PETITIONER: <NAME> Vs. RESPONDENT: STATE OF BIHAR & ORS. DATE OF JUDGMENT: 28/08/1969 BENCH: <NAME>, M. (CJ) BENCH: <NAME>, M. (CJ) SHELAT, J.M. BHARGAVA, VISHISHTHA HEGDE, K.S. GROVER, A.N. CITATION: 1970 AIR 1436 1970 SCR (2) 100 1969 SCC (3) 838 CITATOR INFO : D 1972 SC2301 (30) RF 1975 SC1389 (1,6,7,16) D 1976 SC 714 (75) RF 1976 SC1654 (5,25,51) F 1980 SC 614 (29) RF 1980 SC1955 (41) RF 1981 SC 711 (1) D 1982 SC 697 (27) RF 1986 SC 85 (26) RF 1986 SC1323 (27) E 1991 SC1676 (45,46,47,49,55) ACT: Constitution of India, 1950, Seventh Schedule List I, Entry 54, List II Entry 23-Government of India Act, 1935, Seventh Schedule, List I Entry 36, List II Entry 23-Power to legislate as to mines and minerals-<ORG>'s power is subject to <ORG>'s power-<ORG> had no jurisdiction to enact 2nd proviso to s. 10(2) of Bihar Land Reforms Act, 1950-Field already covered by s. 15 of the Mines and Minerals (Regulation and Development) Act 67 of 1957-Rule 20(2) of Bihar Minor Minerals Concession Rules, 1964 invalid for lack of legislative support. HEADNOTE: Entry 54 of the Union List I in the Seventh Schedule to the Constitution confers power for the regulation of mines and mineral development to the extent to which such regulation and development under the control of the union is declared by <ORG> by law to be expedient in the public interest. The corresponding entry in the Federal List I under the Government of India Act, 1935 was entry 36 which besides mines and mineral development dealt with oilfields also. Entry 23 of List II of the Constitution gives power for regulation of mines and mineral development to the <ORG>s subject to entry 54 of List I. The corresponding entry under the Government of India Act was entry 23 of List Il. <ORG> in exercise of its power under entry 36. of List I in the Government off India Act enacted the Mines and Minerals (Regulation and Development) Act 53 of 1948 which dealt with mines, mineral development as well as oilfields. Rule 4 of the Mineral Concession Rules, 1948 made under the Act which came into force on October 25, 1949 gave power to the <ORG> Government to frame rules for the regulation and development of 'minor minerals' as defined in the Rules. In 1957 <ORG> passed the Mines and Minerals (Regulation and Development) Act 67 of 1957. The Act of 194-8 was adapted to deal with oilfields and gas only. In Act 67 of 1957 the provisions relating to regulation of mines in s.s. 4 to 13 were by s. 14 made inapplicable to 'minor minerals' as defined in the Act. Rules relating to minor minerals were under s. 15 to be made by <ORG> Governments and till such rules were made any rules enforce at the commencement of the Act were to continue. The appellant purchased in 1963 a lease for quarrying minor minerals as defined in Act 67 of 1957 from a vendor who had taken the original lease from the then landlords in 1955. When under s. 10(1) of the Bihar Land Reforms Act, 1950) the rights of the intermediary landlord vested in the <ORG> of Bihar the said <ORG> became lessor of the appellant's lease. The lease was confirmed on behalf of the <ORG> and rent under the terms of the original lease was paid by the appellant up to September 1965. <ORG> had not framed any rules relating to minor minerals under Act 53 of 1948 but it framed the Bihar Minor Mineral Contession Rules, 1964 under s. 15 of the Act 67 of 1957. Also, in 1964 the Bihar legislature amended s. 10(2) of the Reforms Act. A second pro viso was added to sub-el. (2) whereby the terms and conditions of and pubsisting leases of minor minerals would be substituted by the terms and 101 conditions laid down in the Bihar Minor Mineral Concession Rules to the extent that the former were inconsistent with the latter. Rule 20 of the said Bihar Rules as originally framed provided for realisation of dead rent, royalty and surface rent in 'respect of leases granted or renewed. In terms the rule was prospective only. But in December 1964 it was amended by the addition of a second sub-rule according to which the provisions as to dead rent etc. would also apply to leases granted or renewed prior to the date of the commencement of the Act and subsisting on such date. On the strength of the amended s. 10(2) of the Reforms Act and the amended r. 20 <ORG> demanded from the appellant, dead rent, royalty and surface rent contrary to the terms of his lease. The appellant thereupon filed a writ petition in <ORG>. Dissatisfied with the judgment of that court the appellant came to this Court. It was contended on behalf of the: appellant: (i) that the subject of regulation of mines and mineral development came within the exclusive jurisdiction of <ORG> as a result of the passing of Act 67 of 1957 with the result that the <ORG> Legislature was left with no power to pass the second proviso to s. 10(2) and the said proviso was therefore ultra vires, (ii) that r. 20(2) being without legislative support could not touch a lease granted, in 1955. On behalf of the respondent <ORG> it was urged that (a) the 2nd proviso to s. 10(2) of the Reforms Act fell not under entry 23 but under entry 18 of List II which dealt with land and land tenures; (b) Act 67 of 1957 did not result in control of the union as contemplated by entry 54 in List I and therefore the <ORG>'s jurisdiction under entry 23 List II was not ousted; (c) modification of leases was not covered by s. 15 of the said Act and since <ORG> was silent on that subject the field remained open for legislation by the <ORG>. HELD: (i) Entry 54 of the Union List speaks both of regulation of mines and mineral development and entry 23 is subject to entry 54. It is open to <ORG> to declare that it is expedient in the public interest that the control should vest in <ORG>. Once: this declaration is made and the extent laid down the subject of the legislation to the extent laid down becomes an exclusive subject for legislation by <ORG>. Any legislation by the <ORG> after such declaration and touching upon the field disclosed. in the field is extracted from the legislative competence of the <ORG>. [113 B--D] The declaration contemplated by entry 54 is contained in s. 2 of Act 67 of 1957 and the <ORG> is given control as to regulation of mines and mineral development to the extent provided in the Act. Thus what is left within the competence of <ORG> Government has to be worked out from the terms of the Act itself. [113 F] The Act deals with minor minerals separately from other minerals. In respect of minor minerals it provides in s. 14 that ss. 4 to 13 do not apply to prospecting licences and mining leases. It goes on to state in s. 15 ( 1 ) that the <ORG> Government may by 'notification make 'rules for regulating the grant of prospecting licences and mining leases in respect of minor minerals and for purposes connected therewith, and in s. 15(2) that till such rules. are framed any rules already in force would continue. No 'rules existed in the <ORG> of Bihar which could be preserved under s. 15(2) . Therefore the whole subject of legislation was covered in respect of minor minerals by s. 15(1) . Whether rules under that section were made or not the topic was covered by <ORG>ary legislation and to that extent the powers of the <ORG> Legislature were wanting. [114 G--115 B] It must accordingly be held that by the declaration in s. 2 and by the enactment of s. 15 the whole of the field relating' to minor minerals came 102 within the jurisdiction of <ORG> and no scope was left 'for the enactment of the second proviso to s. 10(2) of the Land Reforms Act. The second proviso was therefore ultra vires. <CITATION> .  2 S.C.R. 537 and <CITATION> :

(ii) Vested interests cannot be taken away except by law made by a competent legislature. Mere rule-making power is not sufficient. In view of Act 67 of 1957 <ORG> had lost jurisdiction to legislate about minor minerals. The power of <ORG>; to modify existing mining leases was confined under s. 16 of the Act to leases granted before October 25, 1949. For modifying leases granted after that date legislation by <ORG> on the lines of s. 16 was necessary. Rule 20(2) of the Bihar Minor Concession Rules, 1964 was ineffective 'for the purpose. It could not derive sustenance from the 2nd proviso to s. 10(2) of the Reforms Act as that proviso was not validly enacted. There was also no other legislative support since s. 15 of the Act of 1957 did not contemplate alteration of terms of leases already in existence before that Act was passed. [116 B--E; 116 G; 117 D]

(iii) The contentions raised on behalf of the <ORG> must be rejected: (a) The abolition of the rights of intermediaries in the mines and vesting of these rights as lessors in the <ORG> Government was a topic connected with land and land tenures. But after the mining leases stood between the <ORG> Government and the leases, any attempt to regulate those mining leases will fall not in entry 18 but in entry 23. The pith and substance of the amendment to s. 10 of the Reforms Act falls within entry 23 although it incidentally touches land. [115 C---E]

(b) <ORG> consists of its three limbs namely, <ORG>, <ORG> Government and <ORG> Judiciary. Control by <ORG> is therefore control of the <ORG> within the meaning of entry 54 and for the purpose of ousting jurisdiction under entry 23. [115 F--G]

(c) The entire legislative field relating to minor minerals having been withdrawn from the State legislature it could not be said that because s. 15 did not deal with modification of leases the State was free to legislate in this field. [117 A--C] & CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 685 to 688 of 1967.

Appeals from the judgments and orders dated November 1, 1966, December 21, 1966 and December 23, 1966 of <ORG> in C.W.J.C. Nos..1036, 686, 1200 and 778 of 1965 respectively.

<NAME> and <NAME>, for the appellants (in all the appeals).

<NAME>, <NAME> and <NAME>, for the respondents (in C.A. No.. 685 o.f 1967). <NAME>, for the respondents (in C.A. No. 686 of 1967). <NAME>, for the respondents Nos. 1 to 3 (in C.As. Nos. 687 and 688 of 1967).

<NAME>, <NAME> and <NAME>, for respondent No. 4 (in C.A. No. 687 of 1967) and respondents Nos. 5 to 8 (in C.A. No. 688 of 1967).

<NAME>, for the intervener (in C.A. No. 685 of 1967). The Judgment of the Court was delivered by <NAME>, <NAME> This judgment will also govern the. disposal of Civil Appeals 686 (<NAME> v. State of Bihar and others), 687 (<NAME> v. State of Bihar and others) and 688 (M/s. Pakur Quarries Private Ltd. & <ORG>. v. State of Bihar and others) of 1967. These four appeals have been brought against a common judgment, November 1, 1966, of <ORG> and arise out of four petitions under Art. 226 of the Constitution filed to question the validity of Proviso (2) to s. 10(2) added by Bihar Land Reforms (Amendment) Act 1964 (Bihar Act 4 of 1965), and the operation of the second sub-rule of r. 20 added on December 10, 1964 by a notification of the Governor in the Bihar Minor Mineral Concession Rules, 1964. The facts of all the four cases are similar and the same points arise ,for determination. It is, therefore, sufficient to state the facts in Civil Appeals 685 and 686 as illustrative of the others as well.

One <NAME> obtained on March 23, 1955 from <NAME> and Smt. <NAME> acting for herself' and also as legatee under the will of one <NAME>, registered leases to quarry stone ballast, boulders and chips from and upon Blocks Nos. 32, 45/1 45/2 and 45/3 in tauzi No. 1452, khata No. 1 in Mouza Malpahari No. 89 in Pakur SubDivision of Santhai Parganas. The leases were to commence from November 1, 1954 and to end on October 31, 1984, that is to say, they were for a total period of 30 years. <NAME> was working under the name and style of '<ORG>'. He sold his rights, title and interest by a registered sale- deed on September 9, 1963 to the present appellant. It is admitted that rent under the terms of the original lease was deposited upto September 1965.

On the passing of the Bihar Land Reforms Act, 1950 (Act 30 of 1950) the ex-landlords ceased to have any interest from the date of vesting and in their place the State of Bihar became lessor under s. 10(1) of the Land Reforms Act. The terms of s. 10 were as given below. After the vesting of the estate of the inter-

"10. Subsisting leases of mines and minerals:- (1)Notwithstanding anything contained in this Act, where immediately before the date of vesting of the estate or tenure there is a subsisting lease of mines or minerals comprised in the estate or tenure or any part thereof, the whole or that part of the estate or tenure comprised in such lease shall, with effect from the date of vesting, be deemed to have been mediaries, the State of Bihar as the new lessor recognised the lease for the quarrying of stones for the remaining period and the Deputy Commissioner, <NAME> asked for the rent from the date of vesting to 30 April, 1965 at the rate of Rs. 200/per year as stated in the original lease. This was by a letter issued from his office on February 2, 1963. On December 10, 1964 the appellants received a letter which gives the gist of the facts on which the present controversy starts and the relevant part may be quoted here:

"Government have been pleased to amend the section 10 of Bihar Land Reforms Act, 1950, and according to which the terms and conditions in regard to leases for minor minerals stand statutorily substituted by the corresponding terms and conditions by the Bihar Minor Mineral Concession Rules, 1964. As a result of this, rent and royalty etc. in respect of minor minerals in the State irrespective of the date on which the lease was granted are to be paid by all categories of leases according to the rates given in the aforesaid Rules with effect from 27-10-64".

'The 'appellants denied their liability to pay. The Government informed them by letter as follows:

"This is to inform you that the terms and conditions of your mining lease in so far as they are inconsistent with the Bihar Minor Mineral Concession Rules, 1964, framed by <ORG> under section 15 of the Mines & Minerals (Regulation & Development) Act , 1957, stand substituted by the corresponding terms and conditions prescribed by the Bihar Mineral Concession Rules, 1964, from 27-1-1964. Accordingly, leased by <ORG> to the holder of the said subsisting lease for the remainder of the term of that lease and such holder shall be entitIed to retain possession of the lease-hold property.

(2) The terms and conditions of the said lease by <ORG> shall mutatis mutandis be the same as the terms and conditions of the subsisting condition that, if in the opinion of <ORG> the holder of the lease had not, before the date of the commencement of this Act, done any prospecting or development work, <ORG> shall be entitled at any time before the expiry of one year from the said date to determine the lease by giving three months' notice in writing: Provided that nothing in this sub- section shall be deemed to prevent any modifications being made in the terms and conditions of the said lease in accordance with the provisions of any Central Act for the time being in force regulating the modification of existing mining leases. (3) The holder of any such lease of mines and minerals as is referred to in subsection (1) shall not be entitled to claim any damages from the outgoing proprietor or tenure- holder on the ground that the terms of the lease executed by such proprietor or tenure-holder in respect of the said mines and minerals have become incapable of fulfilment by the operation of this Act.

dead rent, royalty and surface rent in addition to the other substitution as per Bihar Mineral Concession Rules, 1964, will be as follows :--

1. Dead rent .... Rs. 50/- per acre perannum.

2. Royalty .... Rs. 3/- per 100 cft. of stone chips. Rs. 2/- per 100 cft. of stone ballast and boulders. Rs. 4/- per 100 cft. on building stones. Re. 1/-per 100 Nos. of stones 'setts'. 3. Surface rent 3 .. Rs. 10 per acre per year."

It is this additional demand and the liability to pay, which is the subject of controversy here. <ORG> contends that the terms of the original lease have been validly altered by the operation of the second proviso to s. 10 (2) of the Bihar Land Reforms Act added first by Ordinance III of 1964 and later incorporated again by the Bihar Land Reforms (Amendment) Act, 1964 (Act 4 of 1965) and the addition of s. 10A to the Act by the same enactments. The material part of the second section of Act 4 of 1965 is quoted below. Section 10A provided for the vesting of the interest of leases of mines or minerals which were subject to such leases and need not be read here. The State Government also relied upon the Bihar Mineral Concession (First Amendment) Rules, 1964 by which a second sub-rule was added to Rule 20. The twentieth rule, purporting to be framed under s. 15 of the Mines and Minerals (Regulation 'and Development) Act , 1957  was amended on December 19, 1964 and now reads:

Rule 20. ( 1 ) Dead rent, royalty and surface rent.--

When a lease is granted or renewed.

(a) dead rent shall be charged at the rates specified in Schedule 1,

(b) royalty shall be charged at the rates specified in Schedule II, and

(c) surface rent shall be charged at the rates specified by the <ORG>. in <ORG> from time to time.

2. Amendment of section 10 of Bihar Act XXX of 1950.--

In Section 10 of the Bihar Land Reforms Act, 1950 (Bihar Act XXX of 1950) (hereinafter referred to as the said Act).--

(a) in sub-section (2), the following second proviso shall be added, namely :-

"Provided further that the terms and conditions of the said lease in regard to minor minerals as defined in the Mines and Minerals (Regulation and Development) Act , 1957 (Act LXVII of 1957), shall, in so far as they are inconsistent with the rules made by <ORG> under section 15 of that Act, stand substituted by the corresponding terms and conditions prescribed by those rules and if further ascertainment and settlement of the terms will become necessary then necessary proceedings for that purpose shall be undertaken by the Collector"; and

(b) after sub-s. LISup. Cl/70--8 (2) On and from the date of commencement of these rules, the provisions of sub-rule (1) shall also apply to leases granted or renewed prior to the date of such commencement and subsisting on such date." The contention is that the amendment of s. 10 of the Bihar Land Reforms Act is ultra vires the Constitution and that rule 20(2) does not legally entitle the recovery of the dead-rent, royalty etc. as in the Schedules to the Bihar Minor Mineral Concession Rules, 1964.

To understand fully the argument on behalf of the appellants a resume of the legislation on the subject of mines and minerals is necessary. Under the Government of India Act, 1935, the subject of Mines and Minerals was covered by Entry 36 of the Federal Legislative List I and entry No. 23 of the 'Provincial Legislative List II of the 7th Schedule. These entries read as follows:

"Entry 36. Regulation of mines and oil fields and mineral developments to which such regulation and development under a <ORG> control is declared by <ORG> law to be expedient in the public interest." "Entry 23. Regulation of mines and oil fields and mineral development subject to the provisions of List I with respect to regulation and development under <ORG> control."

When the Indian Independence Act, 1947 was passed the word federal' where it occurs for the first time in entry 36 and in entry 23 was changed to 'dominion'. The entries are practically repeated in the present Constitution and may be read immediately here: "Entry 54, of List H--<ORG> List--reads: "Regulation of mines and mineral development to the extent to which such regulation and development under the control of the <ORG> is declared by <ORG> by law to be expedient in the public interest." Entry 23 of List II--State List--reads: "Regulation of mines and mineral development subject to the provisions of List I with respect to regulation and development under the control of the <ORG>." The difference between the entries of the Government of India Act, 1935 and the present Constitution lies in the removal of oilfields from the entries and the declaration now must be by <ORG>. Entry 53 in List I deals with oilfields and mineral resources.

In 1948 <ORG> enacted the Mines and Minerals (Regulation and Development) Act , 1948 (Act 53 of 1948). It received the assent of the Governor-General on September 8, 1948. It was an Act to provide for the regulation of mines and oilfields and for the development of minerals. In s. 2 of that Act is to be found the declaration contemplated by entries 36 and 23, 7th Schedule of the Government of India Act, 1935. That declaration reads as follows:

"2. It is hereby declared that it is expedient in the public interest that <ORG> should take under its control the regulation of mines and oil fields and the development of minerals to the extent hereinafter provided."

Section 3 of the Act of 1948 contained definitions. There were definitions of 'mine' and 'minerals'. The former meant an excavation for the purpose of searching for or obtaining minerals and included an oil-well and the latter included natural gas and petroleum. Section 4 provided that no mining lease would be granted after the commencement of that Act otherwise than in accordance with the rules made under that Act and that a mining lease granted contrary to the provisions would be void and of no effect. Section 5 empowered <ORG>, by notification to make rules for regulating the grant of mining leases or for prohibiting the grant of such leases in respect of any mineral or in any area. In particular the rules could provide for the manner in which, the minerals or areas in respect of which and the persons by whom, 'applications for mining leases could be made and the fees payable, the terms on which and the conditions subject to which, mining leases might be granted, the areas and the period for which any mining lease might be granted and the maximum and minimum rent payable by a lessee, whether the mine was worked or not. Under s. 6 <ORG> had power to make rules as respect mineral development. Section 7 then provided as follows:

"7. (1) The Central Government may, by notification in the official <ORG>, make rules for the purpose of modifying or altering the terms and conditions of any mining lease granted prior to the commencement of this Act so as to bring such lease into conformity with the rules made under sections 5 and 6 :

Provided that any rules so made which provide for the matters mentioned in clause

(c) of sub-section (2) shall not come into force until they have been approved, either with or without modification's, by '<ORG>.

(2) The rules made under sub-section (1) shall provide--

(a) for giving previous notice of the modification or alteration proposed to be made thereunder to the lessee, and when the lessor is not <ORG>, also to the lessor and for affording them an opportunity of showing cause against the proposal.

(b) for the payment of compensation by the party who would be benefited by the proposed modification or alteration to the party whose rights under the existing lease would thereby be adversely affected; and

(c)for the principles or which, the manner in which and the authority by which the said compensation shall be determined."

Section 8 provided that <ORG> might by notification direct that 'any power exercisable under that Act might be exercised, subject to such conditions if any, as might be specified by such officer or authority or might be specified in the direction. In furtherance of the powers conferred <ORG> framed the Mineral Concession Rules 1949 and they came into force on the twenty-fifth day of October 1949. These rules for the first time defined minor minerals and after amendments from time to time the term meant:

"3 (ii) 'minor mineral' means building stone, boulder, shingle, gravel, Chalcedony pebbles (used ,for ball mill purposes only), limeshell, kankar and limestone used for lime burning, murrum, brick-earth (Fuller's earth), Bentonite, ordinary clay, ordinary sand (used for non- industrial purposes), road metal, reh-matti, slate and shale when used for building material."

Rule 4 however provided:

"4. Exemption.--These rules shall not apply to minor minerals, the extraction of which shall be regulated by such rules as <ORG> may prescribe."

The word "provincial" was later changed to 'State'. Although some of the Provinces (now <ORG>) made Minor Mineral Concession Rules, it is admitted that Bihar Government did not frame any such rules.

The leases of the appellants' predecessors were granted in 1955 during the subsistence of the Act of 1948 and the Rules of 1949. It is also to be noticed that a fresh declaration was made by <ORG> as required by entry 54 List I--Union List of the 7th Schedule of the Constitution. The existing laws, however, continued. Without a declaration by <ORG> the field of legislation might have been open to the <ORG> Legislatures under entry 23 of List II--<ORG> List of the Constitution but no law was made except what was enacted by <ORG> in the Land Reforms Act about vesting of mines in the <ORG> and the emergence of the <ORG> as a lessor in place of all original lessors.

Further rules were made by <ORG> in 1955 and 1956. In 1955 Minerals Conservation and Development Rules were made which were later replaced in 1958. On September 4, 1956, <ORG> in exercise of the powers conferred by s. 7 of the Act of 1948 made the Mining Leases (Modification of Terms) Rules 1956. Under these rules existing Conservation 'and Development Rules. The expression 'existing mining leases were to be brought into conformity with the Minerals Conservation and Development Rules. The expression 'existing mining leases' was defined as a mining lease granted before 25th day of October 1949 and subsisting at the commencement of those rules 'but did not include any lease in respect of any minor mineral within the meaning of clause (c) of s. 3 of the Act of 1948.

We now come to the year 1957. In that year <ORG> enacted the Mines and Minerals (Regulation and Development Act , 1957 (Act 67 of 1957). It came into force from December 28, 1957. Act 67 of 1957 made amendments in the Act of 1948 so as to make the latter relate to oilfields only. All references to minerals other than oil were removed, with the result that it became legislation exclusively relating to oil and gas. Since the Act of 1948 was thus altered, <ORG> enacted new provisions for minerals in Act 67 of 1957. We are primarily concerned with this Act in these appeals. A glance at some of the provisions of Act 67 of 1957 is necessary. The Act 67 of 1957 came into force on 1st June, 1958 and extended to the whole of India. It contained the following declaration in s. 2 :

"It is hereby declared that it is expedient in the public interest that the <ORG> should take under the control the regulation of mines and the development of minerals to the extent hereinafter provided."

By definition minerals excluded mineral oils because the Act of 1948 exclusively dealt with oil. 'Minor minerals' were defined to mean building stones, gravel, ordinary clay, ordinary sand other than sand used for prescribed purposes and any other mineral which <ORG> may, by notification in <ORG>, declare to be a minor mineral. Act 67 of 1957 contained 33 sections which were separated by general headings showing the topics dealt with. The first group of sections 4- -9 contained general restrictions on undertaking prospecting and mining operations. of this group we may quote here s. 4 which will be considered later:

"4. Prospecting or mining operations to be under license or lease--

(1 ) No person shall undertake any prospecting or mining operations in ,any area, except under and in accordance with the terms and conditions of a prospecting licence or, as the case may be, a mining lease, granted under this Act and the rules made thereunder: Provided that nothing in this sub-section shall affect any prospecting or mining operations undertaken in any area in accordance with the terms and conditions of a prospecting licence or mining lease granted before the commencement of this Act which is in force at such commencement.

(2) No prospecting licence or mining lease shall be granted otherwise than in accordance with the provisions of this Act and the rules made thereunder."

Section 5 lays down restrictions on the grant of prospecting licences or mining leases. Section 6 prescribes. the maximum area for which a prospecting license or mining lease may be granted and section 7 the periods for which prospecting licences may be granted or renewed and section 8 the periods for which mining leases may be granted or renewed. Section 9 fixes the royalties in respect of mining leases.

Then follows another group of sections 10- -12 which lays down the procedure for obtaining prospecting licences or mining leases in respect of land in which the minerals vest in the <ORG>. The next group of sections 13- -16 is headed Rules for regulating the grant of prospecting licences and mining leases. Section 13 gives power to the Central <ORG> to make rules in respect of minerals. Section 14 however excludes the application of sections 4- -13 to minor minerals. It reads:

"The provisions of sections 4 to 13 (inclusive) shall not apply to prospecting licences and mining leases in respect of minor minerals."

Section 15 gives power to the State Governments to make rules in respect of minor minerals. It reads:

"15 (1 ). The State Government may, by notification in the official <ORG>, make rules. for regulating the grant of prospecting licences and mining leases in respect of minor minerals and for purposes connected therewith.

(2) Until rules are made under sub- section (1 ), any rules made by a State Government regulating the grant of prospecting licences and mining leases m respect of minor minerals which are in force immediately before the commencement of this Act shall continue in force."

Section 16 gives power to modify mining leases granted before 25th October, 1949. It reads:

"16(1 ). All mining leases granted before the 25th day of October, 1949, shall, as soon as may be after the commencement of this Act, be brought into conformity with the provisions of this Act and the rules made under sections 13 and 18 :

Provided that if the Central Government is of opinion that in the interests of minerals development it is expedient so to do, it may, for reasons to be recorded, permit any person to hold one or more such mining leases covering in any one State a total area in excess of that specified in clause (b) of section 6 or for a period exceeding that specified in sub-section (1 ) of section 8 . (2) The Central Government may, by notification in the official <ORG>, make rules for the purpose of giving effect to the provisions of sub-section (1) and in particular such rules shall provide-

(a) for giving previous notice of the modification or alteration proposed to be made in any existing mining lease to the lessee and where the lessor is not <ORG> also to the lessor and for affording him an opportunity of showing cause against the proposal.

(b) for the payment of compensation to the lessee in respect of the reduction of any area covered by the existing mining. lease; and

(c) for the principles on which, the manner in which and the authority by which, the said compensation shall be determined."

Section 17 stands by itself as a group and contains special powers of <ORG> to undertake prospecting or minning operations in certain cases. Section 18 deals with mineral development 'and gives additional rule making power to the <ORG>. Next follow some miscellaneous provisions; of these, only two interest us. Section 19 lays down that prospecting licences or mining leases granted, renewed or acquired in contravention of the provisions of the Act shall be void and of no effect and section 20 that the provisions apply to prospecting licences or mining leases whether granted before or after the Act. The rest of this Act does not concern this dispute.

It may be pointed out here that the rules made under s. 13 do not apply to minor minerals in view of the provisions of s. 14 . The State of Bihar had not made any rules till the Bihar Minor Mineral Concession Rules, 1964 were made. The modification of the terms of existing mining leases was provided for in s. 16 but that provision applied to mining leases granted before 25th October, 1949. The provisions of Mining Leases (Modification of Terms) Rules, 1955 did not apply to minor minerals because the definition of 'existing mining lease' excluded a lease in respect of any minerals. The power to modify the existing leases in the case had to be found elsewhere.

The argument of the appellant is that apart from the provisions of the 2nd proviso to s. 10 added to the Land Reforms Act, 1950 in 1964 by Act IV of 1965 and second sub- rule added to rule 20 of the Bihar Minor Mineral Concession Rules, 1964, there is no power to modify the terms. These provisions of law are said to be outside the competence of <ORG> and <ORG>. With regard to <ORG> it is contended that the scheme of the relevant entries in the Union and State List is that to the extent to which regulation of mines and mineral development is declared by <ORG> by law to be expedient in the public interest, the subject of legislation is withdrawn from the jurisdiction of <ORG> and therefore Act 67 of 1957 leaves no legislative field to <ORG> to enact Act 4' of 1965 amending the Land Reforms Act. As regards Rule 20(2) it is contended that the rule making power of its own force cannot reach mining leases granted in 1955 and that this could only be done by a competent legislature. These are the two matters which need decision.

The main arguments are supplemented by the following contentions. That the Bihar Rules in so far as they make demands of rent and royalty on the existing leases which were executed prior to their coming into force are beyond the power to make rules in respect of minor minerals under s. 15 of Act 67 of 1957, that s. 15 itself is unconstitutional and void because it delegates legislative power to the rule-making authority and it is excessive delegation and that the amendment of Bihar Land Reforms. Act is void because it affects the fundamental rights of the appellants guaranteed under Articles 31 'and 19 of the Constitution.

Although these supplementary arguments were raised it is obvious that they can arise according as the two main arguments are allowed or disallowed. Therefore it is necessary to address ourselves to the first argument that the legislative competence to enact the amendment to s. 10 of the Reform Act was wanting. As the amendment was made after Act 67 of 1957 we have to consider the position in relation to it. Entry 54 of the Union List speaks both of regulation of mines and minerals development and entry 23 is subject to entry 54. It is open to parliament to declare that it is expedient in the public interest that the control should rest in <ORG>. To what extent such a declaration can go is for <ORG> to determine and this must be commensurate with public interest. Once this declaration is made and the extent laid down, the subject of legislation to the extent laid down becomes an exclusive subject for legislation by <ORG>. Any legislation by the <ORG> after such declaration and trenching upon the field disclosed in the declaration must necessarily be unconstitutional because that field is abstracted from the legislative competence of the <ORG> Legislature. This proposition is also self evident that no attempt was rightly made to contradict it. There are also two decisions of this <ORG> reported in the <CITATION> and Ors.(1) and <CITATION> . (2) in which the matter is discussed. The only dispute, therefore, can be to what extent the declaration by <ORG> leaves any scope for legislation by the <ORG> Legislature. If the impugned legislation falls within the ambit of such scope it will be valid; if outside it, then it must be declared invalid.

The declaration is contained in s. 2 of Act 67 of 1957 and speaks of the taking and the control of <ORG> the regulation of mines and development of minerals to the extent provided in the Act itself. We have thus not to look outside Act 67 of 1957 to determine what is left within the competence of <ORG> but have to work it out from the terms of that Act. In this connection we may notice what was decided in the two cases of this Court. In the Hingir-Rampur(1) case a question had arisen whether the Act of 1948 so completely covered the fields of conservation and development of minerals as to leave no room for <ORG> legislation. It was held that the declaration was effective even if the rules contemplated under the Act of 1948 had not been made. However, considering further whether a declaration made by a <ORG> law could be regarded as a declaration by <ORG> for the purpose of entry 54, it was held that it could not and there was thus a lacuna which the Adaptation of  2 S.C.R. 537. (2)  4 S.C.R.

461. Laws Order, 1950 could not remove. Therefore, it was held that there was room for legislation by <ORG>.

In the <NAME> case(1) the firm was working a mining lease granted under the Act of 1948. <ORG> then passed the Orissa Mining Areas Development Fund Act, 1952, and levied a fee for the development of mining areas within the State. After the provisions came into force a demand was made for payment of fees due from July 1957 to March 1958 and the demand was challenged. <ORG> held that after the coming into force of Act 67 of 1957 the Orissa Act must be held to be non-existent. It was held on appeal that since Act 67 of 1957 contained the requisite declaration by <ORG> under entry 54 and that Act covered, the same field as the Act of 1948 in regard to mines and mineral development, the ruling in Hingir Rampur(2) case applied and as ss. 18(1) and (2) of the Act 67 of 1957 were very wide ruled out legislation by <ORG>. Where a superior legislature evinced an intention to cover the whole field, the enactments of the other legislature whether passed before or after must be held to be overborne. It was laid down that inconsistency could be proved not by a detailed comparison of the provisions of the conflicting Acts but by the mere existence of two pieces of legislation. As s. 19 ( 1 ) covered the entire field, there was no scope for the argument that till rules were framed under that section, room was available.

These two cases bind us and apply here. Since <ORG> amended the Land Reforms Act after the coming into force of Act 67 of 1957, the declaration in the latter Act would carve out a field to the extent provided in that Act and to that extent entry 23 would stand cut down. To sustain the amendment the <ORG> must show that the matter is not covered by the Central Act . The other side must, of course, show that the matter is already covered and there is no room for legislation. We have already analysed Act 67 of 1957. The Act takes over the control of regulation of mines and development of minerals to the <ORG>; of course, to the extent provided. It deals with minor minerals separately from the other minerals. In respect of minor minerals it provides in s. 14 that ss. 4- -13 of the Act do not apply to prospecting licences and mining leases. It goes on to state in s. 15 that the <ORG> Government may, by notification in the official <ORG>, make rules for regulating the grant of prospecting licences and mining leases in respect of minor minerals and for purposes connected therewith, and that until rules 'are made, any rules made by the <ORG> Government regulating the grant of prospecting licences and mining lease in respect of minor minerals which were in force immediately before the commencement of (1)  4S.C.R.461. (2)  2 S.C.R.

537. the Act would continue in force. It is admitted that no such rules were made by <ORG>. It follows that the subject of legislation is covered in respect of minor minerals by the express words of s. 15(1) . <ORG> has undertaken legislation and laid down that regulation of the grant of prospecting licences and mining leases in respect of minor minerals and for purposes connected therewith must be by rules made by <ORG>. Whether the rules are made or not the topic is covered by <ORG>ary legislation and to that extent the powers of <ORG> are wanting. Therefore, there is no room for <ORG> legislation.

Mr. <NAME> argued that the topic of legislation concerns land and therefore falls under entry 18 of the State List and he drew our attention to other provisions on the subject of mines in the Land Reforms Act as originally passed. The abolition of the rights of intermediaries in the mines and vesting these rights as lessors in <ORG> was a topic connected with land and land tenures. But after the mining leases stood between <ORG> and the lessees, any attempt to regulate those mining leases will fall not in entry 18 but in entry 23 even though the regulation incidentally touches land. The pith and substance of the amendment to s. 10 of the Reforms Act falls within entry 23 although it incidentally touches land and not vice versa. Therefore this amendment was subject to the overriding power of <ORG> as declared in Act 67 of 1957 in s. 15 . Entry 18 of the State List, therefore, is no help.

Mr. <NAME> next contended that the provisions of ss. 4- -14 do not envisage control of the <ORG> which is a condition precedent to the ousting of the jurisdiction under Entry 23. Obviously Mr. <NAME> reads <ORG> as equivalent to <ORG> Government. This is erroneous. <ORG> consists of its three limbs, namely, <ORG>, <ORG> Government and the <ORG> Judiciary. Here the control is being exercised by <ORG>, the legislative organ of the <ORG> and that is also control by the <ORG>. By giving the power to <ORG> to make rules, the control of <ORG> is not negatived. In fact, it establishes that the <ORG> is exercising the control. In view of the two rulings of this <ORG> referred to earlier we must hold that by enacting s. 15 of Act 67 of 1957 the <ORG> has taken all the power to itself and authorised <ORG> to make rules for the regulation of leases. By the declaration and the enactment of s. 15 the whole of the field relating to minor minerals came within the jurisdiction of <ORG> and no scope was left for the enactment of the second proviso to s. 10 in the Land Reforms Act. The enactment 'of the proviso was, therefore, without jurisdiction.

This leaves for consideration the second sub-rule added to Rule 20 in December, 1964 by <ORG>. It will be noticed that the rule as it stood previously applied prospectively to all 1eases which came to be executed after the promulgation of the rules. The second sub-rule made ,applicable those provisions to all leases subsisting on the date of the promulgation of the rules. The short question is whether the rules could operate on leases in existence prior to their enactment without the authority of a competent legislature. Vested rights cannot be taken away except under authority of law ,and mere rule-making power without the support of a legislative enactment is not capable of achieving such an end. There being two legislatures to consider, namely, <ORG> and <ORG> we have first to decide which legislature would be competent to grant such power.

We have already held that the whole of the legislative field was covered 'by the <ORG>ary declaration read with provisions of Act 67 of 1957, particularly s. 15 . We have also held that entry 23 of List II was to that extent cut down by entry 54 of List I The whole of the topic of minor minerals became a <ORG> subject. The <ORG> <ORG> allowed rules to be made but that did not recreate a scope for legislation at the State level. Therefore, if the old 1eases were to be modified a legislative enactment by <ORG> on the lines of s. 16 of Act 67 of 1957 was necessary. The place of such a law could not be taken by legislation by <ORG> as it purported to do by enacting the second Proviso to s. 10 of the Land Reforms Act. It will further be seen that <ORG> in s. 4 of Act 67 of 1957 created an express bar although s. 4 was not applicable to minor minerals. Whether s. 4 was intended to apply to minor minerals as well or any part of it applies to minor minerals are questions we cannot consider in view of the clear declaration in s. 14 of Act 67 of 1957 that the provisions of ss. 4- -13 (inclusive) do not apply. Therefore, there does not exist any prohibition such as is to be found in s. 4(1) Proviso in respect of minor minerals. Although s. 16 applies to minor minerals it only permits modification of mining leases granted before October 25, 1949. In regard to leases of minor minerals executed between this date and December 1964 when Rule 20(1) was enacted, there is no provision of law which enables the terms of existing leases to be altered. A mere rule is not sufficient.

Faced with this difficulty Mr. <NAME> attempted to claim power for the second Proviso to s. 10 of the Land Reforms Act .from entry 18 of List II, a contention we have rejected. He also attempted to find a field for enactment by <ORG> for the said proviso. This argument was extremely ingenious and needs separate notice.

The contention was that modification of existing leases was a separate topic altogether and was not covered by s. 15 of Act 67 of 1957. Therefore if <ORG> had not said anything on the subject the field was open to <ORG>. The other side pointed to the words 'and for purposes connected therewith' in s. 15 and contended that those words were sufficiently wide to take in modification of leases. Mr. <NAME>'s argument is unfortunately not tenable in view of the two rulings of this Court. On the basis of those rulings we have held that the entire legislative field in relation to minor minerals had been withdrawn from <ORG>. We have also held that vested rights could only be taken away by law made by a competent legislature. Mere rule-making power of <ORG> was not able to reach them. The authority to do so must, therefore, have emanated from <ORG>. The existing provision related to regulation of leases and matters connected therewith to be granted in future and not for alteration of the terms of leases which were in existence before Act 67 of 1957. For that special legislative provision was necessary. As no such parliamentary law had been passed the second sub-rule to Rule 20 was ineffective. It could not derive sustenance from the second Proviso to s. 10(2) of the Land Reforms Act since that proviso was not validly enacted. In the result, therefore, these appeals must succeed. They are allowed with costs. A mandamus shall issue restraining <ORG> from enforcing the provisions of the second Proviso to s. 10(2) added by Bihar L, and Reforms (Amendment) Act, 1964 (Bihar Act 4 of 1965) and the second sub-rule of Rule 20 added by a notification on December 10, 1964 to the Bihar Mineral Concession Rules, 1964.

G.C. Appeals allowed.


PETITIONER: <ORG>, BOMBAY Vs. RESPONDENT: COLLECTOR OF CENTRAL EXCISE, BOMBAY DATE OF JUDGMENT31/01/1989 BENCH: <NAME>, SABYASACHI (J) BENCH: <NAME>, SABYASACHI (J) RANGNATHAN, S. CITATION: 1989 AIR 1153 1989 SCR (1) 382 1989 SCC (1) 602 JT 1989 (1) 450 1989 SCALE (1)226 CITATOR INFO : R 1989 SC2066 (5) R 1990 SC 59 (4) R 1990 SC1676 (11) R 1990 SC1893 (4) RF 1991 SC 999 (7) ACT: <ORG>s and Salt Act , 1944/<ORG> Rules, 1944: Sections 2(d) , 2(f) , 3 , 35-L and 35-P /Rules, 10-A 173-J. Excise duty--Excisable goods--Mere fact that an article falls within Tariff Schedule is not enough--Taxable event is 'manufacture of goods'--Which are marketable or capable of being marketed-Marketability is an essential element--Burden of proof on revenue that goods are marketable. <ORG> Tariff Act , 1985: Schedule Item 15-A(2)-Production of crude PVC films--Non-marketable--Intermediate products--Used for captive consumption in end products such as leather cloth--Laminated jute mattings and PVC tapes--Whether clas- sifiable and liable to duty. Words and Phrases: 'Excisable goods'-'Manufacture'--Meaning of. HEADNOTE: The appellant is a manufacturer of Crude PVC films for the purpose of use in final products such as leather cloth and laminate jute mattings and PVC tapes both insulation and adhesive. The films manufactured by the appellant were subject matter of adjudication by the Excise authorities during the period commencing from 1st March, 1970 to 29th May, 1971. The Appellate Collector of <ORG> by an order dated 14.1.1974 held that the appellant had produced sufficient evidence to prove that the said Crude PVC films were not marketable and were therefore not liable to excise duty. On 20.11.1975 the appellant filed a classification list in respect of Crude PVC films used for lamination with jute and for tapes claiming that the said PVC films were non-excisable on the ground that the same were non-marketa- ble intermediate products used exclusively for captive consumption. On 9.12.1975 the classification list was ap- proved by the Assistant Collector, <ORG>. On 15.2.1977, however, the Assistant Collector issued a show 383 cause notice calling upon the appellant to show cause as to why the aforesaid films should not be re-classified as excisable under Item No. 15A(2) of the <ORG> Tariff Schedule and appropriate duty not recovered under Rule 10 of the <ORG> Rules, as these then stood, read with Rule 173-J. By a corrigendum, dated 23.2.1977, to the said show cause notice Rule 10-A was substituted in place of Rule 10. The appellant contested the notice but the Assistant Collector vide his order dated 16th February, 1978 confirmed the said show cause notice by holding that the said PVC films were classifiable under Item No. 15A(2) and directed the appellant to pay duty at the appropriate rate on past clearances under Rule 10-A read with Rule 173-J. The appeal filed against the aforesaid order was reject- ed by the Appellate Collector of <ORG> on 10th October, 1979. A revision was preferred before <ORG>. The <ORG> confirmed the order of the Appellate Collector and held that the goods in question fell under Tariff Item No. 15A(2) and were dutiable in the intermediate list and the question of marketability or being capable of being sold in the market was not relevant, but modified the order to the extent that duty in respect of clearances prior to the issue of show cause notice was restricted to the period permissible in terms of Rule 10 read with Rule 173-J viz. 12 months. In the statutory appeal to this Court under Section 35-L , of the <ORG>s and Salt Act , 1944 the question for consideration was whether the Crude PVC film was dutiable under Item No. 15A(2). Allowing the appeal, HELD: 1. In view of the Appellate Collector's order holding that the Crude PVC films were not marketable goods and there being no contrary evidence found by the <ORG> subsequent to the finding by the Appellate Collector no excise duty should be charged under Item No. 15A(2) of the <ORG> Tariff on the Crude PVC Sheets. The <ORG> went wrong in not applying the proper test. The test of marketability or capable of being marketed was not applied by the <ORG>. [395D-E] 2. Under the <ORG> Act , as it stood at the relevant time, in order to be goods as specified in the entry the first condition was that as a result of manufac- ture goods must come into existence. For articles to be goods these must be known in the market as such or these 384 must be capable of being sold in the market as goods. Actual sale in the market is not necessary, user in the captive consumption is not determinative but articles must be capa- ble of being sold in the market or known in the market as goods. Taxable event in the case of duties of excise is the manufacture of goods and the duty is not directly on the goods but on the manufacture thereof. The manufacturer could not be taxed unless manufacturing process resulted in pro- duction 'of goods as known in the market'. The expression "goods manufactured or produced" must refer to goods which are capable of being sold to the consumer. [389B-C; 391F] <CITATION> ,  Suppl. 1 S.C.R. 586; South Bihar Sugar Mills Ltd. etc. v. <ORG>,  3 S.C.R. 21; <CITATION> ,  2 S.C.C. 547; Governor General in Council v. Province of Madras,  7 F.C.R. 179; In Re. the Bill to Amend S. 20 of the Sea Customs Act, 1878 and Section 3 of the <ORG>s and Salt Act , 1944,  2 S.C.R. 787; applied. 3. Simply because a certain article falls within the Schedule it would not be dutiable under excise law if the said article is not 'goods' known to the market. Marketabil- ity, therefore, is an essential ingredient in order to be dutiable under the Schedule to the Central Tariff Act , 1985. [392F-G] 3.1. In the instant case, the Crude PVC films as pro- duced by the appellant were not known in the market and could not be sold in the market and were therefore not capable of being marketable. [392G-H] JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2820 of 1984.

From the Order dated 25.4.84/4.5.84 of <ORG>, New Delhi in Appeal No. F.D. (SB)(T) A. 999/80-C in Order No. 223/84. <NAME>, Mrs. <NAME>, <NAME> and <NAME> for the appellant.

<NAME>, Additional Solicitor General, Ms. <NAME> and <NAME> for the respondent.

The Judgment of the Court was delivered by <NAME>, J. This is an appeal under Section 35L of the <ORG>s and Salt Act , 1944 (hereinafter referred to as 'the Act') from the order passed and judgment delivered on 25th April, 1984/4th May, 1984 by <ORG>, New Delhi (hereinafter referred to as 'the Tribunal'). The question involved is whether the crude PVC film is dutiable. The appellant is, inter alia, a manufacturer of crude PVC films for the purpose of use in final products such as leather cloth and laminate jute mattings and PVC tapes--both insula- tion and adhesive. The said crude PVC films are manufactured by the appellant in a continuous process in the factory premises of the appellant which are licensed premises under the Act. The appellant filed classification list No. XIV/75 dated 20th November, 1975 in respect of crude PVC films used for lamination with jute and for tapes claiming that the said PVC films were non-excisable on the ground that the same were nonmarketable intermediate products used exclu- sively for captive consumption. The said classification was approved by the Assistant Collector, <ORG> on 9th December, 1977.

There was an order passed by the Appellate Collector on 14th June, 1974 holding that crude PVC films were not mar- ketable and were not liable to excise duty. It is necessary to refer to the Tariff Entry involved in this case. Tariff Item 15-A(2) of the Central Excise Tariff reads as follows:

"Articles made of plastics, all sorts includ- ing tubes, rods, sheets, foils, sticks, other rectangular or profile shapes. whether lami- nated or not, and whether rigid or flexible, including levy flat tubings and polyvinyl chloride sheets, not otherwise specified."

The same crude PVC films which have been manufactured by the appellant and used in the manufacture of some other end product were subject-matter of adjudication by the concerned authorities in the period 1.3.1970 to 29.5.1971. The Appel- late Collector of <ORG> in an order dated 14th January, 1974 held that the said PVC films manufactured by the appellant are not marketable intermediate products and hence not liable to duty. The Appellate Collector, <ORG> in his order noted the contentions of the appellant that the appellant had produced sufficient evidence to prove that the crude PVC sheets which were the subject-matter of the Show Cause Notice in that case and which are also the subject-matter of the present show cause notice were not known in the market as PVC sheets nor were these marketable as PVC sheets. After reference to the rival contentions, the said Appellate Collector in his order held, inter alia, as follows:

"PVC films/sheets for the clearance of which demand letters are issued are not marketable as the same are neither embossed nor printed nor any finishing Work is done when compared to PVC films/sheets which are marketed by them. It was further stated that the tensile strength of PVC sheets which is marketed by the appellants is as per the international standards laid down by A.S.T.M./I.S.I. and is much higher than the crude PVC sheets manufac- tured by them as an intermediate product for further manufacture of leather cloth. As such, it was contended that the product manufactured by the appellants is not liable to central excise duty. <NAME> further stated that it was not necessary to prove from technical angle that the curde PVC sheets manufactured by the appellants for manufacturing leather cloth are different from PVC sheets which are manufactured by them and sold in the market as such. Crude PVC sheets used in the appellants' factory for further manufacture of leather cloth can be distinguished from PVC sheets which are marketed by them as such by naked eye. Moreover, all the processes which are required in case of PVC sheets which are marketed by the appellants so as to make these sheets marketable are not carried out in the case of crude PVC sheets which are used by the appellants in their factory for the manufac- ture of leather cloth ........"

The Appellate Collector further held in the said order that from the technical point of view, crude PVC sheets are different from marketable PVC sheets inasmuch as the tensile strength of crude PVC sheets is much lower than that of marketable PVC sheets. He further held that:

"This is so because marketable PVC sheets are passed through the calender at very high temperature and at a slow speed to that gela- tion/curing fusion takes place while in the case of crude PVC sheets, the same are passed through the calender at very fast speed and lower temperature with the result that gela- tion fusion in the course of heating and ageing is not formed resulting in lower ten- sile strength. When these crude PVC sheets are coated with textile fabrics, the two layers are passed through the rollers at slow speed and at high temperature and it is only at this stage that the GEL is properly formed and resin particles become swollen by diffusion of plasticizer into them that they touch each other. As heating progresses, the swollen particles begin to weld together, resulting in the required degree of strength."

Thereafter, the Classification List was filed in respect of crude PVC films manufactured for use in adhesive tapes on 9th December, 1975 and the said list was approved by the Assistant Collector of <ORG> after making an in- quiry in that behalf. On 15th February, 1977, however, a Show Cause Notice was issued by the Assistant Collector, calling upon the appellant to show cause as to why crude PVC films should not be classified under teriff Item 15A(2) and appropriate duty not recovered under Rule 10 of the <ORG> Rules, as these then stood, read with Rule 173-J of the <ORG> Rules. There was a corrigendum issued on February 23, 1977 to the said Show Cause Notice dated 15th February, 1977 substituting the words 'Rule 10' by the words 'Rule 10A'. A reply was given by the appellant to the said Show Cause Notice. In the said reply, the appellant stated as follows:

"We have repeatedly pointed out that the issue of "Crude Film" has been decided by the Appel- late Collector and also by the Assistant Collector while approving classification. However, the Superintendent persisted in pressing us for giving information about production figures of 'Crude Film' possibly with a view to raise demand. We had requested the Superintendent to let us know the provi- sion under which he required us to give the information in regard to a product which was non-excisable. He was not able to clarify this and tried to invoke wrong sections and rules according to us. The present action of re- classification, in order to make the product excisable some how or other, seems to us to be a continuation of the matter which the Super- intendent was not able to enforce on us. There is no change in the market terminology of "PVC Film". Our product is not known in the market as "PVC Film". Even technically also a further process is required to be carried out on our product before it is "PVC Film" as is known to the market. The various decisions of <ORG> on this point are well-known to the Department. It is also known that the Appellate Collector's decision is binding on you. The principles of natural justice cannot be served by serving a show cause notice on us in order to change the Appellate Collector's decision in some manner or other. We have an uneasy feeling that an attempt is being made to some how bring the product under excise duty."

There was an order passed on 16th February, 1978 by the Assistant Collector confirming the Show Cause Notice. On 10th October, 1979 an appeal was preferred by the appellant against the order of the Assistant Collector dated 16th February, 1978 which was rejected by the Appellate Collector of <ORG>. On 6th February, 1980 a revision applica- tion was preferred, by the appellant to the Joint Secretary, <ORG>. That was transferred to the <ORG> and by the impugned order, the <ORG> has rejected the appeal under challenge.

The <ORG> in the order has set out the contentions and observed that the question for determination was whether crude PVC film fell for classification under Item 15A(2) of the Central Excise Tariff or not. A submission was made that the Appellate Collector had held that the crude PVC sheets were not marketable and had not acquired the character and status of PVC films as known to the market. It was contended on behalf of the appellant that only marketable PVC film would fall within the said item. On the other hand, the <ORG>'s contention was that there was nothing to show that the film/sheet was crude and the test of marketability was not relevant. According to the <ORG>, the crude PVC films/sheets would fall under the Tariff Item. The <ORG> was of the view that the tariff entry did not spell out whether it covered only finished film/sheet or whether it covered also crude film/sheet. The <ORG> came to the conclusion that the tariff item covered all types of films/sheets. The <ORG> also came to the conclusion that the concept of marketability was not relevant and all sorts of crude films would be covered by the entry. The <ORG> was of the view that the Appellate Collec- tor's observations were made entirely in different context. In that view of the matter, the Appellate Collector's order was confirmed subject to the modification that duty in respect of clearances prior to the issue of the Show Cause Notice was restricted to the period permissible in terms of Rule 10 read with Rule 173-J, that is to say, for 12 months. In other words, the <ORG>'s view was that if the descrip- tion of the goods in question fell into the entry, it was dutiable in the intermediate list and as such the goods had become goods as known to the market and the question of marketability or being capable of being sold in the market was not relevant. In support of this appeal, on behalf of the appellant, it was contended by <NAME> that it was only the 'goods as specified in the Schedule' to the Central Excise that could be subject to the duty. It appears to us that under the Central Excise Act , as it stood at the relevant time, in order to be goods as specified in the entry the first condition was that as a result of manufacture goods must come into existence. For articles to be goods these must be known in the market as such or these must be capable of being sold in the market a goods. Actual sale in the market is not necessary, user in the captive consumption is not determinative but the articles must be capable of being sold in the market or known in the market a goods. That was necessary. This has been clearly spelt out by this <ORG> in <CITATION> ,  Supp. 1 SCR 586. There this <ORG> held that excise duty being leviable on the manufacture of goods and not on their sale, the manufacturer could not be taxed unless manufacturing process resulted in production 'of goods as known in the market' (empahsis supplied). In that case, the respondents, who were manufacturers of vegetable products known as Vanas- pati, were assessed to excise duty under Item 23 of the First Schedule to the Central Excises and Salt Act , 1944, on what the taxing authorities called the manufacture of 'r- efined oil' from raw oil which according to them fell within the description of "vegetable non-essential oils, all sorts, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power". The common case made by the respondents in their petition under Article 226 of the Constitution challenging the imposition was that for the purpose of manufacturing Vanaspati they purchased groundnut and til oil from the market and subjected them to different processes before applying hydrogenation to produce Vanaspati and that nothing that they produced at any stage was covered by that item. Affidavits by experts were filed by both the parties and <ORG> found in favour of the respondents and allowed the petitions. <ORG> appealed. It was urged on its behalf before this <ORG> that before finally producing Vanaspati the respondents produced at an intermediate stage what was known as 'refined oil' in the market and although they might not sell it and although Vanaspati, when produced, was liable to excise duty under another item, that could not affect their liability. It was held that excise duty being leviable on the manufacture of goods and not on their sale, the petitioners in that case no doubt be liable if they produced 'refined oil', as known in the market, at an intermediate stage. But the <ORG> found that it was clear that there could be no 'refined oil' as known in the market without deodorisation according to the specification of <ORG> and the affidavits of the experts. Since, however, the process of deodorisation was admittedly applied in the respondents' factories only after hydrogenation was com- plete, they could not be said to produce 'refined oil' at any stage. Nor could the respondents be held to manufacture some kind of 'non-essential vegetable oil'. <NAME>, J., who spoke for the <ORG>, at page 595 of the report, observed as follows:

"On a consideration of all these materials we have no doubt about the correctness of the respondents' case that the raw oil purchased by the respondents for the purpose of manufac- ture of Vanaspati does not become at any stage "refined oil" as is known to the consumers and the commercial community."

After considering the definition of the word 'manufac-

ture' and several authorities and Words and Phrases, Perma- nent Edition, Vol. 18, from a judgment of <ORG> and also other relevant authorities, this <ORG> held that the definitions made it clear that to become "goods" an article must be something which can ordinarily come to the market to be bought and sold. (Emphasis supplied). In that view of the matter this <ORG> agreed with <ORG> and dismissed the appeal. Therefore, the first principle that emerges is that excise was a duty on goods as specified in the Schedule. In order to be goods an article must be some- thing which can ordinarily come to the market and is brought for sale and must be known to the market as such. Therefore, the marketability in the sense that the goods are known in the market or are capable of being sold and purchased in the market is essential. This principle was again reiterated by this <ORG> in <ORG>, etc. v. <ORG>., [1968] 3 SCR 21, where this <ORG> held that the gas generated by the appellant companies in that case was kiln gas and not carbon dioxide as known to the market, i.e., to those who deal in it or who use it. Therefore, the kiln gas in question is neither carbon dioxide nor com- pressed carbon dioxide known as such to the commercial community and could not attract duty under Item 14-H of the First Schedule. It was held by this <ORG> that the duty being on the manufacture and not on the sale, the mere fact that kiln gas generated by those concerns was not actually sold did not make any difference if what they generated and used in their manufacturing process was carbon dioxide. Justice <NAME> speaking for the <ORG> at page 31 of the report observed:

" The Act charges duty on manufacture of goods. The word "manufacture" implies a change but every change in the raw material is not manu- facture. There must be such a transformation that a new and different article must emerge having a distinctive name, character or use. The duty is levied on goods. As the Act does not define goods, the legislature must be taken to have used that word in its ordinary, dictionary meaning. The dictionary meaning is that to become goods it must be something which can ordinarily come to the market to be bought and sold and is known to the market. (emphasis supplied). That it would be such an article which would attract the Act was brought out in <CITATION> .,  Suppl 1 SCR 586."

In that view of the matter, the <ORG> came to the conclusion that the gas generated by these concerns was kiln gas and not carbon dioxide as known to the trade, i.e., to those who deal in it or who use it. It must be capable of being sold in the market and known in the market as such. Then only it would be dutiable.

This view was reiterated again in <CITATION> ,  2 SCC 547 where <NAME>, J. as the learned Chief Justice then was, speaking for the <ORG> observed that in order to attract excise duty the article manufactured must be capable of sale to a consumer. The expression "goods manufactured or produced" must refer to goods which are capable of being sold to the consumer. This <ORG> observed as follows:

"It does not seem to us that in order to attract excise duty the article manufactured must be capable of sale to a consumer. Entry 84 of List I of Schedule VII to the Constitu- tion specifically speaks of "duties of excise on tobacco and other goods manufactured or produced in India .... ", and it is now well accepted that excise duty is an indirect tax, in which the burden of the imposition is passed on to the ultimate consumer. In that context, the expression "goods manufactured or produced" must refer to articles which are capable of being sold to a consumer. In Union of India v.

<ORG>, this Court con- sidered the meaning of the expression "goods" for the purposes of the Central Excises and Salt Act , 1944 and observed that "to become 'goods' an article must be something which can ordinarily come to the market to be bought and sold", a definition which was reiterated by this Court in <CITATION> ."

It is necessary in this connection to reiterate the basic fundamental principles of excise. The Judicial Commit- tee of <ORG> in Governor General in Council v. Province of Madras, [1945] F.C.R. 179, this Court observed at page 1287 of the report that excise duty was primarily a duty on the production or manufacture of goods produced or manufactured within the country. This Court again in Re The Bill to Amend S. 20 of the Sea Customs Act, 1878, And Sec- tion 3 of the Central Excises and Salt Act , 1944,  3 SCR 787 at page 822 of the report referring to the aforesaid observations of <ORG> reiterated that taxable event in the case of duties of excise is the manu- facture of goods and the duty is not directly on the goods but on the manufacture thereof. Therefore, the essential ingredient is that there should be manufacture of goods. The goods being articles which are known to those who are deal- ing in the market having their identity as such. Section 3 of the Act enjoins that there shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or 'man- ufactured' in India. "Excisable goods" under section 2(d) of the Act means goods specified in the Schedule to the Central Tariff Act , 1985 as being subject to a duty of excise and includes salt. Therefore, it is necessary, in a case like this, to find out whether there are goods, that is to say, articles as known in the market as separate distinct identi- fiable commodities and whether the tariff duty levied would be as specified in the Schedule. Simply because a certain article falls within the Schedule it would not be dutiable under excise law if the said article is not "goods" known to the market. Marketability, therefore, is an essential ingre- dient in order to be dutiable under the Schedule to Central Tariff Act , 1985.

It appears from the facts as aforesaid before that the crude PVC films as produced by the appellant in this case were not known in the market and could not be sold in the market and was not capable of being marketable. The learned Solicitor General submitted before us that the Tri-

<ORG> was right in considering that as the article fell within the Entry the marketability was irrelevant and the Tri<ORG> was right in not considering whether the articles in question, namely, crude PVC films used in this case, were marketable or capable of being sold and used in the market. Mr <NAME> on the other hand submitted that as it was found that the goods were not marketable by the Appellate Collector in the order of 1974 and no evidence was adduced before the Tri<ORG> to the contrary and the Tri<ORG> refused to consider the question of marketability no useful purpose would be served in remanding the matter to the Tri<ORG>. The appeal should be allowed and no duty should be charged.

As mentioned before, the Appellate Collector has on 14.1. 1974 held that the crude PVC sheets/films which formed the subject-matter of the appeal are manufactured by the appellant for the production of leather cloth in the factory are not marketable as PVC sheets and had allowed the appeal because he found that:

" .... because PVC sheets of the gauges manufactured by the appellants are invariably either embossed or printed or both. The nature of embossing may be with an engraving roll or with a mirror finished roller or a mat finish. The manufacture or PVC sheets marketable as such involves the following processing se- quences, namely: Polyvinyl chloride resin is formulated with plasticizer, colorants, heat stabilizers, etc. and the formulation is thoroughly mixed. When homogeneous, this mix is fed through a two roll mill to give heavy sheet stock, which in turn is fed to the calender, where it is reduced to the desired width, thickness etc. The temperature at which PVC sheets which are marketed as such are passed through the calender is about 178o C (330 - 350x) and the speed of the roller is adjusted accordingly. The speed of the roller and the temperature at which the sheets are passed through the calender are important factors in order to achieve the minimum stand- ard of tensile strength of the sheets. Gela- tion, i.e., the change of state from the liquid to the solid condition that occurs during the heating and/or ageing, when the plasticizer has been absorbed by the resin to an extent resulting in a dry but weak and crumbly mass, and thereafter within normal proportions of resin and plasticizer, this state is attained when the resin particles have become so swollen by diffusion of plasticizer into them that they touch each other, is an impor- tant process in the case of PVC sheets which are marketed as such. As heating progresses the swollen particles begin to weld together, resulting in some degree of strength. After the GEL is formed in such PVC sheets and resins get fused with plastisizer, they are further subjected to the processing of finish- ing, embossing/printing. On the other hand, crude PVC sheets manufactured by the appel- lants for production of leather cloth in their factory are passed through the rollers at a temperature of 130o - 1400 (280 F) and the speed of the roller is, therefore, faster. Due to low temperature and faster speed of the rollers fusion is not completed in such crude plasticizers thus resulting in the tensile strength of such crude PVC sheets which is much less than the tensile strength of the PVC sheets which are marketable as such. The tensile strength of PVC sheets which are marketed as such and the crude PVC sheets which are used by the appellants in their factory for the manufacture of leather cloth are as under:

(1) Marketable PVC sheets Thickness Tensile strength Per cm. sq. in Kgs. Longitudinal Transverse 0.08 mm 239 185 O. 10 mm 230 201 O. 15 mm 268 2 0.20 mm 230 200 (2) Crude PVC sheets Thickness Tensile strength Per cm. sq. kgs. Longitudinal Transverse O. 11 mm 127 98 0.22 mm 144 107 The thickness of crude PVC sheets

of O. 11 mm ultimately comes to 10 mm when it is coated with textile fabrics and rolled. Similarly, the thickness of crude PVC sheets of 0.22mm ultimately comes to when it is coated with fabrics and rolled.

The idea behind producing crude PVC sheets at low temperature and at high speed of the rollers is that when such crude PVC sheets are coated with textile fabrics and passed through a coating machine, high temperature is required to be maintained and the speed at which the rollers move has also got to be slow so that these partially fused crude PVC sheets are eventually fully fused at the time of coating these sheets with textile substrates. No finishing, embossing or printing is done in case of such crude PVC sheets. I, therefore, hold that the crude PVC sheets manufactured by the appellants are used by them in the manu- facture of leather cloth in their factory are not marketable as PVC sheets and as such the same are not liable to duty under Item 15A(2) of the said Schedule."

In view of the Appellate Collector's order dated 14.1.1974 it was the duty of the revenue to adduce evidence or proof that the articles in question were goods. No evi- dence or proof was produced. The <ORG> went wrong in not applying the proper test. The test of marketability or capable of being marketed was not applied by the <ORG>. In that view of the matter that there being no contrary evidence found by the <ORG> in this case subsequent to the finding by the Appellate <ORG>, we are of the opinion that the appeal should be allowed and no excise duty should be charged under section 15A(2) of the Central Excise Tariff on the Crude PVC sheets. In the facts and circumstances of the case, there will be no order as to costs.

T.N.A. Appeal allowed.


JUDGMENT <NAME>, J.

1. The appellant sued to recover money due under a mortgage deed for Rs. 3,000 executed in his favour by defendants 1 to 3 and their father on 13th March, 1917. The seventh defendant was the principal contesting defendant. His defence was in the main founded upon certain events that happened in 1918 and 1920.

2. In August, 1918, a third party who had a money claim against the mortgagors attached some of the mortgaged items, before judgment, pending his money suit against them. On 2nd October, 1918, the mortgagors purported to sell the mortgaged items to the plaintiff under the original of Ex. I partly for the mortgage amount and partly for a further consideration of Rs. 441. When the money decree-holder attempted to bring the properties to sale on the basis of the attachment already made, the plaintiff filed a claim petition (Ex. G) on 29th September, 1920. In this petition she claimed one of two reliefs: she set up her sale and asked that the property should be released from attachment, in the alternative, she asked that even if the sale should be held to be invalid as against the attaching decree-holder, the execution sale should be directed to be held subject to the mortgage in her favour. It appears from the endorsement on Ex. G that the decree-holder himself had referred in his sale proclamation to the mortgage in the plaintiff's favour but suggested that it was supported by consideration only to the extent of Rs. 2,500. When the matter carne on for final disposal the executing Court held that the sale having been effected subsequent to the attachment was invalid as against the decree-holder and it directed the sale to be held subject to the mortgage "referred to by the decree-holder." The property was accordingly sold subject to the mortgage and purchased by the decree-holder himself, who in turn conveyed it to the seventh defendant as the result of a decree for specific performance of an agreement entered into between them. The result of the execution sale was that the plaintiff was deprived of possession of items 1, 2 and 4 to 6 of the plaint schedule and retained possession only of items 3 and 7. The plaintiff accordingly filed this suit for the recovery of the amount due under the mortgage, contending that as the sale had failed, he was entitled to fall back upon the mortgage. The seventh defendant contended that the sale must be deemed to have extinguished the mortgage and that the subsequent events could not revive the plaintiff's claim under the mortgage. The learned Subordinate Judge gave effect to this contention and dismissed the suit. The seventh defendant raised other contentions which formed the subject-matter of the other issues raised in the case. One of them was a plea of partial discharge which forms the subject-matter of the fourth issue. Another was a claim that the plaintiff should give credit as against the mortgage amount and the interest due thereon for the profits realised by him during the time that he had been in possession of the properties sold to him. Finally there was a question of the amount which the plaintiff was entitled to recover in view of the fact that he still retains as vendee two items of the hypotheca.

3. So far as the lower <ORG> dismissed the plaintiff's suit, we are unable to concur in its decision. The decision is mainly based on the judgment of this <ORG> in <CITATION> (1933) 65 M.L.J. 819 : I.L.R. 57 Mad. 195. We shall presently show that that case is distinguishable on its facts; but we think it right to add that we are, with all respect, unable to concur in some of the observations in that case, in the present case, the order Ex. G-1 was clearly an order under Order 21, Rule 62, Civil Procedure Code. As we have already stated, the plaintiff put forward alternative claims in his claim petition - one on foot of the sale in his favour and the other on foot of the mortgage. The <ORG> rejected the claim based on the sale but upheld the claim based on the mortgage. Neither party took steps to impeach that order and it became conclusive between the claimant and the decree-holder in the money suit. The <ORG> accordingly purported to sell only the equity of redemption and the decree-holder (who became the auction purchaser) having purchased only the equity of redemption could convey only that interest to the present seventh defendant. In respect of these facts the position in <CITATION> (1933) 65 M.L.J. 819 : I.L.R. 57 Mad. 195 was very different. The claim petition there was dismissed as preferred too late and as no suit was brought by the claimant under Order 21, Rule 63, Civil Procedure Code, that order became final. It was in those circumstances impossible to imply any adjudication that the claim founded on the mortgage was well founded. The learned Judges had therefore to hold that the reference to the mortgage in the sale proceedings amounted to nothing more than a notice to intending purchasers under Rule 66 of Order 21, Civil Procedure Code. It is on that footing that they held that the <ORG> auction purchaser was not precluded from contesting the existence or validity of the mortgage. On the facts of the present case as we have set out above neither the decree-holder in the money suit nor the <ORG> auction purchaser nor the seventh defendant as the purchaser from him could go behind the order in the claim proceedings which upheld the mortgage claim. We may also point out that in <CITATION> (1933) 65 M.L.J. 819 : I.L.R. 57 Mad. 195 , the learned Judges laid stress on the fact that even in the claim petition the claim based on the mortgage was never put forward and that the claimant insisted that the mortgage had been discharged by the sale deed in his favour. The conclusion reached in that case that the mortgage had been extinguished has largely been based upon this ground. That ground also will not avail the seventh defendant in this case because as already stated the claim was put forward both on the mortgage and on the sale. The portion of the judgment with which we are unable to agree is the interpretation which the learned Judges have placed on Section 101 of the Transfer of Property Act. With all respect we think that in a case like the present it must be presumed that it is to the advantage of the mortgagee to keep his interest as mortgagee and his interest as purchaser of the equity of redemption distinct because of the intervening attachment against which his sale cannot be effective.

4. The question in this class of cases is not whether the sale is not effective as between the vendor and the vendee, but whether there being the possibility of the sale proving ineffective as against a third party, it is not to the interest of the mortgagee not to treat his mortgage, as extinguished by the sale. In the application of this principle of presumed intention, it makes no difference whether the third party is allowed to claim in preference to the sale, on the ground of his being a subsequent encumbrancer or on the ground of his being an attaching decree-holder. If the decree in pursuance of which the attachment was made is paid off, the sale will of course stand as between the vendor and the vendee and the mortgage will be satisfied. But if in pursuance of the attachment the properties are brought to sale in execution, the vendee is deprived of his rights under the sale to the extent to which the properties are sold in execution and we think that there is no meaning in saying that even to this extent, the sale is operative as between the vendor and the vendee. This seems to us to be the principle of the decision in <CITATION> (1882) I.L.R. 8 Cal. 530, which we are prepared to follow. The learned Subordinate Judge distinguished that case as a decision under the Civil Procedure Code of 1882 according to which he thought that a transfer pending an attachment was wholly void whereas under the present Code, it is voidable only as against the rights enforceable under the attachment. This distinction drawn by the learned Judge is obviously erroneous. The law has always been that transfer pending an attachment is void only as against the rights enforceable under the attachment.

5. The learned Counsel for the respondent drew our attention to a decision of <ORG> in <CITATION> (1922) 20 A.L.J. 151 : 66 I.C. 203. With all respect, we are unable to follow that decision. The sale was there made to the father of the mortgagee and the father was a member of a joint Hindu family with the mortgagee. The sale deed directed that a portion of the consideration should be applied by the vendee to discharge the mortgage bond in favour of his son. The learned Judges observed that the father and the son must be treated as virtually one and the same person and that the direction to the father to pay off the mortgage must be treated as an extinction of the mortgage debt. We do not find any reference in the judgment to the principle of Section 101 of the Transfer of Property Act. In the leading case in <NAME> v. <NAME> (1884) L.R. 11 I.A. 126 : I.L.R. 10 Cal. 1035 (P.C.), their Lordships of <ORG> referred to the practice prevailing in England of circumventing the doctrine of <NAME> v. <NAME> (1817) 3 Mer. 210 : 36 E.R. 81, by taking a conveyance of the equity of redemption in favour of trustees for the benefit of the prior mortgagee and added that in India it was unnecessary to resort to this conveyancing device and as a rule of equity the principle of presumed intention to keep the mortgage alive might be applied. It seems to us that what was done in the Allahabad case was practically the conveyancing device referred to by their Lordships of <ORG> in <NAME> v. <NAME> (1884) L.R. 11 I.A. 126 : 126 I.L.R. 10 Cal. 1035 (P.C.) and if even under the decision in <NAME> v. <NAME> (1817) 3 Mer. 210 : 36 E.R. 81, such a device would have prevented the extinction of the mortgage, we venture to think with all respect that it would be a fortiori so in this country.

6. Though Section 101 of the Transfer of Property Act has generally been invoked in cases where the rights of mesne encumbrancers come up for decision, the principle of the section is not limited to those cases. It only lays down a general rule of presumed intention and where the later conveyance will be inoperative as against any intermediate right whether founded on an encumbrance or on an attachment, the principle must be held equally to apply. In <NAME> v. <NAME> (1901) 12 M.L.J. 73 : L.R. 29 I.A. 9 : I.L.R. 29 Cal. 154 (P.C.), this question had to be considered in respect of the effect of an intermediate attachment, as in the present case, and their Lordships observed (at p. 164):

It is idle to contend that there was any intention to extinguish the old mortgages for the benefit of the execution creditor or any purchaser at the sheriff's sale.

7. We must accordingly hold that the plaintiffs' claim under the suit mortgage has not been extinguished by the subsequent sale and that it is enforceable in the events that have happened.

8. Mr. <NAME> next contended that according to the proper construction of the order (Ex. G-1) the mortgage must be held to be valid only to the extent of Rs. 2,500. We do not think that is the effect of the order. The only point then decided was that as between the sale and the mortgage the <ORG> upheld the mortgage and negatived the claim under the sale. This is made clear by the use of the words 'mortgage referred to by the decree-holder' instead of words like 'mortgage admitted by the decree-holder'. The <ORG> has now found that the mortgage was fully supported by consideration and nothing has been shown against the correctness of that finding.

9. It remains to deal with two other questions raised by Mr. <NAME> on behalf of the seventh defendant. He first contended that the lower <ORG>'s finding on the fourth issue was not in accordance with the evidence and that the issue should have been found in his client's favour. This relates to a plea of discharge, it being the seventh defendant's case that in or about April, 1925, he paid to the plaintiff a sum of Rs. 1,950 in full quit of so much of the mortgage debt as would be recoverable from the properties agreed to be purchased by the seventh defendant. Though the seventh defendant is not able to fix the exact date of payment, he states that the agreement between himself and the <ORG> auction purchaser was in February, 1925, and that the payment to the plaintiff was about two months later. Though the learned Sub-Judge has not discussed in detail the evidence bearing upon this question, he has clearly indicated that he was not impressed by the evidence adduced in support of the plea of discharge. We have been taken by Mr. <NAME> through the relevant portions of the oral evidence, and we see no reason to come to a different conclusion. The seventh defendant has not thought fit to take any voucher for the payment of such a large sum of money nor has he even cared to insist upon the payment being endorsed on the mortgage bond. Even according to his version, the plaintiff promised to make the endorsement in due course and yet, after the plaintiff had failed to do so for more than a year, the seventh defendant never even thought fit to send any notice to the plaintiff complaining of her conduct. Further, the seventh defendant's evidence as to the circumstances under which the alleged payment was made and the manner in which he found the money to make the payment, is not at all convincing. It is very doubtful if at or about this time he had the money to pay at all. <NAME> whose help has been availed of to support this story apparently because he had to receive some money from the plaintiff, is the son-in-law of the seventh defendant's brother and assuming it to be true, that he had to receive a sum of Rs. 200 from the plaintiff and did receive it about this time, we are not, by any means satisfied that there is any connection between that transaction and the alleged payment by the seventh defendant to the plaintiff. The remaining witnesses who support this story of payment do not really seem to have had anything to do with the transactions between the plaintiff and the seventh defendant and, as one of them admits, it is probably the seventh defendant's local influence that has enabled him to get these witnesses to support his story. We must accordingly find against the seventh defendant on his plea of alleged discharge.

10. The second issue raised the question of the accountability of the plaintiff for the profits received by her from the lands which had been purchased by the seventh defendant. The law on this point is not, by any means, settled. We may observe in passing that the observations in <CITATION> (1917) I.L.R. 41 Mad. 513 are not wholly reconcilable with the view taken in <CITATION> (1937) 46 L.W. 332. As we do not propose to decide the question as an abstract question of law in this case, we do not think it necessary to refer to the cases in detail. We only wish to guard ourselves against being understood as concurring in all the observations in <CITATION> (1937) 46 L.W. 332. For instance, the statement that a purchase by a prior mortgagee in execution of a decree obtained in his suit without impleading the puisne mortgagee therein is a nullity and will not be effective even to pass the title of the mortgagor as against the puisne mortgagee seems to us too broadly stated. In the circumstances of the present case and in view of the fact that a petition has been filed before us on behalf of the seventh defendant for relief under the Agriculturists' Relief Act (IV of 1938), we think it best to hold that no accounting is necessary and it would be more equitable to say that after 23rd October, 1920, the plaintiff is not entitled to claim interest as against the seventh defendant to the extent of the proportion of the mortgage debt recoverable from the properties in the seventh defendant's possession. In this view, there is no occasion in our opinion, to deal with the petition under Madras Act IV of 1938 either. As the plaintiff has become the owner of the equity of redemption in some of the items of the mortgage property, the mortgage must be held to have been split up and the plaintiff will be entitled to a decree only for a proportionate share of the mortgage debt as against the properties purchased by the seventh defendant.

11. The parties are not able to agree before us as to the proportion. The lower <ORG> will ascertain the amount due for principal and interest as per terms of the mortgage bond, on 23rd October, 1920, the date on which the seventh defendant's vendor became the <ORG> auction purchaser; out of that amount, there will be a decree for sale of the properties purchased in that <ORG> sale by the seventh defendant's vendor for an amount bearing the same proportion to the mortgage debt due on that date as the said properties bear to the entirety of the mortgaged properties valued as on the date of the mortgage.

12. The appeal is allowed and the case will be sent back to the lower Court to give effect to the above directions and pass a preliminary decree for sale for the amount ascertained as above. The plaintiff and the seventh defendant will pay and receive proportionate costs both here and in the Court below.