The respondents contended that the village was an estate within the meaning of the Act and that it had been so held by the Settlement Officer. Ultimately both the parties filed a joint memo on 26th March, 1958 that they would abide by the decision of the High Court or the Supreme Court in the appeal or revision arising out of the suit (O.S. 47/53) on the question whether the village was or was not an "estate" under, section 3(2)(d) of the Madras Estates Land Act. The High Court (in A.S. No. 668 of 1954 which was an appeal arising out of O.S. 47 of 1953) confirmed the decree of the trial court that the village in dispute was not an 'estate '. The State did not appeal, with the result that the High Court 's decision became final and the decree dated 28th March, 1958 became, effective. Against the decree of 28th March, 1958 the appellants preferred an appeal (A.S. 239 of 1961) to the High Court. The appeal related only to the extent of the land in the possession of the respondents and the quantum of rent or damages. The appellants ' claim was that the entire land was under cultivation of the respondents and so the lower court was wrong in not decreeing the appellants ' claim for rent or damages in toto. The respondents raised a preliminary objection at the time of hearing of the appeal that the suit itself was incompetent as the Civil Court had no jurisdiction to decide whether the suit village was an estate or not and, therefore, any (decision given by the High Court would not bind the parties and the decree in O.S. 101 of 1954 would be without Jurisdiction rendering it null and void and that the Settlement Officer was the competent authority to decide the tenure of the village and his deci sion had become final in view of the introduction of section 9A by Act 20 of 1960. The High Court upheld the preliminary objection of the respondents and rejected the contentions of the appellants that since section 9A was inserted by an amendment which came into force on 23rd June, 1960, it could not affect the compromise decree of the court passed on March 28, 1958 or the decree of the High Court by which both the parties agreed to abide by the decision of the High Court or the Supreme Court in appeal or revision arising out of O.S. 47 of 1953. The High Court held that the Civil Court was not the forum for the suit as framed by the appellants and the questions raised in the suit L748SuP CI/74 656 including the claim for arrears of rent or damages, were outside the jurisdiction of the Civil Court, and so dismissed the appeal. Allowing the appeal, HELD:1 (a) There is no doubt that the question was within the competence of the Civil Court. Under the Abolition Act, as it stood at the material date, the inquiry of the Settlement Officer could legitimately be confined to the ascertainment of only two disputes of fact, viz., (i) Was the village an "inam village"? (ii) If so, was it an 'Inam Estate ' as defined in section 2(7) of the Abolition Act ? Once issue (ii) was determined, the inquiry would be complete and the limits of his exclusive jurisdiction circumscribed by section 9(1) reached; if he went beyond those limits to investigate and determine something which is unnecessary or merely incidental or remotely related to issue No. (ii), 'then such incidental or unnecessary determination could be questioned in a Civil Court. [668FG] (b) Any finding recorded by the Settlement Officer regarding the property in question being an 'inam village ' or not, ' is not final or conclusive it being a finding of a jurisdictional fact only, the Preexistence of which is a sine qua non to the exercise of his exclusive jurisdiction by the Settlement Officer. [668H] (c) The legislature must have visualised that under the cloak of an erroneous finding as to the existence or nonexistence of this prerequisite, the Settlement Officer may illegally clutch at jurisdiction not conferred on him or refuse to exercise jurisdiction vesting in him. Perhaps that is why the statute does not leave the final determination of this preliminary fact to the Settlement Officer/Tribunal and his erroneous finding on that fact is liable to be questioned in a Civil Court. Once it is held that determination of this fact is not a matter of the exclusive jurisdiction of the Settlement Officer, the appellants cannot be debarred on the basis of any doctrine of res judicata from getting the matter fully and finally adjudicated by a court of competent jurisdiction. [669B C; E] Addanki Tiruvenkata Tata Desika Charyulu vs State of Andhra Pradesh A.I.R. 1964 S.C. 807 followed. District Board, Tanjore vs Noor Mohammed, (1952) 2 MJ. 586 (S.C.) referred to. (2) It is well settled that ordinarily when the substantive law is altered during the pendency of an action, rights of the parties are decided according to law, as it existed when the action was taken unless the new statute shows a clear intention to vary such rights. A plain reading of the impugned Act would show that there was nothing of this kind which expressly or by necessary intendment affects pending actions. [67OC D] (b) There is no non obstante clause in the amending Acts 17 and 18 of 1957 with reference to pending or closed civil actions. These amending Acts ' were published in the government gazette of December 23, 1957 and will therefore be deemed to have come into force from that date only. They could therefore be construed as having prospective operation only. [67OG H] (c) In the Amending Act 20 of 1960 also no back date for its commencement has been mentioned. It will, therefore, be deemed to have commenced on June 23, 1960 which is the date on which it was published in the Government gazette. [674E] Section 9A takes in its retrospective sweep only those decisions of the Settlement Officer or the Tribunal which at the commencement of 'the Amending Act 20 of 1960 were subsisting and had not been totally vacated or rendered non est by a decree of a competent court. [675 F] In the instant case the decision of the Settlement Officer dated September 2, 1950 was not such a decision. It had ceased to exist as a ' result of the inter linked decree in O.S. 47 of 1953 and O. section 101 of 1954 passed before the enactment of the Amending Act. The Amending Act of 1960, therefore, does not in any way affect the finality or the binding effect of those decrees. [675G] 657 (d) Order 23 rule 3 C.P.C. not only permits a partial compromise and adjustment of a suit by a lawful agreement, but further gives a mandate to the court to record it and pass a decree in terms of such compromise or adjustment in so far as it relates to the suit. If the compromise agreement was lawful the decree to the extent it was a consent decree was not appealable because of the express bar in section 96(3) of the Code. [672E] Raja Sri Sailendra Narayan Bhanja Deo vs State of Orissa ; , Shri Prithvi Cotton Mills Ltd. vs Broach Borough Municipality and Reid vs Reid at 408, followed. (e) In any suit the parties, in order to avoid unnecessary expenses and botheration, could legitimately make an agreement to abide by a determination on the same point in issue in another pending action in an advanced stage There was nothing unlawful and improper in such an arrangement particularly when the interests,of the respondents were sufficiently safeguarded by the State. By no stretch of reasoning it could be said that the agreement was collusive or was an attempt, to contract out of the statute. In the instant case as soon as the parties made the agreement to abide by the determination in the appeal (A. section 668) and induced the court to pass a decree in terms of that agreement the principle of estoppel underlying section 96(3) C.P.C. became operative and the decree to the extent it was in terms of that agreement became final and binding between the parties. It was as effective in creating an estoppel between the Parties as a judgment on contest. [672F C & 673C] In the instant case that part of the decree in suit No. 101 of 1954 and the appeal from that decree could not be said to be a continuation of that part of the claim which had been settled by agreement. The combined effect of the two integrated decrees was to completely vacate and render non est decision dated September 2, 1950 of the Settlement Officer. [673F] Raja Sri Sailendra Narayan Bhanja Deo vs State of Orissa ; applied. Per Krishna Iyer, J. concurring Courts have to be anchored to well known canons of statu tory construction and if they are out of tune With the law maker 's meaning and purpose the legitimate means of setting things right is to enact a new Interpretation Act. [678B] The Indian Constitution, adopting the fighting faith of equal I protection of the laws to all citizens, necessarily contemplates a new jurisprudence where vested rights may be, and often times are, extensively interfered. with for achieving the founding fathers ' social goals. Legislative exercises directed towards distributive justice as in the present case, cannot be considered in the light of dated value system, though sanctified by bygone decisions of Courts. [677H] In the present case the Act in question is clear about its intent and its application gives little difficulty.

Section 126 of the Calicut City Municipal Act 30 of 1961 provided for the levy of a timber tax on timber brought into the city. The proviso to the section exempted from the levy any timber brought into the city in the course of transit to any place outside the city and directly removed out of the city by rail, road or water. On a petition filed by the appellants, a single bench of the Kerala High Court held that the legislature was incompetent to enact section 126. But this decision was reversed in appeal by a division bench. It was contended in the appeal to. this Court the High Court had wrongly considered that entry of timber into the Municipal area could only be for consumption, use, or sale within the Municipality or in the course of transit through the limits of the Municipality; such entry could be for storage or other purposes and a provision levying tax on goods entering the area. of the Municipality without specification of the purpose was beyond the legislative powers of the State under entry 52, List II of the 7th schedule to the Constitution. HELD: Dismissing the appeal, If the State Legislature was competent under Entry 52 List II to levy a tax only on the entry of goods for consumption, use or sale into a local area, the Municipality could not under legislation enacted in exercise of the power conferred by that Entry have power to levy tax in respect of goods brought into the local area for purposes other than consumption, use or sale. The authority of the State Legislature itself being subject to a restriction in that behalf, section 126 may reasonably be read as subject to the same limitations. When the power of the Legislature with limited authority is exercised in respect of a subject matter, but words of wide and general import are used, it may reasonably be presumed that the Legislature was using the words in regard to that activity in respect of which it is competent to legislate and no other; and that the Legislature did not intend to transgress. the limits imposed by the Constitution. [632 B E] In re Hindu Women 's Rights to Property Act, 1937, ; referred to. The expression "brought into the city" in section 126 was rightly interpreted by the High Court as meaning brought into the municipal limits for purposes of consumption, use or sale and not for any other purpose.

The appellants, in execution of a decree passed in a suit filed by them under section 180 of the U.P. Tenancy Act, 1939, on December 2, 1948 took back possession of the land in dispute from the respondent Nos. 4 and 5 (respondents for short). On the advent of the U.P. Zamindari Abolition and Land Reforms Act, 1950 ( '1950 Act ' for short) the respondents moved an application under section 232 of the 1950 Act to regain possession of the land on the ground that they hand acquired the status of adhivasis udder that Act. The Assistant Collector dismissed the application. The respondents appealed to the Additional Commissioner. The appellants contended that since the village in which the land in dispute was situated was put into consolidation under the U.P. Consolidation of Holdings Act, 1953 ( '1953 Act ' for short), the Additional Commissioner had no jurisdiction to hear the appeal. The appellants also submitted that a statement under section 8 and 8A of the 1953 Act was published in which they were shown as bhumidars of the land in question and the respondents had not objected to the entries. The Additional Commissioner, by his order dated June 15, 1956, allowed the appeal. Pursuant to that order the entries in the said statement were corrected and the respondents acquired possession of the land. The Board of Revenue, before whom the Additional Commissioner 's order was challenged, held that the Additional Commissioner had no jurisdiction to hear the appeal on merits. On September 11, 1958 the appellants moved an application under section 144 of the Code of Civil Procedure before the Sub Divisional officer praying for restitution of possession. This application and the subsequent appeals were rejected by the authorities. Dismissing a writ petition filed by the appellants the High Court held that the proceedings under section 144 of the Code of Civil Procedure could not succeed, but since the decision recorded by the authorities under the 1953 Act had become final, it was always open 288 to the petitioners to move the first appellate court to decide the appeal in terms of the decision of the consolidation authorities. Thereupon, in August 1966, the appellants filed a suit under sections 209 and 229 (b) of the 1950 Act against the respondents for a decree for possession on the ground that they were bhumidhars of the land in question under the 1950 Act. The Assistant Collector decreed the suit. The Additional Commissioner allowed the appeal filed by the respondents. The Board of Revenue dismissed the appellants ' second appeal. The appellants filed a writ petition in the High Court. A single Judge of the High Court dismissed the writ petition. A Division Bench of the High Court dismissed the special appeal filed by the appellants. Hence this appeal. The respondents contended: (i) that the suit was barred by limitation and the appellants were not entitled to the benefit of section 14(1) of the ; and (ii) that the suit was barred by section 49 of the 1953 Act. Dismissing the appeal, ^ HELD. 1. The party seeking benefit of section 14 (1) of the must satisfy the three conditions laid down in the section, namely, (i) that the Party as the plaintiff was prosecuting another civil proceeding with due diligence (ii) that the former proceeding and the later proceeding relate to the same matter in issue; and (iii) that the former proceeding was being prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it.[297G H] 2. The expression 'other cause of a like nature ' will have to be read ejusdem generis with the expression 'defect of jurisdiction '. So construed the expression other cause of a like nature must be so interpreted as to convey something analogous to the preceding words from defect of jurisdiction '. The defect of jurisdiction goes to the root of the matter as the court is incompetent to entertain the proceeding. The proceeding may as well fail for some other defect. Not all such defects can be said to be analogous to defect of jurisdiction. Therefore, the expression other cause of a like nature on which some light is shed by the Explanation (C) to section 14 which provides "misjoinder of parties or causes of action shall be deemed to be a cause of like nature with defect of jurisdiction", must take its colour and content from the just preceding expression, defect of jurisdiction '. Prima facie it appears that there must be something taking to a preliminary objection which if it succeeds, the court would be incompetent to entertain the proceeding on merits. Such defect could be said to be of the like nature ' as defect of jurisdiction. Coversely if the party seeking benefit of the provision of section 14 failed to get the relief in earlier proceeding not with regard to anything connected with the jurisdiction of the court or some other defect of a like nature, it would not be entitled to the benefit of s 14. [300C G] India Electric Works Ltd. vs James Mantosh & Anr., ; , referred to. In a proceeding under section 144 of the Code of Civil Procedure, the party applying for restitution has to satisfy the court of first instance that a decree under which it was made to part with the property is varied or reversed or modified in appeal or revision or other proceeding or is set aside or modified in any suit instituted for the purpose and therefore, restitution 289 must be ordered. In such a proceeding, the party seeking restitution is not required to satisfy the court about its title or right to the property save and except showing its deprivation under a decree and the reversal or variation of the decree. [298C D; E] 4. In the instant case, the High Court rightly declined to grant benefit of the provision of sec 14 of the to the appellants because the second and third condition laid down in section 14 (1) were not satisfied. It may be assumed that the earlier proceeding under section 144 of Civil Procedure Code was a civil proceeding for the purpose of section 14 (1) and that the appellants were prosecuting the same with due diligence. But it is difficult to accept that the subsequent proceeding relates to same matter in issue as was involved in the earlier proceeding. The appellants merely claimed in their application under section 144 that in view of the reversal of the order by the Board of Revenue the respondents are not entitled to retain possession and that restitution should be evicted because the appellants lost possession under the order of the Additional Commissioner which was reversed by the Board of Revenue. The cause of action was the reversal of the order of the Additional Commissioner. When they failed to obtain restitution, the appellants filed a substantive suit under sections 209 and 229 (b) of the 1950 Act. It was a suit on title as bhumidars for possession against respondents alleging unauthorised retention of possession. It had nothing to do with the order of the Additional Commissioner. Moreover, the appellants failed in the earlier proceeding not on the ground that the authority had no jurisdiction to entertain the application nor on the ground that there was any other defect of a like nature, but on merits inasmuch as the authorities and the High Court held that in view of the decision of the authorities under 1953 Act, the appellants are not entitled to restitution. [301B; 299A; 298G H; 299A] 5. Once an allotment under section 49 of the U.P. Consolidation of Holdings Act, 1953 became final, a suit would not lie before a civil or revenue court with respect to rights in lands or with respect to any other matter for which a proceeding could or ought to have been taken under that Act. [301G] 6. In the instant case, once the village was denotified, as found by the authorities and the High Court the allotment made under the 1953 ACI became final and it could not be questioned in a suit before civil or revenue Court in view of the bar enacted in section 49. [302A B] 7. The appellants ' submission that after reversal of the Additional Commissioner 's order dated June 15, 1956 the respondents had neither a legal nor equatable right to be in possession, has no force. Assuming that the appellants had acquired the status of bhumidars the same was subject to the provision contained in section 20 (b) read with Explanation I of the U.P. Zamindari Abolition and Land Reforms Act, 1950 according to which, as correctly found by single Judge of the High Court, the respondents would become adhivasis of the land. Such adhivasis if they had lost possession were entitled to regain the same by making an appropriate application under section 232 of that Act. The respondents did move such an application which ultimately was accepted by the Additional Commissioner. Therefore, primarily, legally and additionally in equity, respondents have an iron clad case to be in possession against appellants. [294H; 296D G] 290

The assessee appellant had associated himself with the India Gospel Mission while he was getting his education in the United States of America during 1953 to 1957 and was propagating the ideals of Indian Christian Crusade, U.S.A., an Institution sponsoring religious education in India. The India Gospel Mission was collecting money for its working abroad through the Indian Christian Crusade. On returning to India in January 1957 he started publishing a religious magazine called "Viswa Deepam" and in 1959 started publishing Malyalam daily newspaper called "Kerala Dhwani". In the assessment year 1960 61 he filed a return disclosing a 1088 of Rs. 1,59,894 under the head 'business '. While scrutinising the accounts, the Income Tax Office found amounts totalling Rs. 2,90,220 credited in the assessee 's accounts. Since the names and other details of persons who had donated the amounts were not available it had to be presumed that the amounts had been given to the assessee by the Indian Christian Crusade, U.S.A. and therefore, the Income Tax Officer rejected the contention of the assessee that the amounts received by him were purely personal gifts and testimonials made voluntarily and held that the so called donations were payments by way of remuneration for the work done by the assessee in connection with the spreading in India, of the ideals of the Indian Christian Crusade, U.S.A. and that these amounts were connected with the business of the assessee and were liable to be taxed as his business Income. He, therefore, brought to tax Rs. 2,90,220 which had been received during the assessment year 1960 61. For the assessment year 1961 62 the assessee had received similar amounts totalling to Rs. 3,63,750 through the Indian Christian Crusade, U.S.A. and Income Tax Officer treated this amount also as business income and brought the same to tax. 937 The assessee filed appeals and the Appellate Assistant Commissioner while dismissing the appeals held that the assessee was a journalist and it was his avocation or vocation to propagate Christian ideas and ideals and that the assessee during the stay in U.S.A. and after his return was engaged in a movement for the spread of religion and for fighting the forces of atheism. In further appeal, the tribunal held that the amounts did not represent remuneration or payments for services rendered, and that the receipts were clearly casual and non recurring and did not arise in the course of the exercise of any vocation. The Tribunal referred the matter to the High Court, which held that the receipts of casual and non recurring nature would not be included in the total income of a person. But if there was receipts arising from the exercise of vocation, these would be included in the total income, even if these were of a casual or non recurring nature or voluntary and the receipts resulting from such payments would be outside section 4(3)(vii) of the Income Tax Act, 1922. Since there was link between the activity of the assessee and the payments and the same were made by those who held similar views and who were interested in the propagation and the acceptance of those views by the general public, the receipts, therefore, arose from the exercise of an occupation by the assessee. Dismissing the Appeals ^ HELD: 1. The receipts by the assessee arose out of the avocation of the assessee of propagating views against Atheism ant preaching Christian Gospel. [947 H] 2. There was a link between the activities of the assessee and the payments received by him and the link was close enough. [948 A] Strong & Company, of Romsey Limited vs Woodifield (Surveyor of Taxes), ; and The Commissioner of Inland Revenue vs E.C. Warnes & Co. Ltd., [1919] 12 T.C. 227, referred to. Section 4(3)(vii) of the Indian Income Tax Act 1922 makes it clear that in order to be entitled to the exemption, the receipts must be of income character first. if a sum of money is received for the purpose in pursuance of an avocation or vocation, it arose out of this vocation or profession. If that is 938 so, then this was income under the Act. Such income could only be excluded if it was specifically excluded by any provision of the Act. [943 D E] 4. The High Court rightly held that in view of the facts and circumstances of this case as found by the Tribunal, these amounts were received by the assessee in the course of his avocation or vocation and were given to him for the purpose of the same. These were, therefore, incomes which were neither of a casual or non recurring nature nor were these capital gains under section 12B of the Act. The amounts were, therefore, clearly taxable as held by the Income Tax Officer and by the High Court. [943 E G] P. Krishna Menon vs Commissioner of Income Tax, Mysore, Travancore Cochin and Coorg. Bangalore. , relied upon. The burden 18 on the revenue to establish that the receipt is of a revenue character. Once receipt is found to be of a revenue character whether it comes under exemption or not, it is for the assessee to establish. Facts must be found by the Tribunal and the High Court must proceed on the basis of those facts. The High Court cannot afresh go to the facts over ruling the facts found by the Tribunal unless there is a question to that effect challenging the facts as found by the Tribunal. In this case the High Court has not interfered with the basic facts found by the Tribunal. It has been established that the assessee was carrying on a vocation of preaching of Christian Gospel and helping anti athesim. He was running a newspaper in aid of that. The donations received from America were to help him for the said purpose. They arose out of his carrying on and contained so long purpose. The carried on this avocation or vocation. These receipts, therefore, arose out of his vocation. These were, therefore, his Income, not exempt under s.4(3)(vii) of the Act and were taxable. [945 H, 946 A C] Parimisetti Seetharamma vs Commissioner of Income Tax, Andhra Pradesh, inapplicable. Acharya D.V. Pande vs Commissioner of Income tax, Gujarat, , Commissioner of Income Tax, Gujarat vs Shri Giurdharram Hariram Bhagat, , Maharaj Shri Govindlalji Ranchhodlaji vs Commissioner of Income tax, Ahmedabad, , H.H. Maharani Shri Vijay Kuverba Saheb of Morvi and Another vs Commissioner of Income Tax Bombay City II, S.A. Ramkrishnan vs Commissioner of Income tax, Madras, , Siddhartha Publications (P) Ltd. vs Commissioner of 939 Income tax, Delhi. , Karnani Properties Ltd. vs Commissioner of Income tax, West Bengal, , Aluminium Corporation of India Ltd. vs Commissioner of Income tax, West Bengal, , Anil Kumar Roy Chowdhury and Others vs Commissioner of Income tax, West Bengal II, , Commissioner of Income tax, West Bengal III vs Kamal Singh Rampuria, , Commissioner of Income tax, West Bengal III vs Imperial Chemical Industries (India) (P) Ltd. , Commissioner of Income tax, Bombay City II vs Devi Prasad Khandelwal and Co. Ltd. , and Commissioner of Income tax vs P.S. Chelladurai, , referred to.

The Sales Tax Officer assessed tax for the assessment years 1958 1959 and 1959 60, on the respondent assessee by two separate orders. The assessee filed appeals against those orders before the Appellate Authority. On May 10, 1963, when the appeals came up for hearing, the assessee was absent. The appeals were, therefore. dismissed in default by virtue of Rule 68(5) of the U.P. Sates tax Rules. Sub rule (6) of Rule 68. provided for setting aside such dismissal and for re admission of the appeal. On the same day (May 10, 1963), the assessee made two applications in accordance with Sub rule (6) for setting aside the dismissal. During the pendency of those applications, Subrule (5) of Rule 68 was declared ultra vires the rule making authority by Manchanda J. of the High Court who further held that the Appellate Authority could not dismiss an appeal in default but was bound to decide it on merits even though the appellant be absent. When these applications under r. 68(6) came up for hearing. on 20 10 64, the Appellate Authority dismissed them outright in view of the ruling of Manchanda J. Against the order of dismissal of his appeals, the assesees on 16 12 1964 filed two revision petitions under section 10 of the Sales tax Act, before the [Judge (Revisions) Sales tax]. These revisions petitions having been filed more than 18 months after the dismissed of the appeals which was the maximum period of limitation prescribed by sub section (3) of section 10 were prima facie time barred. They were however, accompanied by two application 's in which the assessee prayed for exclusion of the time spent by him in prosecuting the abortive proceedings under r. 68(6) for setting aside the dismissal of his appeals. The Revisional Authority found that the assessee had been pursuing his remedy under r. 68(6) with due diligence and in good faith. It therefore excluded the time spent in those proceedings from computation of limitation by applying section 14, Limitation Act and in consequence, held that the revision petitions were within time. On the motion of the Commissioner of Sales tax. the Judge (Revisions) Sales *ax made two references under section 11(1) of the Sales_tax Act to the High Court for answering the following question of law "Whether under the Circumstances of the case, section 14 of the Limitation Act extended 'the period for filing of the revisions by the time during which the restoration applications remained pending as being prosecuted bona fid. " The references were heard by a Full Bench of three learned Judges each of whom wrote a separate Judgment. Dwivedi J. with whom Singh J. agree utter refraining the question held "that the time spent in prosecuting the application for setting aside the order of dismissal of appeals in default can be 744 excluded from computing the period of limitation for filing the revision by the application of the principle underlying section 14(2), Limitation Act. " Hari Swarup J. was of the opinion : "The Judge (Revisions) Sales tax while hearing the revisions under section 10 of the U.P. Sales Tax Act does not act as a Court but only as a revenue tribunal and hence the provisions of the Indian Limitation Act cannot apply to proceedings before him. If the Limitation Act does not apply then neither section 29(2) nor is 14(2) of the Limitation Act will apply to proceedings before him." The learned Judge was further of the view that the principle of section 14(2) also, could not be invoked to extend the time beyond the maximum fixed by the Legislature in sub section (3 B) of section 10 of the Sales tax Act. These appeals have been preferred on the basis of the special leave granted by this court. Allowing the appeals, HELD : (i) If the legislature wilfully omits to incorporate something of an analogous law in a subsequent statute, or even if there is a casus omissus in a statute, the language of which is otherwise plain and unambiguous, the Court is not competent to supply the omission by engrafting on it or introducing in it, under the guise of interpretation, by analogy or implication, something what it thinks to be. a general principle of justice and equity. To do so "would be entrenching upon the preserves of Legislature", the primary function of a court of law being jus dicere and not jus dare. [749D E] (ii) If the ' legislature in a special statute prescribes a certain period of limitation for filing a particular application thereunder and provides in 'clear terms that such period on sufficient cause being shown, may be extended, in the maximum, only upto a specified time limit and no further, then the tribunal concerned has no jurisdiction to treat within limitation, an application filed before it beyond such maximum time limit specified in the statute, by excluding the time spent in prosecuting in good faith and due diligence any prior proceeding on the analogy of section 14(2) of the Limitation Act. [751D E] Ramdutt Ramkissen Dass vs E. D. Sesson & Co. A.I.R. 1929, P.C. 103 and Purshottam Dass Hassaram vs Impex (India) Ltd. A.I.R. 1954 Bom. 309, referred to. (iii) In view of the pronouncements of this Court in Shrimati Ujjani Bhai vs State of U.P., and jagannath Prasad vs State of U.P. ; , there is no room for argument that the Appellate Authority and the Judge (Revisions) exencising jurisdiction under the U.P. Sales Tax Act, 1948, are 'Courts '. They are merely administrative Tribunals and "not courts". Section 14, Limitation Act, therefore, does not, in terms apply to proceedings before such Tribunals. [747E] (iv) Three features of the scheme of provisions of section 10(3)(i) and section 10(3B) are noteworthy. The first is that no limitation has been prescribed for the suo matu exercise of its jurisdiction by the Revising Authority. The second is that the period of one year prescribed as limitation for filing an application for revision by the aggrieved party is unusually long. The third is that the Revising Authority has no discretion to extend this period beyond a further period of six months, even on sufficient cause shown. The three stark features of the scheme and language of these provisions, unmistakably show that the legislature has deliberately excluded the application of the principles of Ss. 5 and 14 of the Limitation Act. except to the extent and in the truncated form embodied in sub section (3 B) of section 10 of the Act. [748D F]

Allowing the appeal by special leave and answering against the assessee, the Court. ^ HELD: Per Bhagwati,J. (Concurring with Sen and Venkataramiah, JJ.) (1) The expression "Registered dealer" is used in section 8 (ii) in its definitional sense to mean a dealer registered under section 22 of the Bombay Sales Tax Act and it does not include a dealer under the Central Sales Tax Act. [875A] (2) The object of section 8 is to prevent a multiple point taxation on goods specified in Schedule C and for imposition of single point tax on them under the Act. If a dealer is registered only under the Central Act and not under the Bombay Act, it would mean that he is not liable to pay tax under the Bombay Act and in that event, even if he has sold goods specified in Schedule 'C ', to a registered dealer under an intra State sale, no tax would be payable by him on such sale and if the purchasing dealer is also to be exempt from tax in respect of re sale effected by him, the result would be that the goods would escape tax altogether and not suffer even single point tax. That is not the intendment of the legislature in enacting section 8(ii); on the contrary it would frustrate the very object of that section. The situation would be the same even where the sale effected by the dealer registered under the Central Act is an inter State sale. That sale would undoubtedly be taxable under the Central Act but there is no reason why the Gujarat State would give exemption to re sale of goods in respect of which, at the time of the first sale tax has been levied under the Central Act of which the benefit has gone to another State. Moreover, in such a case, the first sale being an inter State sale, would be taxable at a fixed concessional rate under section 8(1)(a) or at the rate of 7% or at a rate equal to or twice the rate applicable to the sale of such goods in the State of the selling dealer, under clause (a) or (b) of sub section (2) of section 8 of the Central Act and if that be so, it is difficult to understand why the Legislature should have insisted, for attracting the applicability of section 8(ii), that the goods re sold by the dealer should at the time of their first sale be goods specified in Schedule 'C '. [873F G, 874C G] 871 (3) Sections 4 and 8(ii) of the Bombay Act are distinct and independent provisions operating on totally different areas. The legal fiction in sub section (1) of section (4) is created for a specific purpose and it is limited by the terms of sub section (2) of section 4 and it cannot be projected in section 8(ii). If a dealer is not registered under the Bombay Act, it could only be on the basis that he is not liable to pay tax under the Bombay Act, but even so, section 4 sub section (1) provides that if he is registered under the Central Act, he would be liable to pay tax under the Bombay Act in respect of the transactions of sale set out in that section. This liability arises despite the fact that the dealer, not being liable to pay tax under section 3 of the Bombay Act, is not registered under that Act. The dealer not being registered under the Bombay Act, the machinery of the Bombay Act would not of itself apply for the recovery of tax from him. Section 4 sub section 2, therefore, enacts that every dealer who is liable to pay tax under sub section (1) shall, for the purpose of sections 32 to 38 and 46 to 48 be deemed to be a registered dealer. Sections 32 to 38 and 46 to 48 are machinery sections and it is for the purpose of making the machinery of these sections applicable for recovery of the tax imposed on the dealer under sub section (1) of section 4 that an artificial fiction is created deeming the dealer to be a registered dealer, that is, a dealer registered under section 22 of the Bombay Act. Per Sen, J. (On behalf of himself and Venkataramiah, J.). (1) It is a well settled principle that when a word or phrase has been defined in the interpretation clause, prima facie that definition governs whenever that word or phrase is used in the body of the statute. But where the context makes the definition clause inapplicable, a defined word when used in the body of the statute may have to be given a meaning different from that contained in the interpretation clause; all definitions given in an interpretation clause, are, therefore, normally, enacted subject to the usual qualification "unless there is anything repugnant in the subject or context", or "unless the context otherwise requires". Even in the absence of an express qualification to that effect such a qualification is always implied. The expression "registered dealer" having been defined in section 2(25) of the Bombay Act as having a particular meaning, that is, a dealer registered under section 22 of the Act, it is that meaning alone which must be given to it in interpreting clause (ii) of section 8 of the Bombay Act unless there is anything repugnant to the context [880B D] There being no obscurity in the language of clause (ii) of section 8 of the Bombay Act, it is clear that no deduction is claimable in respect of re sales of goods purchased from a dealer registered under the Central Act, who is not a registered dealer within the meaning of section 2(25) of the Act. It follows that the expression "registered dealer" in clause (ii) of section 8 of the Act must bear the meaning of that expression as given in section 2(25) of the Act. If the meaning of the section is plain it is to be applied whatever the result, [879H 880A] (2) The meaning of a word or expression defined may have to be departed from on account of the subject or context in which the word had been used and that will be giving effect to the opening sentence in definition section, namely, "unless the context otherwise requires". In view of this qualification, the Court has not only to look at the words but also to look at the context, the collocation and the object of such words relating to such matter and interpret the meaning intended to be conveyed by the use of the words in a particular section. But where there is no obscurity in the language of the section, 872 there is no scope for the application of the rule ex visceribus actus. This rule is never allowed to alter the meaning of what is of itself clear and explicit. [881E G] Bywater vs Brandling, ; Rein vs Lane, and Jobbins vs Middlesex County Council, Craies, , held inapplicable. (3) The provisions of section 4, sub section (3) of section 7 and clause (ii) of section 8 of the Bombay Act operate in three different fields. While section 4 of the Act provides that a registered dealer under the Central Act who may not be liable to pay tax under section 3 of the Act may nevertheless in certain contingencies be liable to pay tax, sub section (3) of section 7 provides for the levy of a single point tax on sale in the course of inter State trade and commerce of declared goods, to bring the Act in conformity with clause (a) of section 15 of the Central Act. The object and purpose of enacting the provisions of section 8 are entirely different, namely, to lay down the mode of computation of the turnover of sales or purchases of a registered dealer for the imposition of a tax. Clause (ii) of section 8 allows for deduction of re sale from the turnover of such registered dealer when the goods are purchased from a registered dealer, that is, a dealer registered under section 22 of the Act. In effect, section 8 deals with transactions of sale or purchase taking place within the State. The disallowance of deduction claimed by the assessee under clause (ii) of section 8 of the Act, therefore, would not result in double taxation of the same goods. [881H 882C, 883C] While it is true that the Baroda dealer being a dealer registered under section 7 of the Central Sales Tax Act, in the instant case, was in certain contingencies, liable to pay tax under section 4 of the Act, but that circumstance by itself would not make him a "registered dealer" within the meaning of section 2(25) of the Act. If the legislature really intended that the expression "registered dealer" in clause (ii) of section 8 should take within its ambit a dealer registered under the Central Sales Tax Act, upon whom liability to pay sales tax is imposed by section 4 of the Bombay Act, it would have said so in the clear words section (2) of section 4. The legal fiction in sub section (2) of section 4 is created for a limited purpose, namely, to make section 4 a self contained code which not only imposes a charge of tax and lays down the rate structure, but also provides the machinery for assessment and recovery of tax and penalty. The legal fiction contained in sub section (2) of section 4 of the Act cannot be stretched any further. [883D E, G]

The appellant company was a dealer in ghee and groundnut oil etc. The Deputy Commercial Tax Officer assessed it to sales tax for the year 1948 49 on a turnover of Rs. 28,69,151 and odd. Similarly for the year 1949 50 the appellant was assessed to sales tax on a turnover of Rs. 28,72,o83 and odd. The appellant challenged these assessments and its appeal before the Commercial Tax Officer having failed the two matters came up in second appeal before the Sales Tax Appellate Tribunal. In the Tribunal the appellant did not place any materials in support of its contentions and the two appeals were disposed of by the Tribunal holding that the appellant was correctly assessed to sales tax. In respect of the aforesaid orders of the Tribunal the appellant filed applications for review under section 12A(6)(a) of the Madras General Sales Tax Act, 1939 (Mad. Act IX Of 1939), taking the plea that in the first case the materials could not be placed before the Tribunal as there was none to instruct the appellant 's advocate in English or Telegu, and in the second case the relevant correspondence was mixed up with other records. The Tribunal rejected the applications for review on the ground that a failure to produce the necessary materials in support of a plea taken before it, due either to gross negligence or deliberate withholding, did not come within the reason of section 12A(6)(a) of the Act. The High Court upheld the decision of the Tribunal. On appeal by special leave in one case and a certificate of the High Court in the other: Held, that the provision in section 12A(6)(a) of the Madras General Sales Tax Act, 1939 (Mad. Act IX Of 1939), permits a review when through some oversight, mistake or error the necessary facts, basic or evidentiary, were not present before the Court when it passed the order sought to be reviewed, but a party was not 805 entitled to ask for a review when it had deliberately or intentionally withheld evidence in support of a claim made by it. State of Andhra vs Sri Arisetty Sriyamulu, A.I.R. 1057 Andhra Pradesh 130, not approved.

13 to 24, 42 and 46 to 54 of 1958. Petitions under Article 32 of the Constitution of India for enforcement of Fundamental Rights. M.C. Setalvad, Attorney General for India, Syed Mahmud, J. B. Dadachanji, section N. Andley, Rameshwar Nath and P. L. Vohra, for the petitioners in petitions Nos. 13 18, and 46 54 of 1958. C.K. Daphtary, Solicitor General of India, Syed Mahmud, J. B. Dadachanji, section N. Andley, Rameshwar Nath and P. L. Vohra, for the petitioners in Petitions Nos. 19 24 of 1958. S.N. Andley, Rameshwar Nath, J. B. Dadachanji and P. L. Vohra, for the petitioner in petition No. 42 of 1958. K.V. Suryanarayana Iyer, Advocate General of Kerala and Sardar Bahadur, for the respondents. December, 9. The Judgment of Sinha, C.J., Jafer Imam, Subba Rao and Shah, JJ., was delivered 81 by Sinha, C. J. Sarkar, J., delivered a separate Judgment. SINHA, C. J. In this batch of 22 petitions under article 32 of the Constitution, the petitioners impugn the constitutionality of the Travancore Cochin Land Tax Act, XV of 1955, as amended by the Travancore Cochin Land Tax (Amendment) Act, X of 1957, which hereinafter will be referred to as the Act. The Act came into force on June 21, 1955, and the Amending Act on August 6, 1957. The petitioners are owners of forest areas in certain parts of the State of Kerala, which, before the reorganisation of States, formed part of the State of Madras. The respondents to the petitions are: (1) the State of Kerala and (2) the District Collector, Palghat: These petitions are based on allegations, which are, more or less, similar, and the following allegations made in Writ Petition No. 42 of 1958 may be taken as typical and an extreme case, which was placed before us in detail to bring into bold relief the full significance and effect of the legislation impugned in these cases. The petitioner in Petition 42 of 1958 is a citizen of India, who owns forests in certain parts of Palghat Taluk in Palghat District, which was part of the State of Madras before the reorganisation of States. These forests are now in the State of Kerala. Up to the time that these forests were in the State of Madras, as it then was, the Madras Preservation of Private Forests Act, Madras Act XXVII of 1949, governed these forests. Even after these areas were transferred to the State of Kerala, the said Madras Act, XXVII of 1949, continued to apply to these forests. Under the said Madras Act the owners of forests, like the petitioner, could not sell, mortgage, lease or otherwise alienate any portion of their forests without the previous sanction of the District Collector; nor could they, without similar permission, cut trees or do any act likely to denude the forest or diminish its utility, as such. The District Collector, in exercise of the powers under the Act, does not ordinarily permit the cutting of more than a small 82 number of trees in the forest. Thus the petitioner has not the right fully to exploit the forest wealth in his forest area and has to depend upon the previous permission of the Collector. In exercise of the powers given to the Collector under the Madras Act aforesaid, the petitioner 's lessee was given permission to cut certain trees in his forest, which brings to the petitioner by way of income from. the forest, a sum of Rs. 3,100 per year. Under the Act, a tax called land tax at a flat rate of Rs. 2 per acre has been imposed on the petitioner. In pursuance of the provisions of the Act, as amended as aforesaid, the District Collector of Palghat, purporting to act under the provisions of section 5A of the Act, issued a notice to the petitioner provisionally assessing the petitioner 's forest under the said Act to a sum of fifty thousand rupees per annum and informing the petitioner that, if no representation was made within thirty days, the said provisional assessment would be confirmed and a demand notice would be issued. As there has been no survey of the area of forest land in the petitioner 's possession, the District Collector has conjectured the said area to be twenty five thousand acres. The Petitioner had made an application to the District Collector under the Madras Preservation of Private Forests Act for felling trees in an area of one thousand acres, but the Collector was pleased to grant permission to out trees from 450 acres only in the course of five years at the rate of 90 acres a year. The petitioner has leased out that right to another person, who made the highest bid of Rs. 3,100 per year, as the landlord 's fee for the right to cut and remove the trees, and other minor produce. Besides the demand aforesaid, the revenue authorities have levied about four thousand rupees as tax on the surveyed portions of the forest. The petitioner 's forest has large areas of and rocks, rivulets and gorges. The petitioner, in those circumstances, questions the constitutional validity of the Act, the provisions of which will be examined hereinafter. These petitions have been opposed on behalf of the first respondent and the allegations and submissions 83 made in the petitions are sought to be controverted by a counter affidavit sworn to by an Assistant Secretary of the Kerala Gover nment in the Revenue Department. It is in similar terms, as a matter of fact printed in most of these cases. It is contended therein on behalf of the respondent that the petitions are not maintainable in as much as no fundamental rights of the petitioners have been infringed; that the allegations about the income, from the forest lands are not admi tted; and by way of submission, it is added, they are irrelevant for the purposes of these petitions. It is stated that the Act was passed with a view to unifying the system of land tax in the whole of the State of Kerala. It is submitted that the validity of the Act has to be determined in the light of article 265 of the Constitution and that articles 19 and 31 were wholly out of the way. It is denied that the tax imposed was harsh or arbitrary, or has the effect of violating the petitioner 's right of holding property; and it was asserted that the allegations in respect of income from the forests are entirely irrelevant, as the tax was not a tax on income, but was an "impost on land". It is equally irrelevant whether the land is productive or not. It is also contended that, in view of the provisions of article 31(5)(b)(i) of the Constitution, article 31(2) could not be relied upon by the petitioners. The allegation of the petitioners that the Act is a device to confiscate private forests is denied. It is admitted that, except in certain cases, the entire area is unsurveyed and that steps are being taken for surveying those areas. It is also stated that the areas shown in the notices served on the petitioners are based on information available to the Collector of the District; and lastly, it is stated that only notice has been issued calling upon the petitioners to make their representations, if any, to the proposed provisional assessments. The assessments have not yet been made, and, therefore, there is no question of demand of tax being enforced by coercive processes. Finally, it is suggested that the Act has been enacted for the legitimate revenue purposes of the State. Before entering upon a discussion of the points in 84 controversy, it is convenient at this stage to indicate briefly the relevant provisions of the Act which is impugned by the petitioners as ultra vires the State Legislature. The preamble of the Act is in these terms: "Whereas it is deemed necessary to provide for the levy of a low and uniform rate of basic tax on all lands in the State of Travancore Cochin. " Basic tax has been defined as "the tax imposed under the provisions of this Act". Section 3 lays down that the arrangement made under the Act for the levy of the basic tax shall be deemed inter alia to be a general revenue settlement of the State, notwithstanding anything in any statute, grant, deed or other transaction subject to certain provisos not material for our present purposes. The charging section is section 4, which is in these terms: "Subject to the provisions of this Act, there shall be charged and levied in respect of all lands in the State, of whatever description and held under whatever tenure, a uniform rate of tax to be called the basic tax. " Section 5 lays down the rate of the tax which, by the Amendment, has been raised to Rs. 2 per acre (two pies per cent. of land per annum) and the basic tax charged and levied at that rate shall be the tax payable to the Government in lieu of any existing tax in respect of land. Section 6 lays down that any stipulation in any contract or agreement or lease or other transaction to pay land revenue assessment of any land shall be construed as stipulation for the payment of the amount. of basic tax, as charged and levied under the Act. Section 7 is in these terms: "This Act is not applicable to lands held or leased by the Government or any land or class of lands which the Government may, by notification in the Gazette, either wholly or partially exempt from the provisions of this Act." Sections 8 and 9 provide for the continuance of the liability to pay certain dues in respect of existing tenures in addition to the basic tax in respect of lands covered by those tenures. Section 10 abolishes the 85 irrigation assessment charged on certain tank beds and other water reservoirs named and described therein. Section 11 preserves the right of the Government to levy certain irrigation and water cesses and lays down that the Act shall not affect the power of the Government to levy any rate or alter any existing rate of irrigation or water cess on any land, as they deem fit. Cesses, other than those mentioned in section 11, are also abolished by section 12. Section 13 authorises the Government to appoint such officers as they deem necessary for the purpose of the Act. Section 14 lays down the bar of suits against the Government in respect of anything done or any order passed under the Act. Section 15 saves the right of the Government which accrued to it before the Act came into force as also the conditions of any agreement. grant or deed relating to any land, except to the extent indicated in the Act. Section 16 vests the Government with the power to make rules for carrying into effect the provisions of the Act, with particular reference to the power to make rules for the apportionment of the basic tax charged on certain kinds of holdings, for defining the powers and duties of the officers appointed under the Act and for determining the kist instalments and the due date for the payment thereof. These in short are the provisions of the Act. The Act, as indicated above, was amended by Act X of 1957 which substituted the words "State of Kerala" for the words "State of Travancore Cochin" and made certain other consequential changes. The Amending Act introduced section 5A, which has been very much assailed in the course of the argument before us and it is, therefore, necessary to set it out in full. It is in these terms: "section 5A. Provisional assessment of basic tax in the case of unsurveyed land8. (1) It shall be competent for the Government to make a provisional assessment of the basic tax payable by a person in respect of the lands held by him and which have not been surveyed by the Government, and upon such assessment such person shall be liable to pay the amount covered in the provisional assessment. 86 (2)The Government after conducting a survey of the lands referred to in sub section (1) shall make a regular assessment of the basic tax payable in respect of such lands. After a regular assessment has been made, any amount paid towards the provisional assessment made under sub section (1) shall be deemed to have been paid towards the regular assessment and when the amount paid towards the provisional assessment exceeds, the amount payable under the regular assessment, the excess shall be refunded to the person assessed. " By section 9, section 3 of the Madras Revenue Recovery Act, 1864, has been substituted in these terms: "3. Landholder when and to whom to pay kist. Every landholder shall pay to the Collector or other officer empowered by 'him in this behalf the land tax due from him on or before the day fixed for payment under the rules framed under section 16 of the Land Tax Act, 1955. " From a review of the provisions of the Act, as amended as aforesaid, it will be clear that the provisions of the Act lay down in barest outline the policy to impose a uniform and, what is asserted to be, a low rate of land tax on all lands in the State of Kerala. Unlike other taxing statutes, it does not make any provision for issue of notice to the assessee, nor is there any provision for submission of a return by the assessee. By section 5A, it authorises the Government to make a "provisional assessment" in respect of land, which has not been surveyed, and such provisional assessment is made payable by the person made liable under the Act. It does not make any provision for any appeals in cases where the assessee may feel dissatisfied with the assessment. The Act does contemplate the making of "a regular assessment of the basic tax". But it does not indicate as to when the regular assessment would be made, except indicating that it can be made only after a survey has been made in respect of the land assessed. The Act could not have been cast in more general terms and the proceedings under the Act could not have been more summary. It has thus the merit of brevity as also of simplicity, derived 87 from the fact that a tax is levied at a flat rate, irres pective of the quality of the land and consequently of its productive capacity. Under the Act, the charge has to be levied, whether or not any income has been derived from the land. The Legislature was so much in earnest about levying and realising the tax that it could not even wait for a regular survey of the lands to be assessed with a view to determining the extent and character of the land. Such are the provisions and the effect of the Act, which has been assailed on a number of grounds on behalf of the petitioners. It is contended, in the first instance, that inequality is writ large in the provisions of the Act, which is clearly discriminatory in character and effect and thus infringes article 14 of the Constitution. As the Act does not have any regard to the quality of the land or its productive capacity, and a tax at a flat rate of Rs. 2 per acre is proposed to be levied under the Act, it is further contended, it imposes very unreasonable restrictions on the right to hold property and is thus an invasion on the rights guaranteed to the petitioners under article 19(1)(f) of the Constitution. The Act does not lay down any provision calling for a return from the assessee, for any enquiry or investigation of facts before the provisional assessment is made or for any right of appeal to any higher authority from the order of provisional assessment; in fact, there is no provision for hearing the assessee at any stage. The Act is of an arbitrary character and is thus wholly repugnant to the guaranteed rights of the petitioners. Section 7 quoted above gives uncanalised, unlimited and arbitrary power to the Government to pick and choose in the matter of grant of total or partial exemption from the provisions of the Act. It also suffers from the vice of discrimination. It has also been vehemently argued that the Act, though it purports to be a tax on land, is really a law relating to forests in possession of the petitioners and would not come within the purview of entry 18 read by itself or in conjunction with entry 45 of List II, but is law relating to forests under entry 19. If we tear the veil in which the real 88 purpose and effect of the Act has been shrouded, 'it will I appear that the true character and effect of the Act is not to levy a tax on land, but to expropriate the private owners of the forests without payment of any compensation whatsoever. Lastly, it has been urged that the whole Act has been conceived with a view to confiscating private property, there being no question of any compensation being paid to those who may be expropriated as a result of the, working of the Act. This last argument is based on the assertion that the tax proposed to be levied on private property in the State of Kerala has absolutely no relation to the paying capacity of the persons sought to be taxed, with reference to the income they could derive, or actually did derive from the property. On behalf of the State of Kerala, the learned Advocate General has argued that, though in most of the cases, that is to say, except in seven petitions (Petitions 21, 22, 47, 49, 50, 51 and 54) the lands have not been surveyed, the areas mentioned in the notices proposing provisional assessment have been ascertained through the local agencies of the Government. It was further contended that the State had only declared the liability to the payment of the tax at a flat rate of Rs. 2 per acre in respect of land, irrespective of the income to be derived therefrom. Hence there was no necessity for making provision for a detailed enquiry or investigation. The rate of the tax being known, and the area of the land to be taxed having been locally ascertained, even though without any regular survey, what remained was merely quantifying the tax, which was of a purely administrative character. The local agencies estimated the land in possession of particular persons. Those persons were called upon to pay provisionally at the rate fixed by the statute. The State has, by executive action, appointed authorities who are expected to act in accordance with the principle of natural justice. There was, therefore, no need for laying down any elaborate procedure as in other instances of taxing statutes. There is a presumption that the authority appointed by the Government would act bona fide and in a 89 proper manner. If there was any case of unfair dealings, the matter could be brought to the Court. It was greatly emphasised that as a flat rate of taxation had been envisaged by the Act and as ultimately the tax at that rate would be realised from land found to be in possession of particular persons after a regular survey, the regular survey to be ultimately made would automatically determine the amount of tax to be paid and the adjustment of the taxes already paid could be made on that basis. On the legal aspect of the controversy raised on behalf of the petitioners, it was argued that the Act has its justification in article 265 of the Constitution, which was not subject to the provisions of Part III of the Constitution and that, therefore, articles 14, 19, 31 could not be pressed in aid of the petitioners. It was also contended that even if the Act is, in effect, confiscatory, it cannot be questioned, being a taxing statute. Finally, it was urged that the question of the amount of income derived by the petitioners from the property sought to be taxed is wholly irrelevant, because the Act was not a tax on income but it was a tax on the property itself. The most important question that arises for consideration in these cases, in view of the stand taken by the State of Kerala, is whether article 265 of the Constitution is a complete answer to the attack against the constitutionality of the Act. It is, therefore, necessary to consider the scope and effect of that Article. Article 265 imposes a limitation on the taxing power of the State in so far as it provides that the State shall not levy or collect a tax, except by authority of law, that is to say, a tax cannot be levied or collected by a mere executive fiat. It has to be done by authority of law, which must mean valid law. In order that the law may be valid, the tax proposed to be levied must be within the legislative competence of the Legislature imposing a tax and authorising the collection thereof and, secondly, the tax must be subject to the conditions laid down in article 13 of the Constitution. One of such conditions envisaged by article 13(2) is that the Legislature shall not make any law which 90 takes away or abridges the equality clause in article 14, which enjoins the State not to deny to any person equality before the law or the equal protection of the laws of the country. It cannot be disputed that if the Act infringes the provisions of article 14 of the Constitution, it must be struck down as unconstitutional. For the purpose of these cases, we shall assume that the State Legislature had the necessary competence to enact the law, though the petitioners have seriously challenged such a competence. The guarantee of equal protection of the laws must extend even to taxing statutes. It has not been contended otherwise. It does not mean that every person should be taxed equally. But it does mean that if property of the same character has to be taxed, the taxation must be by the same standard, so that the burden of taxation may fall equally on all persons holding that kind and extent of property. If the taxation, generally speaking, imposes a similar burden on every one with reference to that particular kind and extent of property, on the same basis of taxation, the law shall not be, open to attack on the ground of inequality, even though the result of the taxation may be that the total burden on different persons may be unequal. Hence, if the Legislature has classified persons or properties into different categories, which are subjected to different rates of taxation with reference to income or property, such a classification would not be open to the attack of inequality on the ground that the total burden resulting from such a classification is unequal. Similarly, different kinds of property may be subjected to different rates of taxation, but so long as there is a rational basis for the classification, article 14 will not be in the way of such a classification resulting in unequal burdens on different classes of properties. But if the same class of property similarly situated is subjected to an incidence of taxation, which results in inequality, the law may be struck down as creating an inequality amongst holders of the same kind of property. It must, therefore, be held that a taxing statute is not wholly immune from attack on the ground that it infringes the equality clause ill 91 article 14, though the Courts are not concerned with the policy underlying a taxing statute or whether a particular tax could not have been imposed in a different way or in a way that the Court might think more just and equitable. The Act has, therefore, to be examined with reference to the attack based on article 14 of the Constitution. It is common ground that the tax, assuming that the Act is really a taxing statute and not a confiscatory measure, as contended on behalf of the petitioners, has no reference to income, either actual or potential, from the property sought to be taxed. Hence, it may be rightly remarked that the Act obliges every person who holds land to pay the tax at the flat rate prescribed, whether or not he makes any income out of the property, or whether or not the property is capable of yielding any income. The Act, in terms, claims to be "a general revenue settlement of the State" (section 3). Ordinarily, a tax on land or land revenue is assessed on the actual or the potential productivity of the land sought to be taxed. In other words, the tax has reference to the income actually made, or which could have been made, with due diligence, and, therefore, is levied with due regard to the incidence of the taxation. Under the Act in question we shall take a hypothetical case of a number of persons owning and possessing the same area of land. One makes nothing out of the land, because it is arid desert. The second one does not make any income, but could raise some crop after a disproportionately large investment of labour and capital. A third one, in due course of husbandry, is making the land yield just enough to pay for the incidental expenses and labour charges besides land tax or revenue. The fourth is making large profits, because the land is very fertile and capable of yielding good crops. Under the Act, it is manifest that the fourth category, in our illustration, would easily be able to bear the burden of the tax. The third one may be able to bear the tax. The first and the second one will have to pay from their own pockets, if they could afford the tax. If they cannot afford the tax, the property is 92 liable to be sold, in due process of law, for realisation of the public demand. It is clear, therefore, that inequality is writ large on the Act and is. inherent in the very provisions of the taxing section. It is also clear that there is no attempt at classification in the provisions of the Act. Hence, no more need be said as to what could have been the basis for a valid classification. It is one of those cases where the lack of classification creates inequality. It is,, therefore, clearly hit by the prohibition to deny equality before the law contained in article 14 of the Constitution. Furthermore, sec. 7 of the Act, quoted above, particularly the latter part, which vests the Government with the power wholly or partially to exempt any land from the provisions of the Act, is clearly discriminatory in its effect and, therefore, infringes article 14 of the Constitution. The Act does not lay down any principle or policy for the guidance of the exercise of discretion by the Government in respect of the selection contemplated by a. 7. This Court has examined the cases decided by it with reference to the provisions of article 14 of the Constitution, in the case of Shri Ram Krishna Dalmia vs Shri Justice section B. Tendolkar and others (1). section R. Das, C. J., speaking for the Court has deduced a number of propositions from those decisions. The present case is within the mischief of the third proposition laid down at pages 299 and 300 of the Report, the relevant portion of which is in these terms: "A statute may not make any classification of the persons or things for the purpose of applying its provisions but may leave it to the discretion of the Government to select and classify persons or things to whom its provisions are to apply. In determining the question of the validity or otherwise of such a statute the Court will not strike down the law out of hand only because no classification appears on its face or because a discretion is given to the Government to make the selection or classification but will go on to examine and ascertain if the statute has laid down any principle or policy for the guidance of the exercise of discretion by the Government in the matter of the selection or classification. 93 After such scrutiny the Court will strike down the statute if it does not lay down any principle or policy for guiding the exercise of discretion by the Government in the matter of selection or classification, on the ground that the statute provides for the delegation of arbitrary and uncontrolled power to the Government so as to enable it to discriminate between persons or things similarly situate and that, therefore, the discrimination is inherent in the statute itself" (p. 299 of the Report). The observations quoted above from the unanimous judgment of this Court apply with full force to the provisions of the Act. It has, therefore, to be struck down as unconstitutional. There is no question of severability arising in this case, because both the charging sections, section 4 and section 7, authorising the Government to grant exemptions from the provisions of the Act, are the main provisions of the Statute, which has to be declared unconstitutional. The provisions of the Act are unconstitutional viewed from the angle of the provisions of article 19(1)(f) of the Constitution, also. Apart from the provisions of sections 4 and 7 discussed above, with reference to the test under article 14 of the Constitution, we find that section 5(A) is also equally objectionable because it imposes unreasonable restrictions on the rights to hold property, safeguarded by article 19(1)(f) of the Constitution. Section 5(A) declares that the Government is competent to make a provisional assessment of the basic tax payable by the holder of unsurveyed land. Ordinarily, a taxing statute lays down a regular machinery for making assessment of the tax proposed to be imposed by the statute. It lays down detailed procedure as to notice to the proposed assessee to make a return in respect of property proposed to be taxed, prescribes the authority and the procedure for hearing any objections to the liability for taxation or as to the extent of the tax proposed to be levied, and finally, as to the right to challenge the regularity of assessment made, by recourse to proceedings in a higher Civil Court. The Act merely declares the competence of the Government to make 94 a provisional assessment, and by virtue of section 3 of the Madras Revenue Recovery Act, 1864, the land holders may be liable to pay the tax. The Act being silent as to the machinery and procedure to be followed in making the assessment leaves it to the Executive to evolve the requisite machinery and procedure. The whole thing, from beginning to end, is treated as of a purely administrative character, completely ignoring the legal position that the assessment of a tax on person or property is at least of a quasi judicial character. Again, the Act does not impose an obligation on the Government to undertake survey proceedings within any prescribed or ascertainable period, with the result that a land holder may be subjected to repeated annual provisional assessments on more or less conjectural basis and liable to pay the tax thus assessed. Though the Act was passed about five years ago, we were informed at the Bar that survey proceedings had not even commenced. The Act thus proposes to impose a liability on land holders to pay a tax which is not to be levied on a judicial basis, because (1) the procedure to be adopted does not require a notice to be given to the proposed assessee; (2) there is no procedure for rectification of mistakes committed by the Assessing Authority; (3) there is no procedure prescribed for obtaining the opinion of a superior Civil Court on questions of law, as is generally found in all taxing statutes, and (4) no duty is cast upon the Assessing Authority to act judicially in the matter of assessment proceedings. Nor is there any right of appeal provided to such assessees as may feel aggrieved by the order of assessment. That the provisions aforesaid of the impugned Act are in their effect confiscatory is clear on their face. Taking the extreme case, the facts of which we have stated in the early part of this judgment, it can be illustrated that the provisions of the Act, without proposing to acquire the privately owned forests in the State of Kerala after satisfying the conditions laid down in article 31 of the Constitution, have the effect of eliminating the private owners through the machinery of the Act. The petitioner in petition 42 95 of 1958 has been assumed to own 25 thousand acres of forest land. The liability under the Act would thus amount to Rs. 50,000 a year, as already demanded from the petitioner on the basis of the provisional assessment under the provisions of section 5(A). The petitioner is making an income of Rs. 3,100 per year out of the forests. Besides, the liability of Rs. 50,000 as aforesaid, the petitioner has to pay a levy of Rs. 4,000 on the surveyed portions of the said forest. Hence, his liability for taxation in respect of his forest land amounts to Rs. 54,000 whereas his annual income for the time being is only Rs. 3,100 without making any deductions for expenses of management. Unless the petitioner is very enamoured of the property and of the right to hold it may be assumed that he will not be in a position to pay the deficit of about Rs. 51,000 every year in respect of the forests in his possession. The legal consequences of his making a default in the payment of the aforesaid sum of money will be that the money will be realised by the coercive processes of law. One can, easily imagine that the property may be sold at auction and may not fetch even the amount for the realisation of which it may be proposed to be sold at public auction. In the absence of a bidder forthcoming to bid for the offset amount, the State ordinarily becomes the auction purchaser for the realisation of the outstanding taxes. It is clear, therefore, that apart from being discriminatory and imposing unreasonable restrictions on holding property, the Act is clearly confiscatory in character and effect. It is not even necessary to tear the veil, as was suggested in the course of the argument, to arrive at the conclusion that the Act has that unconstitutional effect. For these reasons, as also for the reasons for which the provisions of sections 4 and 7 have been declared to be unconstitutional, in view of the provisions of article 14 of the Constitution, all these operative sections of the Act, namely 4, 5A and 7, must be held to offend article 19(1)(f) of the Constitution also. The petitions are accordingly allowed with costs against the contesting respondent, the State of Kerala. 96 SARKAR,J. These petitions were filed under Art.32 of the Constitution, challenging the validity of the Travancore Cochin Land Tax Act, 1955, as amended by Act X of 1957. The principal Act was passed by the legislature of the State of Travancore Cochin and the Amending Act, by the legislature of the State of Kerala, in which the State of Travancore Cochin had been merged. The petitioners are owners of lands in the State of Kerala. The Act as amended and hereafter referred to as the Act, levied a certain basic tax on all lands in the State of Kerala. The petitioners say that the levy is illegal and violates their fundamental rights. It appears from the preamble that the Act was passed as it was deemed necessary to provide for the levy of a low and uniform rate of basic tax on all lands in the State. The Act provides that the arrangement made by it for the levy of the basic tax is to be deemed to be a general revenue settlement of the State. Section 4 of the Act is the charging section and it lays down that there shall be charged and levied in respect of all lands in the State, of whatever description and held under whatever tenure, a uniform rate of tax to be called the basic tax. Section 5 fixes the rate of the tax at 2 n. P. per cent which works out at Rs. 2 per acre per annum. This section also provides that the basic tax shall be the tax payable to the Government in lieu of any other existing tax in respect of land. Section 12 abolishes all cesses on land except irrigation cess. The first ground on which the validity of the Act is challenged is that it offends the provision as to the equal protection of the laws contained in article 14 of the Constitution. The Act applies to all lands in the State and it imposes an uniform rate of tax, namely, Rs. 2 per acre. It is said that all lands in the State have not the same productive quality; that some are waste lands and others, lands of varying degrees of fertility. The contention is that the tax weighs more heavily on owners of waste lands than on owners of fertile lands. It is said that it is bound to happen that some owners make no income out of their lands 97 or make a small income and they would have to pay the tax out of their pocket while the owners of better classes of lands yielding larger income would be able to pay the tax out of the income from the lands. It is contended that the Act therefore discriminates between several classes of owners of lands in the State and is void as infringing the equality clause in the Constitution. It may be conceded that all lands in the State are not of the same degree of fertility. I am however unable to see that because of that, the Act can be said to discriminate between the owners of them. What is really said appears to be that the Act makes a classification of the owners of lands according to areas. Assume that the Act does so. The question then is, is such a classification illegal? The equal protection clause in the Constitution does not mean that there shall be no classification for the purpose of any law. It has been said by this Court in Budhan Choudhury vs The State of Bihar(1): "It is now well established that while article 14 forbids class legislation, it does not forbid reasonable classification for the purposes of legislation. In order, however, to pass the test of permissible classification two conditions must be fulfilled, namely, (i) 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 (ii) that differential must have a rational relation to the object. Bought to be achieved by the statute in question". On the argument of the petitioners, the Act makes a classification between owners of lands using as the differentia, the area of the land held by them. The question then, is, is that differentia intelligible and has that differentia a rational relation to the object of the Act? Now it seems to me that both the tests are satisfied in the present case. The tax payers are classified according to the area of lands held by them. That is quite an intelligible basis on which to make a classification; holders of varying areas of land can (1) ; 1049. 13 98 quite understandably be placed in different classes. Next, has such a basis of classification, a rational relation to the object of the Act? The Act is a taxing statute. It is intended to collect revenue for the governmental business of the State. It says that one of its objects is to provide a low and uniform rate of basic tax. Another object mentioned is to replace all other dues payable to the Government in respect of the ownership of the land by a uniform basic tax. Why is it to be said that the use of the area of land held as the basis of classification has no rational relation to these objects. I find no reason. The object is to tax land held in the State for raising revenues. It is the holding of the land in the State that makes the owner liable to pay tax. It would follow that the quantum of the tax can be reasonably linked with the quantum of the holding. Why is it said that the classification on the basis of area is bad? It is only because it imposes unequal burden of the tax on the owners of land; because owners of less productive land would have a larger burden put on them. Now if this argument is right, then tax on land can be imposed only according to its productivity. I have not been shown any authority which goes to this length. I am further unable to see how productivity as the basis of classification could be said to have a more rational relation to the object of a statute collecting revenue by taxing land held in the State. The tax is not levied because the land is productive but because the land is held in the State. Again if the tax which could be imposed on land had to be correlated to its productivity, then the State would have no power to tax unproductive land and the provision in the Constitution that it would have power to tax land would, to that extent, be futile. It seems to me that a contention leading to such a result cannot be accepted. Reliance was placed for the petitioners on Cumberland Coal Company vs Board of Revision on Tax Assessments (1) in support of the contention that a tax on land not based on its productivity, violates article 14. (1) ; 99 I am unable to hold that this case supports the contention. What had happened there was that a certain statute had imposed a tax ad valorem on all coal situated in a certain area and in assessing the tax, the coal of the Cumberland Coal Company had been assessed by the authorities concerned at its full value while the coal of the rest of the class liable to the tax had been assessed at a lower value. Thereupon it was held that "the intentional systematic undervaluation by State Officials of taxable property of the same class belonging to other owners contravenes the con stitutional right of one taxed on the full value of his property. " On this view of the matter the Supreme Court of America directed readjustment of the assessments. The statute with which this case was concerned had levied the tax ad valorem which, it may be, is the same thing as a tax correlated to productivity. The case had therefore nothing to do with the question that a tax on coal otherwise than ad valorem would be unconstitutional. In fact this case did not declare any statute invalid. Then it seems to me that if the contention of the petitioners is right, and land could be taxed only on its productivity, for the same reason, taxes on all other things would have to be correlated to the income to be derived from them. The result would be far reaching. I am not prepared to accept a contention producing such a result and no authority has been cited to lead me to accept it. It may be that as lands are not of equal productivity, some tax payers may be able to pay the tax out of the income of the land taxed while others may have to find the money from another source. To this extent the Act may be more hard on some than on others. But I am unable to see that for that reason it is unconstitutional. All class legislation puts some in a more disadvantageous position than others. If the classification made by the law is good, as I think is the case with the present Act, the resultant hardship alone cannot make it bad. It was said in Magonn vs Illinois Trust and Savings Bank(1), "It is hardly (1) ; , 1043. 100 necessary to say that hardship, impolicy, or injustice of state laws is not necessarily an objection to their constitutional validity. " It is then said that sub sec. (1) of section 5A, which was introduced into the Act by the Amending Act, offends article 14. The impugned provision is in these terms: S.5A. (1) It shall be competent for the Government to make a provisional assessment of the basic tax payable by a person in respect of the lands held by him and which have not been surveyed by the Government, and upon such assessment such person shall be liable to pay the amount covered in the provisional assessment. This section was enacted as at the date of the Act, all lands had not been surveyed and so the areas of all holdings were not known. In the absence of such knowledge the tax which was payable on the basis of the areas of the holdings could not be assessed on unsurveyed lands, so the section provides that pending the survey, the Government will have power to make a provisional assessment on unsurveyed lands. This provision was necessary as the survey was bound to take time. The contention is that a. 5A(1) gives arbitrary power to the Government to make a provisional assessment on any person it chooses, leaving out others from the provisional assessment. I am unable to read the sub section in that way. It may be that it leaves it to the Government to make a provisional assessment if it chooses. This does not result in any illegal classification. The surveyed lands and unsurveyed lands are distinct classes of properties and may be differently treated. Again, all unsurveyed lands would on survey have to pay tax from the beginning. It would follow that the holders of both classes of lands are eventually subjected to the same burden. As to the contention that under this section the Government has the right to levy the provisional assessment at its choice on some and not on all holders of unsurveyed lands, I am unable to agree that this is a proper reading of the section. In my view, the 101 expression "a person" in the section does not lead to that conclusion. That expression should be read as "all persons" and it is easily capable of being so read. The section says, "It shall ' be competent for the ' Government to make a provisional assessment of the basic tax payable by a person". Now the basic tax is payable by all persons holding land. So the provisional assessment, if made, has to be on all persons holding lands whose lands have not been surveyed. The Government cannot, therefore, pick and choose. A statute is intended to be legal and it has therefore to be read in a manner which makes it legal rather than in a manner which makes it illegal. If the Government did not make the provisional assessment in the case of all liable to such assessment, then the Government 's action could be legitimately questioned. It has however not in fact been said in these petitions that in deciding to make the provisional assessment the Government has made any discrimination between the persons liable to such assessment. Section 5A(1) is also attacked on the ground that it is against rules of natural justice in that it does not say that in making the provisional assessment, any hearing would be given to the person sought to be assessed or requiring a return from him or giving him a right of appeal in respect of the provisional assessment made. It is true that the ' section does not expressly provide for a hearing being given. It seems to me however that if according to the rules of natural justice the assessee was entitled to a hearing, an assessment made without giving him such a hearing would be bad. The Act must be read so as to imply a provision requiring compliance with the rules of natural justice. Such a reading is not impossible in the present case as there is nothing in the Act indicating that the rules of natural justice need not be observed. It was said in Spack man vs Plumstead Board of Works (1) where a statute requiring an architect to give a certain certificate which did not provide the procedure as to how the architect was to conduct himself, came up for consideration that, "No doubt, in the (1) 10 A.C. 229, 240. 102 absence of special provisions as to how the person who is to decide is to proceed, the law will imply no more than that the substantial requirements of justice shall not be violated." Again in Maxwell on Statutes (10th ed.) p. 370 it has been said, "In giving judicial powers to affect prejudicially the rights of person or property, a statute is understood as silently implying, when it does not expressly provide, the condition or qualification that the power is to be exercised in accordance with the fundamental rules of judicial procedure, such, for instance, as that which requires that before its exercise, the person sought to be prejudicially affected shall have an opportunity of defend ing himself." In so far as this Act confers a power on the Government to discharge the judicial duty of making a provisional assessment, which the petitioners say, it does, it must imply that the judicial process has to be observed. As regards the return, that seems to me not to be of much consequence. If the assessee is entitled to be heard, the fact that he is not asked to make a return, would not constitute a departure from the rules of natural justice. Likewise, the absence of a right of appeal is not something on which the petitioners can rely. Rules of natural justice do not require that there must always be a right of appeal. Under the Act it is the Government which makes the assess ment and it would not be unreasonable to hold that in view of the high authority of the person assessing, the absence of a right of appeal is not likely to cause any miscarriage of justice. I am therefore unable to hold that in the absence of express provisions laying down the procedure according to which the provisional assessment is to be made, the Act has to be held invalid. It may here be stated that in those instances where, in the present cases, provisional assessments had been made, the, assessees had either themselves supplied the area of the lands held by them or the area had been determined after giving them a hearing. After the area has been determine , the amount of the tax payable is decided by a simple calculation at the rate 103 of Rs. 2 per acre of land held and with regard to this, no hearing is required. Then again sub see. (2) of section 5A provides that the Government after conducting a survey of the lands mentioned in sub sec. (1) under which provisional assessment is to be made, shall make a regular assessment and adjustments would have to be made in regard to tax already paid on the basis of the regular assessment. A point is made that there is no time limit fixed within which the regular assessment is to be made and so the Act leaves it to the arbitrary decision of the Government when to make the regular assessment. I do not think that this contention is correct. Properly read, the section in the absence of any indication as to time, means that regular assessment would have to be made as soon after the survey, as is reasonably possible. It is also said that section 7 of the Act offends article 14. This section gives power to the Government to exempt from the operation of the Act such lands or class of lands as the Government may by notification decide. This section does not indicate on what grounds the exemption is to be granted. It therefore seems to me that it gives arbitrary power to the Government and offends article 14. But the section is clearly severable from the rest of the Act. If the section is taken out of the Act, the operation of the rest of the Act will not in the least be affected. The only effect will then be that the Government will have no power to exempt any land from the tax. That will not in any way affect the other provisions of the Act. The invalidity of this section is therefore no reason for declaring the entire Act illegal. It may be pointed out that it is not alleged in the petitions that the Government has exempted any lands or class of lands from the operation of the Act. It is contended that section 8 of the amending Act also shows the arbitrary nature of the Act. That section provides that if any difficulty arises in giving effect to the provisions of this Act, the Government may by order do anything not inconsistent with such provisions which appears to it to be necessary or expedient 104 for removing the difficulty. This is a common form of provision now found in many Acts. The power given under it cannot be said to be uncontrolled for it must be exercised consistently with the Act and to remove difficulties arising in giving effect to the Act. In any event, this provision is contained in the amending Act only. Even if the section be held to be invalid that would not affect, the rest of the amending Act or any question that arises on these petitions. The validity of the Act is also challenged on the ground that it infringes article 19, cl. (1), sub cls. (f ) & (g). This challenge seems to me to be wholly untenable. Apart from the question whether a taxing statute can become invalid as offending article 19, as to which the position on the authorities does not seem to be very clear, it is plain that article 19 permits reasonable restrictions to be put on the rights mentioned in subcls. (f ) & (g). Now there is no dispute that the rate of tax fixed by the Act is a very low rate. It has not been said that the rate fixed is unreasonable. It clearly is not so. The restrictions on these rights under article 19(1), (f) & (g) put by the Act, if any, are clearly reasonable. These rights cannot therefore be said to have been infringed by the Act. The lands of the petitioners are lands on which stand forests. It is said that under the Madras Preservation of Private Forests Act, (Act XXVII of 1949), which applies to the lands with which we are concerned as they are situated in an area which previously formed part of the State of Madras, the owners of the forests can work them only with the permission of the officer mentioned in that Act. It is said that the control imposed by the officer has been such that the income received from the forest is much less than the tax payable under the Act in respect of the land on which the forest stands. Taking by way of illustration Petition No. 13, it is pointed out that the income from the forest with which that petition is concerned was Rs. 8,477 for the year 1956 57 while the tax payable under the Act for more or less the same period was Rs. 1,51,000. I am unable to hold that because of this the Act offends article 19(1), (f) and (g). 105 It is not stated that the land is not capable of producing any income other than the income from the forest standing on it. There is nothing to show that in all times to come the income from the land including the income from the forest, will be less than the tax imposed on it by the Act. The area of the land concerned in Petition No. 13 is enormous being about 75,500 acres. I am further unable to hold the impugned ' Act to be invalid because of action that may be taken under another Act, namely, the Madras Act XXVII of 1949. The validity of the Act is challenged also on the ground that it offends article 31 of the Constitution. I am unable to see any force in this contention. If the statute is otherwise valid, as I have found the present Act to be, it cannot, even if it deprives any person of property, be said to offend article 31(1). It has been held by this Court in Ramjilal vs Income tax Officer,. Mohindargarh (1) that "clause (1) of article 31 must be regarded as concerned with deprivation of property otherwise than by the imposition or collection of tax, for otherwise article 265 becomes wholly redundant." No question of cl. (2) of article 31 being violated arises here for the Act does not deal with any acquisition of property. It is also said that the Act is a colourable piece of legislation, namely, that though in form a taxing statute it, in effect, is intended to expropriate lands, held by the citizens in the State by imposing a tax too heavy for the land to bear. As was said in Raja Bhairebendra Narayan Bhup vs The State of Assam (2) "The doctrine of colourable legislation is relevant only in connection with the question of legislative competency". In the present case, there being in my view, no want of legislative competency in the legislature which passed the Act in question, the Act cannot be assailed as a piece of colourable legislation. I may add that I do not accept the argument that the Act is in its nature expropriatary or that the tax imposed by it is really excessive. (1)[1951] S.C.R. 127, 136. (2) [1956] S.C.R. 303. 14 106 I come now to the last argument advanced by the petitioners. It is said that the Act was beyond the legislature competence of the State Legislature. It is conceded that the State Legislature has power to impose a tax on land under entry 49 of List 2 in the Seventh Schedule to the Constitution, but it is said that land as mentioned in that entry does not include lands on which forests stand. It is contended that the State Legislature has power to legislate about forests under entry 19 of that List and also as to land under entry 18. There is however no power to impose a axon forests while there is power under entry 49 of that list to tax land. Therefore, it is said, that there is no power to impose tax on lands on which forests stand and the Act in so far as it imposes tax on lands covered by forests, which the lands of the petitioners are, is hence incompetent. It is not in dispute that a State Legislature has no power to impose a tax on a matter with regard to which it has the power to legislate but has been given no express power to impose a tax. Therefore, I agree, that a State Legislature cannot impose tax on forests. I am however not convinced that "land" in entry 49 is not intended to include land on which a forest stands. No doubt, a forest must stand on some land. In Shorter Oxford Dictionary, one of the mean ings of "forest" is given as an extensive tract of land covered by trees and undergrowth, sometimes intermingled with pastures. The concepts of forest and land however are entirely different. The principal idea conveyed by the word "forest" is the trees and other growth on the land. Under entry 19 there may no doubt be legislation with regard to land in so far it is necessary for the purpose of the forest growing on it. It is well known that entries in the legislative lists have to be read as widely as possible. It is not necessary to cut down the plain meaning of the word ,"land" in entry 49 to give full effect to the word "forest" in entry 19. In my view, the two entries namely, entry 49 and entry 18 deal with entirely different matters. Therefore, under entry 49 taxation 107 on land on which a forest stands is permissible and legal. For these reasons I would dismiss these petitions. BY COURT: In accordance with the opinion of the majority of the Court, these Petitions are allowed with costs against the contesting Respondent, the State of Kerala. Petitions allowed.

The Travancore Cochin Land Tax Act, 1955 was passed by the legislature of the State of Travancore Cochin and was amended by Act 10 of 057, by the State of Kerala. By section 4 Of the Act all lands in the State of whatever description and held under whatever tenure were to be charged and levied a uniform rate of tax to be called the basic tax. Section 7 gave power to the Government to exempt from the operation of the Act such 78 lands or class of lands which the Government may, by notification, decide. Section 5A which was introduced into the Act by the Amending Act enabled the Government to make a provisional assessment of the basic tax in respect of the lands which had not been surveyed by the Government and provided that the Government after conducting the survey shall make a regular assessment and make the necessary adjustments in respect of the amounts paid already. There was, however, no time fixed for the conduct of the survey. The petitioners who owned forest in the State, challenged the constitutional validity of the Act on the grounds that the provisions of the Act contravened articles 14, 19(i)(f) and 31(1) of the Constitution of India inasmuch as (1) the Act did not have any regard to the quality of the land or its productive capacity and the levy of a tax at a flat rate of RS. 2 per acre imposed very unreasonable restrictions on the right to hold property, (2) the. Act did not lay down any provision calling for a return from the assessee for an enquiry or investigation of facts before the provisional assessment was made or any right of appeal to any higher authority and, in fact, did not make any provision for hearing the assessee at any stage, (3) section 7 gave arbitrary power to the Government to pick and choose in the matter of grant of total or partial exemption from the provisions of the Act, and (4) the tax proposed to be levied had absolutely no relation to the production capacity of the land sought to be taxed or to the income they could derive, and therefore the Act had been conceived with a view to confiscating private property, there being no question of any compensation being paid to those who may be expropriated as a result of the working of the Act. The petitioners also challenged the legislative competence of the legislature of the State to levy a tax on lands on which forests stood. The case on behalf of the State of Kerala, inter alia, was that the Act had its justification in article 265 Of the Constitution of India, which was not subject to the provisions of Part III of the Constitution and that, therefore, articles 14, 19 and 31 could not be pressed in aid of the petitioners. , Held, (Sarkar, J., dissenting), that the Travancore Cochin Land Tax Act, 1955, infringed the provisions of article 14 Of the Constitution of India. The Act obliged every person who held land to pay the tax at the flat rate prescribed, whether or not he made any income out of the property, or whether or not the property was capable of yielding any income. Consequently, there was no attempt at classification in the provisions of the Act and it was one of those cases where the lack of classification created inequality. It was therefore hit by the prohibition to deny equality before the law contained in article 14. Section 5A of the Act which enabled the Government to make a provisional assessment of the basic tax payable by the 79 holder of unsurveyed land imposed unreasonable restrictions on the rights to hold property safeguarded by article 19(1)(f) of the Constitution, inasmuch as (1) the Act did not impose an obligation on the Government to undertake survey proceedings within any prescribed or ascertainable period, with the result that a landholder might be subjected to repeated annual provisional assessments on more or less conjectural basis and liable to pay the tax assessed, and (2) the Act being silent as to the machinery and procedure to be followed in making the assessment left it to the Executive, completely ignoring the legal position that the assessment of a tax on a person or property was at least of a quasijudicial character. Section 7 of the Act which vested the Government with the power wholly or partially to exempt any land from the provi sions of the Act did not lay down any principle or policy for the guidance of the exercise of discretion by the Government in respect of the selection contemplated by the section, and was, therefore, discriminatory in effect and offended article 14. The section was not severable from the rest of the Act as both the charging sections, section 4 and section 7, authorising the Government to grant exemptions from the provisions of the Act were the main provisions of the statute. Shri Ram Krishna Dalmia vs Sri justice section R. Tendolkar; , , relied on. The Act was also confiscatory in character inasmuch as the provisions of the Act had the effect of eliminating the private owners through the machinery of the Act, without proposing to acquire the privately owned forests in the State after satisfying the conditions laid down in article 31 of the Constitution. Per Sinha, C.J., Imam, Subba Rao and Shah, JJ. Article 265 of the Constitution which provided that the State shall not levy or collect a tax except by authority of law referred to a valid law, and in order that the law might be valid, the tax proposed to be levied must be within the legislative competence of the Legislature imposing a tax and authorising the collection thereof and, secondly, the tax must be subject to the conditions laid down in article 13, by which all laws inconsistent with or in derogation of the fundamental rights in Part III shall be void. Per Sarkar, J. (1) The object of the Act was to tax land in the State for raising revenues by providing for a low and uniform rate of basic tax replacing all other dues payable to the Government and the tax payers were classified according to the area of lands held by them. Such a classification had an intelligible basis and had a rational relation to the object of the Act. As tax was to be levied not because the land was productive but because the land was held in the State, the classification did not offend article 14 Of the Constitution, even though it might impose unequal burden of the tax on the owners of land on account of owners of less productive land being put on a larger burden. 80 (2)Section 5A did not offend article 14 and in the absence of express provisions laying down the procedure according to which the provisional assessment was to be made, the Act could not be held invalid on the ground that it was against the rules of natural justice. (3)Section 7, even if it were considered invalid on the ground that it gave arbitrary power to the Government and offended article 14, was severable from the rest of the Act and would not affect the other provisions of the Act. (4)The Act did not infringe the fundamental rights in article 19(1)(f) as the rate of tax fixed by the Act was a very low rate and the restrictions on those rights were reasonable. (5) The Act was not in its nature expropriatary and did not offend article 31. As there was no want of legislative competence, theAct could not be assailed as a piece of colourable legislation on the ground that though in form a taxing statute it, in effect, was intended to expropriate lands by imposing a tax too heavy for the land to bear. (6)The word "land" in Entry 49 of List II, Sch. 7, of the Constitution, included "land on which a forest stands" and, therefore, under that Entry taxation on land on which forests stood was permissible and legal. The Act, therefore, could not be challenged as being beyond the legislative competence of the State Legislature.

The State of Uttar Pradesh issued two notifications in 1953, by one of which the Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950, was extended to certain areas, in which, Pargana Agori which was owned by the respondent was situate, and by the other, it was directed that all " estates" in the area including the Pargana should vest in the State. The respondent challenged the notifications by a writ petition on the ground that the Pargana was not an estate within section 3 (8) of the Act. While the matter was pending in the High Court, the definition in section 3 (8) was amended by U.P. Act 14 of 1958, and while appeals were pending in this Court, by U.P. Act 1 of 1964, by which, the Pargana was deemed to be an "estate". The amendments had retrospective effect from 1st July 1952. The appellant State contended that Act 1 of 1964 could not be impugned because, the Pargana was an "estate ' either within article 3 1A(2) (a) or (iii). HELD : The forest land or waste land in the Pargana could not be deemed to be an estate within article 3 1A(2) (a) (iii) unless it was held or let for purposes ancillary to agriculture. But the entire Pargana is la grant in the nature of a jagir or inam, having been held by the respondent 's ancestor under sanads granting the land and the land revenue to him for services rendered to the British, and consequently, is an "estate, within article 31A(2) (a) (i) of the Constitution. [368 D, 370 G H; 371 F H] Thakur Amar Singhji vs State of Rajasthan [1955] 2 S.C.R. 303, followed. The acquisition of the Pargana was a necessary step in the implementation of agrarian reforms contemplated by article 31A. Therefore, U.P. Act 1 of 1964 can claim the protection of article 31A, and the two notifications must be upheld. [372 A C}

By a notification of the Delimitation Commission dated July 24, 1964 issued in terms of section 10(1) of the , Ujjain City, which had been a general constituency, was notified as reserved for the Scheduled Castes. The appellant who was a resident of Ujjain and a citizen of India, Mad a petition under article 226 praying for a writ of certiorari for quashing the notification on the ground that he had a right to be candidate for parliament from the Ujjain City constituency which had been taken away. The petition was rejected by the High Court on the short ground that the notification could not be questioned in any court because under article 329(a) of the Constitution the validity of any law relating to the delimitation of constituencies or the allotment of seats to such constituencies, made or purporting to be made under article 327 or article 328, could not be called in question in any court. In appeal to this Court it was contended on behalf of the appellant that the impugned notification, which was an order under section 9 and published in accordance with the provisions of section 10(1) of the Act, was not a law within the meaning of section 329; that in any event under section 10(2) such an order was to have the force of law but was not itself a law; and that the notification was not made under article 327 but article 82 of the Constitution. HELD : dismissing the appeal, The impugned notification was a law relating to the delimitation of constituencies or the allotment of seats to such constituencies made under article 327 of the Constitution. An examination of sections 8 and 9 of the Act showed that the matters therein dealt with were not to be subject to the scrutiny of any court of law. Section 10(2) clearly demonstrates the intention of the legislature that the orders under sections 8 and 9 published under section 10(1) were to be treated as law which was not to be questioned in any court. There was very good reason behind such a provision. If the orders made under sections 8 and 9 were not to be treated as final, the result would be that any voter, if he so wished, could hold up an election indefinitely by questioning the delimitation of the constituencies from court to court. [410 B C, G, H] Although an order under section 8 or section 9 published under section 10(1) is not part of an Act of Parliament, its effect is to be the same. Section 10(4) puts such an order in the same position as a law made by the Parliament itself which could only be made by it under article 327. [415 E] 401 Case law referred to. Article 82 merely envisages that upon the completion of each census the allocation of seats in the House of the People and the division of each State into territorial constituencies may have to, be readjusted. It is article 327 which enjoins upon Parliament to make provision by law from time to time with respect to all matters relating to or in connection with elections to either House of Parliament, delimitation of constituencies and all other matters necessary for securing the due constitution of such House or Houses. [406 C]

The petitioners Ex patwaris under the State of Uttar Pradesh brought the present petition under Article 32 of the Constitution in the Supreme Court alleging that the provisions of articles 14 and 16 of the Constitution had been violated because they bad been denied equality before the law and equal opportunity for employment under the State. Patwaris numbering about 28,000 in the whole State of Uttar Pradesh had organized themselves into "The U.P. Patwaris Associations" with a view to improving their prospects and emoluments. The association passed resolutions demanding increase in pay and allowances etc. The Government was considering these matters when a large number of patwaris went on a "pen down strike" with the result that the Government withdrew the recognition of the Association. The Government further published the new "Land Records Manual" embodying new amended rules regarding recruitment, conditions of service and duties of patwaris. The Association protested against the revised Land Records Manual and passed a resolution that all patwaris should submit their resignations on the 2nd February, 1953 requesting that they should be relieved of their duties by the 4th March, 1953 after which date they will consider themselves as free from all obligations to work under the Government. About 26,000 patwaris actually resigned with a view to paralyse the whole revenue administration in the State and to coerce 47 358 the Government into accepting their demands. The Government however, accepted their resignations and relieved them of their duties before the 4th March, 1953. On the very next date, the 5th March, 1953, the Government announced the creation of a new service of "Lekhpals" and proceeded to organize that service by recruiting the new personnel which included most of the old patwaris. It also included all those patwaris whose record of service was free from blemishes and who had withdrawn their resignations. Some of the petitioners were absorbed in the new cadre of Lekbpals. The Government was thus giving a locus poenitentiae to those of the ex patwaris who had joined the agitation. The question for consideration before the Supreme Court was whether the petitioners who came within the category excluded from re appointment had been denied equal opportunity of appointment as Lekhpals and thus article 16 of the Constitution had been infringed. Held, that the contention of the petitioners that they bad been prevented from re entering Government service upon the re organisation of the cadre under the new name and had been denied equality of opportunity as contemplated by article 16 of the Constitution was without substance as the Government were within their rights to lay down certain qualifications for the new recruits. They were entitled to exclude those persons who had betrayed a lack of proper sense of discipline. Article 16 of the Constitution is an instance of the application of the general rule of equality laid down in article 14 with special reference to the opportunity for appointment and employment under the Government. Like all other employers, Government are also entitled to pick and choose from amongst a large number of candidates offering themselves for employment under the Government.

The property regarding which the contention is raised that the fundamental rights of the petitioners under articles 19(1) (f) and 31 ( 1) of the Constitution are alleged to 832 have been infringed is a plot of land within the Municipal limits of Hazaribagli with certain buildings and structures thereon,which originally belonged to the Raja of Ramgarh. On January 16, 1948, the Raja leased this property to N for a term of 99 years and sometime thereafter settled his reversionary interest of the property for the benefit of a Trust. The estate of Ramgarh was notified under section 3(1) of the Bihar Land Reforms Act for being taken over by the Government of Bihar and in consequence, the estate statu torily vested in the State of Bihar. A notice was issued to N to show cause why the lease executed in his favour should not be set aside under s.4(h) of the act as the lease was executed well within the period specified under section 4(h). N submitted objections standing that these properties were not covered by section 4(h). During the pendency of the enquiry N surendered his leasehold to the trust. The trust leased the property to one 1, who assigned his household interest in the property to the petitioner Company. The present sought to quas the said proceedings under section 4(h) pending before the Collector wherein an enquiry was having held as to the manner in which the property in, question was being enjoyed by tile Raja of Ramgarh prior to the transfer, by lease for 99 years. The question is whether any fundamental rights of the petitioner have been infringed by the enquiry being held. Held, that before a party could complain of an infringement of his fundamental rights to hold property he must establish that be has title to that property and if that title itself is in dispute and is the subject of adjudication in proceedings legally constituted,the cannot obviously put forward any claim based on such title until as a result of that enquiry his title established. It is only thereafter that the question whether his rights in or to that property have been improperly or illegally infringed could arise.

In his election petition challenging the election of the respondent the appellant alleged that the respondent and three other defeated candidates committed various corrupt practices within the meaning of sub sections (1) to (7) of section 123 of the Representation of the People, Act, 1951. The respondent raised a preliminary objection that the petition was liable to be dismissed for noncompliance with the provisions of section 82 of the Act inasmuch as the defeated candidates against whom allegations of corrupt practice had been made had not been joined as parties to the petition. The High Court upheld the objection and dismissed the petition. In appeal to this Court it was contended that: (i) since the affidavit filed by the appellant in support of the election petition merely stated that the allegations contained in the relevant paragraphs were based on information received and had not stated what the sources of information were, that part of the petition in which the allegations of corrupt practices were made could not form the basis of a triable issued (ii) while section 82(a) was mandatory s.82(b) was directory and as such the petition could not be dismissed: (iii) s.82(b) was violative of article 14 of the Constitution. Dismissing the appeal. HELD : (i) The provision for setting out the sources of information in an affidavit was not a requisite prescribed under r. 94 A of the conduct of Election Rules, 1961. There was 'nothing in the affidavit in Form 25 under this rule which required the petitioner to state the source or source", of his information. When there were specific rules under the Act no other rules were applicable. If the petition and the affidavit conformed to the provisions of the Act and the rules made thereunder, it could not be said that because the source of information had not been given. the allegations made in the petition had to be ignored. [353E F] Smt. Sahodrobai Rai vs Ram Singh Aharwar & Ors. A.I.R. ; Amulva Chandra Rhaduri vs Satish Chandra Giri & Ors. A.I.R. 1932 Cal. 255 and Wasudeoraoji vs A. D. Mani A.I.R. 1951 Nag. 26, held inApplicable. (ii) Section 82(2) enioins that, apart from the returned candidate whose election was challenged, any other candidate against whom any allegations of corrupt practices were made should be joined as parties to the petition Section 86 read with s 82 makes both cls. (a) and (b) of s 82 mandatory and noncompliance with these requirements renders the petition to be dismissed. In view of these provisions it was incumbent upon the High Court where the allegation *as that the requirements of section g) were not complied with, to deter mine that issue as a preliminary issue. [353A D] Charan Lal Sohu vs Nandkishore Bhatt & Ors. C. A. No. 2411 of 1972 dated August 1, 1973, referred to. Mohan Singh vs Bhanwarlal & Ors. ; , held inapplicable. (iii)An election petition cannot be split up in such a manner as to maintain it in respect of allegations of corrupt practiced only against some persons and not against other persons who were required to be made necessary parties. 350 A person who was not a party and against whom corrupt practices had been proved at the trial, natural justice required that he should also be afforded an opportunity to contest that finding. Article 14 had no application because the object of section 82 was one and indivisible and a person coming to the court had to come with clean hands and not attempt to prevent a full and complete enquiry or thwart fair trial by picking and choosing the parties to the peti tion. [357C F]

Upon the sale of certain village land the appellants filed a suit for pre emption, and a compromise decree was passed allowing pre emption provided the appellants deposited the purchase amountbvacertaindate. The appellants Posited the amount and got Possession of the land. Before the appellants deposited 879 the amount, the respondents who were pre emptors of an equal degree, filed a suit to enforce their right of pre emption. The appellants contended that the land could be divided between two equal pre emptors only when both the suits were pending before the court at the time of the passing of the decree, and that the appellants having obtained the decree and paid the amount got substituted in place of the vendees and the respondents could succeed only by establishing a superior right of pre emption. The respondents countered that they had a statutory right under section 17 Of the Punjab Pre emption Act to share the land with the appellants and that the appellants, having been substituted in place of the vendees Pendente lite, were hit by the doctrine of lis pendens and could not claim a higher right than the vendees: Held, that the respondents ' suit could not succeed as they (lid not have a superior right of pre emption over the appellants who had become substituted in place of the vendees upon payment of the purchase money under their decree. A pre emptor has two rights: (i) inherent or primary right to the offer of a thing about to be sold and (2) a secondary or remedial right to follow the thing sold. The secondary right is simply a right of substitution in place of the original vendee. Dhani Nath vs Budhu, 136 P. R. 1894 at P. 511 and Gobind Dayal vs Inayatullah, All. 775, followed. In a suit for pre emption the plaintiff must show that his right is superior to that of the vendee and that it subsists at the time he exercises his right. This right is lost if before he exercises it another person with an equal or superior right has been substituted in place of the original vendee. The Punjab Preemption Act defines the right of pre emption and provides a procedure for enforcing it. It does not enlarge the content of this right nor does it introduce any change in the incidents of the right. Section 28 Of the Act does not preclude the Court from giving a decree for pre emption in a case where the suits are not joined together and one of the suits has been decreed separately. The doctrine of lis pendens applies only to a transfer Pendente lite, but it cannot affect a pre existing right. If the sale is a transfer in recognition of a preexisting and subsisting right, it would not be affected by the doctrine, as the transfer does not create a new right Pendente lite but if the preexisting right became unenforceable by reason of limitation or otherwise, the transfer, though ostensibly made in recognition of such a right, in fact creates only a new right pendente lite. The appellants ' right of pre emption was subsisting and was not barred by limitation at the time of the transfer in their favour as they had filed a suit and had obtained a decree and the coercive 112 880 process was still in operation. Consequently the appellants were not hit by the doctrine of lis pentlens and they acquired an indefeasible right to the land when they took possession of it after depositing the purchase money in court. Mool Chand vs Ganga jal, Lah. 258, Mt. Sant Kaor vs Teja Singh, I.L.R. , Mohammad Sadhiq vs Ghasi Ram, A.I.R. 1946 Lah. 322 and Wazir Ali Khan vs Zahir Ahmad Khan, A.I.R. 1949 East Punj. 193, approved. Kundan Lal vs Amar Singh, A.I.R. 1927 All. 664, disapproved. The right of pre emption is effectively exercised or enforced only when the pre emptor has been substituted for the vendee. A conditional decree whereunder the pre emptor gets possession only if he pays a specified amount within a prescribed time and which also provides for the dismissal of the suit in case the condition is not fulfilled, cannot bring about the substitution of the decree holder for the vendee before the condition is fulfilled. Such substitution takes effect only when the decree holder fulfils the condition and takes possession of the land. Deonandan prashad Singh vs Ramdhari Choudhyi, (1916) L. R. 44 I. A. 80, followed.

The Kerala State Legislature felt the necessity of making comprehensive land reforms in the State. The Kerala Agrarian Relations Act, 1960 (Act IV of 1961) was accordingly passed and received the assent of the President on January 21, 1961. Some of its provisions were brought into force with effect from February 15, 1961. That Act was struck down as unconstitutional by this Court. The Kerala Ryotwari Tenants and Kudikidappukars Protection Act, 1962 was then passed for the temporary protection of tenants in those taluks. The Kerala High Court declared it null and void in its application to the ryotwari lands of the Malabar area and most of the lands of Travancore area. As an interim legislation, the Kerala Tenants and Kudikidappukars Protection Act 1963 was passed to provide some protection to the tenants. But it repealed the Kerala Ryotwari Tenants and Kudikidappukars Protection Act, 1962, and suspended the operation of the Kerala Agrarian Relations Act, 1960. After re examining the requirements in the field of land reforms as a whole, the Kerala Land Reforms Bill, 1963 was published in the State Gazette on Sept. 15, 1963. It covered a wide field in the matter of land reforms and, inter alia, provided for the imposition of a ceiling on `holdings ' of lands, the surrender of excess of lands, grant of compensation thereof, and the assignment of the surrendered lands in accordance with the order of priority mentioned in the Bill, collection of purchase price, constitution of Land Tribunals etc. The Land Reforms Act 1963 (Act 1 of 1964) received the assent of the President on Dec., 31, 1963. It was amended extensively, and in several material particulars by Act, 35 of of 1971 and Act 17 of 1972. The following three main points of controversy arose in the appeals : 1. Whether lands converted into plantations between April 1, 1964 and January 1, 1970 qualified for exemption under section 81(1)(e) of the Act. Whether a certificate of purchase issued by the Land Tribunal under section 72K of the Act was binding on the Taluk Land Board in proceedings under Chapter III of the Act. Whether the validity or invalidity of transfers effected by persons owning or holding lands exceeding the ceiling limit could be determined with reference to the ceiling area in force on the date of the transfer or in accordance with the ceiling area prescribed by Act 35 of 1969 whether sub section (3) of section 84 was retrospective in operation. ^ HELD : Point No. 1. The controversy is whether the restriction of sub. section (4) of section 82 came into force on January 1, 1970, because section 12 of the amending Act of 1971 was brought into force on that date, or 840 whether it came into force on April 1, 1964, when section 82 as originally enacted came into force. [853H, 854G] All the three Acts contain provisions about their "commencement". Subsection (3) of section 1 of the Act provides that : (i) Section 1 of the Act shall come into force at once, (ii) the other provisions of the Act shall come into force on such dates as the Government may appoint, (iii) different dates may be appointed for different provisions of the Act, and (iv) any reference in any such provision to the "commencement of this Act" shall be construed as a reference to the coming into force of that provision. The Act was published in the Gazette on January 14, 1964, and, by virtue of section 3 of the Kerala Interpretation and General Clauses Act, section 1 came into force on that date. Sec. 82, as has been stated, came into force on April 1, 1964, and the reference in sub section (4) of that section to the "commencement of this Act" meant a reference to the coming into force of that provision with effect from April 1, 1964. It may be that the first three rules or directions contained in sub section (3) were spent on the coming into force of sec. 1 of the Act or its other provisions on the dates appointed for them, but, for obvious reasons, rule (iv) continued to hold the field inasmuch as it laid down the rule of construction that any reference to the commencement of the Act shall be construed as a reference to the coming into force of that particular provision. It was therefore applicable as a general rule of construction whenever it became necessary to ascertain the date of commencement of a particular provision of the Act other than section 1. [854G, 855B F] Sub section (4) of section 82, as originally incorporated in the Act, came into force on April 1, 1964. It was amended by section 66 of the Amending Act of 1969, which came into force on January 1, 1970, but that proved to be fortuitous and was supplanted by section 12 of the Amending Act of 1971 from the same date. The sub section as amended by the Amending Act of 1971 also dealt with the conversion of land into any other class of land "after the commencement of this Act", but it added the words "or into a plantation" and provided that such conversion shall not be taken into consideration for determining the extent of the land to be surrendered. [855F H] On the plain meaning of the proviso to sub section 3 of section 1, it follows that when the provision of sub section 4 of section 82 was brought into force on April 1, 1964, its amended version also came into force from that date. [856B, E] No particular significance attaches to the use of the expression "provisions" or "provision" in section 1(3) of the Act. A provision is a distinct rule or principle of law in a statute which governs the situation covered by it. So an incomplete idea, even though stated in the form of a section of a statute, cannot be said to be a provision for, by its incompleteness, it cannot really be said to provide a whole rule or principle for observance by those concerned. A provision of law cannot therefore be said to exist if it is incomplete, for then it provides nothing. [856G, 857C D] The amended section 82 of the Act is a distinct rule or a clause for it provides the extent of the ceiling area in the cases mentioned in it, its effect on the lands owned or held individually by members of a family or jointly 841 by some or all the members of the family, the taking into account of the shares of the members of the family or an adult unmarried person, the effect of conversion of any class of land into any other class of land specified in the Schedule or into a plantation and the extent of land liable to be surrendered, lands covered by a private trust or a private institution and exemption of land covered by section 81(6). The section is therefore a "provision" by any standard as it states the law relating to the imposition of ceiling on land. It may well be stated that sub section (4) of section 82 is also a provision of the law by itself, for it lays down a distinct rule relating to conversion of land for observance by all concerned. [857D F, H, 858A] The view taken by the High Court in Ramunni Nair vs State of Kerala, , in regard to the meaning to be attached to the words "the commencement of this Act" is substantially correct and does not call for interference. [859B] There is no force in the other argument that a landholder is, in any event, entitled to the benefit of the exemption under section 81 as amended by the Act of 1969 in respect of the "extent of plantation within the ceiling area" even though it were converted into a plantation during the period April 1, 1964 to December 31, 1969. The argument is untenable because while sub section (1) of section 81 provides that the provisions of Chapter III shall not apply to lands and plantations mentioned in it, that is overridden by, and is subject to the requirement of, sub section (4) of section 82. [859D F] Reference made to Saidu Muhammed vs Bhanukuitan State of Kerala & Ors. vs Philomina etc. , , and State of Kerala & Ors. vs K. A. Gangadharan, ; Point No. 2. The question for consideration is whether the certificate of purchase issued by the Land Tribunal under section 72K of the Act is binding on the Taluk Land Board in proceedings under Chapter III of the Act for the purpose of taking a decision in regard to the ceiling area under sub section (5) of section 85. Sub section (1) of that section shows that the question for examination by the Board is not that relating to the existence of the tenancy rights of the person who files the statement under sub section (2), but that relating to the bona fides of his belief that the land sought to be excluded by him is liable to be purchased by a cultivation tenant. The Land Tribunal and the Taluk Land Board thus operate in their respective fields for the purpose of the Act. [860 B, E G]. Sub section (2) of section 72K merely declares that the certificate of purchase shall be conclusive proof of the "assignment" of the right, title and interest of the landowner and the intermediary (if any) to the tenant in respect of the holding concerned. There is nothing in the sub section to require that the finding recorded by the Tribunal in those proceedings would be conclusive proof of any other matter so as to bind the Taluk Land Board or any authority. Sub section (2) of section 72K therefore does not impinge on the authority of the Taluk Land Board to discharge its own functions under section 85(5). [860G H, 861A B] As such the Board is quite free to cause the particulars mentioned in the statement to be verified, and to ascertain whether the person filing it owns or holds any other land, and to determine the "extent" as well as the "identity" of the excess land which he is required to surrender. In that sphere of work, 842 the certificate of purchase is not required by law to be conclusive proof in regard to the surplus or any other land held by its holder so as to foreclose the decision of the Taluk Land Board under sub section (5) of section 85. [861B D] Moreover, although the certificate of purchase is conclusive proof in respect of the matters stated in section 72K(2), that only means that no contrary evidence shall be effective to displace it, unless the so called conclusive evidence is inaccurate on its face, or fraud can be shown (Halsbury 's Laws of England, fourth edition, vol. 17, page 22 paragraph 28). "Inaccuracy on the face" of the certificate is not as wide in its connotation as an "error apparent on the face of the record". It will therefore not be permissible for the Board to disregard the evidentiary value of the certificate of purchase merely on the ground that it has not been issued on a proper appreciation or consideration of the evidence on record, or that the Tribunal 's finding suffers from any procedural error. What sub section (2) of section 72K provides is an irrebutable presumption of law, and it may well be regarded as a rule of substantive law. But even so, it thereby does not take away the jurisdiction of the Taluk Land Board to make an order under section 85(5) after taking into consideration the "conclusive" evidentiary value of the certificate as far as it goes. [861E H, 862A] The view taken in Kunianujan Thampuran & Ors. vs Taluk Land Board, is thus not quite correct. [862B] Point No. 3. Some of the persons who owned or held lands exceeding the ceiling prescribed by the Act, had voluntarily transferred some of their lands after the publication of the Kerala Land Reforms Bill, 1963, in the State Gazette on September 15, 1963. Section 84 of the Act therefore provides that, except for the transfers mentioned in the section, the transfers so made shall be deemed to be transfers calculated to defeat the provisions of the Act, and shall be invalid. The section has thus been linked with section 82 which specifies the ceiling area, and has been so amended as to reduce that area considerably. The question is whether the validity of a voluntary transfer is to be determined with reference to the ceiling area in force on the date of the transfer, or the reduced ceiling area prescribed by the Amending Act of 1969. As has been observed by this Court in State of Kerala & Ors. vs K. A. Gangadharan, ; , section 84 has been enacted with a view to making the provisions of sections 83 and 85 effective. Section 15 of the Amending Act of 1972 (which inserted sub section (3) in section 84) does not state that it has been made with retrospective effect, and sub section (3) does not, in terms, state that it shall be deemed to have come into force from the date of the amendment which was made by the Amending Act of 1969. Even so, it is necessary to examine the true effect of the insertion and to decide whether it is retroactive. [862G H, 863A, D, G, H, 864A B] The primary rule of construction is that courts should be guided by the plain and clear language of the statute, for the legislature is intended to mean what it has expressed. It is an equally important rule of interpretation that a statute is not to be read retrospectively except for necessity. [864B] So construed, it is obvious that although the Act had not even come into force on September 15, 1963, it invalidated the transfers made after that date in excess of the ceiling area it prescribed. It follows therefore that so long as September 15, 1963 continues to remain the date with reference to which 843 the transfers are to be invalidated, the variation in the extent of the ceiling has necessarily to work back to that date. The legislature therefore inserted sub section (3) of section 84 to clarify that the expression "ceiling area" in the earlier sub sections would mean the ceiling area specified in section 82(1) as amended by the Amending Act of 1969, i.e. the reduced ceiling. [864D F] In taking this view the Court made a reference to the notes on clauses to the Amending Bill of 1972 and observed that while it was true that the intention of the legislature cannot be ascertained from any statement by way of a note on the clauses of the Bill or, brevet, and the duty of the Court is to find the natural meaning of the words in a statute in the context in which they are used, it has always been considered permissible and even desirable to take note of the history of the statute and the circumstances in which it was passed or the mischief at which it was directed. The reason is that the meaning which is to be given to a statute should be such as will carry out its object. So viewed, it appears that, as has plainly been stated in it, the "ceiling area" referred to in sub sections (1) and (2) of section 84 is the reduced ceiling area specified by the Amending Act of 1969. It is clearly retrospective, as it is meant to invalidate the transfers made after September 15, 1963 when the Bill of 1963 was published. [864F, 865G H, 866A B, C] The Court then examined some of the appeals separately and recorded its finding thereon. [866F 868 & 869, 879 877]. While examining civil appeal No. 1015 of 1976, the Court examined the question whether a child in the womb on January 1, 1970 was a member of the family for the purpose of section 82(1) (c) of the Act. It referred to the definition of the expression "family" in clause (14) of sec. 2 and of the expression "minor" as defined in clause (36A) and held that two postulates were necessary for obtaining the benefit of the increase of one standard acre for each member of the family in excess of five, namely, that the member should be in existence, and it should be possible to ascertain that he had not attained the age of 18 years on the appointed date. It was held that as both these conditions could not be said to exist in the case of a child en ventre sa mere, it would not be regarded as a member of the family for purposes of sec. 82 of the Act. [868D F].

Appeal No. 35 of 1959. Appeal from the judgment and decree dated October 29, 1956, of the Allahabad High Court in Writ Petition No. 327 of 1956. H. N. Sanyal, Additional Solicitor General of India, J. B. Dadachanji, section N. Andley, Rameshwar Nath and P. L. Vohra, for the appellants. G. C. Mathur and C. P. Lal, for the respondents. 1960, December 13. The Judgment of Imam, Kapur, Das Gupta and Dayal, JJ. was delivered by Das Gupta, J. Ayyangar, J. delivered a separate judgment. DAS GUPTA, J. This appeal is against an order of the High Court of Judicature at Allahabad rejecting the appellants ' application under article 226 of the Constitution. The first appellant is the Diamond Sugar Mills Ltd., a public limited company owning and operating a sugar factory at Pipraich in the District Gorakhpur, for the manufacture of sugar from 244 sugarcane. The second appellant is the Director of the company. By this application the appellants challenged the imposition of cess on the entry of sugarcane into their factory. On February 24, 1956, when the application was made the U. P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 (U. P. XXIV of 1953), was in force. Section 20 of this Act gave to the Governor of U. P. the power to impose by notification "a cess not exceeding 4 annas per maund on the entry of sugarcane into an area specified in such notification for consumption, use or sale therein". This Act it may be mentioned had taken the place of an earlier Act, the U. P. Sugar Factories Control Act, 1938, section 29 of which authorised the Governor of U. P. to impose by a notification after consultation with the Sugar Control Board under the Act "a cess not exceeding 10 per cent of the minimum price, if any, fixed under section 21 or 4 annas per maund whichever was higher on the entry of sugarcane into a local area specified in such notification for consumption, use or sale therein". Notifications were issued under this provision for different crushing seasons starting from 1938 39, the last notification issued thereunder being for the crushing season of 1952 53. These notifications set out a number of factories in a schedule and provided that during 1952 53 crushing season cess at a rate of three annas per maund shall be levied on the entry of all sugarcane into the local areas comprised in factories mentioned in the schedule for consumption, use or sale therein. Act No. XXIV of 1953 repealed the 1938 Act. The first notification under the provisions of section 20 of the 1953 Act was in these terms: "In exercise of the powers conferred by sub section (1) of section 20 of Uttar Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1953; (U. P. Act No. XXIV of 1953) the Governor is pleased to declare that during the 1954 55 crushing season, a cess at a rate of three annas per maund shall be levied on the entry of all sugar cane into the local areas comprised in the factories mentioned in the Schedule, for the consumption, use or sale therein". 245 Similar notifications were also issued on October 23, 1954, for the crushing season 1954 55 and on November 9, 1955, for the crushing season 1955 56. The appellants ' factory was one of the factories mentioned in the schedule of all these notifications. On the date of the application, i.e., February 24, 1956, a sum. of Rs. 2,59,644 9 0 was due from the first appellant and a further sum of Rs. 2,41,416 3 0 as liability on account of cess up to the end of January, 1956, also remained unpaid. The appellant contended on various grounds that section 20 of Act XXIV of 1953 was unconstitutional and invalid and prayed for the issue of appropriate writs directing the respondents the State of U. P. and the Collector of Gorakhpur not to levy and collect cess on account of the arrears of cess for the crushing season 1954 55 and in respect of the crushing season 1955 56 and successive crushing seasons and to withdraw the notifications dated October 23, 1954, and November 9, 1955 , which have been mentioned above. During the pendency of this application under article 226 before the Allahabad High Court the U. P. Legislature enacted the U. P. Sugarcane Cess Act, 1956 (U. P. XXII of 1956), repealing the 1953 Act. Section 3 of this Act as originally enacted was in these words: "The State Government may by notification in the official gazette impose a cess not exceeding four annas per maund on the entry of the cane into the premises of a factory for use, consumption or sale therein: Provided that the State Government may like. wise remit in whole or in part such cess in respect of cane used or to be used in factory for any limited purpose specified in the notification. Explanation: If the State Government, in the case of any factory situate outside Uttar Pradesh, so declare, any place in Uttar Pradesh set apart for the purchase 'of cane intended or required for use. consumption or sale in such factory shall be deemed to be the premises of the factory. (2) The cess imposed under sub section (1) shall 246 be payable by the owner of the factory and shall be paid on such date and at such place as may be prescribed. (3) Any arrear of cess not paid on the date prescribed under sub section (2) shall carry interest at 6 per cent. per annum from such date to date of payment. " There is a later amendment by which the words "four annas" have been altered to "twenty five naye paise" and the words "Gur, Rab or Khandsari Sugar Manufacturing Unit" have been added after the words "factory" in sub section (1). These amendments are however not relevant for the purpose of this appeal. Section 9 of this Act repealed section 20 of the Sugar Cane (Regulation of Supply and Purchase) Act, 1953. Sub sections 2 and 3 of section 9 are important. They are in these words: "2. Without prejudice to the general application of section 24 of the U.P. General Clauses Act, 1904, every notification imposing cess issued and every assessment made (including the amount of cess collected) under or in pursuance of any such notification, shall be deemed a notification issued, assess ment made and cess collected under this Act as if sections 2, 3 and 5 to 8 had been in force at all material dates. Subject as provided in clause (1) of Article 20 of the Constitution every notification issued cess imposed and act or thing done or omitted between the 26th January, 1950, and the Appointed date in exercise or the purported exercise of a power under section 29 of the U. P. Sugar Factories Control Act, 1938, or of section 20 of the U. P. Sugarcane (Regulation of Supply and Purchase) Act, 1953, which would have been validly and properly issued, imposed, done or omitted if the said sections had been as section 3 of this Act, shall in law be deemed to be and to have been validly and properly imposed and done, any judgment, decree or order, of any court notwithstanding. " The position after the enactment of the U. P. 247 Sugarcane Cess Act, 1956, was that the imposition and assessment of cess that had already been made under the 1953 Act would operate as if made under the 1956 Act. In view of this the first appellant, the Diamond Sugar Mills Ltd., prayed to the High Court for permission to raise the question of constitutionality and validity of the 1956 Act. It also prayed for the issue of a writ in the nature of mandamus directing the respondents not to levy cess upon the petitioners appellants under this new Act, the U. P. Sugarcane Cess Act, 1956. This application was allowed and the High Court considered the question whether section 3 of the U. P. Sugarcane Cess Act, 1956, 'empowering the State Government to impose a cess not exceeding four annas per maund on the entry of the cane into the premises of a factory for the consumption, use or sale therein was a valid law. The principal ground urged in support of the appellants ' case was that the law as enacted in section 3 was invalid and that it was beyond the legislative competence of the State Legislature. Several other grounds including one that the provisions of the section went beyond the permissible limits of delegated legislation were also raised. All the grounds were negatived by the High Court which accordingly rejected the appellants ' petition. The High Court however gave a certificate under Article 132(1) and also under article 133(1)(c) of the Constitution and on the basis of that certificate the present appeal has been filed. Of the several grounds urged before the High Court only two are urged before us in appeal. One is that the law was invalid, being beyond the legislative competence of the State legislature; the other is that in any case the provision giving the Governor power to levy any cess not exceeding 4 annas without providing for any guidance as to the fixation of the particular rate, amounted to excessive delegation, and was accordingly invalid. The answer to the question whether the impugned law was within or beyond the legislative competence of the State legislature depends on whether the law falls under Entry 52 of the State List 248 List II of the Seventh Schedule to the Constitution. It is quite clear that there is no other entry in either the State List or the Concurrent List under which the legislation could have been made. Entry 52 is in these words: "Tax on the entry of goods into a local area for consumption, use or sale therein". Section 3 of the impugned Act which has already been set out provides for imposition of a cess on the entry of sugarcane into the premises of a factory for use, consumption or sale therein. Is the "premises of a factory" a local area within the meaning of the words used in Entry 52? If it is the legislation was clearly within the competence of the State legislature; if it is not, the law was beyond the State legislature 's competence and must be struck down as invalid. In considering the meaning of the words "local area" in entry 52 we have, on the one hand to bear in mind the salutary rule that words conferring the right of legislation should be interpreted liberally and the powers conferred should be given the widest amplitude; on the other hand we have to guard ourselves against extending the meaning of the words beyond their reasonable connotation, in. an anxiety to preserve the power of the legislature. In Re the Central Provinces & Berar Act No. XI V of 1938 (1) Sir Maurice Gwyer, C. J., observed: "I conceive that a broad and liberal spirit should inspire those whose duty it is to interpret it; but I do not imply by this that they are free to stretch or pervert the language of the enactment in the interests of any legal or constitutional theory, or even for the purpose of correcting any supposed errors". Again, in Navinchandra Mafatlal vs The Commissioner of Income Tax, Bombay City (2) Das, J. (as he then was) delivering the judgment of this Court observed: ". . . The cardinal rule of interpretation however, is that words should be read in their ordinary, natural and grammatical meaning subject to this rider that in construing words in a constitutional enactment conferring legislative power the most (1) , 37. (2) [1955] 1 S.C.R. 829. 249 liberal construction should be put upon the words so that the same may have effect in their widest amplitude. " Our task being to ascertain the limits of the powers granted by the Constitution, we cannot extend these limits by way of interpretation. But if there is any difficulty in ascertaining the limits, the difficulty must be resolved so far as possible in favour of the legislative body. The presumption in favour of constitutionality which was stressed by the learned counsel for the respondents does not take us beyond this. On behalf of the appellants it has been urged that the word "local area" in its ordinary grammatical meaning is never used in respect of a single house or a single factory or a single plot of land. It is urged that in ordinary use the words "local area" always mean an area covering a specified region of the country as distinguished from the general area. While it may not be possible to say that the words "local area" have acquired a definite and precise meaning and the phrase may have different connotations in different contexts, it seems correct to say that it is seldom, if ever, used to denote a single house or a single factory. The phrase appears in several statutes, some passed by the Central Legislature and some by the Provincial or State Legislatures; but in many of these the words have been defined. These definitions being for the peculiar purpose of the particular statute cannot be applied to the interpretation of the words "local area" as used in the Constitution. Nor can we derive any assistance from the judicial interpretation of the words "local area" as used in the Code of Criminal Procedure or other Acts like Bengal Tenancy Act as these interpretations were made with reference to the scope of the legislation in which the phrase occurs. Researches into dictionaries and law lexicons are also of 'no avail as none of these give the meaning of the phrase "local area". What they say as regards the meaning of the word "local" offers no guidance except that it is clear that the word "local" has different meanings in different contexts. 32 250 The etymological meaning of the word "local" is "relating to" or "pertaining to" a place. It may be first observed that whether or not the whole of the State can be a "local area", for the purpose of Entry 52, it is clear that to be a "local area" for this purpose must be an area within the State. On behalf of the respondents it is argued that "local area" in Entry 52 should therefore be taken to mean "any part of the State in any place therein". So, the argument runs, a single factory being a part of the State in a place in the State is a "local area". In other words, "local area" mean "any specified area inside the State". The obvious fallacy of this argument is that it draws no distinction between the word "area" standing by itself and the phrase "local area". If the Entry had been " entry of goods into any area of the State. . . some area would be specified for the purpose of the law levying the cess on entry. If the Constitutions were empowering the State Legislatures to levy a cess on entry of goods into any specified area inside the state the proper words to use would have been "entry of goods into any area. . . " it would be meaningless and indeed incorrect to use the words they did use "entry of goods into a local area". The use of the words "local area" instead of the word "area" cannot but be due to the intention of the Constitution makers to make sure that the power to make laws relating to levy on entry of goods would not extend to cases of entry of goods into any and every part of the state from outside that part but only to entry from outside into such portions of the state as satisfied the description of "local area". Something definite was sought to be expressed by the use of the word "local" before the word "area": The question is: what exactly was sought to be expressed? In finding an answer to the question it is legitimate to turn to the previous history of constitutional legislation in the country on this subject of giving power to legislature to levy tax on the entry of goods. In the State of Madras vs Gannon Dunkerley & Co., Ltd.(1) (1) ; 251 this Court referred with approval to the statement of law in Halsbury 's Laws of England, Vol. II, para. 157, p. 93, that the existing state of English law in 1867 is relevant for consideration in determining the meaning of the terms used in the British North America Act in conferring power and the extent of that power. This has necessarily to be so as in the words of Mr. Justice Brewer in South Carolina vs United States (1) "to determine the extent of the grants of power, we must, therefore place ourselves in the position of the men who framed and adopted the Constitution, and inquire what they must have understood to be the meaning and scope of those grants. " Turning now to the previous legislative history we find that in the Government of India Act, 1935, Entry 49 of the Legislative List (List II of the 7th Schedule) was in the same words as Entry 52 of the Constitution except that instead of the words "taxes" as in Entry 52 of List II of the Constitution, Entry 49 List II of the Government of India Act, used the word "cess". In Government of India Act, 1915, the powers of the provincial legislatures were defined in section 80A. 'Under clause (a) of the third sub section of this section the local legislature of any province has with the previous sanction of the Governor General power to make or take into consideration any law imposing or authorising the imposition of any new tax unless the tax was a tax scheduled as exempted from this provision by rules made under the Act. The third of the Rules that were made in this matter under Notification No. 311/8 dated December 18, 1920, provided that the legislative council of a province may without the previous sanction of the Governor General make and take into consideration any law imposing or authorising a local authority to impose for the purpose of such local authority any tax included in Schedule II of the Rules. Schedule II contained 11 items of which items 7 and 8 were in these words: 7. An octroi 8. A terminal tax on goods imported into a local (1) ; 252 area in which an octroi was levied on or before 6th July, 1917. Item 8 was slightly modified in the year 1924 by another notification as a result of which it stood thus: 8. A terminal tax on goods imported into or exported from a local area save where such tax is first imposed in a local area in which an octroi was levied on or before July 6, 1917. Octroi is an old and well known term describing a tax on the entry of goods into a town or a city or a similar area for consumption, sale or use therein. According to the Encyclopedia Britannica octroi is an indirect or consumption tax levied by a local political unit, normally the commune or municipal authority, on certain categories of goods on their entry into its area. The Encyclopedia Britannica describes the octroi tax system in France (abolished in 1949) and states that commodities were prescribed by law and were divided into six classes and for all the separate commodities within these six groups maximum rates of tariff were promulgated by presidential decree, specific rates being fixed for the three separate sorts of octroi area, established on the basis of population, namely, communes having (1) less than 10,000 inhabitants, (2) from 10,000 to 50,000 and (3) more than 50,000. While we are not concerned here with other features of the octroi tax system, it is important to note that the tax was with regard to the entry of goods into the areas of the communes which were local political units. According to the Shorter Oxford English Dictionary "commune" in France is a small territorial division governed by a maire and municipal council and is used to denote any similar division elsewhere. The characteristic feature of an octroi tax then was that it was on the entry of goods into an area administered by a local body. Bearing in mind this characteristic of octroi duty we find on an examination of items 7 and 8 of the Schedule Rules mentioned above that under the Government of India Act, 1919, the local legislature of a Province could without the previous sanction of the Governor General impose a 253 tax octroi for entry of goods into an area administered by a local body, that is, a local government authority and the area in respect of which such tax could be imposed was mentioned in item 8 as local area. It is in the background of this history that we have to examine the use of the word "local area" in item 49 of List II of the Government of India Act, 1935. Here the word "octroi" has given place to the longer phrase "cesses on the entry of goods into a local area for consumption, use or sale therein. " It was with the knowledge of the previous history of the legislation that the Constitution makers set about their task in preparing the lists in the seventh schedule. There can bring title doubt therefore that in using the words "tax on the entry of goods into a local area for consumption, use or sale therein", they wanted to express by the words "local area" primarily area in respect of which an octroi was leviable under item 7 of the schedule tax rules, 1920 that is, the area administered by a local authority such as a municipality, a district Board, a local Board or a Union Board, a Panchayat or some body constituted under the law for the governance of the local affairs of any part of the State. Whether the entire area of the State, as an area administered by the State Government, was also intended to be included in the phrase "local area", we need not consider in the present case. The only other part of the Constitution where the word "local area" appears is in article 277. That Article is in these words: "Any taxes, duties, cesses or fees which, immediately before the commencement of this Constitution, were being lawfully levied by the Government of any State or by any municipality or other local authority or body for the purposes of the State, municipality, district, or other local area may, notwithstanding that these taxes, duties, cesses or fees are mentioned in the Union List, continue to be levied and to be applied to the same purposes until provision to the contrary is made by Parliament by law. " 254 There can be little doubt that "local area" in this Article has been used to indicate an area in respect of which there is an authority administering it. While the scope of Article 277 is different from the scope of entry 52 so that no direct assistance can be obtained in the interpretation of the words "local area" in entry 52 from this meaning of the words in article 277 it is satisfactory to find that the meaning of "local area" in entry 52 which appears reasonable on a consideration of the legislative history of the matter is also appropriate to this phrase in its only other use in the Constitution. Reliance was sought to be placed by the respondents on a decision of the Allahabad High Court in Emperor vs Munnalal (1) where the word "local area" as used in section 29 of the U. P. Sugar Factories Control Act, 1938, fell to be considered. That section, as we have already mentioned, authorised the Governor of U. P. to impose by a notification, after consulting the Sugar Control Board under the Act, a cess on the entry of sugarcane into a local area specified in such notification for consumption, use or sale therein. The notifications which were issued under this provision set out a number of factories for the levy of a cess at the rate of three annas per maund on entry of all sugarcane into the local area comprised in the factories mentioned in the schedule for consumption, use or sale therein. Section 29 was clearly within the words of entry 49 of List 11. The question that arose before the Court was whether the specification of certain factories as local areas was valid law. The learned Judge appears to have proceeded on the basis that the Governor had notified the area comprised in 74 factories as one "local area" and held that once this was 'done the entire area covered by all these factories should be considered as one statutory local area. It appears to us that the learned Judge was not right in thinking that the area comprised in 74 factories was notified as one local area. What appears to have been done was that the area of each factory was being notified as a local area for the purpose of the Act. Proceeding on (1) I.L.R. 1942 All. 302. 255 the basis that the area comprised in the 74 factories was notified as one local area the learned Judge addressed himself to the question whether this entire area was a local area within the meaning of the Act. He appears to have accepted the contention that the word local area was used in the sense of an administrative unit, but, says he, the administration need not be political, it may be industrial and educational or it may take any other form of governmental activity. "I cannot see," the learned Judge observed, "why it is not open to the provincial government or the provincial legislature to make an industrial survey of the province and to divide up the entire province into industrial areas or factory areas or mill areas or in any other kind of areas, and each one of these areas may be notified and be treated as a local area. And once such areas come into existence and remain in operation they can be regarded as local areas within the meaning of entry No. 49 of List II in which a cess may be levied". Even if this view were correct it would be of no assistance to the respondents. It is no authority for the proposition that the area of one single factory is a local area within the meaning of entry 49. We think however that the view taken by the learned Judge is not correct. It is true that when words and phrases previously interpreted by the courts are used by the Legislature in a later enactment replacing the previous statute, there is a presumption that the Legislature intended to convey by their use the same meaning which the courts had already given to them. This presumption can however only be used as an aid to the interpretation of the later Statute and should not be considered to be conclusive. As Mr. Justice Frankfurter observed in Federal Commissioner vs Columbia B. System (1) when considering this doctrine, the persuasion that lies behind the doctrine is merely one factor in the total effort to give fair meaning to language. The presumption will be strong where the words of the previous statute have received a settled meaning by a (1) 311 U.S. 131. 256 series of decisions in the different courts of the country; and particularly strong when such interpretation has been made or affirmed by the highest court in the land. We think it reasonable to say however that the presumption will naturally be much weaker when the interpretation was given in one solitary case and was not tested in appeal. After giving careful consideration ' to the view taken by the learned Judge of the Allahabad High Court in Emperor vs Munnalal (supra) about the meaning of the words "local area" and proper weight to the rule of interpretation mentioned above, we are of opinion that the Constitution makers did not use the words "local area" in the meaning which the learned Judge attached to it. We are of opinion that the proper meaning to be attached to the words "local area" in Entry 52 of the Constitution, (when the area is a part of the State imposing the law) is an area administered by a local body like a municipality, a district board, a local board, a union board, a Panchayat or the like. The premises of a factory is therefore not a "local area". It must therefore be held that section 3 of the U. P. Sugarcane Cess Act, 1956, empowering the Governor to impose a cess on the entry of sugarcane into the premises of a factory did not fall within Entry 52 of the State List. As there is no other Entry in either State List or Concurrent List in which the impugned law could fall there is no escape from the conclusion that this law was beyond the legislative competence of the State Legislature. The law as enacted in section 3 of the U. P. Sugarcane Cess Act, 1956, must therefore be struck down as invalid. It may be mentioned that this is not a case where the law is in two parts and one part can be severed from the other and saved as valid while striking down the other portion which is invalid. Indeed, that was not even suggested by the learned counsel for the respondents. It is unnecessary for us to consider whether if section 3 had instead of authorising levy of cess for entry of sugarcane into the premises of a factory for use, consumption or sale therein had authorised the imposition of a cess on entry of cane into a local area for 257 consumption, sale or use in a factory that would have been within Entry 52. It is sufficient to say that we cannot re write the law for the purpose of saving a portion of it. Nor is it for the Court to offer any suggestion as to how the law should be drafted in order to keep it within the limits of legislative competence. As the law enacted by the Legislature stands there is no escape from the conclusion that this entire law must be struck down as invalid. In view of this conclusion on the first ground raised on behalf of the appellant it is unnecessary to consider the other ground raised in the appeal that section 3 has gone beyond the permissible limits of delegated legislation. As we have held that the impugned legislation was beyond the legislative competence of the State Legislature the appellants are entitled to the relief asked for. We accordingly allow the appeal, set aside the order passed by the High Court and order the issue of a writ directing that the respondents do forbear from levying and collecting cess from the appellants on account of arrears of cess for the crushing season 1954 55 and in respect of the crushing season 1955 56 and successive crushing seasons under the U. P. Sugarcane Cess Act, 1956. The appellants will get their costs here and below. AYYANGAR, J. I have had the privilege of perusing the judgment just now pronounced, but with the utmost respect regret my inability to agree with the order proposed. The learned Judges of the High Court held that the impugned enactment was within the scope of Entry 52 of the State Legislative List in Schedule 7 to the Constitution, by placing reliance on the following passage in the Judgment of Das, J. in Emperor vs Munna Lal (1) where the learned Judge said: "Indeed I cannot see why it is not open to Provincial Government or Provincial Legislature to make an industrial survey of the Province and to divide up the entire province into industrial areas (1) I.L.R. [1942] All. 302, 328. 33 258 or factory areas or mill areas or in any other kind of areas, and each one of these areas may be notified and be treated as a local area. And once such areas come into existence and remain in operation they can be regarded as local areas within the meaning of Entry No. 45 of List II in which a cess may be levied. " In other words, the view which they favoured was to read the expression "local area". practically to mean any "area" entry into which was by the relevant fiscal statute, made the subject of taxation. In my opinion that is not a correct interpretation of the entry and agree with my learned brethren that having regard to the historical material, which has been exhaustively set out and discussed in their judgment, the word "local area" can in the entry designate only a predetermined local unit a unit demarcated by statutes pertaining to local self government and placed under the control and administration of a local authority such as a municipality, a cantonment, a district or a local board, an union or a panchayat etc. and not any region, place or building within the State which might be defined, described or demarcated by the State 's taxing enactment as an area entry into which is made taxable. But there my agreement stops and we diverge. In my opinion, this construction of the expression "local area" in entry 52 does not automatically result in the invalidity of the impugned enactment and of the levy under it, but the extent to which, if any the charging section exceeds the power conferred by the entry would depend on matters which have not been the subject of investigation, and it is this point that I shall elaborate in the rest of this judgment. It is unnecessary for the purposes of this case and possibly even irrelevant, to determine the precise scope, content and incidents of an "octroi" duty except that in the context in which it appeared in the Scheduled Taxes Rules framed tinder the Government of India Act, 1919, the expression signified a tax levied on entry into an area of an unit of local administration. It is unprofitable to canvass the question 259 whether a local authority empowered at that date to levy an 'octroi ' might or might not lawfully confine the levy to entry for consumption alone, to use alone or for sale alone. But when that entry was refashioned and enacted as item 49 of the Provincial Legislative List under the Government of India Act, 1935 (in terms practically identical with Entry 52 in the State Legislative List under the Constitution), the matter was no longer left in doubt. The new item ran: "Cesses on the entry of goods into a local area for consumption, use or sale therein". In connection with the use of the words "for consumption, use or sale therein" in the item three matters deserve notice: (1) Where the entry into the "local area" was not for one of the purposes set out in it, viz., for consumption, use or sale therein, but the entry was, for instance in the course of transit or for warehousing during transit, the power was not available; in other words, a mere entry could not per se be made a taxable event. (2) It was sufficient if the entry was for any one of the three purposes; the use of the disjunctive 'or ' making this clear. (3) The passage of goods from one portion of a local area to another portion in the same local area, would not enable a tax to be levied, but the entry has to be "into the local area", i.e., from outside the local area. It is the second and the third of the above features that call for a more detailed examination in the context of the points requiring decision in the present case. With this background I shall analyse the terms of section 3(1) of the Act (United Provinces Act XXII of 1956) to ascertain where precisely the provision departs from the scope or content of entry 52. I will read that section which runs: "3. The State Government may by notification in the official gazette impose a cess not exceeding four annas per maund on the entry of the cane into the premises of a factory for use, consumption or sale therein: Provided that the State Government may likewise remit in whole or in part such cess in respect 260 of cane used or to be used in factory for any limited purpose specified in the notification. Explanation: If the State Government, in the case of any factory situate outside Uttar Pradesh, so declare, any place in Uttar Pradesh set apart for the purchase of cane intended or required for use, consumption or sale in such factory shall be deemed to be the premises of the factory. " Leaving the Explanation for the present, there are two matters which require advertence: (1) The first was the point emphasised by Mr. Sanyal for the appellant, that entry into the premises of a factory "for the purpose of consumption, use or sale therein" is fastened on as the taxable event treating the factory premises as if that were itself a "local area". (2) Apart from entry into factory premises for use, consumption or sale therein, entry of the cane into other places within the local area, i.e., into "unit for local administration" is not made the subject of tax levy. The second of the above matters cannot invalidate the legislation, because a power to tax is merely enabling, and apart from any question of discrimination under article 14 which does not arise for consideration before us the State is not bound to tax every entry of goods into "a local area". Again, the tax could undoubtedly be confined to entry of goods into a "local area" for consumption or use in particular modes; in other words, there could be no legal objection to the tax levy on the ground that it does not extend to entry of goods into "a local area" for every type of consumption or use. In my judgment the real vice of the charging section 3(1) lies not in that it Confines the levy to cases where the entry is for purposes of consumption etc. in a factory but 'in equating the premises of a factory with "a local area" entry of goods into which, occasions the tax. Another way of expressing this same idea would be to say that whereas under Entry 52 the movement of goods from within the same local. area in which the factory is situated into the premises of the factory, could not be the subject of tax liability, because there 261 would in such cases be no entry of the goods "into a local area" under section 3(1) of the Act, not merely is the movement of goods into the factory from outside the 'local area ' in which the factory is situate made the subject of tax, but the words used are capable of imposing the tax even in those cases where the entry into the factory is from within the same local area. What I have in mind may be thus illustrated: If factory A situated in Panchayat area B gets its supply of cane from outside the Panchayat area, the levy of the tax on the entry of the cane into the Panchayat area would clearly be covered by entry 52. The State is not bound to tax every entry of the cane into the area but might confine the levy to the entry of the cane for the purpose of consumption in a factory. The tax might be levied and collected at the border of the Panchayat area but there is no legal obligation to do so, and the place at which the entry of the goods is checked and the duty realised is a matter of administrative machinery which does not touch on the validity of the tax imposition. It would thus not detract from the validity of the tax if by reason of convenience for effecting collection, the tax was levied at the stage of entry into the premises of a factory. So long, therefore, as the cane which enters a factory for the purpose of consumption therein comes from outside that local unit of administration in which the factory is situated, in my opinion it would be covered by the words of entry 52 and well within the legislative competence of the State Government. The language of section 3, as it stands appears, however, also to extend to cases where the supply of cane to a factory is from within the same local unit of administration; in other words, where there is no entry of the cane into the local area as explained earlier. If this were the true position, the enactment cannot be invalidated as a whole. It would be valid to the extent to which the tax is levied on cane entering a factory for the purpose of consumption etc. therein from outside the local area, within which the factory premises are situated, and only invalid where it out steps this limitation. 262 The next question is whether this is a case where the valid and invalid portions are so inextricably interwoven as to leave the Court no option but to strike down the entire enactment as invalid as beyond the legislative competence of the State, or whether the charging provision could be so read down as to leave the valid portion to operate. In my opinion, what is involved in the case before us is not any problem of severance, but only of reading down. Before taking up this question for discussion two objections to the latter course have to be considered. The first is that this aspect of the matter was not argued before us by learned Counsel for the State as a ground for sustaining the validity of the legislation. In my judgment this is not an objection that should stand in the way of the Court giving effect to a view of the law if that should appear to be the correct one. In making this observation one has necessarily to take into account the fact that legislation in nearly this form, has been in force in the State for over twenty years, and though its vires was once questioned in 1942, that challenge was repelled and the tax levy was held valid and was being collected during all this period. The sugar cane cess has been a prime source of State Revenue for this length of time and this Court should not pronounce such a legislation invalid unless it could not be sustained on any reasonable ground and to any extent. The second ground of objection which has appealed to my learned brethren but with which, I regret, I cannot concur is that it would require a rewriting of the Act to sustain it. Now if the first paragraph of sub section (1) of section 3 bad read: "The State Government may by notification in the official gazette impose a cess not exceeding four annas per maund on the entry of the cane into the premises of a factory (from outside the local area in which the factory premises were situate) for use, consumption or sale therein:" (The words in brackets added by me) 263 the levy would be entirely within entry 52 even according to my learned brethren. The question is whether the implication of these words would be a rewriting of the provision or whether it would be merely reading the existing provision so as to confine it to the powers conferred upon the State Legislature by the relevant legislative entry. In view of the strong opinion entertained by my learned brethren, I have given the matter the utmost consideration, but I feel that the words which I have suggested are a permissible mode of construction of a statute by which wide words of an enactment which would cover an event, contingency or matter within legislative power as well as matters not within it, are read as confined to those which the law making only had authority to enact. In my judgment the opinion of the Federal Court in In re Hindu Women 's Rights to Property Act, 1937 (1), affords a useful analogy to the present case. The enactment there impugned provided for the devolution or succession to "property" in general terms which would have included both agricultural as well as nonagricultural property, whereas the Central Legislature which enacted the law had no power to deal with succession to agricultural property. The contention urged before the Court was that by the use of the expression "property", the legislature had evinced an intention to deal with property of every type and that it would be rewriting the enactment and not carrying out the legislative intent if the reference to "property" in the statute were read as "property other than agricultural property". Dealing with this contention, Sir Maurice Gwyer, delivering the opinion of the Court said: "No doubt if the Act does affect agricultural land in the Governors 'Provinces, it was beyond the competence of the Legislature to enact it: and whether or not it does so must depend upon the meaning which is to be given to the word "property" in the Act. If that word necessarily and inevitably comprises all forms of property, including agricultural land, then clearly the Act went beyond the powers (1) 264 of the Legislature; but when a Legislature with limited and restricted powers makes use of a word of such wide and general import, the presumption must surely be that it is using it with reference 'to that kind of property with respect to which it is competent to legislate and to no other. The question is thus one of construction, and unless the Act is to be regarded as wholly meaningless and ineffec tive, the Court is bound to construe the word "property" as referring only to those forms of property with respect to which the Legislature which enacted the Act was competent to legislate; that is to say, property other than agricultural land. . . The Court does not seek to divide the Act into two parts, viz., the part which the Legislature was competent, and the part it was incompetent, to enact. It holds that, on the true construction of the Act and especially of the word "property" as used in it, no part of the Act was beyond the Legislature 's powers. " The Court accordingly held that the Hindu Women 's Rights to Property Act, 1937, applied to non agricultural property and so was valid. In this connection it might be interesting to refer to the decision in Blackwood vs Queen (1) which Sir Maurice Gwyer, C.J., referred to with approval. That case related to the validity of a duty imposed by the Legislature of Victoria (Australia) on the personal estates of deceased person. The learned Chief Justice observed "The Judicial Committee construed the expression "personal estate" occurring in the statute to refer only to: "such personal estate as the colonial grant of probate conferred jurisdiction on the personal representatives to administer, whatever the domicile of the testator might be, that is to say, personal estate situate within the Colony, in respect of which alone the Supreme Court of Victoria had power to grant probate: Their Lordships thought that "in imposing a duty of this nature the Victorian Legislature also was contemplating the property which was under its own hand, and did not intend to levy a tax in respect of property (1) 265 beyond its jurisdiction". And they held that "the general expressions which import the contrary ought to receive the qualification for which the appellant contends, and that the statement of personal property to be made by the executor under section 7(2) of the Act should be confined to that property which the probate enables him to administer" (1). To confine the tax to the limitations subject to which it could, under the Constitution, be levied is, in my opinion, not an improper method of construing the statute. The manner in which the word "property" was read down by the Federal Court in In re Hindu Women 's Rights to Property Act, 1937 (1) and the word "personal property" construed by the Privy Council in Blackwood vs Queen (2) make in my opinion less change in the text of the impugned provision than the addition of the words I have set out above, which after all are words implicit in the power conferred on the State Legislature. I would, therefore, hold that the charging section would be invalid and beyond the legislative competence of the State of Uttar Pradesh only in so far as it seeks to levy a tax on cane entering a factory from within the same local area in which the factory is situate and that in all other cases the tax is properly levied; and that the impugned section could and ought to be so read down. The matter not having been considered from this aspect at earlier stages, we have necessarily no material before us for adjudicating upon whether tax levied or demanded from the appellant is due and if so to what extent. We have nothing before us to indicate as to how far the cane, the entry of which into the factory of the appellant is the subject of the impugned levy, has moved into the factory from outside the local unit in which the factory is situated or originated from within the same local area. I consider that without these matters being investigated it would not be possible to adjudicate upon the validity of the tax demanded from the appellants. There is one matter to which it is necessary to (1) Per Sir Maurice Gwyer, C. J. , 23, (2) 34 266 advert which I have reserved for later consideration, viz., the validity of the Explanation to section 3(1)of the Act. It would be apparent that the Explanation was necessitated by the terms of sub section (1) of section 3 which equated "factory premises" with "local areas", or rather rendering factory premises the sole local areas entry into which occasioned the tax. So far as the purchasing centres which are dealt with in the Explanation are concerned, the cane that moves into them from outside the "local area" where these centres are would clearly be covered by Entry 52, since the purpose of the movement into the centre is on the terms of the provision for effecting a sale therein. In other words, the same tests which I have discussed earlier in relation to entry into factory premises, would apply mutates mutandis to these purchasing centres and in so far as a tax is levied on the movement of the cane from outside the local area the levy would be legal and in order. I would read down the Explanation in the same manner, as I have read down the main charging provision so as to confine the levy to entry from outside 'that "local area" local area being understood in the sense already explained. I would accordingly allow the appeal, and remand it to the High Court for investigating the material facts which I have mentioned earlier with a direction to pass judgment in accordance with the law as above explained. BY COURT. In accordance with the opinion of the majority the appeal is allowed, the order passed by the High Court is set aside and a writ be issued directing that the respondents do forbear from levying and collecting cess from the appellants on account of arrears of cess for the crushing season 1954 55 and successive crushing seasons under the Uttar Pradesh Sugarcane Cess Act, 1956. The appellants will get their costs here and below. Appeal allowed.

Entry 52 of List II of the Seventh Schedule to the Consti tution empowered State Legislatures to make a law relating to "taxes on the entry of goods into a local area for consumption, use or sale therein". The U. P. Legislature passed the U. P. Sugarcane Cess Act, 1956, which authorised the State Government to impose a cess on the entry of cane into the premises of a factory for use, consumption or sale therein. The appellant contended that the premises of a factory was not a 'local area ' within the meaning of Entry 52 and the Act was beyond the competence of the legislature. 243 Held, (per Imam, Kapur, Das Gupta and Raghubar Dayal, jj.) that the impugned Act was beyond the competence of the legislature and was invalid. The premises of a factory was not a "local area" within the meaning of Entry 52. The proper meaning to be attached to the words "local area" in Entry 52 was an area administered by a local body like a municipality, a district board, a local board, a union board, a Panchayat or the like. In re: the Central Provinces & Beray Act No. XIV of 1938, , Navinchandra Mafatlal vs The Commissioner of Income tax, Bombay City, [1955] 1 S.C.R. 829, State of Madras vs Gannon Dunkerley & Co., Ltd., ; and South Carolina vs United States, , referred to. Emperor vs Munnalal, I.L.R. 1942 All. 302, disapproved. Per Ayyangar, J. The Act was invalid only in so far as it sought to levy a tax on cane entering a factory from within the same local area in which the factory was situate and was valid in other cases. It was permissible to read the Act so as to confine the tax to the limitations subject to which it could be constitutionally levied and to strike down that portion which out stepped the limitations. In re Hindu Women 's Rights to Property Act, 1937, and Blackwood vs Queen, , applied.

As a result of a notification dated December 30, 1967 under section 59(1) of the Madras General Sales Tax Act and later by Act 2 of 1968 sales of jaggery became liable to tax. But while by notification under section 17 'palm jaggery was exempted from tax 'cane jaggery ' was not. The appellants who were dealers in 'cane jaggery ' challenged the levy by writ petitions in the High Court which were, however, dismissed. In appeal before this Court it was contended (i) that the tax on 'cane jaggery ' while exempting 'palm jaggery ' was ,discriminatory and violative of article 14 of the Constitution; (ii) that taxation of 'cane jaggery ' was restrictive of trade and commerce and therefore violative of article 301; (iii) that the impugned legislation constituted a colourable exercise of power. HELD: (i) The evidence on record clearly showed that 'cane jaggery ' and 'palm jaggery ' were commercially different commodities. The methods of production of 'palm jaggery ' and 'cane jaggery ' were different; they reached the consumers through different channels of distribution; the prices at which they were sold differed and they were consumed by different sections of the community. 'Cane jaggery ' and 'palm jaggery ' did not thus belong to the same class and in differently treating them for the purpose of taxation there was no unlawful discrimination. [620 B E; 621 C D] It was incorrect to say that the State Legislature had always treated the two products on the same footing. For nearly three years before April 1, 1958 sales of 'palm jaggery ' were exempt from tax but sales of 'cane jaggery ' were not. [620 B] Further, it is for the legislature to determine the objects on which tax shall be levied. The courts will not strike down an Act as denying equal protection merely because other objects could have been but are not taxed by the legislature. [621 B C] N. Venugopala Ravi Varma Rajah vs Union of India, ; , applied. (ii) Freedom of trade, commerce and intercourse guaranteed by article 301 of the Constitution is protected against taxing statutes as well as other statutes, but by imposition of tax on transactions of sale of 'cane jaggery ' no restriction on the freedom of trade or commerce or in the course of trade with or within the State. was imposed. [621 D F] State of Madras vs N. K. Nataraja Mudaliar. ; , referred to. (iii) The plea of colourable exercise of power had no substance because the legislature had power in the present case to. levy the tax.[621 G] 4 Sup. C.I./69 616 K.C. Gajapati Narayan Deo & Ors. vs State of Orissa, [1954] S.C.R.1, applied.

Under section 6 of the Bihar Sales Tax Act, 1947, the Government issued a notification exempting certain goods from the 499 payment of sales tax, including "green vegetables other than potatoes, except when sold in sealed containers". The appellant who was a producer of sugar can was assessed to sales tax. He contended that sugar cane was a green vegetables and was exempted from tax and that he was not a dealer as defined in section 2 (c) of the Act and could not be assessed to sales tax. ^ Held, that sugar cane was not a green vegetable and was not exempted under the notification. The word "vegetables" in taxing statutes was to be understood as in common parlance i.e. denoting class of vegetables which were grown in a kitchen garden or in a farm and were used for the table. The dictionaries defined sugar cane as a "grass." Ramavtar Budhaiprasad vs Assistant Sales Tax Officer, Akola, ; , followed. The State of Bombay vs R. section Phadtare, [1956] 7 section T. C. 495, disapproved. Held, further, that the appellant was a dealer within the definition in section 2(c). Section 2(c) was amended by the Bihar Annual Finance Act, 1950. The amended was not a temporary amendment for only one year; the amended section was applicable to the present case. The amending Act did not require the assent of the President as the matter fell entirely within entry 54 of the State List.

Under the Sugar and Sugar Products Control Order, 1946, the consuming States intimated to the Sugar Controller of India their requirements of sugar and the factory owners sent statements of stocks of sugar held by them. The Controller made allotments to various States and addressed orders to the factory owners directing them to supply sugar to the States in question in accordance with the despatch instructions from the State Governments. Under such allotment orders, the assesses, a sugar factory in Bihar, despatched sugar to the State of Madras. The State of Bihar treated these transactions as sales and levied sales tax thereon, under the Bihar Sales Act, 1947. The assesses contended that the despatches of the sugar pursuant to the directions of the Controller did not amount to sales and that no sales tax was exigible on such transactions. Held (per Kapur and Shah, JJ. Hidayatullah, J., dissenting), that the transactions did not amount to sales and were not liable to sales tax. Under Entry 48, List II of Government of India Act, 1935, the Provincial Legislature had no power to levy sales taxes on a transaction which was not of the nature of a sale of goods, as understood in the Sale of Goods act. To constitute a sale of goods, . property in the goods must be transferred from the seller to the buyer under a contract of sale. A contract of sale between the seller and the buyer is a prerequisite to a sale. Despatches of sugar under the directions of the Controller were not the result of any such contract of sale. There was no offer by the assesses to the State of Madras and no acceptance by the latter; the assessee was, under the Control Order, compelled to carry out the directions of the Controller and it had no volition in the matter. Intimation by the State 460 of its requirement of sugar to the controller or communi cation of the allotment order to the assesses did not amount to an offer. Nor did the mere compliance with despatch instructions issued by the Controller, which the assessee could not decline to carry out, amount to acceptance of an offer or to making of an offer. A contract of sale postulates exercise of volition on the part of the contracting parties. State of Madraa vs Gannon Dunkerky & Co., [1959] section C. R. 379; relied on. The Tata Iron & Steel Co. Ltd. vs The State of Bihar, ; , explained. Per Hidayatullah, J. In these transactions there was a sale of sugar for a price and sales tax was payable in respect thereof. Though consent is necessary for a sale, it may be express or implied, and it cannot be said that unless the offer and acceptance are in an elementary direct form there can be no taxable sale. The controller permitted the assesses to supply sugar of a Stated quality and quantity to the State of Madras; thereafter the two parties agreed to "sell" and "purchase" the sugar. So long as the parties trade under controls at fixed price they must be deemed to have agreed to such a price; there wasan implied contract with an implied offer and an implied acceptance. The same is the position with respect to the quality and quantity fixed by the Controller. when the State , after receiving the permit, sent instructions to the assesses to despatch sugar and the assesses despatched it a contract emerged and consent must be implied on both sides though not expressed antecedently to the prmit. State, ofMadras vs Gannon Dunkerky Co.; , andThe Tata Iron and SPA Co. Ltd. vs The State of Bihar, ; , explained.

These two appeals Civil Appeal No. 3446 of 1987 and Civil Appeal No. 3447 of 1987 were filed in this Court against the judgment of the High Court in the Writ Petition No. 6789 of 1982. Ratan Prakash Mangal and Kuldip Singh, respondents Nos. 1 and 2 in the Civil Appeal No. 3446 of 1987 and the appellants in Civil Appeal No. 3447 of 1987, had filed the said writ petition challenging a notification dated 20th May, 1982, issued under section 4(1) read with section 17(4) of the Land Acquisition Act, 1894 (the Act) and also the consequential notification dated 21st May, 1982, issued under section 6 of the Act with regard to a plot No. 289. The notification under section 4(1) of the Act was quashed in part in so far as it invoked Section 17(4) of the Act, and the notification under section 6 was quashed as a whole with regard to the said plotNo. The Civil Appeal No. 3446 of 1987 was preferred by Krishi Utpadan Mandi Samiti, Muzaffar Nagar for which the said plot had been acquired, for setting aside the judgment of the High Court. Civil Appeal No. 3447 of 1987 was preferred by Ratan Prakash Mangal and Kuldip Singh afore mentioned hereinafter referred to as respondents Nos. 1 & 2 asserting that the notification under section 4(1) should have been quashed by the High Court in its entirety and not only in so far it invoked section 17(4) of the Act. Initially, a Notification dated 20th March, 1975 was issued under section 4(1) of the Act for acquiring land, including the plot No. 289, for construction of a market yard for the appellant Krishi Utpadan Mandi Samiti. Later, this Notification was superseded by another Notification dated 30th August, 1975 issued under section 4(1) with regard to land which did not include the said plot. Subsequently, another Notification dated 26th October, 1978, was issued under section 4(1) read with Section 17(4) of the Act with regard to land, including the plot abovementioned. The Notification dated 26th October, 1978 was followed by 183 a Notification dated 27th October, under section 6. Prior to the issue of these Notifications, respondents Nos. 1 and 2 had purchased the said plot No. 289. The said respondents Nos. 1 and 2 had challenged the Notifications dated 26th October, 1978 and 27th October, 1978 by a writ petition in the High Court. The High Court had quashed the two Notifications in so far as Plot No. 289 was concerned. This Judgment of the High Court had been challenged by Krishi Utpadan Mandi Samiti before this Court in Civil Appeal No. 2970 of 1979. This Court had held that even though the quashing of the Notification under Section 6 had been justified, the High Court had not been right in quashing the Notification under section 4(1) in its entirety, and had set aside the Judgment of the High Court in so far as it had quashed the Notification under section 4(1) in its entirety, while maintaining the rest of the Judgment with a direction regarding inquiry under Section 5A into the objections of the respondents Nos. 1 and 2 to the proposed acquisition etc. In pursuance of the said direction, inquiry under section 5A had been made and the Land Acquisition Officer had submitted a report on 20th January, 1981, after about 15 months of the direction above said of this Court, to the effect that the Plot No. 289 might be exempted from acquisition. The Government did not agree with the said report and issued the Notifications impugned in present appeals. Allowing Civil Appeal No. 3446 of 1987, and dismissing Civil Appeal No. 3447 of 1987, the Court, ^ HELD: There was no doubt with regard to the legal position that the Report dated 20th January, 1981 of the Land Acquisition Officer was not binding on the State Government and it was still open to it to continue the proceedings for the acquisition of the Plot No. 289 notwithstanding the said report. The Government had its reason why in place of issuing a Notification under section 6(1) of the Act in continuation of the Notification dated 26th October, 1978 under section 4(1), fresh notifications under section 4 and 6 had to be issued as also the reason for the delay in issuing the fresh Notifications, as was apparent from the record. As regards the submission that section 17(4) of the Act had been erroneously invoked in fresh Notification under section 4(1) dated 20th May, 1982 also and that inquiry under Section 5A had again to be made before issuing this Notification, it was enough to point out that once an inquiry under the said section had already been made and the parties had been given full opportunity to substantiate their case in the enquiry and the State Government had not been inclined to agree with the 184 report of the Land Acquisition Officer submitted in pursuance of that inquiry, it would have been a futile exercise to repeat the whole performance again. After the issue of the earlier Notification dated 26th October, 1978, a period of nearly 3 1/2 years had expired when the fresh Notification dated 20th May, 1982 above said was issued and apparently the necessity to acquire the plot No. 289 during this period became more acute due to this delay. Further, as stated in the said Notification itself, the urgency had become more imminent on account of the direction issued by this Court on 2nd March, 1982 in Writ Petition No. 1318 of 1982 filed by the traders in gur, khandseri and foodgrains, Muzaffar Nagar, challenging the Notification under Section 7(2)(b) of the U.P. Act No. 25 of 1964. Consequently, it was diffcult to hold that the opinion of the State Government that it was a fit case to invoke section 17(4) of the Act was invalid on the ground that there was no basis or material in support of the opinion. On the facts of the case, it was not possible to hold that the Notification dated 20th May, 1982 had been issued by the State Government in colourable exercise of its power. [194A F] The Notification dated 20th May, 1982 and 21st May, 1982 had not been challenged by respondents Nos. 1 and 2 on the basis of mala fides of any particular officer of the State Government. What was urged was that it was a case of legal mala fides inasmuch as in issuing the said fresh Notification dated 20th May, 1982, an attempt had been made by the State Government to circumvent the direction of this Court issued in the Civil Appeal No. 2970 of 1979 to make inquiry under Section 5A of the Act and to proceed thereafter in accordance with law, the State Government did make an inquiry under Section 5A of the Act in pursuance of the direction of this Court after giving full opportunity to the concerned parties to substantiate their case. It was difficult to agree with the submission of respondents 1 and 2 that the government attempted to circumvent the direction of this Court. A case of legal mala fide was not made out. [194G H; 195B] The Government all through was of the opinion that Plot No. 289 did not deserve to be released from acquisition. Also, this plea lost significance and became almost of academic value inasmuch as the State Government had not issued a notification under section 6(1) of the Act in continuation of the Notification dated 26th October, 1978 under Section 4(1). After the issue of the fresh Notification what was really to be seen was whether there was justification for invoking section 17(4) of Act or not. There was such a justification. There had been a material change in the circumstances after the report of the Land Acquisition 185 Officer dated 20th January, 1981, to justify Section 17(4) of the Act being invoked and to dispense with a further inquiry under section 5A of the Act. [196D E; 198C] The submission of the respondents 1 and 2 about the lack of application of mind before issuing the Notification dated 20th May, 1982 with regard to plot No. 289 had no substance, as indicated by the original record produced by counsel for the State Government. The effect of issuing a fresh Notification under Section 4(1) and the delay in issuing it had benefited the respondents 1 and 2 inasmuch as now they would be entitled to compensation not on the basis of market value of plot No. 289 as on 26.10.78 when the earlier Notification under Section 4(1) was issued but as on 20th May, 1982 when the fresh Notification under the said section was issued. [200G H; 201A] Civil Appeal No. 3446 of 1987 was allowed and the judgment of the High Court in the Writ Petition No. 6789 of 1982 was set aside, and as a consequence, Civil Appeal No. 3447 of 1987 was dismissed. [201B] State of Punjab vs Gurdial Singh & Ors., ; ; The Collector (District Magistrate) Allahabad and Anr. vs Raja Ram Jaiswal, etc. ; , ; P.L. Lakhanpal vs Union of India & Ors., ; Siemens Engineering & Manufacturing Co. of India Limited vs Union of India & Anr., ; Narayan Govind Gavate vs State of Maharashtra, ; and State of U.P. vs Pista Devi, ; , referred to.

The appellants employed about 1,600 seasonal workers and about 650 permanent workers. The cane crushing process terminated on March 1,2, 1959, and on that day about 1,000 of the 1,600 seasonal workers left for their homes by the evening after receiving their dues. The remaining seasonal workers continued to work in the factory till March 16, 1959. Under the term of a previous award, they were entitled to three days ' closure holidays. According to the Appellant the crushing season must be regarded as having ended on ' March 16, 1959, which was the last day on which the factory was worked and that only those seasonal workers who were borne on the muster roll of the factory on March 17, 1959, would be entitled to three days ' closure holidays. The point for consideration was whether the "Crushing season" of 1958 59 must be deemed to have ended on March 12, 1959, when the actual crushing of sugar cane stopped, or on March 16, 1959. when all ancillary operations in the factory came to an end and the entire machinery was at a stand still. Held, that the expression "Crushing Season" must be given its ordinary meaning unless it is shown that in the industry in question it has acquired some other meaning. There was no evidence, before the tribunal to the effect that "crushing season" meant the period during which the factory was actually working and not merely the period during which the crushing operations were being carried on. Since the operations came to an end on March 12, 1959, the crushing must be held to have ended on that day, and, therefore, the seasonal workers borne on the muster roll on March 13, 1959, were entitled to three days ' closure holidays.

By virtue of the notifications issued by the Government of Maharashtra in exercise of its powers under section 41 of the Bombay Sales Tax Act, the new industries set up in backward areas for the production of edible as well as non edible oils came to enjoy the benefit of exemption from paying purchase tax/sales tax. Subsequently, the Government of Maharashtra amended the Act and introduced section 41A by virtue of which the tax exemption facility originally granted under the Package Scheme of Incentives, 1979 to edible oil units stood withdrawn earlier than stipulated in the exemption notifications. The withdrawal of the tax exemption however did not apply to units engaged in producing non edible oils. The petitioner in one petition has challenged the constitutional validity of section 41, while the petitioners in the other two writ petitions challenged the validity of section 41A. The petitioner in the first petition, who was engaged in the production of washed cottonseed oil, in an old unit, contends that (i) the power of exemption can be granted on any specified class of sales or purchases from payment of tax, and the Government was not entitled to grant exemption only in favour of new units set up in backward areas, (ii) section 41 confers arbitrary powers of exemption on the State Government so as to exempt new units from the payment of purchase tax, sales tax and central sales tax, thus placing old units in a very disadvantageous position, and PG NO 72 PG NO 73 (iii) washed cottonseed oil is also edible oil although it requires some processing for making it fit for human consumption, and therefore the new washed cottonseed oil units should also be classified as units producing edible oils and subjected to purchase tax and sales tax. The petitioners in the other two petitions contend that the Government was precluded by Promisory Estoppel from going back on the lncentive Scheme before the expiry of the full term of tax exemption benefit period. Dismissing the writ petitions, it was, HELD: (l) Section 41 has been provided in order to enable the State (government to grant exemption from payment of purchase tax/ sales tax on any specified class of sales or purchases in public interest. It is not as if the power has been given to the government to act in an arbitrary manner or for conferring largess on any section of manufacturers or traders. Section 41 has withstood the test of time and has enabled the government to promote public interest, by granting tax exemption benefit, whenever needed. [81A D] (2) The words "exempt any specified class of sales or purchases ' could well be construed as applying to the grant of exemption of the new units because the sales and purchases effected by new entrants would constitute a specified class by themselves in contra distinction with the class of sales and purchases effected by the older and seasoned units. [82C D] (3) Even though edible and non edible oils may fall under the general heading of 'oils they undoubtedly constitute two separate groups which are capable of distinct classification on intelligible basis. [83A B] (4) The Package Incentives Scheme was only evolved to provide incentive to entrepreneurs to start new units in backward areas. It could never have been the intention or the object of the Government that the entrepreneurs should unjustly enrich themselves at the cost of the public exchequer or to be given competing ability with the older units to such an extent as to virtually drive the latter out of the business. (5) Since the very foundation of the Scheme for giving tax exemption benefits is public interest, the government PG NO 74 was not only entitled but it was under an obligation to withdraw the tax exemption benefit when the continuance of the Scheme was going against public interest. (6) As long as the washed cottonseed oil that is produced is sold without further processing, it will not constitute edible oil. [82Fl (7) The government had neither acted arbitrarily nor practised any discrimination against edible oil units started newly or had interfered with the rights of the owners of the new units in running their business and trade in any manner when it enacted Section 41A. (8) Section 41A is fully in accordance with law and not violative of Articles 14, 19(i)(g) and 300A of the Constitution. [83E] Tapti Oil Industries vs The State of Maharashtra. AIR 1984 Bom. 161 Olympic Oil Industries Ltd. W.P. No. 3275 of 1985 in Bombay High Court and S.L.P. (Civil) No. 10144 and 10550 of 1986 in the Supreme Court, referred to.

On suo motu enquiry conducted against the appellant with regard to the nature of the properties in question, the Deputy Charity Commissioner held that the properties were of a public trust. The appellant 's appeal before the Charity CommissiOner was dismissed. An application filed under section 72 of the Bombay Public Trust Act, 1950 was also dismissed by the City Civil Court. The First Appeal filed in the High Court was dismissed by a Single Judge. In the Letters Patent Appeal on behalf of the appellant it was contended: that section 72(1) speaks only of an applica tion to the Court to set aside the decision of the Charity Commissioner, and it does not speak of an appeal; that while section 70 and 71 use the word "appeal" and that the proceedings under section 72 were not in the nature of an appeal and that, therefore. when the District Court exercised its jurisdic tion it did not exercise an appellate jurisdiction but a special jurisdiction under 'the section. The High Court dismissed the appeal holding that it was not maintainable since the requisite certificate under clause 15 of Letters Patent Appeal was not obtained by the appellant, that though the well known word "appeal" was not used in section 72, the absence of that word cannot be regarded as determinative of the nature of the proceedings, and that the jurisdiction that the District Court is exercising under section 72 was appellate jurisdiction. Dismissing the appeal. 1084 HELD:1.1 The power of the District Court in exercising jurisdiction under section 72 of the Bombay Public Trust Act, 1950, is a plenary power. It is true that the Commissioner is not subordinate to the District Court but the District Court has powers to correct, modify, review or set aside the order passed by the Commissioner. All the characteristics of an appeal and all the powers of an appellate Court are available to the District Court while deciding an applica tion under section 72. [1089D E] 1.2 The proceedings before the District Court under section 72(1) are in the nature of an appeal and that District Court exercises appellate jurisdiction while disposing of a matter under section 72(1). [1089E F ] 1.3 The absence of the word "appeal" in section 72(1) does not make any difference. [1089C] Hiragar Dayagar vs Ratanlal, ; and [1986] 58 Bombay Law Reporter 894 approved and AIR 1974, Bombay 40, disapproved. Consequently, the Single judge of tile High Court while deciding the appeal from the order of the District Court deals with a matter made by the District Judge in the exercise of a appellate jurisdiction by a Court subject to the superintendence of the High Court and hence clause 15 of the Letters Patent Appeal is directly attracted. [1089F G]

Appeal No. 516 of 1959. Appeal from the judgment and order dated September 3, 1957, of the Bombay High Court in Income tax Reference No. 49 of 1957. J.M. Thakar, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the appellants. A. N. Kripal and D. Gupta, for the respondent. December 12. The Judgment of the Court was delivered by HIDAYATULLAH, J. The three appellants appeal against the judgment and order of the High Court of Bombay answering, in the affirmative, the following question: "Whether the share income of the assessees from the unregistered firm (which is separately taxed), namely, Rs. 26,110 can be set off against their share loss from registered firms, namely, Rs. 13,167?" The facts are as follows: Two of the appellants are 176 brothers, and the third appellant is the widow of a third brother, who died during the pendency of the appeal after certificate had been granted by the High Court. The three brothers were partners in two registered firms and one other firm, which was unregistered. The assessment years for the purposes of the appeal are 1948 49 and 1949 50. For the assessment year 1948 49, the income of the three brothers was the same, and it was as follows: From registered firms . Rs. 11,902 loss 1,265 loss Total loss Rs. 13,167 Income from the unregistered firm Rs. 26,110 profit Other income Rs. 262 The income of the unregistered firm was taxed on the firm and not in the hands of the partners, as was possible under the provisions of cl. (b) of sub section (5) of section 23. In assessing the amount of Rs. 262, the Income tax Officer first determined the total income of each of the appellants by setting off their share of the profits of the unregistered firm against their share of the loss of the registered firms. The appellants contended that, inasmuch as tax had already been assessed on the unregistered firm, this could not be done, and that as there was loss in the business of the registered firms, no tax was demandable on Rs. 262. They also contended that they were entitled to carry forward the, loss amounting to Rs. 12,905 to the succeeding year under section 24(2) of the Income tax Act. These contentions were not accepted by the Income tax Officer, to whose order it is not necessary to refer in detail. The assessment for the assessment year 1949 50 was also done on similar lines. The appeal to the Appellate Assistant Commissioner was unsuccessful, and six appeals were taken to the Tribunal by the three appellants three for each assessment year. These appeals were disposed of by a common order. The Tribunal held, relying upon the second proviso to section 24(1), that just as loss in an unregistered firm could not be set off against profits 177 from a registered firm under that proviso, the profits in an unregistered firm could not be set off against the loss from a registered firm. It relied upon a decision of the Madras High Court in Commissioner of Income tax vs Ratanshi Bhavanji (1), which it purported to follow in preference to a decision of the Punjab High Court in Banka Mal Niranjandas vs Commissioner of Income tax (2). The same reasoning was applied to the assessment year 1949 50, and in the result, all the six appeals were allowed. The order of the Tribunal involved, in addition to the point set out above, certain other questions, which were asked by the assessees to be referred to the High Court for decision under section 66(1). The Commissioner also asked for a reference in respect of the decision, substance whereof has been set out above. The Tribunal referred two questions at the instance of the assessees and one question, which we have already quoted, at the instance of the Commissioner. In the High Court, the assessees abandoned the two questions, and the High Court accordingly expressed its opinion in the judgment and order under appeal, on the remaining question. The High Court differed from the decision of the Tribunal, and held that the profit from the unregistered firm could be set off against the losses from the registered firms to find out the rate applicable to Rs. 262, which was other income of the assessees. The High Court also held that the assessees could not carry forward the loss of the registered firms to the following year, because such loss must be deemed to have been absorbed in the profits of the unregistered firm. It, however, certified the case as fit for appeal to this Court, and the present appeal has been filed. In our opinion, the High Court correctly answered the question referred to it, but was in error in holding that the losses of the registered firms could not be carried forward, because they must be deemed to have been absorbed in the profits of the unregistered firm. Inasmuch as we substantially agree with the High (1) (2) 23 178 Court on the first part of the case, it is not necessary to examine closely or in detail the reasons on which the decision of the High Court proceeds. In our opinion, the matter is simple, and can be stated within a narrow compass. Under section 3 of the Income tax Act, income tax is chargeable for an assessment year at rate or rates prescribed by an annual Act in respect of the total income of the previous year. Section 14 (2)(a), before its amendment in 1956, provided that the tax shall not be payable by an assessee, if a partner of an unregistered firm in respect of any portion of his share in the profits and gains of the firm, computed in the manner laid down in cl. (b) of sub section (1) of section 16 on which the tax had already been paid by the firm. The section thus gave immunity from tax to the share of the assessee as a partner in an unregistered firm in respect of the share of profits received by him from the unregistered firm and on which the unregistered firm had already been taxed. Section 16(1)(a), however, provided that in computing the total income of an assessee, any sum exempted under sub section (2) of section 14 shall be included. The combined effect of those two sections was stated by the High Court to be, "that although the share of a partner in the profits of an unregistered firm is exempt from tax, it is included in his total income for the purpose of rate only. " We agree that this is a correct analysis. The Tribunal relied upon the second proviso to section 24(1), which read as follows: "Provided further that where the assessee is an unregistered firm which has not been assessed under the provisions of clause (b) of sub section (5) of section 23 . any such loss shall be set off only against the income, profits and gains of the firm and not against the income, profits and gains of any of the partners of the said firm; and where the assessee is a registered firm, any loss which cannot be set off against other income, profits and gains of the firm shall be apportioned between the partners of the firm and they alone shall be entitled to have the amount of the loss set off under this section. " 179 The Tribunal came to the conclusion that, ". just as a partner in an unregistered firm which has suffered loss will not be allowed to set off his share loss in the unregistered firm against his income from any other source, so it stands to reason that his loss from other sources cannot also be set off against his share income from an unregistered firm. " The decision of the Tribunal was not based upon any specific provision of the Income tax Act but upon a parity of reasoning, by which a specific provision about loss was held to apply the other way round also. The High Court correctly pointed out that all that section 14, subs. (2), did was to save the profits of an unregistered firm from liability to tax in the hands of the partners. It did not affect the computation of the total income to determine the rate applicable under section 3, in the light of section 16(1)(a). Indeed, section 16(1)(a) clearly provided that any sum exempt under section 14(2) was to be included in computing the total income of an assessee, and in view of this specific provision, the converse of the second proviso to section 24(1) which we have quoted above, hardly applied. To this extent, the order of the Tribunal was incorrect. The error was pointed out by the High Court, and the question thus raised was properly decided. We see no reason to differ from the High Court on this part of the case. The question, however, arose before the High Court as to whether in view of this decision, the assessees could carry forward loss from the registered firms in the subsequent year or years. The High Court came to the conclusion that they could not carry forward the loss. Indeed, the Tribunal had earlier stated that if the profits from the unregistered firm were to be set off against the losses of the registered firms, such losses would not be carried forward to the following year, and that would be contrary to section 24. The High Court rejected this ground in dealing with the question as to the rate applicable to the other income, and pointed out and in our view, rightly, that under sections 14(2) and 16(1)(a) the profits and losses had to be set off against each other, to find out the total income. 180 The High Court, however, held that once losses were set off against profits, they were to that extent absorbed, and that there was nothing to carry forward. This conclusion does not follow. Section 24 provides for a different situation altogether; it provides for the carrying forward of a loss in business to the subsequent year or years till the loss is absorbed in profits, or till it cannot be carried forward any further. That has little to do with the manner in which the total income of an assessee has to be determined for the purpose of finding out the rate applicable to his income, taxable in the year of assessment. To read the provisions of sections 14(2) and 16(1)(a) in this extended manner would be to nullify in certain cases section 24 altogether. Neither is such an intention expressed; nor can it be implied. In our opinion, though the decision of the High Court on the main issue and on one aspect of the question posed for its opinion was correct, it was in error in deciding that the losses of ,the registered firms could not be carried forward because they had been absorbed by the profits of the unregistered firm. To this extent, the judgment and order of the High Court will stand modified. Subject to that modification, the appeal will be dismissed. In the circumstances of the case, there will be no order as to costs. Appeal dismissed with modification.

The appellants were partners of two registered firms and another firm which was unregistered. Their profit and loss for the assessment year 1948 49 were as follows: From registered firms Rs. 11,902 loss, 1,265 loss, total loss Rs. 13,167. Income from the unregistered firm Rs. 26,110 profit, other income Rs. 262. The income of the unregistered firm was taxed on the firm. In assessing the amount of Rs. 262 the Income tax Officer first determined the total income of each of the appellants by setting off their share of the profits of the unregistered firm against their share of the loss of the registered firm. The appeal to the Appellate Assistant Commissioner being unsuccessful appeals 175 were taken to the Tribunal which relying on the decisions in Commissioner of Income tax vs Ratanshi Bhavanji, [1952]22 I.T.R. 82, held that just as loss in an unregistered firm could not be set off against profits from a registered firm, the profits in an unregistered firm could not be set off against the loss from a registered firm. On a reference being made to it the High Court differed from the decision of the Tribunal, and held that the profit from the unregistered firm could be set off against the loss from the registered firms to find out the rate applicable to Rs. 262 which was other income of the assessees. The High Court further held that the assessees could not carry forward the loss of the registered firms to the following year, because such loss must be deemed to have been absorbed in the profits of the unregistered firm. On appeal with a certificate of the High Court, Held, that the view of the High Court that under sections 14(2) and 16(1)(a) the profit and loss had to be set off against each other to find out the total income, and that although the share of a partner in the profits of an unregistered firm is exempt from tax, it is included in his total income for the purpose of rate only, was correct but the High Court erred in holding that the losses suffered by the registered firms could not be carried forward because they had been absorbed by the profits of the unregistered firm.

In 1950, the respondent had executed three trust deeds for the benefit of three ladies who were described as his wives, and himself, as the father of their minor children. After the returns in respect of the assessment year 1955 56, 1956 57, 1957 58 and 1958 59 were filed by the respondent, the Income tax Officer, who had the three trust deeds before him called upon the respondent for information regarding his relationship to those three ladies as well as his relationship to a fourth lady. A statement was filed, on behalf of the respondent, before the Income tax Officer, wherein it was stated that only the fourth lady was his legally wedded wife, that the other three were merely referred to as the wives, and that their children were not the legitimate children of the respondent. The Income tax Officer, in assessing the total income of the respondent did not include, under section 16(3) of the 1922 Act, the income of those three ladies and their minor children arising out of the trust properties. In fact, he assessed them separately with respect to their income from the trust properties. In 1964 the Income tax Officer issued notices under section 148 of the 1961 Act seeking to reopen the assessments under section 147 on the ground that there were two other trust deeds of 1957, which were not produced before the I. T. 0. in which also two of the ladies were acknowledged as the wives of the respondent and their children as his children and that their marriage should be presumed because of the acknowledgement. The respondent there upon challenged the validity of the proceedings and the High Court allowed his petition. Dismissing the appeal to this Court, HELD : (1) Section 147(a) provides that if the Income tax Officer has 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 for any year, income chargeable to tax has escaped assessment for that year, he may assess or reassess such income for the assessment year concerned. The fact that the ladies and their children had been described in the 1957 documents as wives and children of the respondent would have been material if the description were any thing new that the Income tax Officer happened to discover for the first time. But the 1950,deeds also contained the same description. The non production of the 1957 documents at the time of the original assessment cannot therefore be regarded as non disclosure of any material fact necessary for the assessment of the respondent for the relevant assessment years. Having second thoughts on the same material does not warrant the initiation of a proceeding under section 147. [467G H; 468B; D E] (2) The law has not changed or since the original assessments were made and it was open to the Income tax Officer to have made the presumption that the ladies were the wives at the time when he made the assessment. He cannot avail of section 147 to correct his mistake. [468F G] (3) The expression 'reason to believe ' occurring in section 147 of the 1961 Act or the corresponding section 34 of the 1922 Act, does not mean a purely subjective satisfaction on the part of the Income tax Officer. The reasons for the belief must have a rational connection or relevant bearing to the formation of the belief. Therefore, the High Court, under article 226, has power to set aside a notice under section 147 of the 1961 Act or section 34 of the 1922 Act, if the condition precedent to the exercise of the .jurisdiction under those sections did not exist. [469C D]

The appellant firm M/s. Kishinchand Chellaram was assessed to tax for the assessment year 1947 48, the relevant accounting year being the year ending 6th April, 1947. The concerned Income Tax Officer on an information that a sum of Rs. 1,07,350 purported to have been sent by the assessee by a telegraphic transfer through the Punjab National Bank Ltd., Madras, to its Bombay Branch favouring one Nathirmal on 16 10 1946, has escaped assessment, called upon the assessee, through his letters dated 24th February, 1955 and 4th March, 1955 to explain the same. The Income Tax Officer did not refer to the letters dated 14th January, 1955 and 10th February, 1955 addressed by him to the Bank Manager nor the reply of the Manager dated 18th February, 1955 in the said two letters addressed to the assessee. Nor were the copies supplied to the assessee nor even made available on record before all authorities including the Supreme Court. The assessee through its letter dated 24th March, 1955 replied that as per its records no such remittance was ever sent by it from Madras to Nathirmal in Bombay. On 2nd February, 1956, the Income Tax Officer for the second time called the very same particulars to which the assessee by its letter dated 9th February, 1956 once again denied the remittance by it. Despite this, by his letter dated 4th March, 1957 addressed to the assessee, the Income Tax Officer repeated his earlier request to it to explain about the remittance, complaining at the same time of silence by the assessee to his letter dated 2nd February, 1956. The assessee in its reply dated 13th March, 1957 while inviting attention to its earlier replies dated 24th March, 1955 & 9th February, 1956 reiterated that no amount of Rs. 1,07,350 was remitted by it from Madras to Nathirmal. Disbelieving it, the Income Tax Officer, by his order brought to tax the amount of Rs. 1,07,350 on the ground that it represented the concealed income of the assessee and observed that "there was no reason to doubt the banker 's statement that the amount was remitted by M/s. Kishinchand Chellaram from Madras". The assessee preferred an appeal to the Assistant Appellate Commissioner. At this stage, it came to light that the purported telegraphic transfer was applied for by one "Tilok Chand C/o M/s. K. Chellaram, 181, Mount Road, Madras" and it was received at Bombay by one "N.B. Bani". In spite of the plea of the assessee that the transaction did not relate to its firm, the Assistant Appellate 721 Commissioner holding that the assessee has not discharged the burden of proof lying on it to explain the amount, rejected the appeal. Further appeal to the Tribunal and a reference called for by the High Court at the instance of the assessee was also answered against it. Hence the appeal after obtaining special leave of the Court. Allowing the appeal, the Court, ^ HELD: (1) There was no material evidence at all on the basis of which the Tribunal could come to the finding that the amount of Rs. 1,07,350 was remitted by the assessee from Madras and that it represented the concealed income of the assessee. [731E]. In the face of the application for remittance signed in the name of Tilok Chand, that this amount was sent by the assessee and the finding to that effect reached by the Tribunal is unreasonable and perverse. What at the highest could be said to be established by the material evidence on record is that Tilok Chand remitted the amount of Rs. 1,07,350 from Madras and this amount was received by Nathirmal in Bombay. Even if it is accepted that Tilok Chand and Nathirmal were employees of the assessee as held by the Tribunal, the utmost that could be said is that an employee of the assessee in Madras remitted the amount of Rs. 1,07,350 to another employee in Bombay. But, from this premise it does not at all follow that the remittance was made by the employee in Madras on behalf of the assessee or that it was received by the employee in Bombay on behalf of the assessee. The burden was on the Revenue to show that the amount of Rs. 1,07,350 said to have been remitted from Madras to Bombay belonged to the assessee and it was not enough for the Revenue to show that the amount was remitted by Tilok Chand, an employee of the assessee, to Nathirmal, another employee of the assessee. It is quite possible that Tilok Chand had resources of his own from which he could remit the amount of Rs. 1,07,350 to Nathirmal. It was for the Revenue to rule out this possibility by bringing proper evidence on record, for the burden of showing that the amount was remitted by the assessee was on the Revenue. [730H 731D] The two documents viz. the letters dated 18th February, 1955 and 9th March, 1957 did not constitute any material evidence which the Tribunal could legitimately have taken into account for the purpose of arriving at the finding that the amount of Rs. 1,07,350 was remitted by the assessee from Madras to Bombay because while the former was not disclosed to the assessee by the Revenue Authorities till the hearing before the Tribunal in regard to the preparation of the supplemental statement of the case, giving the assessee an opportunity to cross examine the Manager of the Bank, the latter was not disclosed to the assessee at any stage. Further, there is no explanation given by the Revenue as to how these two important documents were not traceable earlier. Even if these two letters were to be taken into account, they did not supply any reasonable basis for reaching the finding that it was the assessee which sent the remittance of Rs. 1,07,350. There can be no doubt that if the amount had been remitted by Tilok Chand on behalf of the assessee he would have signed the application for telegraphic transfer on behalf of the assessee and not in his own name. This apart it is impossible to believe that the Manager of the Bank could have failed to appear before the Income Tax Officer in answer to the summons dated 5th March, 1957 and there is no doubt that this statement must have been recorded and the said statement also withheld. [729H 730A; 729B, C; 730B, E; 729F G] 722 (2) It is true that the proceedings under the Income Tax law are not governed by the strict rules of evidence and therefore it might be said that even without calling the Manager of the Bank in evidence to prove this letter, it could be taken into account as evidence. But before the Income Tax Authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross examine the Manager of the Bank with reference to the statements made by him. Moreover, this letter was said to have been addressed by the Manager of the Bank to the Income Tax Officer on 18th February, 1955 in relation to a remittance alleged to have been sent on 16th October, 1946 and it is impossible to believe in the absence of any evidence to that effect, that the Manager who wrote this letter on 18th February, 1955 must have been incharge of the Madras Office on 16th October, 1946 so as to have personal knowledge as to who remitted the amount of Rs. 1,07,350. The Revenue authorities ought to have called upon the Manager of the Bank to produce the documents and papers on the basis of which he made the statements contained in his letter and confronted the assessee with those documents and papers but instead of doing so, the Revenue authorities chose to rely merely on the statements contained in the letter and that too, without showing the letter to the assessee. [728A F]

For the assessment year 1946 47 the appellant, a Hindu undivided family carrying on business, filed a petition before the income tax Officer, under section 25A of the Indian Income tax Act, 1922, claiming that there had been a partition in the family on April 24,1945. As regards the income assessable under section 23 Of the Act, the appellant 's case regarding six sums aggregating to Rs. 2,30,346 shown in the accounts as the sale proceeds of ornaments, was that at the partition the jewels of the family were sold and that the price realised therefrom was invested in the business. The Income tax Officer held that the partition was true and that the family had become divided into five groups, but as regards the amount of Rs. 2,30,346 aforesaid he rejected the explanation given by the appellant as to how the amount came to be received and held that the amount was not the proceeds of the family jewels sold but represented concealed profits of the business. He accordingly included the said amount in the taxable income. The appellant 's contentions, inter alia, before the Appellate Tribunal were (1) that the order passed under section 25A of the Act by the Income tax Officer must be held to have decided the factum of a partition in the family as well as the 'possession and division of the jewels, as set up by the appellant, and that it was not open to the Department to contend that the amount in question did not represent the value of the family jewels; and (2) that, in any case, there was no evidence to show that the amount represented undisclosed profits. Held, that when a claim is made under section 25A of the Indian Income tax Act, 1922, the points to be decided by the Incometax Officer are whether there has been a partition in the family, and, if so, what the definite portions are in which the division had been made among the members or groups of members. The question as to what the income of the family assessable to tax under section 23(3) was, would be foreign to the scope of an enquiry under section 25A, and any finding thereon would not be conclusive in assessment proceedings under section 23. 416 Held, further, that the assessee in the present case having failed to explain satisfactorily the truth of what is a credit in business accounts, the Income tax Officer was entitled to draw the inference that the amount credited represents in reality a receipt of an assessable nature.

The appellant owned a cardamom plantation. For the assessment year 1957 58, he submitted a return under the Madras Plantations Agricultural Income tax Act, 1955. The Agricultural Income tax Officer did not accept the return, and 'added to the income the value of stocks of cardamom sold in the accounting year. The High Court in revision, confirmed the assessment made by the Department. In appeal to this Court, it was contended that: (1) the agricultural produce itself was income and became charged to tax under the Act when it was received and not when it was sold, used or consumed, and therefore, the High Court ought to have directed determination of the produce which was actually derived from agriculture in the year of account and ought to have brought to tax only that quantity and excluded the value of the rest of the produce received in earlier years, from taxation; and (2) from the fact that the appellant applied to compound the tax for the earlier years, it must be inferred that the produce which was sold by him in the year of account had already suffered tax in the earlier years. HELD : (1) Merely because the produce of the plantation was received in the earlier years, income derived from sale of that produce in the year of account was not exempt from tax under the Act in that year. [953 B] Section 3 of the Act read with the definition of "agricultural income" charges to tax the monetary return either as rent or revenue or agricultural produce from the plantation. The expression "income" in its normal con notation does not mean mere production or receipt of a commodity which may be converted into money. Income arises when the commodity is disposed of by sale, consumption or use in the manufacture or other processes carried on by the assessee qua that commodity. It is not necessary, however, for income to accrue that there must be a sale of a commodity : consumption or use of a commodity in the business of the assessee from which the assessee obtains benefit of the commodity may be deemed to give rise to income. [952 G H; 953 A B] Dooars Tea Co. Ltd. vs Commissioner of Agricultural Income tax, West Bengal; , , referred to. (2) It had to be proved by evidence that the crop sold related to the years in respect of which the assessee had applied to compound the tax, but there was no such evidence. [954 F]

The appellant company was a dealer in ghee and groundnut oil etc. The Deputy Commercial Tax Officer assessed it to sales tax for the year 1948 49 on a turnover of Rs. 28,69,151 and odd. Similarly for the year 1949 50 the appellant was assessed to sales tax on a turnover of Rs. 28,72,o83 and odd. The appellant challenged these assessments and its appeal before the Commercial Tax Officer having failed the two matters came up in second appeal before the Sales Tax Appellate Tribunal. In the Tribunal the appellant did not place any materials in support of its contentions and the two appeals were disposed of by the Tribunal holding that the appellant was correctly assessed to sales tax. In respect of the aforesaid orders of the Tribunal the appellant filed applications for review under section 12A(6)(a) of the Madras General Sales Tax Act, 1939 (Mad. Act IX Of 1939), taking the plea that in the first case the materials could not be placed before the Tribunal as there was none to instruct the appellant 's advocate in English or Telegu, and in the second case the relevant correspondence was mixed up with other records. The Tribunal rejected the applications for review on the ground that a failure to produce the necessary materials in support of a plea taken before it, due either to gross negligence or deliberate withholding, did not come within the reason of section 12A(6)(a) of the Act. The High Court upheld the decision of the Tribunal. On appeal by special leave in one case and a certificate of the High Court in the other: Held, that the provision in section 12A(6)(a) of the Madras General Sales Tax Act, 1939 (Mad. Act IX Of 1939), permits a review when through some oversight, mistake or error the necessary facts, basic or evidentiary, were not present before the Court when it passed the order sought to be reviewed, but a party was not 805 entitled to ask for a review when it had deliberately or intentionally withheld evidence in support of a claim made by it. State of Andhra vs Sri Arisetty Sriyamulu, A.I.R. 1057 Andhra Pradesh 130, not approved.

The then Satguru of the appellant Creed was assessed for the assessment years 1937 38, 1938 39 for the first time. He was a retired Govt. servant. His pension as well as the income from the institution were assessed together. On appeal, the Assistant Commissioner of Income tax confirmed the assessments made by the Income tax Officer. The Income tax Commissioner under reference made under section 66(2) of the Income tax Act, 1922 held that the offerings made to the assessee Satguru were offerings as held in trust and same were exempted under section 4(3)(1) of the Act. When an application under Section 35 of the Act was made for ratification, whether the offerings received by the assessee consisted of interest income, property income, and income derived from sale of books and photographs etc. to be excluded, the Commissioner directed deletion thereof. For the year 1939 40, though the Income tax Officer did not allow exemption u/s.4(3)(1) of the Act, the Appellate Assistant Commissioner allowed exemption. Till 1963 64 the appellant was not taxed and its refund applications were accepted by the respondent Revenue. For the assessment years 1964 65, 1965 66, 1966 67, 1967 68, 1968 69, 1969 70, the assessee appellant was as sessed, treating it to be an association of persons, and held that the donations and contributions received volun tarily had limited religious use. When the appellant assesses appealed, the appellate authority upheld the assessments. 313 Against the orders of the Appellate authority the asses see appealed before the Income tax Tribunal. The Tribunal allowing the appeals of the assessee, held that the assessee was entitled to the exemption claimed under Section 11 of the Income tax Act, 1961. On the question, referred to the High Court by the Tribunal, "Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that the income derived by the Radha Swami Satsang, a religious institution, was entitled to exemption under Sections 11 and 12 of the Income Tax Act, 1961?", the High Court answered the question in favour of the Revenuerespondent, holding that the trust deed was revocable and the conditions for exemption under Sections 11 and 12 of the Act were not satisfied. Allowing the appeals of the assessee, this Court, HELD: 1.01. Assessments are quasi judicial. Each assess ment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have al lowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. [320H, 321 A B] 1.02. No formal document is necessary to create a trust. The conditions which have to be satisfied to entitled one for exemption are: (a) the property from which the income is derived should be held under trust or legal obli gation, (b) the property should be so held for charitable or religious purposes which enure for the benefit of the pub lic. [317 E G] 1.03. The property was given to the Satguru for the common purpose of furthering the objects of the Sat Guru. The property was therefore subject to a legal liability of being used for the religious or charitable purpose of the Satsang. [319 E, F] 1.04. The Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under Sections 11 and 12 of the Income Tax Act, 1961. [321 D] Patel Chhotahhai and Ors. Janan Chandra Bask and Ors., AIR 314 1935 Privy Council 97; Acharya Jagdish Waranand Avadhuta & Ors. vs Commissioner of Police, Calcutta & Ant., , The Secretary of State for India in Council vs Radha Swami Sat Sang, ; All India Spinners 'Associ ation vs Commissioner of Income Tax, Bombay, ; TM.M. Sankaralinga Nadar & Bros. & Ors. vs Commissioner of Income tax, Madras, ; Hoystead & Ors. vs Commis sioner of Taxation, and Parashuram Pottery Works Co. Ltd. vs Income tax Officer, Circle 1, Ward A Rajkot, at p.10, referred to.

The Income tax Officer, Bangalore commenced a proceeding under section 34 of the Mysore Income tax Act for reassessment of the income of the respondents for the assessment year 1949 50 and served a notice in that behalf in March 1951, on the respondents. The Income tax Officer determined the total income of the respondents in May 1954, but the order was set aside by the Appellate Assistant Commissioner in November 1961, and the Income tax Officer was directed to make a fresh inquiry, When the Income tax Officer commenced inquiry, the respondents applied to the High Court for a writ of prohibition and the High Court passed an order restraining the Income tax Officer on the ground that the assessment proceeding was barred because of the expiry of the period of limitation. In appeal to this Court, Held: The High Court was in error, because, though the Appellate Assistant Commissioner vacated the Income tax Officer 's assessment order of 1954 and remanded the case for further inquiry, the Appellate Assistant Commissioner did not set aside the notice of March 1951 served on the respondents, If a proper notice was served within the period provided by the section (four years from the close of the assessment year) the proceeding could be completed even after the expiry of four years for the Act prescribes no period for completion of the proceeding. [8E G]

Appeals Nos. 32 and 33 of 1960. Appeals by special leave from the Award dated February 24, 1959, of the Industrial Tribunal, Bihar, Patna, in Reference nos. 10 of 1959 and 1 of 1955. M. C. Setalvad, Attorney General for India, Nooni Coomar Chakravarti and B. P. Maheshwari, for the appellant. B. C. Ghose and P. K. Chatterjee, for the respondents. December 15. The Judgment of the Court was delivered by WANCHOO, J. These are two connected appeals by special leave in an industrial matter and relate to the dismissal of sixty workmen of the appellant company. The dispute was referred by two references; 310 one relates to 31 workmen and the other to 29 workmen. They have been disposed of by a common award, though, as the references were two, there are two appeals before us. The brief facts necessary for present purposes are these: On November 10, 1953, a general meeting was held by the workmen of the appellant and a no confidence motion was passed against the executives of the workmen 's union and Shri Shahabuddin Bari was elected as the new president of the union. On February 6, 1954, the newly elected president served a strike notice on the management. On February 18, 1954, a settlement was arrived at between the management and Shri Fateh Narain Singh, the general secretary of the old executive committees. On February 23, 1954, the strike was launched in accordance with the notice served by Shri Bari and the strike continued for about a month. The strike was called off on March 19 and 20, 1954. The case of the appellant was that the strike which began on February 23,1954, was an illegal strike as it took place during the currency of a settlement arrived at in the course of conciliation proceedings with the assistance of the Labour Commissioner who acted as conciliation officer. Conse quently, the appellant took steps to serve charge sheets on the workmen, who had joined the illegal strike, on March 4, 1954. This was followed by the dismissal of these sixty workmen after a managerial inquiry. It is said that thereafter there were conciliation proceedings which failed and consequently the two references were made. The main findings of the tribunal are that the settlement of February 18, 1954, was a bona fide settlement arrived at during the course of conciliation proceedings and was therefore binding on the workmen; and consequently the strike which began on February 23, 1954, was in breach of the terms of the settlement and was therefore illegal. The tribunal further held that the strike was staged in hot haste and no reasonable opportunity was given to the management to reply to the demands made before launching the strike. It also held that the trouble arose because of the election of 311 Shri Bari and the new office bearers. This matter was referred to the Registrar of Trade Unions and he held that the meeting at which Shri Bari and the new office bearers were elected was irregular and in consequence the old office bearers of the union continued to remain validly elected executives of the union. This decision was given on February 22, 1954, and the strike was launched on February 23 immediately thereafter. The tribunal was not sure whether this decision had been communicated to Shri Bari before the strike was launched; but in any case it was of the opinion that there was no reason to stage the strike in such hot haste after the settlement of February 18, 1954. Having thus held that the strike was illegal and there was no reason why it should have been launched in such hot haste, the tribunal went on to consider the case of these sixty workmen who were dismissed. It held that no charge of violence was brought home to these workmen and even the charge sheets which were originally issued to the workmen did not contain any charge of violence. The tribunal then divided the sixty workmen into three batches of 47, 11 and 2. In the case of 47 workmen, it held that they must be assumed to have been served with charge sheets as they refused to accept them and that proper inquiry was held into the charges, though in their absence. In the case of 11 workmen, it was of opinion that charge sheets had not been served on them and therefore any inquiry held in their absence was of no avail. In the case of two workmen, it held that no attempt was made to serve any charge sheet on them. Further, it set aside the order of dismissal with respect to 13 of the workmen on the ground that they were either not served with any charge sheet or no charge sheet was issued to them; as for the remaining 47, though it found that charge sheets had been issued to them and they had refused to accept them and proper inquiry had been held in their case, it set aside the order of dismissal on the ground that they had not been shown to have taken part in violence and there were extenuating circumstances in their case inasmuch as they were misled to join the strike in order to oust the old office 312 bearers of the union so that others might be elected in their place. It further pointed out that though a much larger number of workmen had taken part in the illegal strike and the union took up their case, only these sixty were eventually dismissed while the rest were reinstated. It was of the view that there was no reason for the appellant to make any distinction between these workmen and the others who were reinstated. It therefore ordered reinstatement of these 47 workmen also. Finally, it held that the workmen were sufficiently penalised, they being out of employment from March 1954 to February 1959 when it made the award and that there was no reason in the circumstances to maintain their dismissal. It awarded 50% of the back basic wages to the two workmen in whose case charge sheets were not even issued and 25 per cent of the back basic wages to the 11 workmen who were not served with charge sheets; no back wages were allowed to the forty seven workmen who had refused to accept the charge sheets sent to them. Three points have been raised on behalf of the appellant before us; namely, (i) as a settlement had been arrived at during the course of conciliation proceedings on September 2, 1954, which specifically dealt with the case of these sixty workmen, the references were incompetent; (ii) the references were incompetent because what was referred was not an industrial dispute but a dispute between the employer and its individual workman; and (iii) the tribunal 's order of reinstatement was in any case unjustified. It appears that after the dismissal of a large number of workmen consequent on the illegal strike that took place on February 23, 1954, there were conciliation proceedings before the Labour Commissioner, Bihar, with respect to these dismissals and other matters. These conciliation proceedings appear to have begun some time before May 1, 1954, for we find that on that day the Labour Commissioner wrote to the appellant that its objection that conciliation proceedings were illegal and without jurisdiction was baseless. It seems 313 that efforts at conciliation continued right up to the end of August 1954, for we find another letter of August 31, 1954, from the Labour Commissioner to the appellant saying that he had heard that mutual negotiations were going on between the appellant and its workmen for the settlement of their dispute and September 2 had been fixed for that purpose. The Labour Commissioner therefore gave notice to the appellant that he would hold conciliation proceedings on September 3 at 3 p.m. in his office in case the disputes were not mutually settled before that date. It seems that an agreement was arrived at between the appellant and the union on September 2. In this agreement it was Doted that 76 dismissed workmen had already been employed; it was further provided that 110 workmen would also be employed in the same manner as the seventy six. Further 31 dismissed workmen were to remain dismissed and would not be considered for further employment or for any other benefit. 30 other dismissed workmen would for the time being remain dismissed and it would be decided later on between the union and the appellant whether their dismissal should be confirmed like those of 31 mentioned above or whether they should be given the option to wait for employment as and when vacancies arose or should be treated as retired on the date of dismissal in order to enable them to receive the benefits of gratuity and refund of provident fund. It may be added that the present references are with respect to sixty workmen out of these sixty one. It seems that the Labour Commissioner was apprised of this settlement. Consequently he wrote on September 3, 1954, to the appellant that the conciliation proceedings proposed to be held on that date were cancelled. The Labour Commissioner further pointed out that the union was opposing reinstatement of certain workmen; he therefore proposed to hold further conciliation proceedings in the case of such workmen on September 6, 1954, at 3 p.m. before making his final recommendations to government in this matter. The appellant protested to the Labour Commissioner 40 314 against the holding of any further conciliation proceedings after the agreement of September 2 and apparently did not attend the meeting fixed for September 6. Nothing further therefore seems to have taken place in the conciliation proceedings. Presumably the Labour Commissioner must have reported thereafter to the government under section 12(4) of the , No. XIV of 1947 (hereinafter called the Act). Then followed the two references by the government; the first on October 8, 1954, relating to 31 workmen and the other on January 15, 1955, relating to 29 workmen. On these facts the contention on behalf of the appellant is that the references were incompetent because of the agreement made on September 2, 1954. Reliance in this connection is placed on sections 18 and 19 of the Act, as they were at the relevant time. 18 provided that a settlement arrived at in the course of conciliation proceedings would be binding on all parties to the industrial dispute and others indicated therein and section 19 provided that such settlement would come into force on such date as was agreed upon between the parties and if no date was agreed upon then on the date on which the memorandum of the settlement was signed by the parties. Such settlement would be binding for such period as was agreed upon by the parties and if no such period was agreed upon, for a period of six months and would continue to be binding upon the parties thereafter until the expiry of two months from the date on which a notice in writing to terminate the settlement was given by one of the parties to the other party or parties to the settlement. The contention on behalf of the appellant is that the agreement of September 2, 1954, arrived at during the course of conciliation proceedings between the appellant and the union was binding on all workmen and therefore it was not open to the government to make these references within six months of it. The question thus posed raises the question as to what is meant by the words "in the course of conciliation proceedings " appearing in section 18 of the Act. One thing is clear that these words refer to the duration 315 when the conciliation proceedings are pending and it may be accepted that the conciliation proceedings with respect to these dismissals, which began sometime before May 1, 1954, were certainly pending upto September 6, 1954, and may be a little later, as is clear from the two letters of the Labour Commissioner. But do these words mean that any agreement arrived at between the parties during this period would be binding under section 18 of the Act ? Or do they mean that a settlement arrived at in the course of conciliation proceedings postulates that that settlement should have been arrived at between the parties with the concurrence of the conciliation officer? As we read this provision we feel that the legislature when it made a settlement reached during the course of conciliation proceedings binding not only on the parties thereto but also on all present and future workmen intended that such settlement was arrived at with the assistance of the conciliation officer and was considered by him to be reasonable and therefore had his concurrence. 12 of the Act prescribes duties of the conciliation officer and provides that the conciliation officer shall for the purpose of bringing about settlement of the dispute without delay investigate the dispute and all matters affecting the merits and the right settlement thereof and may do all such things as he may think fit for the purpose of inducing the parties to come to a fair and amicable settlement of the dispute: (vide section 12(2) ). Then comes section 12(3), which provides, "If a settlement of the dispute or of any of the matters in dispute is arrived at in the course of the conciliation proceedings the conciliation officer shall send a report thereof to the appropriate Government together with a memorandum of the settlement signed by the parties to the dispute". Reading these two provisions along with section 18 of the Act, it seems to us clear beyond doubt that a settlement which is made binding under section 18 on the ground that it is arrived at in the course of conciliation proceedings is a settlement arrived at with the assistance and concurrence of the conciliation officer, for it is the duty of the conciliation officer to promote 316 a right settlement and to do everything he can to induce the parties to come to a fair and amicable settlement of the dispute. It is only such a settlement which is arrived at while conciliation proceedings are pending that can be binding under section 18. In the present case it is obvious that the Labour Commissioner took no steps to promote the actual agreement which was arrived at between the appellant and the union on September 2. The letter of August 31 made it clear that the Labour Commissioner would take action under section 12(2) on September 3 if no mutual agreement was arrived at between the appellant and the union. It seems that a mutual agreement was arrived at between the appellant and the union without the assistance of the Labour Commissioner and it did not receive his concurrence even later; on the contrary evidence shows that the Labour Commissioner did not approve of the settlement which excluded the reinstatement of a large group of workmen and so he did not act under section 12(3). In the circumstances such a mutual agreement could not be called a settlement arrived at in the course of conciliation proceedings even though it may be accepted that it was arrived at a time when conciliation proceedings were pending. A settlement which can be said to be arrived at in the course of conciliation proceedings is not only to be arrived at during the time the conciliation proceedings are pending but also to be arrived at with the assistance of the conciliation officer and his concurrence; such a settlement would be reported to the appropriate government under section 12(3). In the present case the agreement of September 2, 1954 was not arrived at with the assistance and concurrence of the conciliation officer, namely, the Labour Commissioner, which will be clear from his letter of September 3, 1954. In the circumstances it is not a settlement which is binding under section 18 of the Act and therefore will not bar a reference by the Government with respect to these sixty workmen. Re (ii). The next point that is urged is that it is not an industrial dispute but a dispute between the employer 317 and its individual workmen, even though their number may be large and therefore the Government had no jurisdiction to make the references. We are of opinion that there is no force in this contention. We have already set out the history of the conciliation proceedings in this case. It is obvious from the letter of the Labour Commissioner dated September 3, 1954, that he must have made a report to the Government under section 12(4) and it must be on that report that these references must have been made under section 12(5) read with section 10(1). It is not in dispute that originally the case of dismissal of a much larger number of workmen was under consideration during the conciliation proceedings but on September 2,1954, a mutual agreement was arrived at between the appellant and the union, which in a sense excluded the case of these sixty workmen. The Labour Commissioner apparently was not prepared to concur with this action of the parties as appears from his letter of September 3 and must therefore have made a report to the Government under section 12(4) which was followed by references under section 10. In the circumstances we fail to understand how what began as an industrial dispute and was sponsored by the union, related to the dismissal of a much larger number of workmen (including these sixty) and as such became the subject matter of conciliation proceedings under section 12(1) would turn into an individual dispute because a mutual agreement was arrived at between the appellant and the union with which the Labour Commissioner was not in entire agreement and in consequence of which he apparently made a report to the Government under section 12(4) which was followed by the two references under section 10(1). In these circumstances we are satisfied that the references are not bad on the ground that an individual dispute had been referred to the tribunal for adjudication. Re (iii) We now come to the merits of the case. We shall deal with the sixty workmen in three batches in the same manner as the tribunal did. We shall first take the case of 47 workmen. In the case of these workmen, the tribunal held that they were guilty of 318 taking part in an illegal strike and that there was no reason for staging such an illegal strike in hot haste. It also held that they were sent charge sheets which they refused to take. The Standing Orders provide that a workman who refuses to accept a charge sheet or to submit an explanation on being charged with an offence will be deemed to have admitted the charge against him. It also provides that a workman who refuses to accept any communication addressed to him by the company will be liable to disciplinary action for insubordination. The tribunal also held that in the case of these workmen, a proper inquiry was held, though in the circumstances in their absence. It further held that such misconduct as merited dismissal under the Standing Orders was committed by these 47 workmen. On these findings we should have thought that the tribunal would not have interfered with the order of dismissal, for the case would be clearly covered by the principles governing the limits of the tribunal 's power of interference with the findings of the managerial inquiry laid down by this Court in Indian Iron and Steel Co. Ltd. and another vs Their Workmen (1). Learned counsel for the respondent workmen in this connection relies on Indian General Navigation and Railway Co. Ltd. vs Their Workmen (2). In that case it was laid down that "to determine the question of punishment, a clear distinction has to be made between those workmen who not only joined in such a strike but also took part in obstructing the loyal workmen from carrying on their work, or took part in violent demonstrations, or acted in defiance of law and order, on the one hand and those workmen who were more or less silent participators in such a strike on the other hand. " These observations have however to be read in the context of that case, which was (i) that it was not shown in that case that an employee merely taking part in an illegal strike was liable to be punished with dismissal under the Standing Orders and (ii) that there was no (1) ; (2) ; 319 proper managerial inquiry. In these circumstances the quantum of punishment was also within the jurisdiction of the industrial tribunal. In the present case, however, the finding of the tribunal is that there was misconduct which merited dismissal under the Standing Orders and that the managerial inquiry was proper. In these circumstances those observations torn from their context cannot be applied to the facts of this case. The reasoning of the tribunal therefore that as these 47 workmen had not taken part in violence the appellant was not justified in dismissing them cannot be accepted on the facts of this case. The other reason given by the tribunal for setting aside the dismissal is that the appellant had taken back a large number of other employees who had taken similar part in the illegal strike and had absented themselves and there was no reason to discriminate between those employees and these 47 workmen. It is clear from the award of the tribunal that no discri mination was made when taking back the workmen on the ground that these workmen supported Shri Bari, for the award shows that a number of other workmen who supported Shri Bari were taken back. Reliance in this connection is placed on Messrs. Burn and Co. Ltd. vs Their Workmen (1), where, it was observed when dealing with the workmen involved in that case that it could not be said that mere participation in the illegal strike would justify the suspension or dismissal particularly when no clear distinction could be made between those persons and the very large number of workmen who had been taken back into service although they had participated in the strike. There is no doubt that if an employer makes an unreasonable discrimination in the matter of taking back employees there may in certain circumstances be reason for the industrial tribunal to interfere; but the circumstances of each case have to be examined before the tribunal can interfere with the order of the employer in a properly held managerial inquiry on the ground of discrimination. In Burn & Co. 's case (1) there was apparently no reason whatsoever for (1) A.I.R. 1959 S.C. 529. 320 making the discrimination. In the present case, however, the circumstances are different. It is not the appellant which has made the discrimination; in the present case so far as the appellant is concerned it was prepared to take back even those who supported Shri Bari and did actually take back a large number of such workmen. The genesis of the trouble in this case was a dispute within the union itself which led to the illegal strike, the history of which we have already given. The mutual agreement of September 2, 1954, shows that the union which represented the workmen was not agreeable that sixty one workmen should be taken back and these forty seven workmen are out of these sixty one. The appellant in this case was therefore placed in the position that it had to choose between the large majority of workmen and sixty one workmen whom the union did not want to be taken back. It was in these circumstances that the appellant did not take back those sixty one workmen out of whom are these forty seven. The charge of discrimination therefore cannot be properly laid at the door of the appellant in this case and if there is anybody to blame for it it is the union. In these circumstances when the managerial inquiry was held to be proper and the misconduct committed is such as to deserve dismissal under the Standing Orders, there was no reason for the tribunal to interfere with the order of dismissal passed by the appellant in the case of these forty seven workmen. It may be that participation in an illegal strike may not necessarily and in every case be punished with dismissal; but where an inquiry has been properly held and the employer has imposed the punishment of dismissal on the employee who has been guilty of the misconduct of joining the illegal strike, the tribunal should not interfere unless it finds unfair labour practice or victimisation against the employee. Then we come to the case of two workmen to whom no charge sheets were given at all. They are Jagdish Lal (respondent 31) and L. Choudhary (respondent 60). It is not in dispute that no charge sheets were issued to these workmen. The appellant 321 however contends that under the Standing Orders it was not necessary to issue any charge sheet to them. The Standing Orders provide that "any workman charged with an offence under these Orders, except in cases of lateness and absenteeism, shall receive a copy of such charge but in all cases will be given an opportunity of offering his explanation before any decision is arrived at. " It is said that the charge against these two workmen was only for absenting themselves; it was not therefore necessary to frame any charge sheet against them. This is not quite correct so far as Jagdish La]. in concerned as will appear from the letter of dismissal sent to him; but assuming it to be so, Standing Orders provide that though the charge sheet may not be given no action can be taken against a workman for any misconduct unless he is given an opportunity of offering his explanation before any decision is arrived at. There is no proof in this case that any opportunity was given to these two workmen of offering their explanation before the decision of dismissal was arrived at in their case. In these circumstances even though no charge sheet might have been necessary in the case of these two workmen their dismissal was against the provision of the Standing Orders, for no explanation was taken from them before arriving at the decision to dismiss them. The order of the tribunal with respect to these two workmen must be upheld. This brings us to the case of eleven workmen who are: Mohd. Mansoor (respondent 6), Ram Kuber Das (respondent 9), Ramasis (respondent 15), Mohd. Zafir (respondent 19), Mohd. Islam (respondent 20), Mohd. Zafir (respondent 22), Rajeshwar Prasad (respondent 26), Chirkut (respondent 27), Lal Das (respondent 43), Inderdip (respondent 47) and Mohd. Nazir (respondent 58). In their case the tribunal held that though charge sheets were issued to them, they could not be served and the inquiry took place without their knowing anything about the charges or the date of the inquiry. In those circumstances the tribunal held 41 322 that the inquiry was no inquiry and therefore ordered their reinstatement. It is contended on behalf of the appellant that the case of these eleven workmen is similar to the case of forty seven who refused to take the charge sheets sent to them by registered post. In any case it is urged that the charge sheets were notified on the notice board and notices were issued in the newspapers and that should be deemed sufficient service of the charge sheets on them. In this connection reliance was placed on Mckenzie & Co. Ltd. vs Its Workmen(1). In that case the Standing Orders provided that notice would be served on a workman by communicating the same orally to the workman concerned and/or by affixing the same on the company 's notice board and the company had acted in conformity with the Standing Orders by affixing the notices on its notice board. It was found in that case that the company first sent notices by registered post acknowledgement due to the workmen concerned. When some of the notices came back unserved the company wrote to the secretary of the union asking for the addresses of the workmen but the secretary gave no reply to the letter. It was then that the company affixed the notices on the notice board both inside and outside the mill gate. In those circumstances it was held that the company did all that it could under the Standing Orders to serve the workmen and the affixing of the notices on the notice board was sufficient service. The facts in the present case however are different. All that the Standing Orders provide is that the workmen charged with an offence shall receive a copy of such charge. It is also provided that a workman who refuses to accept the charge sheet shall be deemed to have admitted the charge made against him. There is no provision in the Standing Orders for affixing such charge sheets on the notice board of the company. The charge sheets in this case were sent to the eleven workmen by registered post and returned unserved, because they were not found in their villages. On the same day on which the charge sheets were sent by registered post it appears that notices were (1) [1959] SUPPl. 1 S.C.R. 222. 323 issued in certain newspapers to the effect that a group of workmen under a common understanding had engaged in an illegal strike from February 23, 1954, and that all such workmen were liable to strong disciplinary action and that in consequence they had been charged under the Standing Orders and Rules of the company and such charge sheets had been sent to them individually by registered post acknowledgement due and had also been displayed on the notice boards inside and outside the factory gate and they were required to submit the explanations by March 9, 1954. These notices did not contain the names of the work. men to whom charge sheets were sent and in whose case charge sheets were displayed on the notice boards. In the circumstances it can hardly be said that these eleven workmen would have notice that they were among those to whom charge sheets had been sent or about whom charge sheets had been displayed on the notice boards. The proper course in our view was when the registered notices came back unserved in the case of these eleven workmen to publish notices in their names in some newspaper in the regional language with a wide circulation in Bihar along with the charges framed against them. It would have been a different matter if the Standing Orders had provided for service of charge sheets through their display on the notice boards of the appellant. In the absence of such provision, the proper course to take was what we have mentioned above. If that course had been taken, the appellant would have been justified in saying that it did all that it could to serve the workmen; but as that was not done, we agree with the tribunal that these eleven workmen had no notice of the charges against them and the date by which they had to submit their explanations as well as the date of inquiry. In these circumstances the order of the tribunal with respect to these eleven workmen must also be upheld. We therefore allow the appeal so far as the first group of forty seven workmen are concerned and set aside the order of the tribunal reinstating them. We dismiss the appeals so far as the remaining thirteen 324 are concerned, namely, Jagdish Lal (respondent 31), L. Choudhary (respondent 60), Mohd. Mansoor (respondent 6), Ram Kuber Das (respondent 9), Ramasis (respondent 15), Mohd. Zafir (respondent 19), Mohd. Islam (respondent 20), Mohd. Zafir (respondent 22), Rajeshwar Prasad (respondent 26), Chirkut (respondent 27), Lal Das (respondent 43), Inderdip (respondent 47) and Mohd. Nazir (respondent 58) and confirm the order of the tribunal with respect to them. In the circumstances the parties will bear their own costs of this Court. Appeal partly allowed.

During the course of conciliation proceedings in respect of a dispute between the appellant company and its workmen a settlement was arrived at between the parties on February 18, 1954. Despite the settlement some of the workmen went on strike on February 23, 1954, but eventually it was called off on March 19 and 20, 1954. On the ground that the strike was illegal because it took place during the currency of a settlement, the appellant took steps to serve charge sheets on the workmen who had joined the strike and, after a managerial inquiry, dismissed sixty of them. There were conciliation proceedings in respect of the dismissal of the workmen before the Labour Commissioner and an agreement was arrived at between the appellant and the union on September 2, 1954. The Labour Commissioner was apprised of this settlement, but since it was found that the union was opposing reinstatement of certain workmen, he proposed to hold further conciliation proceedings. The appellant was against holding further conciliation steps and, therefore, the Labour Commissioner reported the matter to the Government under section 12(4) of the . A reference was accordingly made and the Tribunal gave the award under which all the dismissed workmen were to be reinstated on the ground that they had not been shown to have taken part in violence and there were extenuating circumstances in their case inasmuch as they were misled to join the strike in order to oust the old office bearers of the union so that others might be elected in their place, and that though a much larger number of workmen had taken part in the illegal strike and the union took up the case, only these sixty were eventually dismissed while the rest were reinstated. The appellant objected to the award on the grounds (1) that as a settlement had been arrived at during the course of conciliation proceedings on September 2, 1954, which specifically dealt with the case of these sixty workmen, the reference was incompetent in view of section 18 of that Act, (2) the reference was also incompetent because what was referred was riot an industrial dispute but a dispute between the employer and its individual workmen, and (3) the Tribunal 's order of reinstatement was in any case unjustified. 309 Held:. .(1) under sections 12 and 18 of the , a settlement which is binding under section 18 on the ground that it was arrived at in the course of conciliation proceedings is a settlement arrived at with the assistance and concurrence of the conciliation officer, and that a settlement which is not binding under section 18 will not be a bar to a reference by the Government. In the present case the agreement of September 2, 1954, did not have the approval of the conciliation officer and, consequently, the reference based on 'the report of the conciliation officer under section 12 of the Act was competent. (2). that the reference was not bad on the ground that an individual dispute had been referred to the Tribunal for adjudication, because the dispute in the present case was originally sponsored by the union and related to the dismissal of a much larger number of workmen. (3). that where the finding of the Tribunal was that there was misconduct which merited dismissal under the Standing Orders and that the managerial inquiry was proper, the Tribunal was not justified in interfering with the action of the management unless it found unreasonable discrimination in the matter of taking back employees, or unfair labour practice or victimisation against the employees. Indian Iron and Steel Co. Ltd. and Another vs Their Workmen, ; , followed. I. G. N. and Railway Co. Ltd. vs Their Workmen, ; , distinguished.

In the Delhi region there are four textile units. namely, the D.C.M., the S.B.M., the B.C.M., and the A.T.M. The D.C.M. and the S.B.M. are under one management. Since 1940 they had also a common retirement benefit scheme with a scale of gratuity. The ' workmen in all the units were receiving basic wages plus dearness allowance. On March 4, 1958, an industrial dispute between the four units and their workmen was referred to the Industrial Tribunal and one of the matters in dispute related to gratuity. The Tribunal in its award framed two schemes relating to the payment of gratuity, one relating to D.C.M. and S.B.M., and the other, to B.C.M. and A.T.M. They were made operative from January 1, 1964. Both employers and employees appealed to this Court. On the questions: (1 ) Whether in view of a settlement between the management of A.T.M. and its workmen it was open to the Tribunal to ignore the settlement and impose the scheme on the management; (2) Whether in view of the unstable financial condition of A.T.M. the burden of payment of gratuity on A.T.M. was excessive; (3) Whether a uniform scheme applicable to the entire industry on the region cum industry basis should have been adopted instead of schemes applicable to individual units; (4) Whether in determining the quantum of gratuity, basic wage alone should be taken into account and not the consolidated wage including dearness allowance; (5) Whether in deciding this question, an overall view of similar and uniform conditions in the industry in different centers in the country, could he taken into consideration; (6) Whether it was not necessary for the Tribunal to fix the age of superannuation when introducing a gratuity scheme; (7) Whether gratuity should have been awarded even in cases of dismissal for misconduct; (8) Whether provision should have been made for payment of gratuity to badli workmen irrespective of the number of days for which they worked in a year; (9) Whether the schemes should have been made operative from the date of reference; and (10) What is the scope of the expression 'average of the basic wage '. HELD: (1) The settlement between the workmen and management of A.T.M. did not bar the jurisdiction of the Tribunal to make the Scheme of gratuity applicable to A.T.M. [340] Under the settlement all that was agreed to was, that an award should be made and if it he found that A.T.M. acquired financial stability then it would be liable to pay the gratuity to its workmen. It was not agreed that the proceedings before the Tribunal should be dropped and that it 308 was only after A.T.M. became financially stable that a fresh claim should be made by the workmen. [320 D F] (2) The trading accounts of A.T.M. showed that since 1959 60 the Mills had achieved some stability, and that by 1961 62 all previous losses were wiped out. Therefore, though it was a much weaker unit than the others, it was financially stable from the date on which the scheme became operative. [321 A C] (3) A unit wise approach in framing the gratuity scheme 'for the four units was appropriate in the present case. [323 B C; 340 D E] No inflexible rule has been laid down by this Court that gratuity schemes should he framed only on the region cure industry principle. In the present case, if a common scheme was framed for the entire industry in Delhi for all four units, in view of the financial condition of A.T.M., the benefits under such a scheme would be not only low, but would be lower than the existing benefits available to workmen in the D.C.M. and S.B.M. Units. [321 C D, H; 322 E F, H] Garment Cleaning Works vs Its Workmen, [1962] 1 S.C.R. 711: and Burhanpur Tapti Mills Ltd. vs Burhanpur Tapti Mills Mazdoor Sangh, , followed. Bharatkhand Textile Mfg. Co. vs Textile Labour Association ; , explained. (4) The Tribunal was in error in relating the gratuity awardable to the workmen to the consolidated wage instead of the basic wage. [340 G] (a) In determining the scope of an industrial reference words used, either in the claim or in the order of reference, should not necessarily be given the meaning they have under the Industrial Disputes Act. Therefore, merely because the expression "wages" in the Act includes dearness allowance, the Tribunal could not base the gratuity scheme on consolidated wages. [325 D F] (b) An industrial tribunal cannot adjudicate on disputes not referred; but when called upon to adjudicate ' whether a certain scheme, on the terms indicated in the reference should be framed, such basic guidance does not limit its jurisdiction. The Tribunal, in this case, was in error in thinking that in determining the rate of gratuity it was limited to the number of days of service in the order of reference as the applicable multiple. On that assumption, since the gratuity would be too low if only basic wage was chosen, it was not justified in choosing consolidated wage. The proper procedure would have been to choose only the basic wage and fix upon a larger number of days of service as the appropriate multiple. [327 E H] (c) The decisions of this Court in May and Baker (India) Ltd. vs their Workmen, [1961] II L.L.J. 94 (S.C.), British India Corporation vs Its Workmen, [1965] II L.L.J. 556 (S.C.), British Paints (India) Ltd. vs Its Workmen, , Hindustan Antibiotics Ltd. vs Their Workmen, and Remington Rand of India vs The Workmen, are conflicting and no principle can be extracted as to whether basic wage or consolidated wage should be considered for purposes of gratuity. Ordinarily, in those circumstances, this Court would not have interfered with the conclusion of the Tribunal choosing consolidated wage; but, the Tribunal had failed 309 to take into account the prevailing pattern in the textile industry all over the country. It is country wide industry and in that industry, gratuity has never been granted on the basis of consolidated wages. [329 C F; 330 A] (d) The primary object of industrial adjudication is to adjust the relations between employers and employees with the object of promoting industrial peace. If the basic wage alone is taken for purposes of gratuity, it would produce in the present case, a scheme which deprives the workmen of the D.C.M. and S.B.M. of benefits which had been granted to them under the voluntary scheme introduced by the management of those two units and disturb industrial peace therein. But on that account, the Tribunal was not justified in introducing a fundamental change in the concept of gratuity granted by numerous schemes in the textile industry all over the country. The appropriate remedy is to frame a scheme consistent with the normal pattern prevailing in the industry and introduces reservations protecting benefits already acquired. [326 C F] (e) In the report of the Central Wage Board for the cotton textile industry, also, gratuity was directed to be given on the basis of wages excluding dearness allowance. [330 G] (f) In D. C.M. Chemical Works vs Its Workmen, this Court affirmed the award relating gratuity to consolidated wages. Though the unit also belonged to D.C.M. it is a unit entirely independent of the textile unit. So, it cannot be regarded as an effective or persuasive precedent justifying variation from the normal pattern of gratuity schemes in operation in the textile industry all over the country. [331 H; 332 A B, D E] (5) If all over the country, in textile centres, payment of gratuity. is related to the basic wage and not to the consolidated wage any innovation Delhi region alone is likely to give rise to serious industrial disputes in other centres in the country. If maintenance of industrial peace is a governing principle of industrial adjudication, it would be wise to maintain a 'reasonable degree of uniformity in the diverse units all over the country and not to make a fundamental departure from the prevailing pattern.the basic wage is low in all other centres, and if it does not play an important part, there is no reason why it should play, only in the Delhi region, a decisive part so as to make a vital departure from schemes in operation in other centres in the country. The acceptance of the award the Tribunal in the present case is likely to create conditions of great instability in other parts of the country in the textile industry. Therefore, the Tribunal 's award granting gratuity on the basis of consolidated wage could not be upheld. [332 G H; 333 A E] (6) It is not necessary, for a gratuity scheme to be effective, that here should be fixation of the age of superannuation. [323 C D] Burhanpur Tapti Mills Case, , referred Further, on the terms of the reference the plea of the employers to fix the age of superanuation was beyond the scope of the 'reference, nor was such fixation incidental to the framing of the scheme. [323 H 324 c] (7) The object of providing a gratuity scheme is to provide a retiring benefit to workmen who have rendered long and unblemished service to the employer and thereby contributed to the prosperity of the employer. It is therefore not correct to say that no misconduct, however grave, may not be visited with forfeiture of gratuity. Misconduct could be (a) 310 technical misconduct which leaves no trail of indiscipline; (b) misconduct resulting in damage to the employers ' property which may be compensated by forfeiture of gratuity or part thereof; and (c) serious misconduct such as acts of violence against the management or other employees or riotous or disorderly behaviour in or near the place of employment which, though not directly causing damage, is conducive to grave indiscipline. The first should involve no forfeiture, the second may involve forfeiture of an amount equal to the loss directly suffered by the employer in consequence of the misconduct, and the third will entail forfeiture of gratuity due to the workmen. [324 F G; 336 D F; 341 A B] Garment Cleaning Works vs Its Workmen, ; (1961) I L.LJ. 513, Wenger & Ca. vs Its Workmen, [1963] II L.L.J. 403 (S.C.), Motipur Zamindari (P) Ltd. vs Their Workmen, [1965] II L.LJ. 139 (S.C.) Calcutta Insurance Co. vs Their Workmen, [1967] II L.LJ. 1 (S.C.), and Remington Rand of India vs The Workmen, [1968] I L.L.J. 542 (S.C.). referred to. (8) The award does not require to be modified with regard to badli workmen. If gratuity is to be paid )for service rendered then there are no grounds for holding that a badli workman must be deemed to have rendered service giving rise W a claim of gratuity, merely because, for maintaining his name on the record of the badli workmen, he is required to attend the mills. [338 A B] (9) The award needs no modification with regard to the date of commencement of the schemes. The liability of A.T.M. to pay gratuity arose after it acquired sufficient financial stability and the unit acquired financial stability only from January 1, 1964. If in respect of the A.T.M. which had no scheme. gratuity becomes operative from January 1, 1964, there is no reason why respect of B.C.M. any different rule should be provided for. As regards D.C.M. and S.B.M. there was already a more advantageous gratuity scheme in operation and the workmen in those two units were not prejudiced by directing the scheme applicable to them, to commence from January 1, 1964. If effect was given to the schemes before January 1, 19 '64, it may rake up cases in which workmen have left the establishment many years ago and it would not be conducive to industrial peace to allow such questions to be raised after a long delay. In the absence of any principle, the matter must be decided on considerations of expediency. [338 G H; 339 A D] (10) The expression 'average of the basic wage ' means wage earned by a workman during a month, divided by the number of days for which he had worked, and multiplied by 26 in order to arrive at the monthly wage for the computation of gratuity payable. [333 C D] [Appropriate directions modifying the schemes were accordingly given.]

The Standing Orders of the appellant 's establishment, duly certified under the , dealt, inter alia, with provisions relating to leave to be granted to the workmen. In I.C. 11 of 1955 the Industrial Tribunal by its award modified the said standing orders and made provisions for certain kinds of leave. The award came into operation on November 18, 1956 under section 19(3) read with section 17A(7) of the . On further disputes arising the parties entered on September 19, 1958 into a settlement under section 12(3) of the whereby in return for the revision of the scales of pay, the workmen agreed that for a period of three years commencing from January 1, 1958, they would not raise any dispute on certain matters including leave. This settlement was terminated by the workmen by notice dated August 14, 1961 under section 19(2) of the . In 1963 the State Government again referred to the Industrial Tribunal an industrial dispute between the appellant and the workmen. This dispute was registered as I.D. No. 8 of 1963 and the questions referred related to privilege leave, casual leave and sick leave. The appellant urged before the Tribunal that it was not competent to hear the reference because (i) the earlier award in I.C. 11 of 1955 which dealt with matters relating to leave had not been terminated by a notice under section 19(6) of the ; (ii) the Standing Orders in question could be modified only by the procedure under the Standing Orders, Act and not under the because the former Act was self sufficient in regard to the matters covered by it. The Tribunal and the High Court both rejected the appellant 's objections, whereupon, by special leave, appeal was filed in this Court. On behalf of the workmen it was stated that notice of termination of the earlier award under section 19(6) of the Industrial disputes Act had been given by them in a letter dated June 26, 1961. HELD:(i) When there is a subsisting award binding on the parties the Tribunal has no jurisdiction to consider the same points in a fresh reference. In the present case the earlier award had not been terminated and the reference was therefore incompetent. [588D] The letter of June 26, 1961 could not be treated as a notice under s.19(6) of the terminating the earlier award in I.C. 11 of 1955 because it did not convey any such intention. Moreover it was written while the settlement of September 19, 1958 by which the workmen had bound themselves not to raise any dispute regarding leave facilities for three years was still in force, for the notice of. termination of the settlement under section 19(2) was given by the workmen only on August 14, 1961. Until the said settlement was terminated the union of workmen had no right to make demands about leave facilities as it purported to do on June 26, 1961. [587G 588C] 582 The Workmen of Western India Match Co. Ltd. vs The Western India Match Co. Ltd., ; , referred to. (ii) The Standing Orders Act which has for its object, the defining with sufficient precision. the conditions of employment, under the industrial establishments and to make the said conditions known to the workmen, has provided more or less a speedy remedy to the workmen, for the purpose of having a standing order modified or for having any question relating to the application, or interpretation of a standing order. referred to a labour court. But there is no warrant for holding that merely because the Standing Orders Act is a selfcontained statute with regard to the matters mentioned therein, the jurisdiction of the Industrial Tribunal under the Act. to adjudicate upon the matters covered by the standing orders, has been in any manner abridged or taken away, It will always be open in a proper case, for the union or workmen to raise an 'industrial dispute ' as that expression is defined in section 2(k) of the , and if such a dispute is referred by the Government concerned for adjudication the Industrial Tribunal or Labour Court as the case may be will have jurisdiction to adjudicate upon the same. [595B D] Guest, Keen, Williams., Private Ltd. vs P. J. Sterling, ; , The Baualkot Cement Co. Ltd. vs R. K. Pathan, [1962] Supp. 2 S.C.R. 697 and Salem Electricity vs Employees. , distinguished.

On the refusal of the appellant employer to fix the minimum wages and rates for contract work of the workmen respondents who alleged that they were paid below the level of bare subsistance wage, the dispute was referred to the Industrial Tribunal for adjudication. The first Tribunal could not fix any minimum basic wage and the award of the second Tribunal which fixed a scale was set aside on the ground that the appointment of the Tribunal was not published according to law. The third Tribunal ultimately fixed the basic minimum wage on the industry cum region basis after considering the rates prevalent in various parts of the country and a place nearest to the appellant company. The minimum awarded by the Tribunal was slightly increased by the Labour Appellate Tribunal in accordance with a statutory notification issued under ,the (XI of 1948), which had come into force after two years of the award of the Tribunal and by which a scale of minimum wage and dearness allowance was fixed. On appeal by the appellant company by special leave. Held, that the Labour Appellate Tribunal committed no error of law in awarding the same minimum basic wage which was statutorily fixed and which came into force only two years after the award of the Tribunal. In determining the minimum basic wage the fact that a large amount of dearness allowance was paid to the employees in other comparable occupations in the same region should not be ignored. In order that the Central Government might itself become the appropriate Government within the meaning Of section 2(a)(i) of the Industrial (Development and Regulation) Act, 1951, (65 of I 95 1) it must specify in that behalf that the industry in question was a controlled industry. If the services of one Tribunal were not available to the appropriate Government it was perfectly competent to that Government to appoint another Tribunal to take up the work of adjudication.

The three collieries owned by the appellant company employ over 4,200 workmen. At the relevant time, there were three Trade Unions functioning at the collieries namely, Madhya Pradesh Koyla Mazdoor Panchayat, Azad Koyla Shramik Sabha and Madhya Pradesh Colliery Workers ' Federation. At the material time, the Panchayat, according to the allegations of the Company, had about 75 per cent of the workers on its rolls. This Union conducted a complete strike for 57 days in the months of March and April 1968 at the collieries. The Central Wage Board for Mining Industry by its award recommended payment of Variable Dearness Allowance (V.D.A.), correlated to the cost of living index prevailing from time to time. The Company accepted those recommendations. The workers represented by the various Unions, on the basis of the Wage Board 's award, demanded V.D.A. at the rate of Rs. 1.47 per day with effect from April 1, 1968 while the Company was paying it at the rate of Re. 1. 1 1 per day. The Company refused to pay more than Re. 1. 11 per day. Thereupon, in December 1968. the Federation. which had a membership of 169 workers (Respondents 4 to 173) made an application before the Central Labour Court cum Industrial Tribunal Jabalpur (the Labour Court) under section 33 C(2) of the Industrial Disputes Act for determination of the amount of V.D.A. due to the workers. The Company submitted its Written Statement on May 13, 1969, challenging the jurisdiction of the court and raised other legal objections. In consequence of the notice of strike under Sec. 22(1) of the Act by the Panchayat, the conciliation proceedings to be under section 22 read with sec. 12(1) of the Act were held by Mr. B. D. Sharma. Assistant Labour Commissioner. In the course of these conciliation proceedings besides other matters, the dispute relating to V.D.A. was settled. Subsequent to the signing of the conciliation agreement, the company filed a supplementary statement before the Labour Court that, in view of the settlement, the application filed by the Federation had become infructuous. The stand taken by the workers Was that the settlement was not in accordance. with the provisions of the Act. The Labour Court tried this issue as a preliminary issue. It held that Shri Sharma was not a duly appointed ,conciliation officer on the 'date on which the settlement was arrived at and consequently, it did not put an end to the dispute pending before the Labour Court. The Writ Petition filed by the Company in the High Court impugning the order of the Labour Court was dismissed. Hence this appeal by special leave. It was contended for the appellant (i) Assuming that the settlement in question was not a settlement in the course of conciliation proceedings and binding under section 18(3) of the Act, it was still a settlement binding on the workmen, including respondents 4 to 173 herein, when 99 per cent of the total workmen had accepted the terms of the settlement, including V.D.A; (ii) The Labour Court 's order refusing permission to the appellant Company to lead evidence to prove the implementation and acceptance of the aforesaid settlement by 99 per cent of the workers, was violative of the principles of natural justice, and (iii) There is nothing in the Act which prohibits the employers and the workmen 874 from entering into a settlement during the pendency of proceedings under section 33 C(2) the Act. On the other hand, settlements inter se between the parties have always been preferred by this Court to the adjudicatory process. HELD (i) A perusal of sec. 18 of the Act makes it clear that a settlement at rived at in the course of conciliation proceedings is binding not only On the actual parties to the industrial dispute but also on the heirs, successors or assigns ,of the employer on the one hand, and all the workmen in the establishment, present or future. on the other. Thus had Mr. B. D. Sharma been a duly appointed Conciliation Officer, the settlement arrived at in the conciliation proceedings, duly conducted by him under sec. 12, would have been binding on the entire body of the workers. Since the finding of the High Court to the effect, that the settlement between the Panchayat and the management cannot be deemed a, settlement arrived at in the course of conciliation proceedings under the Act, now stands unassailed, sub sec. (3) of sec. 18 cannot be invoked to make it binding on Respondents 4 to 173 represented by the Federation. An implied agreement by acquiescence or conduct such as acceptance of a benefit under an agreement to which the worker acquiescing or accepting the benefit was not a party being out side the purview of the Act is not binding on such a worker either under sub sec. (1) or under sub sec. (3) of sec. 18 of the Act. It follows, therefore, that, even if 99% of the workers have impliedly accepted the agreement by drawing V.D.A. under it, it will not whatever its effect under the general law put an end to the dispute before the Labour Court and make it functus officio under the Act, [878C E; 879A B] (ii) The refusal of the Labour Court to allow the appellant to lead evidence at this stage, has not caused any prejudice to the appellant. The issue decided as a preliminary issue involved a question of law which could be decided on the basis of material on record. Furthermore, the decision of the Labour Court neither debars the appellant from bringing on record evidence relevant to the issues which still remain to be decided, nor does it rule out the agreement for all purposes. [879C E] ' (iii) In East India Coal Company Ltd., Benares Colliery, Dhanbad vs Rameshwar and ors. , this Court held that although the scope of section 33C(2) is wider than that of sec. 33 C(1), cases which would appropriately be adjudicated under sec. 10(1) are outside the purview of sec. 33C(2). The provisions of section 33 C are broadly speaking in the nature of executing provisions. The jurisdiction of the Labour Court, in the present case, is not only circumscribed by sec.33 C(2) but the matter also is yet at the initial stage. The controversy between the parties still remains to be determined on merits. [880F & G] Amalgamated Coffee Estates Ltd. and Ors. vs Their workmen and Ors. discussed and The Sirsilk Ltd. and Ors. vs Govt. of Andhra Pradesh and Anr, [1964] S.C.R. 448, referred to.

The question for decision in this appeal was whether a dispute raised by the workmen ' relating to a person who was not a workman could be an industrial dispute as defined by section 2(k) of the , as it stood before the amendments Of 1956. The appellants, who were the workmen of Dimakuchi Tea Estate, espoused the cause of one Dr. K. P. Banerjee, Assistant Medical Officer, who had been dismissed unheard with a month 's salary in lieu of notice but who had accepted such payment and left the garden and the dispute raised was ultimately referred by the Government for adjudication under section 10 of the Act. Both the Tribunal and the Appellate Industrial Tribunal took the view that as Dr. Banerjee was not an workman within the meaning of the Act, the, dispute was not an industrial dispute as defined by section 2(k): Held, (per Das, C. J., and section K. Das, J., Sarkar, J., dissenting), that the expression 'any person ' occurring in section 2(k) of the , cannot be given its ordinary meaning and must be read and understood in the context of the Act and the object the Legislature had in view. Nor can it be equated either with the word 'workman ' or 'employee '. The two tests of an industrial dispute as defined by the section must, therefore, be, (1) the dispute must be a real dispute, capable of being settled by relief given by one party to the other, and (2) the person in respect of whom the dispute is raised must be one in whose employment, non employment, terms of employment, or conditions of labour (as the case may be), the parties to the dispute have a direct or substantial interest, and this must depend on the facts and circumstances of each particular case. Applying these tests, the dispute in the present case which was in respect of a person who was not a workman and belonged to a different category altogether, could not be said to be a dispute within the meaning of section 2(k) of the Act and the appeal must fail. Narendra Kumar Sen vs All India Industrial Disputes (Labour Appellate) Tribunal, , approved. Western India Automobile Association vs The Industrial Tribunal, Bombay, , distinguished 1157 Case law discussed. Per Sarkar, J. There is no reason why the words 'any person ' in section 2(k) of the Act should not be given their natural meaning so as to include an employee who is not a workman within the meaning of the Act. Consequently, a dispute concerning a person who is not a workman may be an industrial dispute within that section. The primary object which the Act has in view is the preservation of the industrial peace. The Act does not make the interest of the workmen in the dispute a condition of the existence of an industrial dispute. Such interest is incapable of definition and to make it a condition of an industrial dispute would defeat the object of the Act. Western India Automobile Association vs The Industrial Tribunal of Bombay, ; Narendra Kumar Sen vs The All India Industrial Disputes (Labour Appellate) Tribunal, and United Commercial Bank Ltd. vs Kedar Nath Gupta, , referred to. Even assuming that the workmen must be interested in order that there can be an industrial dispute, the present case satisfies that test and falls within the purview of section 2(k) of the Act.

Certain goods which are essential for the manufacturing process in the appellant 's mill were detained by the Excise Authorities for non payment of Central Excise Duty and consequently there was a disruption in the functioning of the appellant 's mill compelling the appellant to stop the working of the mill for the period from March 24, 1964 to June 10, 1964. The Respondent Sangh demanded that the employees who were affected by the said closure should be paid their wages for the aforesaid period. As the said demand was not accepted by the appellant, the respondent filed an application before the First Labour Court, praying for the payment of full closure compensation to the affected employees. The Labour Court held the appellant liable to pay closure compensation to the employees affected by the closure of the mill for the aforesaid period at the rate of 50% of the basic wages and dearness allowance. The Industrial Court partly allowing the appeal of the appellant, directed the appellant to pay closure compensation to the employees affected by the closure for the period from March 24,1964 to June 10, 1964 at the rate of 50 per cent of their basic wages and dearness allowance and further directed that where the employees had been sick and enjoyed sickness benefits for all the days or had been on privilege leave or enjoyed leave with wages for all the days or secured alternative employment for any period during the closure, such employees would 420 not be entitled to any closure compensation for such days, but in respect of such days half of the wages payable to Badli workmen in lieu of the said three categories of workmen would be paid to the Badli workmen equitably. In appeal to this Court, it was contended on behalf of the appellant that as the closure had been made in accordance with the provisions of the Standing orders 16 and 17 due to circumstances beyond the control of the appellant, the appellant is not liable to pay any compensation to its employees for the period of closure including payment to the Badli workmen. Allowing the appeal in part, ^ HELD: (1) The order of the Industrial Court in so far as it directs payment of compensation to the Badli workmen is set aside and, except that, the rest of the order of the Industrial Court is affirmed. [427F G] 2.(i) Sub section (4) of Sec. 42 read with the provision of section 78(1)(a)(iii) of the Bombay Industrial Relations Act 1946, makes it manifestly clear that an employee is entitled to challenge the refusal by the company to pay compensation of the closure and claim such compensation before the Labour Court whether or not such closure was due to circumstances beyond the control of the company, as enumerated in Standing order 16. The Respondent Sangh therefore, was entitled to make the application before the Labour Court claiming compensation for the period of closure even though such closure was made in accordance with the provisions of the Standing orders 16 and 17.[425E H] 2.(ii) The Standing order 16 provides that such closure can be made without notice and no compensation would be required to be paid in lieu of notice. It is clear from Standing order 16 that it does not contemplate that when there has been a closure on account of some unavoidable circumstances, no compensation is required to be paid to the employees. Therefore, the order of the Industrial Court directing payment of compensation to the employees of the appellant for the above period of closure is upheld. [426A C] 3. Badli workmen get work only in the absence, temporary or otherwise, of regular employees, and that they do not have any guaranteed right of employment. Their names are not borne on the muster rolls of the establishment concerned. Indeed a Badli workman 421 has no right to claim employment in place of any absentee employee. In A any particular case, if there be some jobs to be performed and the employee concerned is absent, the Company may take in a Badli workman for the purpose. Badli workmen are really casual employees without any right to be employed. Therefore, the Badli employees could not be said to have been deprived of any work to which they had no right and, consequently, they are not entitled to any compensation for the closure. It may be that the Company may not have to pay closure compensation to the three categories of employees as mentioned by the Industrial Court, but that does not mean that the company has to pay compensation to the Badli workmen in place of these categories of employees. [426D Il] Rashtriya Mill Mazdoor Sangh vs Appollo Mill Ltd., []960] 3 SCR 231 distinguished.

The appellant firm held mining lease of a colliery on the condition to continue the work, without voluntary intermission, in a skillful and workman like manner. The partners fell out amongst, themselves, the work of the colliery stopped, wages of the labourers were not paid, the essential services stopped working, and the colliery began to get flooded. The State Government stepped in and made a promise to the essential workmen that their wages would be paid and this saved the colliery. The State Government gave a notice asking the firm to remedy the defect within sixty days failing which it would take over the colliery. As the firm did nothing to remove the defects and did not request for extension of time, the State Government took over the colliery and terminated the lease. The firm filed a revision before the Central Government. The Central Govern ment asked for the comments of the State Government and invited the firm to make its own comment upon the reply of the State Government. Taking the entire matter into consideration, the Central Government rejected the revision. In appeal to this Court, the firm contended that the action by the State Government was arbitrary and highhanded and that the Central Government did not give a hearing to the firm and also did not give any reasons in its order dismissing the revision. HELD:The action of the State Government far from being arbi trary or capricious was not only right but proper. This$ was hardly a case in which any act ion other than rejecting the application for revision was called for and a detailed order was really not required because after all the Central Government was merely approving the action taken in the case by the State Government, which stood completely vindicated. [108 B C] The Mineral Concession Rules make it incumbent on the Central Government to obtain the comments 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 comments of the State Government. This procedure was correctly followed and the Central Government thus had a detailed discussion of the pros and cons of the case before it. [107 G]. Harinagar Sugar Mills Ltd. vs Shyam Sundar Jhunjhunwala, [ ; , Madhya Pradesh Industries Ltd. vs Union of India. [1966] J.S.C.R. 466 and Aluminium Corporation of India Ltd. vs Union of India and Ors., C.A. No. 635/64, dated 22 1965] referred to. 105 The firm did not fulfil its obligations under the lease and, whatever the reason, it was guilty of voluntary intermission in the working of the colliery 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. [107 C D].

Appeals Nos. 137 to 141 of 1958. Appeals by special leave from the judgment and order dated April 26, 1956 of the Patna High Court in Misc. Judicial Cases Nos. 362 to 366 of 1955. A. V. Viswanatha Sastri, section K. Majumdar and I. N. Shroff, for the appellants Nos. 2 to 4 (In all the appeals). Hardayal Hardy and D. Gupta, for the respondent (In all the appeals). December 15. The Judgment of the Court was delivered by KAPUR, J. The assessee who is the appellant has brought these five appeals against the judgment and order of the High Court of Patna by which it answered the two questions stated under section 66(2) of the Indian Income tax Act against the appellant and in favour of the Commissioner of Income tax. The appellant is the son of the late Maharajadhiraja of Darbhanga and the brother of the present Maharaja. The father died in 1929 and the appellant was given by way of maintenance the Estate of Rajnagar. He was also given a yearly allowance of Rs. 30,000 which was later raised to Rs. 48,000. From 1929, the appellant invested his cash surplus in shares and securities, the account of which was entered in what is called Account Book No. 1. From the year 1930 onwards up to the year 1941 42 the appellant purchased a large number of shares and securities which by the accounting year 1941 42 were of the value of Rs. 14.91 lacs. During this period the appellant sold shares and securities in the accounting years 1936 37 and 1939 40 of the value of 1.48 lacs and 1.69 lacs respectively. He made certain amount of profits on these sales but under orders of the Commissioner of Income tax in the former case and of the Income tax Tribunal in the latter case, these sums were not assessed to income tax. In the 290 accounting years 1942 43 to 1946 47 the appellant purchased and sold some shares and securities. The entries in Account No. 1 stood as follows: Total value of Total cost of Total cost of shares shares & securities shares and and securities sold cost at the securities pur during the year. beginning of the chased during the year. 1350 Fs. Rs. 14.66 lacs Nil Rs. 4.68 lacs 942 43 (13 items) 1351 Fs. Rs. 9.98 lacs Rs. 2.37 lacs. Rs. 416 lacs 1943 44 (4 items) (12 items) Rs. 3 05 lacs. Rs. 069 lacs 1352 FS. Rs. 8.20 lacs (2 items) and (3 items) 1944 45 other call money. 1353 Fs. Rs. 10.52 lacs Nil Rs. 1.03 lacs 1945 46 (3 items) 1354 Fs. Rs. 9.50 lacs Rs. 15 83 lacs. Rs. 3.39 lacs 1946 47 ( 9items) (2 items) and in all these years the appellant made profits which varied from Rs. 2,56,959 in the accounting year 194243 to Rs. 33,174 in the accounting year 1946 47. On July 16, 1940, the appellant arranged an overdraft with the Mercantile Bank of India and actually withdrew Rs. 10,000 for the purchase of shares. But his brother the Maharaja advanced to him without interest Rs. 10 lacs and thus the overdraft was paid off. A new Account was opened in the books of the appellant named No. 2 Investment Account which contained all entries in regard to shares purchased and sold from out of the money borrowed from the Maharajadhiraj. In this account entries of the different years were as follows: 292 was held not to. be taxable. Thus in the second period the assessee was held not to be carrying on any trade. In the third period, i.e., the assessment years 1944 45 to 1948 49 the profits made by the appellant from purchase and sale of shares were as follows: 1944 45. Rs.2,62,000 and odd 1945 46. Rs.3,95,000 and odd 1946 47. Rs.1,57,000 and odd 1947 48. Rs.1,33,000 and odd 1948 49. 76,000 and odd The Income Tax Officer held these to be liable to income tax as business profits. On appeal the Appellate Assistant Commissioner excluded the profits for the years 1944 45 and 1945 46 but for the years 1946 47 to 1948 49 the assessments were upheld. Both parties appealed to the Appellate Tribunal. It held on the evidence that the appellant was to be regarded as a dealer in shares and securities and therefore the profits were assessable to income tax. The appellant applied for a case to be stated under section 66(1) of the Income tax Act. This application was dismissed but the High Court made an order under section 66(2) of the Income tax Act to state a case on two questions of law. The questions were as follows: (1). Whether in the circumstances of the case, there is material to support the finding of the Appellate Tribunal that the assessee was a dealer in shares and securities with respect to each of the accounts and, therefore, liable to be taxed? (2). Whether, having regard to the findings of the Appellate Tribunal in respect of 1941/42 assessment, it was open to the Appellate Tribunal in the present case to hold that the profits and the transactions of sale and purchase of shares and securities amounted to profits of business and so liable to be taxed ? The High Court held that the facts and circumstances which the Tribunal took into consideration in arriving at the finding were the material before the Tribunal to support the finding and the first question 293 was answered in the affirmative and therefore against the appellant. In regard to the second question the answer was again in the affirmative and against ', the appellant who has come to this Court by special leave. It was argued on behalf of the appellant that he was not carrying on the business of buying and selling shares but his purchases and sales were in the nature of investments of his surplus monies and therefore the excess amounts received by sales were capital receipts being merely surplus and not profits. It was also submitted that the appellant being a zamindar the buying and selling of shares was not his normal activity; that he had a large income and it was his surplus income which he was investing in buying the shares and whenever he found it profitable he converted his holdings and securities and for a number of years from 1931 32 he had been buying shares but he did not sell them; that the very nature of investments was such that they had to be constantly changed so that the monies invested may be used to the best advantage of the investor; and that the sales were really for the purpose of reemploying the monies that he had invested to his best advantage. Counsel for the appellant relied upon certain cases in support of his submission that the first question raised was of a wider amplitude and that it had been erroneously restricted by the High Court and that its true import was the same as of the questions which were raised in the following cases decided by this Court. He relied on G. Venkataswami Naidu & Co. vs The Commissioner of Income tax (1), Oriental Investment Co., Ltd. vs The Commissioner of Income tax, Bombay (2). In the former case the assessee purchased four plots of land adjacent to the mills of which he was the Managing Agent. On various dates and about five years later sold them to the mills in which he realized about Rs. 43,000 in excess of his purchase price. This was treated by the Income tax authorities as purchase with a view to sell at a profit. The question referred was whether there was material for the (1) [1959] Supp. 1 S.C.R. 646. (2) ; 294 assessment of that amount as income arising from an adventure in the nature of trade. The High Court held that that was the nature of the transaction. On appeal this Court held that before the Tribunal could come to the conclusion that it was an adventure in the 'nature of trade, it had to take into consideration the legal requirements associated with the concept of the trade or business and that such a question was a mixed question of law and fact. It was also held that where a person invests money in land intending to hold it and then sells it at a profit it is a case of capital accretion and not profit derived from an adventure in the nature of trade but if a purchase is made solely and exclusively with the intention to resell it at profit and the purchaser never had any intention to hold the property for himself there would be a strong presumption that the transaction is in the nature of trade but that was also a rebuttable presumption. The purchase in the absence of any rebutting evidence was held to fall in the latter category, i.e., adventure in the nature of trade. In the Oriental Investment case(1) the assessee was an investment company. It had purchased certain shares and sold them and qua those shares it claimed to be treated as an investor and not a dealer on the ground that it did not carry on any business in the purchase and sale of shares. The assessee 's applications for reference to the High Court were rejected on the ground that no question of law arose out of the order of the Tribunal. It was held that the question whether the assessee 's business amounted to dealing in shares and in properties or was merely an investment was a mixed question of law and fact and the legal effect of the facts found was a question of law and this Court ordered the case to be stated on two questions that it framed. One of the questions was similar to the first question in the present case but the second question was a wider one, i.e., whether the profits and losses arising from the sale of shares etc. could be taxed as business profits. The question which the High Court had to answer (1) ; 295 in the present case was a narrow one and the answer to that on the material before the Court was rightly given in the affirmative. But even if the question is taken to be wider in amplitude, on the materials produced and on the facts proved the appellant must be held to have been rightly assessed. Counsel for the appellant argued that the amounts received by him in the accounting years were in the nature of capital accretions and therefore not, assessable. In support, Counsel for the appellant relied on the following cases: Raja Bahadur Kamakshya Narain Singh vs The Commissioner of Income Tax, Bihar & Orissa (1) where Lord Wright observed that profits realised by the sale of shares may be capital if the seller is an ordinary investor changing his securities but in some instances it may be income if the seller of the shares is an investment company or an insurance company. The other cases relied upon were Californian Copper Syndicate Limited vs Harris (2); Cooper vs Stubbs (3); Leeming vs Jones (4) and Edwards vs Bairstow & Harrison (5). It is not necessary to discuss these cases because. the principle applicable to such transactions is that. when an owner of an ordinary investment chooses to realise it and obtains a higher price for it than he originally acquired it at, the enhanced price is not a profit assessable to income tax but where as in the present case what is done is not merely a realisation or a change of investment but an act done in what is truly the carrying on of a business the amount recovered as appreciation will be assessable. In July 1948 the appellant had borrowed, though without interest, a large sum of money to the extent of about Rs. 10,00,000, no doubt from his brother. He started a new account calling it No. 2 Investment Account. For the assessment years under appeal shares purchased and sold were of a large magnitude ranging from Rs. 4.68 lacs to Rs. 69 thousands in what is called the first account and from Rs. 9,64,000 or even if Port Trust Debentures are excluded (1) [1943] L.R.70 I.A. 180,194. (2) (3) , 57. (4) (5). [1955] ; 296 Rs. 3,60,000 to Rs. 30,000. The magnitude and the frequency and the ratio of sales to purchases and total holdings was evidence from which the Income tax Appellate Tribunal could come to the conclusion as to the true nature of the activities of the appellant. The principle which is applicable to the present case is what we have said above and on the evidence which was before the Tribunal, i.e., the substantial nature of the transactions, the manner in which the books had been maintained, the magnitude of the shares purchased and sold and the ratio between the purchases and sales and the holdings, if on this material the Tribunal came to the conclusion that there was material to support the finding that the appellant was dealing in shares as a business, it could not be interfered with by the High Court and in our opinion it rightly answered the question against the appellant in the affirmative. The second question is wholly unsubstantial. There is no such thing as res judicata in income tax matters. The Appellate Tribunal has placed in a tabulated form the activities of the appellant showing the buying and selling and the magnitude of holdings and it cannot be said therefore that it was not open to the Appellate Tribunal to give the finding that it did. In our opinion the High Court rightly held against the appellant. The appeals are therefore dismissed with costs. One hearing fee in this Court. Appeals dismissed.

The appellant used to invest his cash surplus in shares and securities and maintained an account book called Book No. 1 relating thereto. During the period from 1930 to 1941 42 he purchased a large number of shares and securities which by the accounting year 1941 42 were of a value Rs. 1491 lacs. He sold certain shares and securities of the value of several lacs and made certain amount of profit on those sales. In 1940 the appellant borrowed a large amount of money from his brother, the Maharaja of Darbhanga and opened a new account named account No. 2 which contained all entries regarding shares purchased and sold out of the money borrowed from the Maharaja. In the assessment year 1944 45 to 1948 49 the profits made by the (1) ; 288 appellant from purchase and sale of shares amounted to several lacs and the Income tax Officer held those to be liable to income tax as business profits. The Appellate Assistant Commissioner upheld the assessments but excluded the profits for the years 1944 45. On appeal by both the parties the Appellate Tribunal held on the evidence that the appellant was to be regarded as a dealer in shares and securities and therefore the profits were assessable to income tax. The High Court stated the following two questions under section 66(2) of the Income tax Act and answered them in the affirmative: "(1) Whether in the circumstances of the case, there is material to support the finding of the Appellate Tribunal that the assessee was a dealer in shares and securities with respect to each of the account and, therefore, liable to be taxed? (2)Whether having regard to the finding of the Appellate Tribunal in respect of 1941 42 assessment, it was open to the Appellate Tribunal in the present case to hold that the profits and transactions of sale and purchase of shares and securities amounted to profits of business and so liable to be taxed?" On appeal by special leave the appellant contended inter alia, that being a Zamindar the buying and selling of shares was not his normal activity and he did not carry on any such business but his purchases and sales were in the nature of investments of his surplus monies and therefore the excess amounts received by sales were capital receipts being merely surplus and not profits. Held, that on the materials produced and on the facts proved the appellant must be held to have been rightly assessed. The principle applicable to such transactions is that when an owner of an ordinary investment chooses to realise it and obtains a higher price for it than the original price paid by him, the enhanced price is not a profit assessable to income tax, but where as in the present case what is done is not merely a realisation or a change of investment but an act done in what is truly the carrying on of a business the amount recovered as appreciation will be assessable. G.Venkataswami Naidu & Co. vs The Commissioner of Income tax, [1959] Supp. 1 S.C.R. 464, Oriental Investment Company Ltd. vs The Commissioner of Income tax, ; , Raja Bahadur Kamakshya Narain Singh vs Commissioner of Income tax, Bihar and Orissa, (1943) L.R. 70 I.A. 180, discussed. The substantial nature of the transactions, the manner in which the books were maintained, the magnitude of the shares purchased and sold and the ratio between the purchases and sales and the holding justified tile Tribunal to come to the conclusion that the appellant was dealing in shares as business. The High Court could not interfere with those findings and it rightly answered the questions in the affirmative. There is no such thing as res judicata in income tax matters 289 and it was quite open to the Appellate Tribunal to give the finding that it did.

The respondent assessee claimed deductions in his assessments relating to the assessment years 1962 63 to 1964 65 in respect of payments of interest on loans taken from Kalinga Foundation Trust and others and certain dividend transactions relating to the shares of Kalinga Tubes, Ltd. The Income Tax officer issued a letter to the assessee requesting him, inter alia, to produce evidence and prove (i) that the cash credits appearing in his account in the name of Kalinga Foundation Trust were genuine; and (ii) that 39,000 shares of Kalinga Tubes Ltd. standing in the names of shareholders were not really his own investment. After examining the assessee 's evidence and on the basis of documentary evidence and government records and on the basis of local enquiries made, the Income Tax officer came to the conclusion that no trust in the name of Kalinga Foundation Trust really existed and even if it existed, it had no funds of its own and that the name "Kalinga Foundation Trust" was used by the assessee as a camouflage to put through his unaccounted money. Accordingly, all cash credits appearing in the books of accounts of the assessee himself or in the books of other concerns or persons or remittances of actual payments in the name of Trust were treated by the Income Tax officer as moneys coming out of the undisclosed sources of the assessee and accordingly assessed the same as his income from undisclosed sources. All interest and dividend received in the name of the Trust were included by the Income Tax officer in the assessment of the assessee as his own income. The Income Tax officer was also of the opinion that the moneys advanced in the name of the Trust to several persons in connection with the acquisition of 39,000 shares of Kalinga Tubes Ltd. which were 27 issued in 1358 actually belonged to the assessee. Accordingly, the dividend of the said shares was treated as the income of the assessee and the expenses incurred in that connection were allowed as deduction. The persons m whose names the 39,000 shares of Kalinga Tubes Ltd. stood, were treated by the Income tax officer as benamidars of the assessee. Against the orders of assessment, appeals were filed by the assessee before the Appellate Assistant Commissioner who set aside the assessments for the years under consideration and remanded the matters back, to Income tax officer to frame issues and give due opportunity to the assessee to cross examine the witnesses in the light of the observations made m the order. Again, against the order of the Appellate Assistant Commissioner, the appeals were filed. It was argued before the Tribunal on behalf of the appellant assessee; (i) that on the basis of the facts emerging on an examination of assessee 's evidence and facts found on the basis of documentary evidence, the Appellate Assistant Commissioner should have confirmed the assessments; (ii) that local inquiries and oral testimony had been used by the Income tax officer to support the conclusions already arrived at on an examination of assessee 's own evidence and corroborated by documentary evidence and therefore the Appellate Assistant Commissioner should not have set aside the assessment on the ground that the persons who were examined by the Income tax officer should have been allowed to be cross examined by the assessee; (iii) that the gist of the enquiries had been communicated to the assessee to enable him to meet the case against him and it was for the assessee to produce before the Income tax officer the persons who had collected the funds for the Kalinga Foundation Trust as the Income tax officer was not bound by the technical rules of evidence; (iv) that it had collected evidence to prove that these shares were purchased by the assessee benami in the names of the shareholders named; (v) that the assessee had created a private registered Trust in 1949 out of his own properties having the same name as Kalinga Foundation Trust and that a reference to Kalinga Foundation Trust m some of the documents produced by the assessee was to this private trust and not to any public trust of the same name alleged to have been created at a public function. After considering the material, the Tribunal held (a) that the Kalinga Foundation Trust came into existence in 1947 and continued after its registration in 1353 under the same name and style and the fund of the Trust was built up by collection of donation from the public at large; (b) that seven persons who were designed by the Income tax officer as benamidars of the assessee for the purchase of the 28 shares of M/s Kalinga Tubes Ltd, were not benamidars and the money required for the purchase of these shares had been raised by themselves; (c) that the investments made by the Trust in the assessee 's group of industries or with the assessee were from its own resources and funds and such investments were guided by business expediency and prudence; (d) that the Trust was comprised of persons of public repute and the control and management of the trust styled as "Kalinga Foundation Trust" were under the effective control of the Board of Trustees comprised of persons of public reputation and (e) that the income from interest, dividend, or any other usufruct arising out of the investments made by the Trust in the various concerns and the investments of the Trust which were included in the assessments of the assessee in the years under reference should be excluded as appertaining to a separate and distinct entity and therefore directed the Income tax officer to exclude these amounts from the assessments of the assessee in all these three years. The revenue did not accept the findings of the Tribunal as correct. Several questions of law were sought for from the Tribunal to be referred out of the decision of the Tribunal under section 256(1) of the Income Tax Act, 1961. The Tribunal refused to refer these questions. An application was made under section 256(2) of the Act asking for reference on those questions from the High Court. The High Court also rejected the application and refused to call for a statement of case on those questions. Hence these appeals by sepcial leave. Allowing the appeals, ^ HELD: 1. The High Court, in the facts and circumstances of the case, was in error in not directing a reference under section 256(2) of the Act. Therefore, the judgment and order of the High Court, are set aside and the Tribunal is directed to send a statement of case for the three years involved within six months of the date of receipt of this order on the questions mentioned in this judgment. [44 C D] 2. The Supreme Court in several decisions has laid down the following principles with regard to the scope of the jurisdiction of the High Court in directing reference on question of law where the decision rests primarily on appreciation of facts: (i) When the point for determination was a pure question of law, such as construction of a statute or document of title, the decision of the Tribunal was open to reference to the Court. (ii) When the point for determination was a mixed question of law 29 and fact, while the finding of the Tribunal on the facts found was final, its decision as to the legal effect of those findings was a question of law which could be reviewed by the Court. (iii) A finding on a question of fact was open to attack under reference under the relevant Act as erroneous in law when there was no evidence to support it or if it was perverse. (iv) When the findings was one of facts, the fact that it is itself an inference from other basic facts will not alter its character as one of fact. [36 F H; 37A] Sree Meenakshi Mills Limited vs Commissioner of Income Tax, Madras, , Gouri Prasad Bagaria and others vs Commissioner of Income Tax, West Bengal, , I.C.I. (India) Private Ltd. vs Commissioner of Income tax, West Bengal 111, , Commissioner of Income tax (Central), Calcutta vs Daulat Ram Rawatmull, , Commissioner of Income tax, Bihar and Orissa vs S.R. Jain, , relied upon. The question as to whether the donations alleged were given by the assessee were the moneys raised by the Trust as donations from various people or not should be considered in its proper perspective but does not seem to have been done. This is the most material portion and in not appreciating the material portion and discussing the evidence in respect of the same, there was non consideration of a relevant factor on a factual aspect and on this the question is whether the Tribunal 's decision was perverse in the sense that no man instructed properly at law could have acted as the Tribunal did, and secondly whether there was ignoring of all the materials and relevant facts in considering this aspect. There was also evidence on record as to who had collected it to a certain extent, but no evidence on the other aspect. Ignoring of that fact is a vital fact which influences the decision and a conclusion and must be judged in its proper perspective. Therefore, the questions which arise on this aspect are questions of law, and the High Court should have directed the statement of a reference. [41C G] 4. Regarding the ownership of 39,000 shares in Kalinga Tubes Ltd. issued in 1958, this involved determination of two issues: (a) whether the ostensible holders of these 39,000 shares were real owners or benamidars and if they were benamidars, who were the real holders. The Income tax officer was of the view, on facts suggested, that the 30 seven persons were benamidars of the assessee, whether they are so or not and what is the effect of the said fact is another question. But these facts were not properly considered by the Tribunal to come to the conclusion as to whether, 39,000 shares of Kalinga Tubes Ltd. belonged to the assessee and not to the shareholders named. [42 D E; 43 E F]

In proceedings for assessment to tax for each of the assessment years 1956 57 and 1957 58, the Income Tax Officer reduced the rebate in supertax admissible to the respondent under the Finance Acts of 1956 and 1957 on the view that the respondent bank, which was a public limited company, had distributed dividends exceeding 6% of its paid up capital. In reducing the rebate the Income Tax Officer excluded an amount representing share premium received by the company. The Appellate Assistant Commissioner held that the company 's share premium was liable to be added to its capital in computing the reduction in the rebate in super tax and directed modification of the order of assessment. The Appellate Tribunal in appeal, as well as the High Court, on a reference, agreed with this view. In the appeal to this Court, it was contended on behalf of the appellant that the amount representing share premium was not to be added to the share capital because (1) the expression "share premium account" in the definition of "paid up capital" in the Explanation to Paragraph D of Part II of the Finance Acts of 1956 and 1957 means an account apart from the reserves maintained by the company; and (2) in view of the provisions of section 78 (3) read with section 78(1) of the , the respondent company was bound to maintain a separate share premium account outside the reserves and to transfer the share premium into that account which the respondent company had failed to do. HELD : A share premium account is liable to be included in the paid up capital for the purpose of computing rebate if it is maintained as a separate account. But the Explanation to paragraph D of of the Finance Acts of 1956 and 1957 does not contemplate that the account must be kept apart from the reserves. if within the reserves it is an identifiable separate account, the share premium will qualify for inclusion in the paid up capital. [728 H] Although under the 1 of 1956 there was an express provision that the share premium account shall be maintained in a separate account and by virtue of Sch. VI of the Act the share premium has to be shown in the balance sheet under the head "Liabilities" as part of the share capital and not of reserves, on that account it cannot be assumed that if the share premium is maintained as a separate account within the reserves, reduction in the rebate in super tax is liable to be computed after excluding share premium. [728 C] In any event with respect to the assessment year 1956 57 the company was being assessed to tax for the previous year of the company ending on 723 December, 1955, when the of 1956 was not in force. During that period the company was governed by Act 7 of 1913 which contained no provision analogous to section 78 of the C D]

The appellants were partners in a registered firm which was dissolved on March 24, 1945. A private limited company succeeded to the business of the firm from March 25, 1945. For the accounting period April 1, 1944, to March 24, 1945, the firm was assessed to excess profits tax under the Excess Profits Tax Act, 1940. It had deposited certain sums of money as required under section 10 of the Indian Finance Act, 1942, read with section 2 Of the Excess Profits Tax Ordinance, 1943, and in accordance with those provisions became entitled to repayment of a portion of the excess profits tax. The appellant 's claim before the Income. tax Officer under section 25(4) of the 'Indian Income tax Act, 1922, that no tax was payable on the profits of the firm for the period between April 1, 1944, to March 24, 1945, was allowed, but their plea that the amount of refund of the excess profits tax was business profit and therefore similarly exempt from tax, was rejected. The High Court, on a reference, took the view that the amount refunded was income from other sources taxable under section 12 Of the Indian Income tax Act, 1922, and that, therefore, the appellants were not entitled to the benefit of section 25(4) Of that Act. Held, that in view of section 12(1) of the Excess Profits Tax Act, 1940, and section II(II) of the Indian Finance Act, 1946, the amount refunded was income from business for the purposes of the Indian Income tax Act, 1922, and did not lose its character which it had before the deposit. It fell under section 10 of the Indian Income tax Act and was, therefore, exempt under section 25(4) of that Act. Mc Gregor and Baljbur Ltd. vs Commissioner of Income tax, Bengal, and A. & W. Nesbitt Ltd. vs Mitchell, [1926] II T.C. 2II, relied on.

The appellant assessee is a company carrying on the business of manufacturing and selling Textile at Porbunder (formerly a princely State) in Saurashtra in the State of Gujarat. No income tax was levied by the former Porbunder State prior to 1948. In 1949 the princely State of, Porbund er integrated into newly formed Saurashtra State. In 1949 the State of Saurashtra promulgated the Saurashtra Income Tax Ordinance wherein provision for grant of depreciation based on written down value was made. On 26.1.1950, State of Saurashtra became a part of the Union of India as a Part 'B ' State and thus the Income Tax Act, 1922 became applicable to the State of Saurashtra from 1st April 1950 under the Fi nance Act, 1950. The said Saurashtra Income Tax Ordinance was repealed under Sec. 13 of the Finance Act, 1950. Section 12 of that Act provided for removal of difficulties, if any, arising in giving effect to the Income Tax Act. The Central Govt. on 2.12.50 issued an order known as "Taxation Laws (Part B States) Removal of Difficulties) Order 1950". Clause 2 of the said order provided the manner in which the aggre gate depreciation allowance and written down value were to be computed. On March 9, 1953, the Central Government in the exercise of its powers under Sec. 60A of the Indian Income Tax Act, 1922, added an Explanation to the said clause (2). The vires of the said Explanation was challenged before the Andhra Pradesh High Court which held that the Explanation referred to above was ultra vires the powers of the Central Government under Sec. 60A of the Income Tax Act. Commissioner of Income Tax, Hyderabad vs D.B.R. Mills Ltd., Thereupon, the Central Government issued another notifi cation dated the 8th May, 1956 in exercise of its powers under Section 12 of the Finance Act 1950, whereby an Expla nation in identical terms as the earlier Explanation was added to Clause (2) of the Removal of Difficulties Order, 1950. The validity of the said Explanation added by the notification dated 8th May, 1956 was upheld by this Court in The Commissioner of Income tax, Hyderabad vs Dewan Bahadur Ramgopal Mills Ltd., ; On the appeal from the said decision of the High Court 2 of the Andhra Pradesh in Commissioner of Income tax, Hydera bad vs D.B.R. Mills, The assessee was assessed under the Indian Income Tax Act from 1940 41 in respect of the income arising or deemed to arise in British India from 1940 41 onwards. For these years its income was assessed on receipt basis but in calcu lating the world income depreciation was taken into consid eration for arriving at the income outside British India. The assessee was also assessed for the assessment year 1949 50 under the Saurashtra Income Tax Ordinance, 1949. From 1950 51 it was assessed under the Income Tax Act. The assessment years concerned in this case are 1957 58, 1958 59 and 1959 60, the corresponding previous years being the Calender years 1956, 1957 and 1958 respectively. The case of the assessee is that during the course of the assessment of its income, depreciation was allowed for the assessment year 1950 51 and thereafter on the original cost of the assets as reduced by the depreciation allowance given under the Sau rashtra Income Tax Ordinance 1949. The respective written down values for the assessment years 1951 52 and 1952 53 were fixed on the basis of the written down value for the assessment year 1950 51. But later the concerned Income Tax Officer rectified the calculations of depreciation allowance by further reducing the written down value of the assets of the assessee. The Income Tax Officer took the written down value for the assessment years 1940 41 as the starting point. The assessee was not satisfied with this rectification. Its contention was that the depreciation for the previous years should have been calculated only on the basis of Clause (2) of the Taxation Laws (Part B States) (Removal of Difficulties) Order 1950, which provided for computation of the aggregate depreciation allowance on the basis of the deduction which was actually allowed under the Saurashtra Income Tax Ordinance, 1949. Regarding the explanation, the assessee contended that it was ultra rites the powers of the Central Government as it was not necessary for the removal of any difficulty. The contentions of the assessee were rejected by the Income Tax authorities as well as by Income Tax Appellate Tribunal. It was contended by the assessee before the Tribu nal that the decision of this Court in Commissioner of Income Tax Hyderabad vs Dewan Bahadur Ramgopal Mills Ltd., ; was no longer good law in view of the later decision of this Court in Straw Products Ltd. vs Income Tax Officer "A" Ward, Bhopal and Ors., The Tribunal having rejected the said contentions, at the in stance of the assessee a reference was made to the Gujarat High Court in which the following question was raised: 3 "Whether on the facts and in the circumstances of the case. the Tribunal was justified in holding that the depreciation allowable and not 'actually allowed ' under the Saurashtra Income tax Ordinance, 1949, should be taken into account in computing the aggregate depre ciation allowance and written down value under Sec. 10(2)(vi) of the Income Tax Act 1922. " The High Court held that in its advisory jurisdiction under the Income Tax Act, it could not go into the question of the vires of the said Explanation and therefore answered the question against the assessee. Therefore, the appellant filed Special Civil Application 1797 of 1972 in the High Court. The Division Bench of the High Court in its judgment disposing of the said special Civil Application pointed out that the decision of this Court in the Commissioner of Income Tax, Hyderabad vs Dewan Bahadur Ramgopal Mills, case, referred to above had upheld the validity of the Explanation in question. The High Court further opined that some of the arguments which did not find favour with this court in the said case were accepted by a Bench of 7 Learned Judges in the Straw Products Ltd. vs Income Tax Officer, "A" Ward, Bhopal and Ors., The High Court fur ther pointed out that in its decision in the said case of Straw Products this court had considered the decision in Dewan Bahadur Ramgopal Mills Ltd. and explained that on the facts of that case a difficulty had arisen and it was for removing that difficulty that the Order of 1956 was issued. For the said reason the High Court considered that decision was good law and following the same, it dismissed the Spe cial Civil Application. Hence this appeal by the assessee. In this appeal the Explanation added by the Central Government by its notification dated May 8, 1956 as well as the assessments made on the assessee for the assessment year 1957 58 to 1959 60 have been assailed. It was inter alia contended on behalf of the assessee that there was no diffi culty which had arisen in giving effect to the provisions of the Indian Income Tax Act in the State of Saurashtra and hence the pre condition on which the Central Government was authorised to make an Order under the Removal of Difficul ties Order and add the Explanation in question had never come into existence and as such the Explanation was without the authority of Law, invalid and of no legal effect. It was further contended by the assessee that under the scheme of the Income Tax Act, generally speaking, almost the entire cost of a capital asset used for purposes of business or profession should 4 be allowed to be written off by way of depreciation, whether worked on the basis of straight line method or written down value. The assessee disputed the mode of assessment and the applicability of the Explanation. Following this Court 's decision in Dewan Bahadur Ramgo pal Mills ' Ltd. ; this Court dismissing the appeal, HELD: The Saurashtra Income Tax Ordinance was repealed by Section 13 of the Finance Act 1950 and not by any provi sion in the Indian Income Tax Act. The basic and normal scheme of depreciation under the Indian Income Tax Act is that it decreases every year, being a percentage of the written down value which in the first year is the actual cost and in succeeding years actual cost less all deprecia tion actually allowed under the Income Tax Act or any Act repealed thereby etc. [18D E] Commissioner of Income Tax Hyderabad vs Dewan Bahadur Ramgopal Mills Ltd., ; The Saurashtra Income Tax Ordinance having been repealed not by the Indian Income Tax Act but by Sec. 13 of the Finance Act 1950, a difficulty had come into existence, and hence it could not be said that the Government had no good basis to come to the conclusion that a difficulty had, in fact, arisen. [18F G] Madeva Upendra Sinai vs Union of India & Ors., [1975] 98 I.T.R. 209.

The appellant assessee filed a memorandum of appeal to the Assistant Commissioner, Sales Tax, stating therein that the amount of admitted tax had been paid and forfeited the statement by an affidavit. Before the hearing, he produced a certificate from the Sales Tax Officer that the tax had been paid. The Assistant Commissioner relying on the Allahabad High Court 's decision in Swastika Tannery, Jaimau vs Commissioner of Sales tax, U.P. rejected as defective the memorandum of appeal, holding that it was not accompanied by the challan showing the deposit of admitted tax under section 9 of the Uttar Pradesh Sales Tax Act, 1948 and r. 66 of the U.P. Sales tax Rules. Against this order the assessee directly filed special leave to appeal to this Court without exhausting the remedies of revision and reference provided in the Act. This Court granted Special Leave and; HELD:The appeal must be allowed. (i) By the word "entertain" in the proviso to section 9 is meant the first occasion on which the Court take up the matter for consideration. It may be at the admission stage or if by the rules of that Tribunal, the appeals are automatically admitted, it will be the time of hearing of the appeal. But on the first occasion when the court takes up the matter for consideration, satisfactory proof must be presented that the tax was paid within the period of limitation available for the appeal. Rule 66(2) lays down one uncontestable mode of proof which the Court will always accept but it does not exclude the operation of the proviso when equally satisfactory proof is made available to the officer hearing the appeal and it is proved to his satisfaction that the payment of the tax has been duly made and in time. [512E F; 513E G] In the present case, when the Assistant Commissioner took tip the appeal for consideration, satisfactory proof was available in the shape of a certificate. Swastika Tannery of Jaimau vs Commissioner of Sales tax, U.P. Lucknow, (1963) 14 S.T.C. 518, disapproved. Kundan Lal vs Jagannath Sharma, A.I.R. 1962 All. 547; Dhoom Chand Jain vs Chaman Lal Gupta and Anr. A.I.R. 1962 All. 42: Haji Rahim Bux & Sons & Ors. vs Firm Samiullah & Sons, A.I.R. 1963 All. 320, approved. (ii) Though this Court would not ordinarily grant special leave to appeal against an order when other remedies were available and had not been exhausted, there is no inflexible rule that this Court will never entertain such an appeal. It would have been futile in this case for the assessee to have gone to the court of revision which was bound by the decision in Swastika Tannery of Jaimau vs Commissioner of Sales tax, U.P. and it would have been equally 506 futile to have gone to the High Court on a reference. The matter was more easily disposed of by giving special leave in this Court and this was one of those extra ordinary cases in which the ends of justice would be better served, by avoiding a circuity of action and by dealing with this matter in this Court directly. [513H 514C]

The appellant filed its returns for the assessment years 1954 55 to 1964 65. The Income tax Officer passed orders of assessment for the years 1954 55 to 1959 60. While the appeals to the Appellate Assistant Commissioner for those years, and the, assessment proceedings before the Income tax Officer for the years 1960 61 to 1962 63, were still pending, for the assessment year 1963 64 (the return for which was flied under section 139 of the Income tax Act, 1961), the Income tax Officer made a provisional assessment under section 141. He held that the appellant was not entitled to deduct the aggregate amount of losses as claimed by it during the previous years and allowed only a much smaller sum as loss which could be carried forward from the earlier years. For the assessment year 1964 65, the Income tax Officer made a provisional assessment without allowing any deduction of loss claimed by the appellant; and for the assessment year 1965 66 the Income tax Officer called upon the appellant to pay a certain sum as advance tax under section 210(3). The appellant filed writ petitions in the High Court for quashing the orders of the Income tax Officer for each of the three years, but the petitions were dismissed. The High Court held: (1) that under section 141 the provisional assessment of tax must also be made in accordance with and subject to the provisions of the Act, and that the combined effect of sections 72 and 80 was that a business loss can be carried forward to subsequent assessment years only when it has been determined in pursuance of a return flied under section 139; and (2) that under section 210(3) as inserted by Act 13 of 1963 and modified by Act 31 of 1964, the Income tax Officer was entitled to make an order for payment of advance tax for 1965 66 on the provisional assessment for the year 1964 65. In appeal to this Court, HELD: (1) Section 141 bars an enquiry, at the stage of making a provisional assessment, into disputed questions of law and fact: it is immaterial that the dispute raised is complicated or easy. Therefore the Income tax Officer was not justified. in ignoring the appellant 's claim. [198 D F] Under section 80 loss of a previous year under the head of income from profits and gains may be carried forward only if it has been determined in pursuance of a return filed under section 139; that is, if it is not so determined it cannot be carried forward and set off against the profit of the subsequent year or years. But the section applies only to a regular assessment. In the case of 'a provisional assessment under section 141, if there has been such a determination of the allowances mentioned in sub section 2 in a regular assessment for an earlier year, then under section 141(2) 194 the income tax officer must whether the assessee has claimed or not give effect to the allowances so determined. But he has no power to adjudicate upon a claim for deduction made by the assessee when making a provisional assessment. [196 G; 197 A 198 B; 199 B C] The section has been enacted with the object of expediting collection of tax on the basis of the return made by the assessee. The assessment so made is summary and is based only on the return and the accounts and documents filed by the assessee. If there be discrepancy between the return made and the accounts and documents accompanying the return the Income tax Officer may ask the assessee to explain the discrepancy but he must make a provisional assessment on the basis of the return initially filed or clarified, but cannot hold that certain claims made by the assessee are in law unjustified. The provisional assessment does not bind the assessee nor the department and the tax paid pursuant to such provisional assessment is liable to be adjusted in the light of the final order in the regular assessment, and it is open to the Income tax Officer to impose a penalty in appropriate cases after the regular assessment is completed. If it is held that the Income tax Officer has jurisdiction to hold an enquiry into disputed matters, the expression 'provisional assessment ' loses all significance: the Income tax Officer. may, under such a summary assessment, without giving an opportunity to the assessee to explain his claim negative it and the assessee has no redress under the Act against any erroneous or arbitrary action because, the Income tax OffiCer is not bound to give notice to the assessee or hear witnesses and an appeal against a provisional assessment is expressly barred. [196 D E; 198 B C; B C;199 (2) Under section 210(3) the Income tax Officer is entitled to make an order for payment of advance tax on the basis of provisional assessment under section 141, but it predicates a valid provisional assessment. Since the provisional assessment in the present case, for the year 1964 65 is invalid, an order for payment of advance tax or the year 1965 66 could not be made. [200 A C]

For the assessment year (1945 46) the assessable income of the appellant bank was computed by the Income tax Officer by splitting up its income into two heads " interest on securities " and " business income ", and deducting the business loss from interest on securities. In the previous year the assessment showed a loss which was computed by setting off the " business loss against " interest on securities The appellant claimed that in the computation of its profits for the assessment year in question it was entitled to set off the carried over loss of the previous year under section 24(2) Of the Indian Income tax Act, 1922. The Income tax Officer rejected the claim on the ground that the loss was under the head " business " and so could not be set off against income from securities under section 24(2) of the Act. Both the Income tax Appellate Tribunal and the High Court, on reference, held that in view of sections 6, 8 and 10 of the Act " interest on securities " could not be treated as business income and therefore the appellant could not claim a set off under section 24(2). On appeal to the Supreme Court it was contended for the appellant that (1) sections 8 and 10 should be so read that where the securities in the hands of an assessee are trading assets, section 8 would be excluded, being restricted to capital investments only, and the matter would fall under the head " business " within section 10, and (2) in any case, even if the income from securities fell under section 8, the appellant would be entitled to a set off under section 24(2) because it carried on only one business, namely banking, and the holding of securities by it was part of the said business. Held, that the scheme of the Indian Income tax Act, 1922, is that the various heads of income, profits and gains enumerated in section 6 are mutually exclusive, each head being specific to cover the item arising from a particular source and, consequently, " interest on securities " which is specifically made chargeable to tax under section 8 as a distinct head, falls under that section and cannot be brought under section 10, whether the securities are held as trading assets or capital asset," 80 Commissioner of Income Tax vs Chunnilal B. Mehta, Salisbury House Estate Ltd. vs Fry, (1930) 15 T. C. 266, Commercial Properties Ltd. vs Commissioner of Income Tax, Bengal, and H. C. Kothari vs Commissioner of Income Tax, Madras, , relied on. The question whether the holding of securities by the appellant formed part of the same business within section 24(2), could not be decided in the absence of a finding that the securities in question were a part of the trading assets held by the appellant in the course of its business as a banker, and the case was remitted to the High Court for a fresh decision on the reference after getting from the Tribunal a fuller statement of facts.

Appeals Nos. 290 to 292 of 1959. Appeals by special leave from the judgment and order dated December 6, 1957, of the Kerala High Court in Agricultural Income tax Referred Cases Nos. 15, 18 and 19 of 1955. C.K. Daphtary, Solicitor General of India, Thomas Vellapally and M. R. K. Pillai, for the appellants (in all the appeals) Sardar Bahadur, for the respondents. December 15. The Judgment of the Court was delivered by KAPUR, J. These three appeals are brought by special leave against the judgment and order of the High Court of Kerala and arise out of a common judgment of that court given in three Agricultural Income tax References Nos. 15, 18 and 19 of 1955. In the first reference the question raised was: "Whether under the Travancore Cochin Agricul tural Income Tax Act, 1950 in calculating the assessable agricultural income of a rubber estate already planted and containing both mature yielding rubber trees and also immature rubber plants which have not come into bearing, the annual expenses incurred for the upkeep and maintenance of such rubber plants, are not a permissible deduction, and if so, whether the sum of Rs. 42,660 4 1 expended by the assessee in the relevant accounting year 1952, under this head may be deducted." and in the other two the question referred was: 281 "Whether the expenses incurred for the mainte nance and upkeep of immature rubber trees constitute a permissible deduction within the meaning of section 5(j) of Act XXII of 1950?" In all the references the questions were answered in the negative and against the appellant. The appeals relate to three accounting years 1950, 1951 and 1952 (assessment years 1951 52, 1952 53 and 1953 54). The appellants have rubber plantations and in the accounting year 1950, corresponding to the assessment year 1951 52, the appellants had under cultivation 3558 84 acres out of which 334 64 acres had immature rubber trees growing and the rest i.e. 3224 20 acres mature rubber yielding trees under cultivation. In that year a sum of Rs. 19,056 0 9, which was expended for the upkeep and maintenance of immature portion of the rubber plantation, was allowed by the Agricultural Income tax Tribunal and at the instance of the respondent a reference was made to the High Court under section 60(1) of the Agricultural Income tax Act (Act XXII of 1950) hereinafter termed the 'Act ' and that was reference No. 18 of 1955. During the accounting year 1951 corresponding to the assessment year 1952 53 the appellant had under cultivation. a total area of 3426,55 acres of which 3091.91acres were mature rubber yielding trees and 334.64 acres had immature rubber trees. In that year a sum of Rs. 59,271.9 5 was the expenditure incurred for the upkeep and maintenance of immature portion of the rubber estate. That sum was allowed by the Agricultural Income tax Tribunal and at the instance of the respondent a reference was made under section 60(1) of the Act to the High Court and that was reference No. 19 of 1955. In Agricultural Income tax Reference No. 15 of 1955 which related to, accounting year 1952 and the assessment year 1953 54, the area under cultivation was 3453,65 out of which 2967,91 acres had mature rubber yielding trees and 485,74 acres had immature rubber growing trees. In that year the amount expended on the maintenance and tending of the imma ture rubber trees was Rs. 42,660,4 1. In that case, 36 282 however, the Agricultural Income tax Tribunal rejected the appellant 's claim and disallowed the expenditure. At the instance of the appellant a case was stated to the High Court under section 60(1) of the Act and was answered in the negative and against the appellant. In all the cases the assessee company is the appellant and the main question for decision is whether the amount expended for the upkeep and maintenance of the immature, rubber trees is a permissible deduction under section 5(j) of the Act. The charging section under the Act is section 3 and section 5 relates to computation of agricultural income. It provides: S.5 "The agricultural income of a person shall be computed after making the following deductions, namely: expenditure (not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purpose of deriving the agricultural income;". In regard to this income the High Court held: "We find it impossible to say that the 'amounts spent on the upkeep and maintenance of the immature rubber plants were laid out or expended "for the purpose of deriving the agricultural income", much less that they were laid out or expended "wholly and exclusively for that purpose". "The agricultural income", in the context, can only mean the agricultural income obtained in the accounting year concerned and not the agricultural income of any other period." In our opinion the High Court has taken an erroneous view of the relevant provision. It is not denied that the expenditure claimed as a deduction was wholly and exclusively laid out for the purpose of deriving income but the use of the definite article "the" before agricultural income has given rise to the interpretation that the deduction is to be from the income of the year in which the trees on which the amount claimed 283 was expended bore any income. In a somewhat similar case Vallambrosa Rubber Co. Ltd. vs Farmer (1) the expenditure of the kind now claimed was allowed under the corresponding provision of the English Income tax Act. In that case a rubber company had an estate in which in the year of assessment only 1/7 produced rubber and the other 6/7 was in process of cultivation for the production of rubber. It may be added that rubber trees do not yield any rubber until they are about six years old. The expenditure for the superintendence, weeding etc. incurred by the company in respect of the whole estate including the nonbearing rubber estate was allowed on the ground that in arriving at the assessable profits the assessee was entitled to deduct the expenditure for superintendence, weeding etc. on the whole estate and not only on the 1/7 of such expenditure. Lord President said at page 534: "Well that is for the case quite correct, but it must be taken, as you must always take a Judge 's dicta, secundum materiam subjectum of the case that is decided. But to say that the expression of Lord Esher 's lays down that you must take each year absolutely by itself and allow no expense except the expense which can be put against the profit which is reaped for the year is in my judgment to press it much further than it will go." Counsel for the respondent relied upon a judgment of this Court in Assam Bengal Cement Co. Ltd. vs The Commissioner of Income tax, West Bengal (2) and particularly on a passage at page 983 where Bhagwati J. observed: "The distinction was thus made between the acquisition of an income earning asset and the process of the earning of the income. Expenditure in the acquisition of that asset was capital expenditure and expenditure in the process of the earning of the profits was revenue expenditure. " But that case has no relevancy to the facts of the present case nor has that passage any applicability to the facts of the present case. The question there was (1) (2) 284 whether certain payments made were by way of capital expenditure or revenue expenditure. The assessee acquired a lease from Government for twenty years and in addition to paying the rent and royalties for the lease the assessee had to pay two further sums as 'protection fees ' under the terms of the lease. Those sums were held to be capital expenditure inasmuch as they were incurred for the acquisition of an asset or an advantage of enduring nature and were no part of the working or operational expenses for carrying on the business of the assessee. In our opinion the amount expended on the superintendence, weeding etc. of the whole estate should have been allowed against the profits earned and it is no answer to the claim for a deduction that part of those expenses produced no return in that year because all the trees were not yielding rubber in that year. We therefore allow these appeals, set aside the judgments and orders of the High Court and answer the questions in favour of the appellant in all the three agricultural Income tax References. The appellant will have its costs in this Court and the High Court. One hearing fee in this Court. Appeals allowed.

In computing the agricultural income of a person section 5(f) of the Travancore Cochin Agricultural Income tax Act, 1950, allowed deductions of any expenditure "laid out wholly and exclusively for purpose of deriving the agricultural income". The assessee who had rubber plantations claimed that the amount expended on the maintenance and tending of immature rubber trees should be deducted in computing its agricultural income but this was disallowed on the ground that the use of the article "the" before the words agricultural income implied deduction (1) ; 280 from the income of the year in which the trees on which the amount was expended bore income. Held, that the assessee was entitled to the deduction claim ed. It was no answer to the claim for the deduction that these expenses produced no return in the year in question as the trees were not yielding rubber in that year. Vallambrosa Rubber Co. Ltd. vs Farmer, , followed. Assam Bengal Cement Co. Ltd. vs The Commissioner of Income tax, West Bengal, , not applicable.

While computing the net wealth of the respondent assessee for purposes of wealth tax assessment under the Wealth Tax Act, 1957, the wealth tax officer included certain amount as the value of the assessee 's right to compensation which had accrue;! to him on vesting of his estate in the State of Bihar under the Bihar Land Reforming Act, 1950 on the basis of market value on the valuation date. This was contested by the assessee on the ground that after adjusting his outstanding agricultural income tax liability the compensation payable to him was nil. The assessee also produced Collector 's letter to show that the amount of compensation receivable by the assessee would be nil. The Appellate Assistant Commissioner agreed with the view of the Wealth Tax officer. In appeal before the Tribunal the assessee contended that the unpaid agricultural income tax as a debt WAS deductible while computing his net wealth. The Tribunal accepting the Revenue 's contention held that the amounts claimed by the assessee were not deductible as a debt under s.2(m) as the arrears of agricultural income tax were outstanding for more than twelve months. On a reference being made, a Full Bench of the High Court was of the opinion that the market value of the right of the assessee to receive ad interim compensation should be determined in view of the provisions of s.4(c) of the Bihar Land Reforms Act, 1950 and held that in the facts and circumstances of the case as nothing was receivable by the assessee from the State of Bihar in view of the arrears of agricultural income tax, the value of the asset to the assessee was nil. 635 Hence this appeal. Dismissing the appeal, ^ HELD: For computing net wealth under s.2(m) of the Wealth Tax Act, 1957 there are two different steps. The first and essential step would be to estimate the value of the assets in accordance with the provisions of the Act and the second step would be to deduct therefrom the debts owed by the assessee except the debts excluded by that section. For estimating the value of the assets the material provision would be $7(1) of the Act which enjoins the Wealth Tax officer to estimate the price which, in his opinion, an asset other than cash would fetch if sold in the open market on the valuation date. The Wealth Tax officer must take into account any factor which detracts from the value of an asset which a willing purchaser would Pay for buying that asset in open market. [643 B C] C Section 4 of the Bihar Land Reforms Act, 1950 deals with the consequences of the vesting of all estate or tenure in the State and stipulates different consequence Clause (c) of s.4 provides that the arrears of revenue and cesses remaining lawfully due in respect of the estate or tenure shall continue to be recoverable in spite of the vesting of the estate and shall without prejudice to any other mode of recovery, be recoverable, when so ordered by the Collector by the deduction thereof from the amount payable. [643 G H] In the instant case , the possibility of deduction of the dues of the assessee for agricultural income tax under s.4(c) of the Bihar Land Reforms Act from the compensation money is a factor that affects price or value of the compensation money receivable by the assessee under the Bihar Land Reforms Act and until it has been finally determined that no arrears Of agricultural income tax is payable at all, will remain a hindrance and the value of which must be qualified and deducted before a proper estimate of the value of the asset money receivable by the assesses is prepared. Except in cases where the question of arrears of agricultural income tax is settled, this is a factor which goes to the domination of the value of the asset. To what extent that would affect the value of the asset is a matter of quantification. The court is not concerned with the question of actual qualification. The Court is concerned with the question whether 'that factor is a matter which has to be taken into consideration in estimating the value of the asset is a matter of qualification. The court b. Of the opinion that it is a factor certainly to be taken into consideration in estimating what it would fetch in the open market. [644 H; 645 A C] The contention that a debt which is not deductible because of provisions ' of s.2(m) should not be taken into consideration in estimating, the value of an asset is not acceptable in the facts and circumstances of this case. [645 F]

The State of Travancore Cochin merged with Indian Union on March 7, 1949, but the Travancore Income tax Regulation, VIII of 1096 (Malayalam Era) and the Travancore Taxation on Income (Investigation Commission) Act, II24 (Malayalam Era), continued to apply to that area not withstanding the merger. On August 6, 1949, the Travancore Cochin Government passed an order referring the case of the appellants to the com mission constituted under the 'Travancore Taxation on Income (Investigation Commission) Act, 1124 M. E. The investigation commission held by its report that the appellants had made a secret profit in the accounting year 1118 M. E., which was not included in the income tax return submitted by the appellants earlier. The Travancore Cochin Government accepted the report and directed recovery of the tax due by its order dated February 14, 1950. The Income tax Officer without holding any fresh assessment proceedings, issued a demand notice. The Union Legislature enacted the Opium and Revenue Laws (Extension of Application) Act (33 of 1950) providing for extension of certain opium and revenue laws to certain parts of India. In exercise of the authority under section 8(2) of the said Travancore Investigation Act, read with section 3, cl. (c), of the Opium and Revenue Laws (Extension of Application) Act, the Government of India, on October 25, 1951, directed that appropriate assessment proceedings under the Travancore Income tax Act be taken against the appellants with a view to assess or reassess the concealed income which bad escaped assessment. The Commissioner of Income tax withdrew the earlier notice of demand and thereafter the Income tax Officer after reassessment proceedings directed the appellants to pay income tax and super tax on the concealed income. The said orders of the Government of India and of the 467 Income tax Officer were questioned by the appellants and the matter was referred by the Commissioner of Income tax to the High Court. The High Court held that the orders in question were valid orders. The appellant appealed with special leave. Held, that the Government of India had the powers under section 3(c) of the , to direct proceedings for assessment or reassessment under the Travancore Income tax Regulation after consideration of the report made by the Travancore Investigation Commission. The order passed by the Government of India on February 14, 1950, was not inconsistent with the order passed by the Travancore Cochin Government. Liability to pay income tax would arise only on an effective order of assessment. No such order having been passed by the Income tax Officer in the instant case, there could be no doubt as to the competency of the Government of India to direct proceedings for assessment. There is nothing in section 8(2) of the Travancore Taxation on Income (Investigation Commission) Act which states that action may be taken thereunder only once, and if an unauthorised direction is given thereunder there is nothing which prevents rectification of that order. By sub section (4) 'of section 8 of the Travancore Taxation on Income (Investigation Commission) Act the findings by the Investigation Commission are final in all assessment or reassessment proceedings. Section 8(2) of the Act removed the bar of limitation which arose by section 25 of the Income tax Act. Consequently, it was competent to the Income tax Officer to reopen the assessment proceedings notwithstanding any lapse of time and the previous order of assessment did not operate as a bar to such re. assessment.

Item 5 of entry 4(1) of the First Schedule to the Central Excise and Salt Act, 1944, imposes an excise duty of Rs. 1 10 nP. per kilogram on tobacco other than flue cured and not actually used for the manufacture of cigarettes, smoking mixtures for pipes and cigarettes or birds in the whole leaf form. Item 6 imposes a duty of Rs. 2 20 nP. per kilogram on tobacco in the broken leaf form. The petitioners who dealt in tobacco in the broken leaf form contended that their tobacco could not be distinguished on any rational basis from the whole leaf form in Item 5 and the imposition of a double tariff on their tobacco was invalid as it was based on unconstitutional discrimination, the tariff being on the basis of use to which the tobacco was put. 119 Held, that there was no unconstitutional discrimination in the imposition of the excise duty on tobacco in the broken leaf form. Tobacco in the broken leaf form was capable of being used in the manufacture of biris while tobacco in the whole leaf form could not be so used economically. The two forms of tobacco were different by the test of capability of user. The tariff was not based either wholly or even primarily by reference to the use of tobacco. There was a clear and unambiguous distinction between tobacco in the whole leaf form covered by item 5 and tobacco in the broken leaf form covered by item 6 which had a reasonable relation to the object intended by the imposition of the tariff. Kunmathat Thathunni Moopil Nair vs The State of Kerala, ; , referred to.

Respondent, an Income tax Officer, called an assessee to his house and took a sum of Rs. 800 from him. Immediately afterwards a search was made and the respondent, after some evasion, produced the money. The respondent 's defence was that he had taken the money as a loan and not as illegal, gratification. The Special judge who tried the respondent found him guilty under section 16i, Indian Penal Code, and sen tenced him to six months simple imprisonment. On appeal, the High Court acquitted the respondent. The State obtained special leave and appealed. Held, that the words used in article I36 of the Constitution show that in criminal matters no distinction can be made as a matter of construction between a judgment of conviction and one of acquittal. The Supreme Court will not readily interfere with the findings of fact given by the High Court but if the High Court (i) A.I.R. (1954) S.C. 680. 581 acts perversely or otherwise improperly interference will be called for. The findings of the High Court are halting and its approach to the case has been erroneous as it disregarded the special rule of burden of proof under section 4 Of the Prevention of Corruption Act (II Of 1947). The judgment of the High Court shows that certain salient pieces of evidence were missed or were not properly appreciated. In this situation the Supreme Court can interfere in an appeal by special leave. Where it is proved that a gratification has been accepted, the presumption under s 4 Of the Prevention of Corruption Act shall at once arise. It is a presumption of law and it is obligatory on the Court to raise it in every case brought under section 4. The evidence and circumstances in this case lead to the conclusion that the transaction was not one of loan but of illegal gratification.

The respondent rice millers obtained permits under clause (3) of the Southern States (Regulation of Export of Rice) Order, 1964, for exporting "broken rice" from Andhra Pradesh to Kerala but were intercepted for allegedly transporting "whole rice" for "broken rice". The rice was seized, and samples analysed in the presence of the District Revenue Officer who ordered confiscation of the estimated quantity of the "whole rice". On appeal, the District Judge remanded the matter for giving fuller opportunity to the respondents for objecting to the sample analysis which was to be carried out afresh in their presence. The State 's revision application against the remand order dismissed by the High Court, The Revenue Officer then ordered a release of 12%, and the confiscation of the remaining quantity seized, as no sample from the bags contained a minimum percentage of 60% of "broken" grains satisfying the test laid down in the Hand book on Grading Foodgrains and Oilseed. The District & Sessions Judge partially allowed the respondents ' appals. Both sides filed revision applications. The High Court decided in favour of the respondent, holding that "broken rice" included "whole rice". Allowing the appeals, the Court, ^ HELD: (1) Ordinarily, this Court does not interfere with findings of fact. But, where the errors of logic as well as law appear to be gross and to have occasioned a miscarriage of justice, the court is constrained to interfere. [609 D] (2) The Revenue Officer 's order releasing the seized rice to the extent of about 12% having become final, it should not be interfered with except to the extent that the learned Sessions Judge added 2% more for foreign matter thereby releasing slightly more in favour of the respondent. [610 D]

The respondent was a firm carrying on business in different lines. It was assessed to income tax under section 23(4) of the Income tax Act, 1922 for the assessment year 1949 50 on the ground that notices issued under section 22(2) and (4) had not been complied with. Later on, that assessment 412 was cancelled. However, before the cancellation, it was found that an interest income of Rs. 88,737 in the shape of U.P. Encumbered Estates Act Bonds received by the respondent from third parties had escaped assessment as the assessee failed to disclose the same. The Income tax Officer issued a notice for the assessment year 1949 50 on the ground that a sum of Rs. 88,737 had escaped assessment in the said assessment year. After the cancellation of the assessment made under section 23(4), the Income tax officer, ignoring the notice issued by him under section 34(1)(a), included that amount in the fresh assessment made by him for the year 1949 50.The respondent appealed to the Appellate Assistant Commissioner who ordered the deletion of the sum of Rs. 88,737 from the assessment for the year 1949 50 and directed the same to be included in the assesment for the year ending 1948 49. Pursuant to the direction given, the Income tax Officer served a notice on the respondent under section 34(1). Against that notice the assessee filed a writ petition in the High Court for quashing the above mentioned proceeding on the ground that these were initiated beyond the time prescribed by a. 34. The High Court accepted the petition and quashed the notice on the ground that it was issued by the appellant beyond the ordinary period of limitation It also overruled the contention of the appellant that no period of limitation governed the notice in as much as the second proviso to section 34(3) was attracted to the facts of the case. The only direction which the Appellate Assistant Commissioner could give was one which was covered by section 31 of the Act and as the appeal before him was confined to a particular assessment year, the direction must necessarily be limited to a matter falling within that year. if the direction be treated as based on a finding recorded by Appellate Assistant Commissioner, that finding would have to be disregarded when applying the proviso. The appellant came to this Court by special leave. Held: (per B. P. Sinha, C.J., K. Subba Rao and N. Rajagopala Ayyangar JJ.). The proviso to sub section (3) of section 34 of the Indian Incometax Act, 1922 does not save the time limit prescribed under sub section (1) of section 34 in respect of an escaped assessment of a year other than that which is the subject matter of appeal or revision as the case may be and hence the notice under section 34(1)(a) issued in the present case was clearly barred by time. The jurisdiction of the High Court or the Supreme Court under section 66 or section 66(b) is a limited one and is confined only to the questions referred to them. Moreover, the questions referred by Tribunal cannot exceed its jurisdiction. Therefore the assessment or reassessment made under the said sections or Pursuant to the orders or directions made thereunder must necessarily relate to the assessment of the year under review, revision or appeal as the case may be. 'Me proviso to sub section (3) of section 34 does not confer any fresh power upon the Income tax Officer to make assessment in respect of the escaped incomes without any time limit. It only lifts the ban of limitation in respect of certain assessments made under certain provisions of the Act and the lifting of the ban cannot be so construed as to increase the jurisdiction of the tribunal Under the 413 relevant sections. The lifting of the ban was only to give effect to the orders that may be made by the appellate, revisional or reviewing Tribunal within the scope of its jurisdiction. If the intention was to remove the period of limitation in respect of any assessment against any person, the proviso would not have been added as proviso to sub section (3) which deals with completion of an assessment but would have been added to sub section (1) of section 34. The word 'finding ' covers only the material questions which arise in a particular case for decision by the authority hearing the. case or the appeal which, being necessary for passing the final order or giving the final decision in the appeal, has been the subject of controversy between the interested parties or on which the parties concerned have been given a hearing. The expression 'direction ' refers to a direction which the appellate or revisional authority is empowered to give under the law. The expression "any person" must be confined to a person intimately connected with the assessment of the year under appeal or revision. Held: per Raghubar Dayal and J. R. Mudholkar JJ. (dissenting): That the notice was not in contravention of the provisions of section 34 and hence could not be quashed on that ground. When an appeal is before an appellate authority, the whole matter is at large before it and there fore when a specific case is put before it by an assessee, it has both the power as well as the duty to give its finding thereon. The ground given by an assessee for claiming a reduction or annulment of assessment may be that the income upon which he had been assessed was not earned in the accounting period of the year to which the assessment pertained but in respect of a specified earlier or later year. The appellate authority is entitled to go into the whole question and come to a finding one way or the other. The finding of a tribunal is its conclusion on a point agitated before it and for a conclusion to amount to a finding, it is not necessary that it should be the final and ultimate conclusion. The contention of respondent that the second proviso to a. 34(3) enabling a notice to issue only to assessee in respect of escaped income without limit of time on the ground that the appellate authority has made a finding or direction in the proceeding before it makes a discrimination against such assessee because it does not lift the bar of limitation with regard to other assessees similarly situated but with regard to whom no finding has been made or direction given by appellate authority, was rejected. It was held that prima facie, there was a reasonable basis for the classification. The ground on which classification was made had a rational relationship with the object which was intended to be achieved by law, ie., to detect and bring to assessment the escaped income. Commissioner of Income tax vs section M. Chitnavis, (1932) L.R. 59 I.A. 290, Sir Kikabhai Premchand vs Commissioner of Income tax (Central), Bombay, pt. Hazart Lal vs Income tax Officer, Kanpur. Lakshman Prakash vs Commissioner of Income 414 tax, U.P., , A. section Khader Ismail vs Income tax Officer, Salem, (1963)48 I.T.R. 16, Simrathmul vs Additional Income tax Officer, Ootachamund, (1959)36 I.T.R. 41, Brindaban Chandra Basak vs Incometax Officer, , K. C. Thomas, First Income tax Officer. Bombay vs Vasant Hira Lal Shah , Prashar & Anr. V. Sasantsen Dwarkadas 49 I.T.R. (S.C.) 1, Kamlapat Hotilal vs Income tax Officer, , Hiralal Amrit Lal Shah vs K. C. Thomas, Income tax Officer, Bombay, , General Construction and Supply Co. vs Income tax Officer (8th) C Ward, Bombay, , Suraj Mal Mohata & Co. vs A. V. Visvanatha Sastri ; , A. Thangal Kunju Mudaliar vs M. Venkatachalam Potti & Anr. ; and Palaji vs Income tax Officer, Special Investigation Circle ; , referred to.

The appellant firm had its factory in the State of Madras, where it manufactured, assembled and sold motor vehicles, spare parts and accessories. For the assessment year 1952 53, the sales tax authority computed the appellant 's taxable turnover of sales for that year excluding a sum which represented the value of vehicles etc., sold outside the State of Madras, but on revision, the taxable turnover was increased by including a sum which related to certain transactions with dealers outside the State of Madras on the ground that the sales covered thereby were made within the State of Madras and were therefore liable to tax under the Madras General Sales Tax Act, 1939. The appellant claimed that these sales were in the course of inter State trade and commerce and not liable to sales tax by reason of the provi sions of article 286(2) Of the Constitution of India. The matter was taken up to the Supreme Court and in the meantime, the Sales Tax Laws Validation Act, 1956, had been passed by Parliament. The question was whether the transactions in question, even if they were considered as having taken place in the course of inter State trade, came within the protection of the Validation Act of 1956 and, therefore, the assessment in the present case was valid. The appellant contended (1) that the Validation Act was applicable only when the law of the State imposed, in express terms, a tax on the sale or purchase of any goods in the course of inter State trade or commerce, and (2) that the new section 22 inserted in the Madras General Sales Tax Act, 1939, by Madras Act 1 of 1957, which operated retrospectively from January 26, 1950, talked of sales in which the goods were delivered for consumption in the State of Madras, and, therefore, the Validation Act did not operate on sales of an inter State character other than such sales. Held: (1) that the effect of the Sales Tax Laws Validation Act, 1956, was to liberate the State laws from the fetter placed on them by article 286(2) of the Constitution of India and enable such laws to operate on their own terms. Consequently, the transactions in question were liable to tax under the provisions 608 of the Madras General Sales Tax Act, 1939, and it was not necessary to provide in that Act in express terms that it was taxing sales in the course of the inter State trade. M. P. V. Sundararamier & Co. vs The State of Andhra Pradesh and Another, , relied on. (2) that the transactions in question came within the definition of sale in section 2(h) of the Madras General Sales Tax Act, 1939, and the power to tax conferred on the State by the charging section, section 3, was not affected by section 22 in view of sub section (2) therein.

Appeal No. 352 of 1958. Appeal by special leave from the judgment and order dated July 27, 1956, of the Labour Appellate Tribunal of India, Bombay, in Appeal (Bom.) No. 72 of 1956. G. section Pathak, J. B. Dadachanji, section N. Andley and Rameshwar Nath, for the appellant. D. section Nargoulkar and K. R. Choudhuri, for the respondent No. 1. B. P. Maheshwari, for the Interveners. December 16. The Judgment of the Court was delivered by WANCHOO, J. This is an appeal by special leave in an industrial matter. The appellant owns two sugar mills. There was a dispute between the appellant and its workmen with respect to the employment of contract labour in the two mills. Consequently, a notice of change under section 42 (2) of the Bombay Industrial Relations Act, No. XI of 1947, (hereinafter called the Act) was given to the appellant by the union re. presenting the workmen. Thereafter the union, which is the respondent in the present appeal, made two references to the industrial court, one with respect to each mill, under section 73A of the Act, and the main demand in the references was that "the system of employing contractors ' labour should be abolished and the strength of the employees of the respective departments should be permanently increased sufficiently 344 and accordingly". The appellant raised two main contentions before the industrial court, namely, (i) that the industrial court had no jurisdiction to decide the dispute as the matter was covered by item (6) of Sch. III of the Act, which is within the exclusive jurisdiction of a labour court; and (ii) that any award directing abolition of contract labour would contravene the fundamental right of the appellant to carry on business under article 19(1)(g) of the Constitution. The industrial court decided both the points against the appellant; on the question of jurisdiction it held that the matter was covered by item (2) of Sch. 11 of the Act and therefore the industrial court would have jurisdiction, and on the second point it held that there was no contravention of the fundamental right conferred on the appellant under article 19(1)(g). It may be mentioned that the second point arose on the stand taken by the appellant that the workmen of the contractors were not the workmen of the appellant. The industrial court then dealt with the merits of the case and passed certain orders, with which we are however not concerned in the present appeal. It may be mentioned that there were cases relating to a number of other sugar mills raising the same points, which were decided at the same time by the industrial court. In consequence, there were a number of appeals to the Labour Appellate Tribunal by the mills and one by one of the unions (though not by the respondent union). All these appeals were heard together by the appellate tribunal, where also the same two points relating to jurisdiction and contra vention of the fundamental right guaranteed by article 19(1)(g) were raised. The Appellate Tribunal did not agree with the industrial court that the references were covered by item (2) of Sch. 11 to the Act. It, however, held that the word "employment" in item (6) of Sch. III to the Act had to be given a restricted meaning. It pointed out that the three Schedules did not exhaust the comprehensive provisions of section 42(2) and the subject matter of dispute, namely, the abolition of contract labour was a question of far reaching and important change which could not have 345 been intended to be dealt with in a summary way by a labour court, which is the lowest in the hierarchy of courts established under the Act. It therefore held that the industrial court had jurisdiction to decide the matter. On the question of contravention of the, fundamental right, the appellate tribunal took the view that the question whether the restriction imposed was reasonable depended upon the facts of each case and therefore was a matter outside its power as a court of appeal It then considered the merits of the matter and came to the conclusion that the approach of the industrial court to the questions raised before it was not correct and therefore it found it difficult to support the award. Eventually it set aside the award and remanded the matter for early hearing in the light of the observations made by it. Further, it decided that in the interest of justice the entire award should be set aside, even though there was no appeal before it by the unions in most of the cases. The appellant then came to this Court and was granted special leave; and that is how the matter has come up before us. Mr. Pathak on behalf of the appellant has raised the same two points before us. We shall first deal with the question of jurisdiction. Reliance in this connection is placed on item (6) of Sch. III of the Act, which is in these terms: "Employment including (i) reinstatement and recruitment; (ii) unemployment of persons previously employed in the industry concerned. " It is not in dispute that matters contained in Sch. III are within the jurisdiction of a labour court and an industrial court has no jurisdiction to decide any matter in a reference under section 73A of the Act which is within the jurisdiction of a labour court. Mr. Pathak contends that item (6) of Sch. III speaks of "employment" and includes in it two matters which might otherwise not have been thought to be included in it. Therefore, according to him, employment as used in item (6) is wider than the two matters included in it 44 346 and the question whether contract labour should be employed or not would be a matter of employment within the meaning of that word in item (6) of Sch. We do not think it necessary for purposes of this appeal to consider what would be the ambit of employment as used in item (6) of Sch. 111. The scheme of the Act shows that under sections 71 and 72 the jurisdiction of a labour court and an industrial court is concurrent with respect to any matters which the State Government may deem fit to refer to them; but under section 73A reference by a registered union which is a representative of employees and which is also an approved union, can only be made to an industrial court, subject to the proviso that no such dispute can be referred to an industrial court where under the provisions of the Act it is required to be referred to the labour court for its decision. 78 of the Act provides for jurisdiction of labour courts and matters specified in Sch. 11 are not within their ordinary jurisdiction. Therefore, when a registered union wishes to refer any matter which is contained in Sch. 11 of the Act such reference can be made by it only to the industrial court. It follows in consequence that whatever may be the ambit of the word "employment" used in item (6) of Sch. III, if any matter is covered by Sch. 11 it can only be referred to the industrial court under section 73A. Now the question whether contract labour should be abolished (on the assumption that contract labour is not in the employ of the mills) immediately raises questions relating to permanent increase in the number of persons employed, their wages including the period and mode of payment, hours of work and rest intervals, which are items (2), (9) and (10) of Sch. Therefore, a question relating to abolition of contract labour is so inextricably mixed up with the question of permanent increase in the number of persons employed, their wages, hours of work and rest intervals that any dispute relating to contract labour would inevitably raise questions covered by Sch. Therefore, a dispute relating to contract labour if it is to be referred under section 73A by a registered union can only be referred to an industrial court as it immediately 347 raises matters contained in items (2), (9) and (10) of Sch. Mr. Pathak urges however that matters relating to permanent increase in the number of persons employed due to the abolition of contract labour, their wages, hours of work and rest intervals were not really disputed at all by the appellant. It appears that in the written statements of the appellant, these points were not raised; but the decision of the appellate tribunal shows that one of the contentions raised before it by the sugar mills was that the workmen concerned were not employees of the sugar mills. Therefore, as soon as this contention is raised a dispute as to permanent increase in the number of persons employed, their wages, hours of work and rest intervals would immediately arise. It must therefore be held that a question relating to the abolition of contract labour inevitably raises a dispute with respect to these three items contained in Sch. In the circumstances we are of opinion that the industrial court had jurisdiction to deal with the matter. In particular, we may point out that in their petitions the unions had raised at least the question as to the permanent increase in the number of persons employed and that would immediately bring in item (2) of Sch. It is true that the question of permanent increase in the number of persons employed, their wages, hours of work and rest intervals would only arise if contract labour is to be abolished; but in our opinion these are matters so inextricably mixed up with the question relating to abolition of contract labour that they must be held to be in dispute as soon as the dis pute is raised about the abolition of contract labour, (assuming always that the employer does not accept contract labour as part of its labour force). The contention about jurisdiction must therefore be rejected. This brings us to the second contention raised by Mr. Pathak. He bases his argument in this behalf on section 3(18), which defines an " industrial matter " as meaning any matter relating to employment, work, wages, hours of work, privileges, rights or duties of employers or employees, or the mode, terms and 348 conditions of employment. Mr. Pathak urges that the definition of " industrial matter " contravenes the fundamental right guaranteed under article 19(1)(g), when it provides that the mode of employment is also included within it. Reference is also made to section 3(17) which defines an "industrial dispute" as any dispute or difference which is connected with any industrial matter. Mr. Pathak therefore urges that reading the two definitions together the industrial court is given the power to decide disputes as to the mode of employment and that contravenes the fundamental right guaranteed under article 19(1)(g), for it enables an industrial court to adjudicate on the mode of employment and thus interfere with the right of the employer to carry on his trade as he likes subject to reasonable restrictions. Now assuming that the mode of employment used in section 3(18) includes such questions as abolition of contract labour, the question would still be whether a provision which enables an industrial court to adjudicate on the question whether con tract labour should or should not be abolished is an unreasonable restriction on the employer 's right to carry on his trade. We cannot see how the fact that power is given to the industrial court, which is a quasi judicial tribunal to decide whether contract labour should be abolished or not would make the definition of "industrial matter" in so far as it refers to the mode of employment, an unreasonable restriction on the fundamental, right of the employer to carry on trade. The matter being entrusted to a quasi judicial tribunal would be decided after giving both parties full opportunity of presenting their case and after considering whether in the circumstances of a particular case the restriction on the mode of employment is a reasonable restriction or not. The tribunal would always go into the reasonableness of the matter and if it comes to the conclusion that the mode of employment desired by labour is not reasonable it will not allow it; it is only when it comes to the conclusion that the mode of employment desired by labour in a particular case is a reasonable restriction 349 that it will insist on that particular mode of employment being used. Take, for example, the case of contract labour itself. The tribunal will have to go into the facts of each case. If it comes to the conclusion that on the facts the employment of contract labour is reasonable and thus doing away with it would be an unreasonable restriction on the right of the employer to carry on trade, it will permit contract labour to be carried on. On the other hand if it comes to the conclusion that employment of contract labour is unreasonable in the circumstances of the case before it it will hold that it should be abolished, the reason being that its abolition would be a reasonable restriction in the circumstances. Therefore the decision whether the mode of employment in a particular case is a reasonable restriction or unreasonable one is in the hands of a quasi judicial tribunal. In the circumstances it cannot be said that by providing in section 3(18) that an "industrial matter" includes also the mode of employment, there is any contravention of the fundamental right of the employer to carry on trade. If the argument on behalf of the appellant were to be accepted it would mean that judicial and quasi judicial decisions could be unreasonable restrictions on fundamental rights and this the Constitution does not envisage at all. We are therefore of opinion that this contention also fails. Finally, Mr. Pathak draws our attention to sections 3(13) and 3(14) of the Act and submits that the appellant never said that contract labour employed in its mills was not in its employment. 3(13) defines the word "employee" and includes in it any person employed by a contractor to do any work for him in the execution of a contract with an employer within the meaning of sub cl. (e) of cl. 3(14) defines the word "employer" in an inclusive manner and in cludes "where the owner of any undertaking in the course of or for the purpose of conducting the undertaking contracts with any person for the execution by or under the contractor of the whole or any part of any work which is ordinarily part of the undertaking, the owner of the undertaking". It is urged that in view 350 of these definitions, the employees of the contractors are the employees of the mills and the mills are the employers of these employees of the contractors. Therefore, Mr. Pathak urges that there is no necessity of abolishing contract labour and that the industrial court may, if it so chooses, give the same wages and hours of work and rest intervals and other terms and conditions of employment to the employees of the contractors as are provided for comparable direct employees of the appellant and in such circumstances it would not be necessary to abolish the contract system so long as the employees of contractors are to be in the same position as the direct employees of the appellant as to their terms and conditions of service. This was not however the manner in which the case was contested before the industrial court or the appellate tribunal. All that we need therefore say is that when the matter goes back before the industrial court as directed by the appellate tribunal, the industrial court may take this submission of the appellant into account and may consider whether it is necessary to abolish the contract system, provided the appellant is able to assure the industrial court that employees of the contractors who are deemed to be its employees within the meaning of section 3(13) and section 3(14) would have the full benefit of the same terms and conditions of service as its comparable direct employees. The appeal fails and is hereby dismissed with costs. Appeal dismissed.

A dispute having arisen between the appellant employer and its workmen regarding the employment of contract labour in the appellant 's mills, the union representing the workmen which is the respondent in the present case after serving notice on the appellant under section 42(2) of the Bombay Industrial Relations Act made reference to the Industrial Court under section 73A of the Act demanding the abolition of the system of employing contractors ' labour and the permanent increment of employees in the respective departments. The contention of the appellant, inter alia, was that the Industrial Court had no jurisdiction to decide the dispute which was within the exclusive jurisdiction of a Labour Court under item (6) of Sch. III of the Act, and that any award directing the abolition of contract labour would contravene the appellant 's fundamental right to carry on business under article 19(1)(g) of the Constitution. The Industrial Court decided that the Industrial Court would have jurisdiction as the matter was covered by item (2) of Sch. 11 of the Act and that there was no contravention of the fundamental rights of the appellants. On appeal the Labour Appellate Tribunal, held, that the Industrial Court had jurisdiction to decide the matter although it was not covered by item (2) of Sch. 11 of the Act. As regards the question of contravention of the fundamental right it held that the question whether the restriction imposed was reasonable depended upon the facts of each case and the matter was outside the powers of a court of appeal. Eventually it set aside the entire award on the merits. On appeal 'by the appellant by special leave, Held, that the Industrial Court had jurisdiction to deal with the matter. Whatever might be the ambit of the word "employment" used in item (6) of Sch. III, if a matter was covered by Sch. 11 it could only be referred to the Industrial Court under section 73A. A question relating to the abolition of contract labour inevitably raised a dispute relating to matters contained in items (2), (9) and (10) of Sch. 11, namely, permanent increase in the number of 343 persons employed, the employees ' wages, hours of work and rest intervals and could, therefore, be referred only to an Industrial Court. The power given to the Industrial Court which was a quasi judicial tribunal to decide whether contract labour should be abolished or not would not make the definition of "industrial " matter" in so far as it referred to the mode of employment an section unreasonable restriction on the fundamental right of the employer to carry on his trade and as such there was no contravention of his fundamental right by providing in section 3(18) that an "industrial matter" included also the mode of employment of the employees.

The Government of U. P. appointed a Court of enquiry under sections 6 and 10 of the United Provinces , and referred to it the present dispute. The Court of enquiry submitted its report to the Government, whereupon the Government issued a notification in July, 1950, directing the various sugar factories to pay bonus to their workmen for the years 1948 49 as well as to pay certain amounts as bonus for the years 1947 48. 331 Court against the Government, prohibiting it from enforcing the notification. The State Government came up in appeal, urging, that the provisions of cl. (b) of section 3 of the United Provinces , were wide enough to permit it to issue such a direction to the employer because by doing so the State Government would be imposing a condition of employment in future. The respondents, inter alia, contended that (1) clause (b) of section 3 of the Act does not operate retrospectively ; (2) bonus could only be a term of employment by agreement and could not be imposed by statute ; (3) where there was an industrial dispute cl. (d) and not cl. (b) of section 3 of the Act would apply and (4) if cl. (b) was applicable it was ultra vires being discriminatory and violative of article 14 of the Constitution and also violative of article 19(i) of the Constitution as it confers arbitrary powers on the State Government. Held, that (i) though cl. (b) of section 3 of the United Provinces , could not be given a retrospective effect, yet there was nothing therein which prohibited the State Government from giving a direction with regard to the payment of bonus and by giving such a direction the State Government was not giving retrospective effect to the provisions of that clause nor did it add a new term or a condition for a period which was over, it merely required the employer to pay an additional sum of money to their employees as a term and condition of employment in future; (ii) though normally wage is a term of contract it can be made a condition of employment by statute, and it was open to the State Government under cl. (b) of section 3 to make the payment of bonus to workmen a condition of their employment in future; (iii) where the employees bargained in their collective capacity, the fact that the personnel of the factory when the order for the payment of bonus was made by the Government and in the year to which dispute related were not the same, did not affect the power of the Government as the order would apply only to those employees who had worked during the period in question and not to new employees ; (iv) the normal way of dealing with an industrial dispute would be to have it dealt with judicially and not by resort to executive action, but cl. (b) of section 3 empowers the Government to act promptly in case of an emergency and arms it with additional powers to deal with such an emergency in the public interest; (v) when the Government had made an executive or per under cl. (b) of section 3 on the ground that it was in the public interest to do so it was open to the aggrieved party to move the Government to refer the industrial dispute for conciliation or adjudication under cl. (b) of section 3 of the Act. 332 (vi) the provisions of cl. (b) of section 3 are not in any sense alternative to those of cl. (d) and the former could be availed of by the State Government only in an emergency and as a temporary measure. The right of the employer or the employee to require the dispute to be referred for conciliation or adjudication would still be there and could be exercised by them by taking appropriate steps; (vii) clause (b) of section 3 of the Act is not violative of the provisions of article 19(1)(g) of the Constitution as it permits action to be taken thereunder by the Government only in an emergency and in the public interest. The restriction placed upon the employer is only a temporary one and having been placed in the public interest falls under cl. (6) of article 19 of the Constitution. Ram Nath Koeri and Anr. vs Lakshmi Devi Sugar Mills and Ors., , approved. L. D. Mills vs U. P. Government, A.I.R. 1954 All. 705, overruled.

The appellant was a mining company with its head office at Nagpur. The business of the head office was to look after the sale of coal extracted from the collieries. An employee of the company working in the head office made applications under section 16 of the Central Provinces and Berar Industrial Disputes Settlement Act, 1947, to the Assistant Commissioner of Labour, Nagpur. The company objected that by virtue of the notification under section 1(3) of the Act the mining industry had been exempted from the operation of the Act including section 16 and therefore the Assistant Labour Commissioner had no jurisdiction. The authorities under the Act as well as the High Court under articles 226 and 227, re jected the company 's contention. The High Court took the view that what was exempted by the third item in the notification was not the head office of a mine but the mine itself and consequently the employees of the head office were governed by the Act. The company appealed to the Supreme Court by special leave. HELD : The notification in question said that the Act would come into force on 21st November, 1947 "in all the industries except the following" and then went on to name four industries the third one being 'Mines '. After the word 'following ' the, word industries must be read and thus read the notification in effect said the Act would come into effect on the given date in all industries except the industries mentioned. Therefore it was not only mines but the mining industry itself that was exempted from the operation of the Act. [593 A B, D E] If the notification exempted the industry of mines or the mining industry it could not be said that it merely exempted that part of the said industry of mines or mining industry which consisted of raising coat at the colliery and did not include the head office thereof. As the High Court said, the head office was part of the integrated activity of the company. Therefore when the mining industry was exempted from the operation of the Act the exemption applied not only to that part of the industry which consisted of raising coal at the colliery but also to that part of it which consisted in the sale of coal and its supply to the customers and would thus include the head office also. [593 E G] M/s. Godavari Sugar Mills Ltd. vs D. K. Worlikar, A.I.R. and M/s. Serajuddin and Co. vs Their Workmen, [1962] 3. S.C.R. 934, distinguished. On the above view the Assistant Labour Commissioner had no jurisdiction under the Act to deal with the matter in question. [595 E]

The General Manager of the appellant Mills ordered the transfer of four workmen from the appellant mill to a new mill, which had been purchased subsequently. The only connection between the two mills was the identity of ownership and, but for it, one had nothing to do with the other. The concerned workmen protested to the said order of transfer and did not acceed to the request, thereupon they were served with notice for disobedience of standing orders and were called upon for explanation which the workmen did and thereafter they were dismissed from service. The Labour Appellate Tribunal found that the management had no right to transfer the workmen to the new factory and therefore the order dismissing them was illegal. The appellants came up by special leave before the Supreme Court and contended that the right to transfer an employee by an employer from one of his concerns to another is implicit in every contract of service. The question is whether a person employed in a factory can be transferred to some other independent concern started by the same employer at a stage subsequent to the date of the employment. Held, that apart from any statutory provision, the right of an employee and an employer are governed by the terms of contracts between them or by the terms necessarily implied therefrom; but in the absence of an express agreement between the employer and employees it cannot necessarily be implied that the employer has the right to transfer the employee to any of its concerns in any place, and that the employee has a duty to join the concern to which he may be transferred. In the instant case, it was not a condition of service of employment of the concerned workmen either express or implied that the ' employer had the right to transfer them to a new concern started by the employer subsequent to the date of the employment. Alexandre Bouzourou vs The Ottoman Bank, A.I.R. 1930 P.C. 118, Mary (Anamalai Plantation Workers ' Union) vs Selali arai Estate, (1956) I.L.L.J. 243 and Bata Shoe Company, Ltd vs Ali Hasan, (1956) I.L.L.J. 278, discussed.

The appellant paid wages to its workmen in the Carding Department on piece rate basis and in addition, the workmen were entitled to receive further emoluments if their production exceeded a certain norm. The right to receive these additional emoluments had become a part of the terms of service of these workmen. In 1948 the Government of Uttar Pradesh with a view to make it obligatory on the employers in the different industries to keep the wages of workmen at a certain level, by its order under the provisions of section 3 of the U.P. , laid down the standard of basic wages and dearness allowance for different industries in the province. The appellant in giving effect to the said order of the Government for introducing the new piece rate raised the fixed piece rate but stopped the system of paying additional emoluments, as it thought itself to be justified, in taking into consideration for this purpose the amounts actually earned by the workers including what had been earned as additional emoluments which were being paid to the workmen by way of productive and incentive bonuses. The workmen 's case was that by stopping the additional emoluments which they used to get on the basis of better production by extra efforts the employer had in fact reduced the wages to which they were entitled and the fact that higher piece rates were introduced did not affect the question. The question was whether the Government order required or authorised the company to. include the incentive bonus and the production bonus which they had been so long paying in fixing the new piece rate for the purpose of compliance with the directions given in the Government order as regards the basic wages: Held, that the Government. order did not require or justify the employer including the production and incentive bonuses in the calculation of the rates of the basic wage of the workers and consequently the Government order did not have the effect of absolving the company from the duty of continuing to pay the production and incentive bonuses to workmen as before: Held, further, that the concept of " basic " is not peculiar to wages alone; it is what is normally allowable to all, irrespective of special claims and is also ordinarily understood to mean that part of the price of labour, which the employer must pay to all 489 workmen belonging to all categories. The phrase is used ordinarily in marked contradistinction to " dearness allowance " the quantum of which varies from time to time, in accordance with the rise or fall in the cost of living. Thus understood " basic wage" never includes the additional emoluments which some workmen may earn, on the basis of a system of bonuses related to the production. Titaghur Paper Mills Co. Ltd. vs Their Workmen, [1959] SUPP. (2) S.C.R. 1012, referred to.

A settlement was arrived at between the management of Mankatha Distillery and the workmen 's union before the con ciliation officer. The Union was not registered under the Indian Trade Unions Act on the date of the said settlement. The terms of the settlement not having been carried out by the management the respondent, who was the proprietor, and the manager of the said distillery were prosecuted and were convicted by the Magistrate. The Sessions Court, on appeal by the respondent, confirmed the Magistrate 's order. On an appeal to the Patna High Court by the respondent the High Court set aside the order of conviction and acquitted the respondent holding that there was no recognised union and that because the conciliation officer had visited the Distillery without giving a reasonable notice, on 18 3 1954 there could be no agreement between the proprietor on one side and the workmen as a whole on the other on the date and it was wrong to suppose that because somu workmen had signed the settlement that it bound all the workmen: Held, that for a dispute to constitute an industrial dispute it is not a requisite condition that it should be sponsored by a recognised union or that all the workmen of an industrial establishment should be parties to it. A settlement arrived at in course of conciliation proceedings falls within section 18(3)(a) and (d) of the Industrial Disputes Act and as such binds all the workmen though an unregistered union or only some of workmen may have raised the dispute. The absence of notice under section 11(2) by the Conciliation Officer does not affect the jurisdiction of the conciliation officer and its only purpose is to apprise the establishment that the person who is coming is the conciliation officer and not a stranger. Any contravention of section 12(6) in not submitting the report within 14 days may be a breach of duty on the part of the conciliation officer ; it does not affect the legality of the proceedings which terminated as provided in section 20(2) of the Act. 1 2 Where a fresh settlement is arrived at between the parties and all disputes are settled, then " public interest does not require that the stale matter should be resuscitated ". Newspapers Limited, Allahabad vs State Industrial Tribunal, Uttar Pradesh, , referred to. Andheri Marol Kurla Bus Service vs The State of Bombay, A.I.R. and State of Bihar vs Hiralal Kejrilal, [1960] 1 S.C.R. 726, approved.

The appellant applied under section 33(21)(b) of the to the Industrial Tribunal for the Tribunal 's approval of the order passed by the appellant discharging its employee the respondent. This application was made because certain industrial disputes were pending between the appellant and its employees, but when the matter came to be argued before the Tribunal, the pending disputes had been disposed of. Hence, the appellant contended that the application made by it no longer survived '. which the Tribunal rejected. In appeal by Special Leave. HELD:The Tribunal was right in overruling the appellant 's contention. [419 E]. A proceeding validly commenced under section 33(2)(b) would not automatically come to an end merely because the main industrial dispute had in the meanwhile been finally determined. [417 D E]. The application of the appellant can in a sense, be treated as an incidental proceeding; but it is a separate proceeding all the same, and in that sense it will be governed by the provisions of section 33(2)(b) as an independent proceeding. It is not an interlocutory proceeding properly so called in its full sense and significance; it is a proceeding between the employer and his employee who was no doubt concerned with the main industrial dispute along with other employees; but it is nevertheless a proceeding between two parties in respect of a matter not covered by the main dispute. [417 B D]. The order being incomplete and inchoate until the approval is obtained, cannot effectively terminate the relationship of the employer and the employee between the appellant and the respondent; and so even if the main industrial dispute was finally decided, the question about the validity of the order would still have to be tried and if the approval is not accorded by the Tribunal, the employer would be bound to treat the respondent as its employee and pay him full wages for the period even though the appellant may subsequently proceed to terminate the respondent 's service. [418 C E]. Besides, if it were held that with the final determination of the main industrial dispute such application would automatically come to an end, it would mean that section 33 A under which a complaint by the employee is treated as an independent proceeding, would be rendered nugatory. [419 A]. Alkali and Chemical Corporation of India Ltd. vs Seventh Industrial Tribunal, West Bengal and Ors. (1964) II L.L.J. 568, Mettur Industries Ltd. vs Sundara Naidu and Anr. (1963) II L.L.J. 303 and Shah (A.T.) vs State of Mysore and Ors (1964) I LL.J. 237, disapproved Kannan Devan Hill Produce Company Ltd. Munnar vs Miss Aleyamma Varughesa and Anr. (1962) II L.L.J. 158, Om Prakash Sharma vs Industrial Tribunal, Punjab and Anr. (1962) II L.L.J. 272 and Amrit Bazar Patrika (Private) Ltd. vs Uttar Pradesh State Industrial Tribunal and Ors. (1964) II L.L.J. 53, approved.

The respondent company, which was incorporated in New York and carried on business in spices, brought a suit in the original side of the Bombay High Court against the appellant for recovery of a sum of Rs. 92,884 4 10 on the basis of a judgment of the Supreme Court of the State of New York affirming two awards obtained by it and also on the awards in the alternative. 20 The respondent was a partnership firm carrying on import and export business in Bombay. By two letters exchanged between them, the appellant and the respondent agreed to do business in turmeric fingers on the terms and conditions of the American Spice Trade Association, one of which was an arbitration clause which ran as follows : "All questions and controversies and all claims arising under this contract shall be submitted to and settled by Arbitration under the Rules of the American Spice Trade Asso ciation printed on the reverse side thereof. This contract is made as of in New York. " The appellant failed to supply turmeric in terms of the two contracts it entered into with the respondent. The respondent put the matter into arbitration in pursuance of the arbitration clause. The appellant took no part in it. The arbitrators gave the two awards in favour of the respondent for damages. The appellant did not pay. The respondent then took appropriate proceedings and got the awards confirmed by the judgment of the Supreme Court of the State of New York. The single judge of the Bombay High Court who tried the suit held that it was not maintainable either on the foreign judgment or on the awards and (dismissed the suit. The Division Bench on appeal held that the suit was maintainable on the awards, though not on the judgment, as part of the cause of action had arisen in Bombay and the relevant facts had been proved by the Public documents produced by the respondent and the admissions made by the appellant and decreed the suit. Held, (per Dayal and Mudholkar JJ.) The decision of the Single judge of the High Court that the suit was not maintainable on the foreign judgment must be affirmed but on other grounds. Apart from the provisions of the Arbitration Protocol and Conventions Act, 1937, foreign awards and foreign judgments based upon award arc enforceable in India on the same grounds and in the same circumstances in which they are enforceable in England under the Common Law on grounds of justice, equity and good conscience. On the original side of the Bombay High Court English Common Law is also applicable under cl. 19 of the Letters Patent read with cl. XLI of the Charter of that Court. If the award is followed by a judgment which is rendered in a proceeding in which the person against whom judgment is sought can take objections as to the validity of the award, the judgement will be enforceable in England. Even then the plaintiff will have the right to sue on the original course of action. Secondly, even a foreign award will be enforced only if it satisfies mutate 's mutandis the tests applicable to the enforcement of foreign judgments on the ground that it creates a contractual obligation arising out of submission to arbitration. But there is a difference of opinion in this connection on two matters, (1) whether an award which 21. is followed by a judgment can be enforced as an award or whether the judgment alone can be enforced, and (2) whether an award which is not enforceable in the country in which it was made without an enforcement order or a judgement, can be enforced or in such a case the only remedy is to sue on the original cause of action. Thirdly, both a foreign judgment and a foreign award may be sued upon provided certain conditions are fulfilled one of which is that it has become final. Although, therefore, the respondent could sue on the original cause of action in the Bombay High Court that cause of action must be distinguished from the one furnished by the 'judgment of the New York Supreme Court which must be held to have arisen in New York and not in Bombay and was a cause of action independent of the one afforded by the contracts and the Bombay High Court would, consequently, have no jurisdiction to try the suit based on that judgment. East India Trading Co. vs Carmel Exporters & Importers Ltd., , Schibsby vs Westenholz., and Re Davidson 's Settlement Trust, (1873) L. R. 15 Eq. 383, referred to. In a suit based on a foreign award the plaintiff has to prove,. (1) that the contract between the parties provided for arbitration by a tribunal in a foreign country, (2) that the award is in accordance with the agreement, (3) that the award is valid according to the law of that country (4) that it was final according to that law and, (5) that it was subsisting award at the date of the suit. The essential difference between a foreign judgement and 2 foreign award is that while the former is a command of the foreign, sovereign and the coming of nations accords international recognition to it if it fulfill certain basic requirements, the latter is founded on the contract between the parties and is not given the status of a judgment in the country in which it is made 'and cannot claim the same international status as the act of a foreign sovereign. Even though an award may not have obtained the status of judgment in the country in which it is made, if it possesses the essential attribute of a judgment, that is finality, it can be sued upon in in other country. Union Nationaledes Cooperatives Agricoles de Careales vs Robert Catterall & Co. Ltd. ' , referred to. But the finality that r. 15, cl. (E) of the American Spice Trade Association gives to the awards in question is no more than a matter of contract between the parties and must be subject to the law of the State. A reference to the laws of the State of New York makes it abundantly clear that the relevant provisions of the laws of the 22 State under which alone the awards could become final had not been complied with and they could not, therefore, provide a cause of action for the suit. For an award to furnish a fresh cause of action, it must be final. If the law of the country in which it was made gives finality to the judgment based on an award and not to the award itself, the award cannot furnish a cause of action in India. Although the High Court of Bombay has jurisdiction to enforce a final award made in a foreign country in pursuance of a submission made within the limits of its original jurisdiction, the awards in question not being final the suit must fail. Per Subba Rao J. The doctrine of non merger of the original cause of action with the foreign judgment pronounced upon it is a well established doctrine. Popat vs Damodar, , Oppenbeim and Co. vs Mohmed Haneef, Mad. 496 and Nil Ratan Mukhopahya vs Cooch Behar Loan Office, Ltd. I.L.R. , referred to. If the contract does not merge in the judgment, by a parity of reasoning an award on which a foreign judgment is passed cannot also merge in the judgment. There is no distinction between a foreign award which would require an enforcement order to be enforceable in law and an award which cannot be enforced except by a judgment. An en forcement order as well as a judgment on an award serves the same purpose and they are two different procedures for enforcing, an award. Meerifield Ziegler & Co. vs Liverpool Cotton Association Ltd., , referred to. A suit would, therefore, lie on a foreign award completed according to the law of that country and before a decree can be passed on it three things must be proved, (1) arbitration agreement, (2) that the arbitration was conducted in accordance with the agreement, and (3) that the award was valid according to the law of the country when it was made. Norske Atlas Insurance Co. Ltd. vs London General Insurance Company Limited. , referred to. It was not correct to say that the High Court had gone wrong in holding that the three necessary conditions had been proved by the admission of the appellants in their pleadings. Rules 3, 4 and 5 of the Order VIII of the Code of Civil Procedure form an integrated code dealing with the manner in ,which the allegations of fact made in a plaint has to be traversed :and the legal consequences that follow from its non compliance. 23 The written statement must deal specifically with each allegation of fact made in the plaint and if the defendant denies any such fact, such denial must not be evasive, he must answer the point of substance and if he fails to do so the said fact must be take to be admitted. The discretion under the proviso to r. 5 has to be exercise by the court as justice demands and particularly according to the nature of the parties, standard of drafting prevailing in the locality and the practice of the court. There can be no doubt that pleadings on the original side of the Bombay High Court have to be strictly construed in the light of the said provisions unless the court thinks fit to exercise it discretion under the proviso. Tildesley vs Harper, and Laxmi narayan vs Chimniram Girdharilal, Bom. 89 referred to. The said three conditions were also proved by the exhibited record of the proceedings of the Supreme Court of New York containing the certificate of the Consul General of India in New York and certified copies of the order and judgment of the Supreme Court. While under section 78(6) of the Indian Evidence Act, proof of the character of the document according to the law of the foreign country, is condition precedent to its admission, such admission is not a condition precedent for drawing the requisite presumption under section 86 of the Act. That presumption can be drawn before the document is admitted. The judgment of the Supreme Court of New York, therefore, which satisfied the first two conditions laid down by section 78(6), could be legitimately admitted into evidence. The contracts between the parties having been concluded within the local limits of the original jurisdiction of the Bombay High Court, a part of the cause of action must have arisen there. and that court had jurisdiction to try the suit on the awards.