Appeal No. 1713(NT) of 1973.

From the.

Judgment and Order dated 6.1.1971 of the Allahabad High Court in Wealth Tax Reference No. 285 of 1965 124 S.C. Manchanda and Ms. A. Subhashini for the Appellant.

Respondent in person.

(Not present ) The Judgment of the Court was delivered by SABYASACHI MUKHARJI, J.

The appeal under section 29(1) of the (hereinafter called the Act) is directed against the judgment and order of the High Court of Allahabad dated 6th of January 1971.

The questions involved before the Allahabad High Court in the reference under section 27(1) of the Act were as follows: (1) Whether, on the facts and in the circumstances of the case, the Tribunal right ly held that the assessee did not make valid gifts aggregating Rs. 1,50,000 on 1.1.

1957? (2) Whether, on the facts and in the circumstances of the case, the Tribunal right ly held that the assessee did not validly assign Rs. 1,50,000 in favour of his sons and grand sons by his letter dated 1.1.

1957? (3) Whether, on the facts and in the circumstances of the case, the Tribunal tight ly held that the sum of Rs. 1,50,000 was properly included in the assessee 's net wealth? (4) Whether, on the facts and in the circumstances of the case, the Tribunal right ly held that the assessee did not make valid gifts aggregating Rs.67,560/ (5) Whether, on the facts and in the circumstances of the case, the Tribunal right ly held that the sum of Rs.67,560/12/ was rightly included in the net wealth of the assessee? The case relates to the assessment year 1957 58 and the relevant date of valuation was 31st March, 1957.

The asses see, Dr. R.S. Gupta had maintained an account in the books of Messrs. Tika Ram and Sons Pvt.

On 1st January, 1957, the account showed a credit of Rs. 1,50,740.

On that day, the assessee had addressed a letter to the Company stating that he had decided to gift away for love and affection various sums to the following persons: 125 Ved Prakash Gupta .

Rs.25,000 Om Prakash Gupta .

Rs.25,000 Hari Prakash Gupta .

Rs.50,000 Pravin Kumar Gupta .

Rs. 50,000 By that letter the assessee had directed the Company to debit his account to the extent of Rs. 1,50,000 and credit the respective amounts in the names of the aforesaid per sons.

It appears further that copies of this letter were sent to one Om Prakash Gupta and Ved Prakash Gupta.

There was no dispute that instructions of the assessee were car ried out by the Company and relevant debit and credit en tries were made in the respective accounts.

On the same day i.e. on ist January, 1957, Om Parkash Gupta wrote to the assessee, his father, thanking him for the gift of Rs.25,000 made in his favour and the gift of Rs.50,000 in favour of his son Pravin.

A similar letter was written by Ved Prakesh thanking the assessee, his father, for the gift of Rs.25,000 made to him and Rs.50,000 gifted to his son.

It must be mentioned, however, that the company i.e. Messrs Tika Ram and Sons.

Ltd. was stated to be running an oil mill and carrying on business as grain tillers.

contractors and brick kiln owners.

It was also stated to be carrying on business of advancing money and taking money on loan when necessary.

But it appears that it was admitted position that Tika Ram & Sons had a cash balance of Rs.4000 only on 1.1.1957 and it did not have any overdraft facilities with any bank.

The respective donees were stated to have later on withdrawn amounts from the amounts so transferred to their accounts.

The assessee contended that a total sum of Rs. 1,50,000 was validly gifted by him to his sons and grand sons and hence the amounts had been wrongly included in his net wealth by the Income Tax Officer and the Appellate Assistant Commissioner.

It was his contention that Tika Ram & Sons carried on the business of banking and hence the gifts were valid.

But there was no evidence that Tika Ram and Sons were carrying on any banking business.

The Tribunal held that they were not carrying on banking business.

The main question therefore that falls for consid eration is whether gifts in question made by transfer en tries in the books of debtor company were valid gifts even though the debtor company was not carrying on business of banking and had no cash in hand for the amount in question on that date.

Gift is defined in section 122 of the as transfer of certain existing mova ble or immovable property made voluntarily and without consideration by 126 one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee.

Section 123 of the said Act deals with how transfers are effected and stipulates, inter alia, that for the purpose of making a gift of movable property as in this case, the transfer must be effected either by a registered instrument signed by the donor and attested or by delivery.

Such delivery may be made in the same way as goods sold may be delivered.

The next contention was regarding the inclusion of net wealth a sum of Rs.67,560/12/ standing to the credit of the assessee in the books of M/s Pearls & Beads.

The assessee claimed to have gifted the said amounts by transfer entries in the books of M/s Pearls & Beads on 30th March, 1957.

No letter as in the previous case was addressed by the assessee but only oral instructions were said to have been given.

The Tribunal held that there was no valid gifts.

There was no evidence, it appears, that the said sum was available with the said firm of M/s Pearls & Beads.

The High Court in view of the decision of the Division Bench of the Allahabad High Court in the case of Gopal Raj Swarup vs Commissioner of Wealth tax, Lucknow, answered the first question in the negative and so far as the second question is concerned, it declined to answer as it did not arise in view of the answer given to the first question and the questions Nos.

3,4 and 5 were answered in the negative.

Aggrieved by the said decision, the revenue has come up in appeal.

In order to constitute a valid gift there must be an existing property.

In case of entries in the books of ac count by credit and debit, the sums should be available on the date of gift in the account of the firm whose accounts are said to be credited or debited.

In the case of banking companies or other firms and companies who have overdraft facilities, even if the sums are not in credit of the donor and are not with such companies or firms, gifts might be possible by adjustment of the book entries.

But in the cases of non banking companies or firms, if these companies or firms do not have overdraft facilities, it is not possible to make valid gift if sums or funds are not available.

This question has been examined by the various High Courts.

It is possible in certain circumstances for a donor to make a valid gift by instructing a firm or a company or a H.U.F. in which the donor has an account to give effect to the gift by debiting his account and crediting the account in the name of the donee.

But in such cases 127 merely books entries would not suffice.

The circumstances must be such as to make it clear that there were sufficient funds at the disposal of the donor by reason of which he could make the gift by such book entries.

The firm in which the donor may have account may or may not have sufficient cash balance but it must have sufficient provision for overdraft with the bank on the basis it could honour in structions given by the assessee.

This position of law has been referred to and reiterated by the Bench decision of the Delhi High Court in the case of India Glass Agency vs Com missioner of Income Tax, New Delhi, Justice Ranganathan of the Delhi High Court after referring to several authorities has observed that book entries may be sufficient only when circumstances make it clear that the gift was genuine and the firms where accounts transfer are effected must have sufficient cash in hand or sufficient provision for overdraft facility upon the basis of which it would honour the instructions given by the assessee.

The assessee must also have sufficient credit balance to enable him to make the gift.

Reference may also be made for this proposition to the decision of the Delhi High Court in New India Colour Co. vs Commissioner of Income:Tax, New Delhi, The effect of the two aforesaid decisions of the learned fudges of the Delhi High Court indicates that in case there was not sufficient cash balance from out of which the amount gifted could be physically given to the donee, more entries in the books of account in the form would not constitute delivery of possession over the gifted property to the donee and gift in such case will not be valid.

The position, however, might be different if such firms or companies or H.U.F. in whose accounts gifts are effected have overdraft facilities.

The Calcutta High Court had occasion to discuss this aspect in the case of Commissioner of Income Tax, West Bengal 111 vs Ashok Glass Works, There it was held on facts that the entries had been made contemporane ously showed that the transaction was genuine and there was no suggestion that the interests which were credited in the accounts of the minor donees by the firm which carried on money lending business also were fictitious.

The Tribunal therefore, it was found, tightly held that the gifts were valid and the interest paid in respect of the accounts standing in the name of the donees was allowable as a deduc tion in the hands of the assessee firm.

The Calcutta High Court had to consider this in the case of Commissioner of Gift Tax, West Bengal 111 vs Tara chand Maghraj, There the High Court after discussing various decisions 128 including certain decisions of the Allahabad High Court which we shall presently note and the provisions of section 122 of the , and the Sale of Goods Act.

held that under section 123 of the , in case of gift of movable property, the transfer may be effected by delivery.

Such delivery may be in the same way as goods sold may be delivered.

Section 33 of the Sale of goods Act permitted the parties to deliver by any manner or method which the parties agreed would be treated as delivery or which had the effect of putting the goods in the possession of the buyer.

In that case, it was found that the effect of the transaction in that case was to put the amounts in the possession of the assessee who was authorised to hold the amounts on behalf of the donees which resulted in a delivery of the amounts within the meaning of the Sale of Goods Act.

The Court, however, pointed out that it was held that there was no valid gift on the date of the entries, then it could not be held that, subsequently, when the money was transferred by further entries in the same books, it resulted in a valid gift.

In the instant case before us and we have noted and we reiterate only a sum which could be taken by the donees was Rs.4000 in Messrs Tika Ram & Sons Pvt. Ltd. and there was no overdraft facility of Tika Ram & Sons with any bank.

In that view of the matter, there was no existing goods to be part ed.

Before the Bombay High Court, in the case of Chimanbhai Lalbhai vs Commissioner of Income Tax (Contral), Bombay, there were entries in the books of a Banking Company and gifts were held to be valid.

In the case of Commissioner of IncomeTax, Ahmedabad vs Digvijaysinghji Tin Factory, , on the contrary it was held that the gifts were valid though not sufficient cash with firm avail able but proper book entries were made.

See also the cases of Commissioner of Income Tax, Bombay City H vs Popatlal Mulji, and also in the case of Addl.

Commis sioner of Income Tax, Poona vs Dharsey Keshavji, 143 I.T.R. 509 and Commissioner of Income Tax, Poona vs Devichand Uttamchand, In the background of facts of those cases the Bombay High Court held that the gifts were valid.

In the case of Baliram Mathuradas (By his legal Heir, Madanlal Paliram) vs Commissioner of Income Tax, Bombay City II, the Bombay High Court had occasion to consider this question and held that there was no evidence of acceptance.

It was held by the Bombay High Court that there was no valid gift.

Similarly, in the case of Virji Devshi vs Commissioner of Income Tax, Bombay, the Bombay High Court held 129 "Just as the entries in his own account book by a person would not constitute a valid transfer even the entries in the accounts of the firm would not be sufficient." The Madras High Court had also taken divergent views.

It may be noted that in E.M.V. Muthappa Chettiar vs Commission er of Income Tax, Madras, the Madras High Court held that mere entries were not enough to constitute valid gifts particularly when gift of fund continued to be used in the donors ' business.

The Madras High Court in the case of Mrs. Ida L. Cham bers and Three Others vs Kelland Huxford Chambers, was dealing with a case where C, proprietor of a business who had invested a large amount of capital in it, caused entries to be made in his account books crediting his wife and certain other members of his family with sums which were debited to his capital account.

Separate accounts in their names were opened in the books and in their accounts the credits were entered.

The entries were followed up by letters to the effect, inter alia, that the sums were en tirely in the nature of personal gifts from C and would bear interest payable half yearly.

C was not in a position to make gifts in cash of the amounts credited in favour of his wife and relatives.

He had large assets but these were represented by land, buildings, plant, machinery and stock in trade.

Interest on the amounts was also credited in the accounts regularly for some time, until a bank from which C had obtained an overdraft objected to such crediting of interest.

C 's wife withdrew various sums of money from time to time from the interest account and whenever C desired to retransfer amounts to his capital account he obtained let ters of consent from her.

The principal amounts credited were shown as 'deposits" in the balance sheets of the busi ness for some years and were thereafter referred to as "unsecured loans".

On a question arising whether there was a valid gift or trust in respect of the said amounts, it was held by the Division Bench of the Madras High Court that there was no completed gift of the principal amounts as there was no registered deed and as there was no delivery of the property.

Though C had the intention of making gifts, the entries in the books did not complete the gift.

It was further held that there was no trust either and that there was nothing in the acts or conduct of C to show that he intended to create a trust or to constitute himself a trus tee.

Where moneys were actually paid by way of interest on the alleged gifts, those became completed gifts.

This deci sion went up to the Privy Council but on the aspect of gift, no opinion was expressed by the Judicial Committee.

The decision of the Privy Council is reported in ILR 1944 at page 617. 130 The Punjab and Haryana High Court in Balireal Nawal Kishore vs Commissioner of Income Tax, Punjab, held that the credit cash balance of the donor was Rs.81,000 and cash balance with firm was only Rs.4,299 but the unuti lised overdraft of the firm was Rs. 1,27,088.

The gift was held to be valid.

In Sukhlal Sheo Narain vs Commissioner of Wealth Tax, Haryana, the Punjab & Haryana High Court had dealt with a case where the father had gifted Rs.84,000 i.e. Rs.28,000 to each of his sons.

Father had complete control and dominion over that amount.

There was no evidence that gifts were accepted on behalf of minors.

It was held by the High Court that gifts were invalid.

Rangoon High Court in Abba Dada and Company vs Commis sioner of Income Tax, Burma, held that the mere book entries were not sufficient in that case to constitute valid gift.

The Rajasthan High Court in K.P. Brothers vs Commission er of Income Tax, New Delhi, held that there was a valid gift but in that case it was a banking company.

The Allahabad High Court in the case of Commissioner of Income Tax, U.P.v. Smt.

Shyamo Bibi, had to deal with a case where the credit balance of 2 1/2 lakhs was with the firm.

Balance of the firm was only Rs. 15.

Memo of gift recorded on stamp paper.

It was held that the gift was not valid.

In Commissioner of Wealth Tax vs Gulab Rai Govind Pra sad, there was an alleged gift of Rs.2 lakhs to minor son by book entries.

Cash Balance was only Rs.7626.

No interest was credited to donee 's account.

No acceptance was produced.

Property purchased out of gift and income was used by the family.

It was ' held that there was no valid gift.

But the Allahabad High Court in the case of Gopal Raj Swarup vs Commissioner of Wealth Tax, Lucknow (supra) had to deal with the wealth tax.

There the assessee was the karta of a Hindu undivided family.

On 20th November, 1956, the assessee purported to transfer Rs.50,000 from his account to the account of his son.

The transfer was effected by debit ing the assessee 's personal account in the books of the Hindu undivided family with Rs.50,000 and crediting the same in the personal account of his son.

On 20th November, 1956, the assessee had a substantial credit balance exceeding the sum of Rs.50,000 which he purported to give to his son.

The adjustment of entries made in the books of account was in pursuance of a letter 131 written by the assessee to the said Hindu undivided family on the same date.

The Wealth Tax Officer and the Income Tax Officer rejected the contention that he made a gift of Rs.50,000 to his son and this amount should be excluded from his taxable net wealth.

The Tribunal never doubted that the transaction in question was bona fide but dismissed the appeal of the assessee on the sole ground that the transfer evidenced by the entries in the books of account and by the declaration, did not operate to bring into existence a valid gift.

It was held on the facts of that case that the asses see had made a valid gift of the value of Rs.50,000.

In the impugned judgment, the Allahabad High Court had followed the said decision.

The said decision was also followed in Bhau Ram Jawaharmal vs Commissioner of Income Tax, U.P., in Gopal Jalan vs Commissioner of Income Tax, U.P., and in Phool Chand Gajanand vs Commis sioner of Income Tax, U.P., We are of the opinion that each case must be decided on the facts of that case.

Where the assessee has a credit amount with firm or with family or with a banking company and that sum is available to that firm or the company or H.U.F. on the date of the gift, then a valid gift by book entries might be possible but where a sum was not available with the firm or the family or a company which was not a banking company or which had no overdraft facility, by mere book entries even though there was acceptance of that gift by the donee would not effectuate a valid gift.

The Court in Controller of Estate Duty, Punjab, Haryana, J. & K., H.P., and Chandigarh vs Kamlavati, had to deal with gift by way of transfer in the account books.

There this Court held that when the property was gifted by a donor the possession and enjoyment of which was allowed to a partnership firm in which the donor was a partner, then the mere fact of the donor sharing the enjoy ment or the benefit in the property was not sufficient for the application of section 10 of the , until and unless such enjoyment or benefit was clearly referable to the gift, i.e. to the parting with such enjoy ment or benefit by the donee or permitting the doner to share them out of the bundle or rights gifted in the proper ty.

If the possession, enjoyment or benefit of the donor in the property was consistent with the facts and circumstances of the case other than those of the factum of gift, it could not be said that the donee had not retained the possession and enjoyment of the property to the entire exclusion of the donor, or, to the entire exclusion of the donor in any benefit to him by contract or otherwise.

There, M, the deceased, was a 132 partner in a firm having a half share in the partnership.

On 27th March, 1957, M made a gift of Rs. 1 lakh to his son, L, and of Rs.50,000 to his wife, K, by making debit entries in his account in the firm and corresponding credits to the accounts of L and K. With effect from 28th March, 1957, L was taken as a partner in the firm by giving L one forth share out of the half share of M. M died on 9th January, 1962.

The Tribunal held that section 10 of the was not attracted and the sum of Rs. 1,50,000 could not be included in the property passing on the death of M; and the High Court, on a reference, affirmed the viewes of the Tribunal.

This Court held affirming the decision of the High Court that section 10 did not apply to the gifts of Rs. 1 lakh and Rs.50,000 made by the deceased to his son and to his wife respectively.

But in that case, the question in the present form in which it arises before us in the instant case did not arise.

This Court in the case of Badri Prasad Jagan Prasad vs Commissioner of Income Tax, U.P., (judgment by one of us) had occasion to refer to the effect of book entries but this question which is present before us in the present appeal was not before this Court in that case.

No useful purpose, therefore, will be served by reference to that case.

In that view of the matter, except to the extent indi cated above, the entries in the books of account could not effectuate gifts.

As we have discussed the facts on the principles, we are of the opinion that the High Court was in error in answering the question in the manner it did.

The order and judgment of the High Court are therefore set aside.

All the questions are answered in favour of the revenue.

As the respondent is not appearing, there will be no order as to costs.

N.P.V. Appeal allowed.

Summary: The Income Tax Officer included in the net wealth of the respondent assessee for the assessement year 1957 58, two sums, viz., Rs. 1,50,000 and Rs.67,560/12/ which the asses see claimed to have gifted.

Summary: It is stated that on January 1, 1957 the respondent assessee, by a letter directed a company in which he maintained an account, to debit his account to the extent of Rs. 1,50,000 and credit in the names of his two sons and grandsons various sums, as he had decided to give away these amounts to them out of love and affection.

Summary: The company carried out the instructions and relevant debit and credit entries were made in the respective accounts.

Summary: On the same day, by two separate letters, the gifts were ac cepted by the sons and later on these amounts were withdrawn by the respective donees.

Summary: In the case of second gift, oral instructions were given for transferring the amounts stand ing to his credit.

Summary: The respondent assessee having failed before the Income Tax Officer and the Appellate Assistant Commissioner, ap pealed to the Income Tax Appellate Tribunal and contended that the first company was carrying on the business of banking and hence the gifts in question were valid, and that the Income Tax Officer and the Appellate Assistant Commis sioner had wrongly included these amounts in his net wealth and in the case of second gift, the assessee claimed that the amounts were gifted by him by transfer entries.

Summary: The Tribunal found that there was no evidence that the first company was carrying on any banking business, and in the case of second gift, the sum was available with the company.

Summary: It, therefore, held that the first company was not carrying on banking business, and in the 122 second case, there was no valid gift.

Summary: It, however, referred the matter to the High Court.

Summary: The High Court held that the Tribunal was not right in holding that the assessee did not make valid gifts and in holding that the amounts were rightly included in the net wealth of the assessee.

Summary: Allowing the appeal by the Revenue, this Court, HELD: 1.

Summary: In order to constitute a valid gift there must be an existing property.

Summary: In case of entries in the books of account by credit and debit, the sums should be available on the date of gift in the account of the firm whose accounts are said to be credited or debited.

Summary: In the case of banking companies or other firms and companies who have overdraft facilities, even if the sums are not in credit of the donor and are not with such companies or firms, gifts might be possible by adjustment of book entries.

Summary: [126E G] 2.

Summary: It is possible in certain circumstances for a donor to make a valid gift by instructing a firm or a company or H.U.F., in which the donor has an account to give effect to the gift by debiting his account and crediting the account in the name of the donee.

Summary: But in such cases merely book entries would not suffice.

Summary: The circumstances must be such as to make it clear that there were sufficient funds at the disposal of the donor by reason of which he could make the gift by such book entries.

Summary: The firm in which the donor may have account may or may not have sufficient cash balance but it must have sufficient provision for overdraft with the bank on the basis of which it could honour instructions given by the assessee.

Summary: [126H;127A B] 3.

Summary: Each case must be decided on the facts of that case.

Summary: Where the assessee has a credit account with a firm or with a family or with a banking company and that sum is available to that firm or the company or H.U.F. on the date of the gift, then a valid gift by book entries might be possible.

Summary: But where a sum was not available with the firm or the H.U.F. or a company which was not a banking company or which had no overdraft facility, by mere book entries, even though there was acceptance of that gift by the donee a valid gift would not be effectuated.

Summary: [131D E] 4.

Summary: In the instant case, the entries in the books of account could not effectuate valid gifts.

Summary: The only sum which could be taken by the donee was Rs.4,000 in the case of the first company, which had no 123 overdraft facility with the bank.

Summary: Thus, there was no exist ing goods to be parted.

Summary: The High Court was, therefore, in error in answering the questions against the Revenue.

Summary: [132E F] [Appeal allowed.

Summary: Order and Judgment of the High Court set aside.] Gopal Raj Swarup v, Commissioner of Wealth tax, Lucknow, 12; Indian Glass Agency vs Commissioner of Income Tax, New Delhi, ; New India Colour Co. vs Commissioner of Income Tax, New Delhi, ; Commissioner of Income Tax, West Bengal 111 vs Ashok Glass Works, ; Commissioner of Gift Tax, West Bengal 111 vs Tarachand Meghraj, ; Chimanbhai Lalbhai vs Commissioner of Income Tax (Central), Bombay, 34 I.T.R. 259; Commissioner of Income Tax, Ahmedabad vs Digvijay singhji Tin Factory, ; Commissioner of Income Tax, Bombay City I1 vs Popatlal Mulji, ; Addl.

Summary: Commissioner of Income Tax, Poona vs Dharsev Keshavji, ; Commissioner of Income Tax, Poona vs Devinchand Uttamchand, ; Baliram Mathuradas (By his Legal Heir, Madanlal Paliram) vs Commissioner of Income Tax, Bombay City H, ; Virji Devshi vs Commissioner of Income Tax, Bombay, ; E.M.V. Muthappa Chet tiar vs Commisioner of Income Tax, Madras, ; Mrs. Ida L. Chambers and Three Others vs Kelland Huxford Chambers, ; Balimal Nawal Kishore vs Commis sioner of Income Tax, Punjab, ; Sukhlal Sheo Narain vs Commissioner of Wealth Tax, Haryana, 89 I.T.R. 157; Abba Dada and Company vs Commissioner of Income Tax, Burma, ; K.P. Brothers vs Commissioner of In come tax, New Delhi, ; Commissioner of Income Tax, U.P.v. Smt. 'Shyamo Bibi, ; Commissioner of Wealth Tax vs Gulab Rai Govind Prasad, ; Bhau Ram Jawaharmal vs Commissioner of Income Tax, ' U.P., ; Gopal Jalan vs Commissioner of Income Tax, U.P., ; Phool Chand Gajanand vs Commissioner of Income Tax, U.P., ; Controller of Estate Duty, Punjab, Haryana, J. & K., H.P. and Chandigarh vs Kamlavati, , referred to.


ivil Appeals No. 625630 of 1967.

Appeals by special leave from the judgment and order dated ' March 6, 1967 of the Orissa High Court in O.J.C. Nos.

495 and 496 of 1966, and 3, 4, 27 and 28 of 1967 respectively.

C.K. Daphtary, Attorney General, N.S. Bindra, G. Rath and R.N. Sachthey, for the appellant (in all the appeals).

Sarjoo Prasad and S.N. Prasad, for respondents Nos. 8, 23, 8 ' and 5 (in C.As.

Nos. 6.25; 627,629 and 630 of 1967 respectively).

, N.M. Patnaik and Vinoo Bhagar, for respondents Nos.

5 to 7 (in C.As.

625 and 629 of 1967) and respondents Nos. 20 to 22 (in C.A. No. 627 of 1967).

156 The Judgment of the Court was delivered by Hegde, J.

These cases are the outcome of an unfortunate conflict between the High Court and the government of Orissa.

The Orissa Superior Judicial Service (senior branch) is a combined cadre consisting of officers holding purely judicial posts as well as posts which are essentially administrative in character.

It consists of eight district and sessions judges, two additional district and sessions judges, secretary to government in law department, superintendent and legal remembrancer, law department, deputy secretary to government in the law department, member administrative tribunal and the Registrar of the Orissa High Court, in all 15 in number.

All these officers are the members of the Orissa '"Judicial Service" within the meaning of that expression in article 236(b) of the Constitution.

Out of these, the district and sessions judges and additional district and sessions judges were discharging purely judicial functions.

In view of article 229 of the Constitution.

the power to appoint the Registrar of the High Court is exclusively that of the Chief Justice.

Neither the High Court as such nor the Governor has any hand in his appointment.

The power to appoint the secretaries to the government is that of the Governor.

Under the Government of India Act 1935, the power to transfer a district judge from one post to another was that of the Governor though that power was always exercised in consultation with the High Court and by and large on the recommendation of the High Court.

In Orissa, as in most of the other States, that practice continued till the decision of tiffs Court in the State of Assam vs Ranga Mahammad and others(1).

Obviously when the Governor promulgated the Orissa Superior Judicial Service Rules 1963, he proceeded on the basis that the power to transfer the district judges and addl.

district judges, from one post to another whether as a judge or to one of the posts in the secretariat was in his hands.

It appears that for some time past there were differences between the High Court and the government about the posting of some of the judicial officers.

The High Court was anxious that a judicial officer occupying one of the administrative posts enumerated above, should not, in the interest of judicial work, continue in that post for an unduly long time.

The High Court insisted that ordinarily judicial officers should: not hold those posts for more than three years.

The High Court was repeatedly requesting the government to send back judicial officers working in administrative posts as district judges or as addl.

district judges as the case may be, after they had held those posts for three years or more.

But those requests were not respected.

On that account, there appears to have been some friction between the High Court and the gov ernment for some years past.

(1) ; 157 Shri B.K. Patro one of the district and sessions.

judges, was posted as superintendent and legal remembrancer in March 1962 Shri K.K. Bose, addl.

district and sessions judge, was posted as joint secretary in the law department in the same month.

He worked in that capacity till February 1965.

Thereafter, he was, posted as superintendent and legal remembrancer.

Shri P.C. Dey.

a district and sessions judge, was posted as member sales tax tribunal on 31 1 62.

That was a non cadre post.

In February 1965, the High Court took a policy decision to the effect that as a general rule, judicial officers working in special posts whether cadre or non cadre, outside their regular line, should be recalled to the regular line after the completion of three years.

in the interest of the service as well as the officers, so that "Officers may not deteriorate by remaining out of touch from regular judicial work for continuously long periods and the service will not suffer by being deprived of the services of senior and experienced officers in manning the posts in the regular judicial line.

" It is of utmost importance that judicial officers should not be kept away from judicial work for a long time lest they should lose touch.

with judicial work and even more than that should become indifferent to judicial approach.

The above.

policy decision was duly communicated to the government.

The government by its letter of April 2, 1965, intimated that it had no objection to adhere to the principle of three years service in an appointment at a particular station against a special post.

But when it came to the question of implementing that policy, the government was reluctant.

Every time the High Court requested the government to release the three officers mentioned above for 'being posted as district and sessions judges or addl.

district and sessions judges as the case may be, the government turned down those requests on one ground or the other.

We do not think that it was proper for the government to do so.

But at that stage the High Court felt helpless as it was under the impression that under law the Governor was the sole authority to effect the. necessary transfers.

On September 21 1966, this Court rendered its decision in Ranga Mahammad 's(1) case.

Therein this Court held that power to transfer judges presiding over courts vested with the High Court under article 235 of the Constitution.

Soon after that decision was rendered and without any further dialogue with government in the ' light of that decision, the High Court took the precipitate step of transferring the aforementioned officers to other posts and in their place posted officers who were doing judicial work till then.

By its order dated October 10, 1966, the High Court ordered the following transfers: (a) Shri K.B. Panda who was attached to the commission of enquiry in connection with students ' (1) ; 158 agitation, as law secretary to the government of Orissa, (b) Shri B.K. Patro, the then law secretary as district and sessions judge of Ganjam Boudh, (c) Shri T. Misra, district and sessions judge, Ganjam Boudh, as superintendent and legal remembrance and ex officio additional law secretary to the government of Orissa, (d) Shri K.K. Bose, the then superintendent and legal remembrance and additional law secretary as district and sessions judge of Mayurbhanj Keonjhar.

(e) Shri P.K. Mohanti, district and sessions judge, Bolangir Kalahandi, as deputy secretary to the law department, a post which was vacant then, and (f) Shri P.C. Dey, member sales tax tribunal, as district and sessions judge, Bolangir Kalahandi.

These orders were duly notified in the Orissa Gazette.

In pursuance of those orders, Shri K.B. Panda, Shri T. Misra and Shri P. K. Mohanti handed over charge of the posts they were holding and reported themselves at the secretariat for assuming charge of the posts to which they were posted.

But the government refused to accept them.

Further it directed Shri Patro, Shri Bose and Shri Dey to continue in the posts they were holding.

Those officers acted in accordance with the orders of the government.

Consequently, the sessions divisions of Ganjam Boudh, Mayurbhanj Keonjhar and Bolangir Kalahandi were without district and sessions judges for several days.

It is at this stage the petitions which have given rise to those appeals were filed by some of the advocates practising in one or the other of the sessions divisions mentioned above, praying for a writ of mandamus against the government as well as the concerned officers to implement the transfers ordered by the High Court on October 10, 1966 and also a writ of quo warranto against Shri B.K. Patro, Shri K.K. Bose and Shri P.C. Dey requiring them to show cause under what authority they were holding the posts of the law secretary the superintendent and legal remembrancer and member sales tax tribunal, respectively.

In every one of those petitions, rule nisi was issued.

The government as well as the concerned officers in the returns made by them justified the action taken by the government.

On March 6, 1967 a special Bench of the High Court by majority allowed those petitions and made the rule absolute.

The High Court overruled the prayer made on behalf of the government to stay the operation of its decision till necessary orders were obtained from this Court.

It directed the government to imple 159 ment its orders forthwith.

Having No. alternative before it, the government implemented the orders in question on March 6 1967, on the very day the decision of the High Court was rendered.

The government 's prayer for necessary certificates for leave to appeal to this Court was rejected.

Therefore, these appeals were filed after obtaining special leave from this Court.

The order of the High Court consists of two parts, namely, (1) holding that Shri B.K. Patro, Shri K.K. Bose and Shri P.C. Dey had no authority to act as law secretary, superintendent and legal remembrancer and member sales tax tribunal, respectively, on and after October 10, 1966, and (2) commanding the State of Orissa, the Chief Secretary to the government of Orissa, the Home Secretary to the government of Orissa, Shri P.C. Dey, Shri K.K. Bose and Shri Patro to implement the transfers ordered by the High Court on October 10, 1966.

It was not the case of the contesting respondents that Shri P.C. Dey, Shri K.K. Bose and Shri B.K. Patro had not the necessary qualifications to hold the posts they were holding.

It was also not disputed that they had been validly appointed to those posts.

In these circumstances we fail to see how the High Court could have held that they had no authority to hold the posts in question.

Shri Sarjoo Prasad learned counsel for the High Court of Orissa at the very commencement of his arguments conceded that the order of the High Court holding that those officers had no authority to hold the posts in question is unsustainable.

In view of that concession it is unnecessary for us to go into that question further.

As mentioned earlier, member, sales tax tribunal, was an ex cadre post.

Hence in the case of Shri P.C. Dey it must be assumed that his services were placed by the High Court at the disposal of the government for being posted as member sales tax tribunal.

It is not the case of the parties that he was placed at the disposal of the government for any definite period.

AS seen earlier, he was holding the post in question ever since 1962.In those circumstances, the High Court was entitled to recall him and post him as a district and sessions judge.

Hence that part of the High Court 's order is unassailable.

Before going into the validity of the orders of transfer relating to the other officers, it is necessary to ascertain the law bearing on the subject.

As seen earlier, the cadre of the superior judicial service (senior branch) consisted of not only the posts of district and sessions judges and addl.

district and sessions judges but also officers holding other posts.

One of the officers included there is the Registrar of the High Court.

Neither the government nor the High Court could have posted any officer as the Registrar of the High Court as that post can be filled only by 160 the Chief Justice.

To hold otherwise would be to contravene article 229 of the Constitution.

Similarly the posts of the law secretary, deputy law secretary and file superintendent and legal remembrancer cannot be considered as district courts or courts subordinate to district courts within the meaning of those words in article 235 of the Constitution.

Those posts are similar to.

the corresponding posts in other departments in the secretariat.

Prima facie it is for the Governor to fill up those posts.

It was conceded that if those posts had not been included in the cadre of superior judicial service the High Court would not have had any right to fill those posts.

But we were told that in view of the decisions of this Court in State of West Bengal vs Nripendra Nath Bagchi(1) and State of Assam vs Ranga Mahammad(2) the High Court must be held to have that right as those posts are included in the cadre of superior judicial service.

Before considering the correctness of that submission it is necessary to notice that this argument breaks down when we come to the question of filling up the post of the Registrar.

If the argument advanced on behalf of the High Court is correct.

the High Court must also have, the power to fill up the post of the Registrar as that is also Included in the cadre.

Now let us consider the ratio of the decisions in Nripendra Nath Bagchi 's case (1), and Ranga Mahammad 's (2) case.

In Bagchi 's case,(1), this Court laid down that the word "control" found in article 235 includes disciplinary jurisdiction as well.

The only question that fell for decision in that case was whether the government of West Bengal was competent to institute disciplinary proceedings against an addl.

district and sessions judge.

This Court upheld the decision of the High Court of Calcutta holding that it had no such jurisdiction.

That was the single question decided in that case.

It is true that in the course of the judgment.

this Court observed that the High Court is made the sole custodian of the control of the judiciary, but that observation was made only in the context of the question that arose for decision.

In Ranga Mahammad 's case(2), the point that arose for decision was as to who was the authority to transfer a district judge.

the State government or the High Court.

In that case, the State government ordered the transfer of certain district judges without even consulting the High Court.

The rule laid down in that decision is of no assistance in determining the question as to whether the High Court has power to fill up some of the posts in the secretariat.

In the course of that judgment, this Court observed (at page 459 of the report): "The question we have posed resolves itself into a question of a very different but somewhat limited form.

(1) ; (2) ; 161 namely, whether the power to transfer District Judges is included in the 'control ' exercisable by the High Court over District Courts under article 235, or in the power of 'appointment of persons to be and the posting and promotion, of district judges ' which is to be exercised by the Governor under article 233, albeit in consultation with the High Court.

If the sense of the matter be the former, then the High Court and if the latter, the Governor, would possess that 'power.

The right approach is, therefore, to enquire what is meant by 'posting ' and whether the term does not mean the initial posting of a District Judge on appointment or promotion to a vacancy in the cadre, permanent or temporary.

If this be the meaning, as the High Court holds.

then the transfer of District Judges already appointed or promoted and posted in the cadre must necessarily be outside the power of the Governor and fall to be made by the High Court as part of the control vested in it by article 235." After analysing articles 233 and 235 and noticing the development of the law on the subject this Court held that under article 233, the Governor is only concerned with the appointment, promotion and posting to the cadre of district judges but not with the transfer of district judges already appointed or promoted and posted to the cadre which power is vested in the High Court under article 235 as the control given to the High Court over the district courts under that Article includes control over the officers who preside over those courts.

Proceeding further this Court observed: "This is, of course, as it should be, the High Court is in the day to day control of courts and knows the capacity for work of individuals and the requirements of a particular station or Court.

The High Court is better suited to make transfers than a Minister.

For however well meaning a Minister may be he can never possess the same intimate knowledge of the working of the judiciary as a whole and of individual Judges, as the High Court.

He must depend on his department for information.

The Chief Justice and his colleagues know these matters and deal with them personally.

There is less chance of being influenced by secretaries who may withhold some vital information if they are interested themselves.

It is also well known that all stations are not similar in climate and education, medical and 162 other facilities.

Some are good stations and some are not so good.

There is less chance of success for a person seeking advantage for himself if the Chief Justice and his colleagues, with personal information, deal with the matter, than when a Minister deals with it on notes and information supplied by a secretary.

The reason of the rule and the sense of the matter combine to suggest the narrow meaning accepted by us.

The policy displayed by the Constitution has been in this direction as has been explained in earlier cases of this Court.

" Obviously relying on the observation of this Court that after a judicial officer is posted to the cadre, it is for the High Court to effect his transfers, the court below has come to the conclusion that as the posts of the law secretary, deputy law secretary and superintendent and legal remembrancer are included in the cadre, the High Court has the power to fill those posts by transfer of judicial officers.

The cadre this Court was considering in Ranga Mahammad 's(1) case, namely, Assam Superior Judicial Services Cadre consisted of the Registrar of the Assam High Court and three district judges in the first grade and some additional district judges in grade II.

In that cadre, no officer holding any post under the government was included.

Hence the reference by this Court to the cadre is a reference to.a cadre consisting essentially ,of officers under the direct control of the High Court.

It was in that context this Court spoke of the cadre.

The question of law considered in that decision was as regards the scope of the expression "control over district court" in article 235.

The reference to the cadre was merely incidental.

A decision is only an authority for what it actually decides.

What is of the essence in a decision is its ratio and not every observation found therein nor what logically follows from the various observations made in it.

On this topic this is what Earl of Halsbury L.C. said in Quinn vs Leathem(2): "Now before discussing the case of Allen vs Flood and what was decided therein, there are two observations of a general character which I wish to make, and one is to repeat what I have very often said before, that every judgment must be read as applicable to the particular facts proved, or assumed to be proved, since the generality of the expressions which may be found there are not intended to be expositions of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to.

be found.

The other is that a case is only an authority for what it actually decides.

I entirely deny that it can (1) ; (2) [1901] A.C. 495.

163 be quoted for a proposition that may seem to follow logically from it.

Such a mode of reasoning assumes that the law is necessarily a logical code, whereas every lawyer must acknowledge that the law is not always logical at all.

" It is not a profitable task to extract a sentence here and there from a judgment and to build upon it.

Neither Bagchi 's case nor Ranga Mahammad 's case is of any assistance to us in deciding the question whether the High Court has competence to fill some of the posts in the secretariat by transfer judicial officers under Its control.

Just as the executive cannot know the requirements of a particular court, the High Court also cannot know the requirements of any post in the secretariat.

Just as the High Court resents any interference by the executive in the functioning of the judiciary, the executive has a right to ask the High Court not to interfere with its functions.

It is for the executive to say whether a particular officer would meet its requirements or not.

The High Court cannot, as contended by the learned Attorney General, foist any officer on the government.

The cadre with which we are concerned in this case consists of three parts i.e., (1) presiding officers of district courts, (2) the Registrar of the High Court and (3) the judicial officers working in the secretariat.

No doubt all these officers belong to the judicial service of the State and they were before 1962 presiding over district courts or courts subordinate to them and as such were under the control of the High Court.

Hence without the consent of the High Court the government could not have posted them to administrative posts in 1962.

It must be presumed that they were taken over by the government with the consent of the High Court.

While sparing the service of any judicial officer to the government it is open to the High Court to fix the period during which he may hold any executive post.

At the end of that period, the government is bound to allow him to go back to his parent department unless the High Court agrees to spare his services for some more time.

In other words, the period during which a judicial officer should serve in an executive post must be settled by agreement between the High Court and the government.

If there is no such agreement it is open to the government to send him back to his parent department at any time it pleases.

It is equally open to the High Court to recall him whenever 'it thinks fit.

If only there is mutual understanding and appreciation of the difficulties of the one by the other, there will be harmony.

There is no reason why there should be any conflict between the High Court and the government.

Except for very good reasons we think the High Court should always be 164 willing to spare for an agreed period the services of any of the officers under its control for filling up such executive posts as may require the services of judicial officers.

The government, in its turn should appreciate the anxiety of the High Court that judicial officers should not be allowed to acquire vested interest in the secretariat.

Both the High Court and the government should not forget the fact that powers are conferred on them for the good of the public and they should act in such a way as to advance public interest.

If they act with that purpose in view as they should, then there is no room for conflict and no question of one dominating the other arises.

Each of the organs of the State has a special role of its own.

But our Constitution expects all of them to work in harmony in a spirit of service.

As Shri K.K. Bose and Shri B.K. Patro had not been placed at the disposal of the government for any definite period, it was open to the High Court to recall them and post them as presiding officers of district courts.

Hence, the High Court was within its powers in posting Shri B.K. Patro as district and sessions judge of Ganjam Boudh division, Shri K.K. Bose as district and sessions judge of Mayurbhanj Keonjhar division, and Shri P.C. Dey as district and sessions judge of Bolangir kalahandi division though it would have been graceful if it had effected those transfers after reasonable notice to the government.

But it was beyond the powers of the High Court to post Shri K.B. Panda as the law secretary, Shri T. Misra as superintendent and legal remembrancer and Shri P.K. Mohanti as the deputy law secretary.

That part of the High Court 's order is clearly unsustainable.

But as mentioned earlier, the government has already implemented that part of the order as well.

Those officers are now functioning in the posts to which they were transferred.

The learned Attorney General told 'us that the government has no objection to those officers continuing in those posts for the present.

We are sure if any change is required the same will be effected by mutual understanding between the High Court and the government.

In the result these appeals are partly allowed and the order of the High Court holding that Shri B.K. Patro, Shri K.K. Bose and Shri P.C. Dey had no authority to hold the posts they were holding on or after October 10, 1966 is set aside.

Though we hold that the orders of the High Court posting Shri B.K. Panda as law secretary, Shri T. Misra as superintendent and legal remembrancer and Shri P.K. Mohanti as deputy law secretary were excess of its powers, we do not set aside the mandamus issued by it for the reasons mentioned earlier.

In other respects the judgment appealed against is upheld.

The parties will bear their own costs in these appeals.

R.K.P.S. Appeals allowed in part.

Summary: The Orissa Superior Judicial Service consisted of 15 posts.

Summary: 10 of which were District and Sessions Judges or Additional District and Sessions Judges; of the other five, one was Registrar of the High Court and four were officers of the State Government.

Summary: P, one of the District and Sessions Judges was posted as Superintendent and Legal Remembrance in March 1962.

Summary: B. an Additional Judge.

Summary: was posted as Joint Secretary in the Law Department in the same month and sometime thereafter was posted as Superintendent and Legal Remembrance.

Summary: D, a District and Sessions judge was posted in January 1962 as member.

Summary: Sales Tax Tribunal, which was a non cadre post.

Summary: In February 1965 the High Court took a policy decision to the effect that as a general rule, judicial officers working in special posts.

Summary: whether cadre or non cadre.

Summary: outside their regular line, should be called to the regular line after the completion of three years in the interest of the service as well as the officers, so that the officers did not become out of touch with judicial work.

Summary: Although this policy decision was accepted by the State Government.

Summary: it was not implemented ' in respect of P, B and D.

Summary: The High Court being under the impression at the time that in law the Governor was the sole authority to effect the necessary transfers.

Summary: did not take any action itself.

Summary: After the decision of this Court in Ranga Mohammad 's case ; holding that the power to transfer Judges presiding over Courts vested with the High Court under article 235 of the Constitution.

Summary: the High Court. issued an order on October 10.

Summary: transferring P. B and D to judicial posts and posting to the administrative posts in their place, K. T and M who were doing judicial work till then.

Summary: In pursuance of those orders K. T and M handed over charge of the posts they were holding and reported to the Secretariat for assuming charge of the administrative posts to which they were assigned.

Summary: but the Government refused to accept them.

Summary: The State Government directed P. B and D to continue in the posts they were previously holding and those officers acted in accordance with the orders of the Government.

Summary: Consequently.

Summary: some of the Sessions Divisions in the State were without District and Sessions Judges for several days and some Advocates practising in those Divisions filet/petitions before the High Court for a writ of mandamus against the Government.

Summary: as well as the concerned officers to implement the transfers ordered by the High Court.

Summary: They also sought a writ of quo warranto against P. B and D questioning the authority under which they were holding the administrative posts held by them until then.

Summary: The High Court allowed the petition and directed the Governments to implement its orders forthwith.

Summary: The Government implemented these orders on March 6.

Summary: 1967 and thereafter appealed to this Court, by special leave.

Summary: 155 HELD: (i) Although the High Court was within its powers.

Summary: in posting P. B and D, the three officers holding administrative posts.

Summary: as District and Sessions Judges, it was beyond its powers to post in their places three other officers to the administrative posts.

Summary: Just as the executive cannot know the requirements of a particular court, the High Court cannot also know the requirements of any post in the Secretariat.

Summary: It is for the Executive to say whether a particular officer would meet its requirements or not.

Summary: The High Court cannot foist an officer on the Government.

Summary: [163C D] While sparing the service of any judicial officer to the government it is open to the High Court to fix the period during which he may hold any executive post.

Summary: If there is no such agreement it is open to the Government to send him back to his parent department at any time it pleases.

Summary: It is equally open to the High Court to recall him whenever it thinks [163 F H] It was not the case of the contesting respondents that P, B and D did ' not have the necessary qualifications to hold the posts that they were holding or that they had not been validly appointed to those posts.

Summary: In these circumstances the High Court could not have held that they had no authority to hold the posts in question.

Summary: [159D] State of Assam vs Ranga Mohammad and Ors. ; ; State of West Bengal vs Nripendra Nath Baghi; ; ; explained and distinguished.

Summary: (ii) A decision is only an authority for what it actually decides.

Summary: What is of the essence in a decision is its ratio and not other observations found therein nor what logically follows from the various observations made in it.

Summary: [162E F] Quin vs Leathem, ; ; referred to.


Appeal No. 4366 of 1991.

From the Judgment and Order dated 16.5.1988 of the Punjab & Haryana High Court in Regular Second Appeal No. 3648 of 1987.

R.K.Kapoor and Anis Ahmed Khan for the Appellant.

S.N.Mishra, L.K. Gupta, D.K. Yadav and D.K.Garg for the Respondents.

The Judgment of the Court was delivered by AHMADI, J.

Delay condoned.

Special leave granted.

The constitutional validity of section 15(1)(a) of the Punjab Preemption Act, 1913 was challenged on the ground that it offended the fundamental right guaranteed by Article 19(1)(f) m Ram Sarup vs Munshi & Ors., A Constitution Bench of this Court upheld the validity holding that there was no infringement of Article 19(1)(1 ') of the Constitution.

Thereafter, a host of writ petitions 122 were filed in this Court under Article 32 of the Constitu tion challenging the constitutional validity of section 15 on the ground that it infringed Articles 14 and 15 of the Constitution.

It may be mentioned that the mother State, the State of Punjab, had repealed the Act in 1973 but it contin ued to be in force in the State of Haryana which prior to 1966 was a part of the State of Punjab.

Section 15 of the 1913 Act, as it originally stood, underwent substantial changes in 1960 and as amended read as under: "15.

Persons in whom right of pre emption vests in respect of sales of agricultural land and village immovable property (1) The right of pre emption in respect of agricultural land and village immovable property shall vest (a) where the sale is by a sole onwer First, in the son or daughter or son 's son or daughter 's son of the vendor; Secondly, in the brother or brother 's son of the vendor; Thirdly, in the father 's brother or father 's brother 's son of the vendor; Fourthly, in the tenant who holds under tenan cy of the vendor the land or properly sold or a part thereof Co) where the sale is of a share out of joint land or property and is not made by all the co sharers jointly First, in the sons or daughters or son 's son or daughter 's sons of the vendor or vendors; Secondly, in the brothers or brother 's sons of the vendor or vendors; Thirdly, in the father 's brother or father 's brother 's sons of the vendor or vendors; Fourthly, in the other co sharers; Fifthly, in the tenants who hold under tenancy of the vendor or vendors the land or property sold or a part thereof; (c) where the sale is of land or property owned jointly and is made by all the co shar ers jointly 123 First, in the sons or daughters or sons ' sons or daughters ' sons of the vendors; Secondly in the brothers or brother 's sons of the vendors; Thirdly, in the father 's brothers or father 's brother 's sons of the vendors Fourthly, in the tenants, who hold under tenancy of the vendors or any one of them the land or properly sold or a part thereof.

(2) Notwithstanding anything con tained in sub section (1): (a ') where the sale is by a female of land or property to which she has succeeded through her father or brother or the sale in respect of such land or property is by the son or daughter of such female after inheritance, the right of pre emption shall vest: (i) if the sale is by such female, in her brother or brother 's son; (ii) if the sale is by the son or daughter of such female, in the mother 's brothers or the mother 's brother 's sons of the vendor or vendors; (b) where the sale is by a female of land or property to which she has succeeded through her husband, or through her son in case the son has inherited the land or property sold from his lather, the right of pre emption shall vest First, in the son or daughter of such husband of the female: Secondly, in the husband 's brother or hus band 's brother 's son of such female." This Court in Atam Prakash vs State of Haryana & Ors, ; ; held that the right of pre emption given to co sharers as well as to a tenant can be justified as they constitute a class by themselves.

This Court, therefore, upheld the constitutional validity of clause 'fourthly of section 15(1)(a) clauses 'fourthly ' and 'fifthly ' of section 15(1)(b) and clause fourthly of section 15(1)(c) as valid and not infringing Articles 14 or 15 of the Constitution This Court, however, did not find any justification for the classification contained m section 15 which conferred a right of pre emption on the kinsfolk.

The right of preemption based on consanguinity was held to be a relic of the feudal past totally inconsistent with the constitutional philosophy and scheme.

It also found the list of kinsfolk entitled to pre emption as intrinsically defec tive and Self contradictory.

Finding no reasonable classifi cation it struck down 124 clauses 'first ', 'secondly ' and 'thirdly ' of section 15(1)(a), clauses 'first ', 'secondly ', and 'thirdly ' of section 15(1)(b) and clause 'first ', 'secondly ', and 'third ly ' of section 15(1)(c) and the entire section 15(2) as ultra vires the Constitution.

The right of pre emption in regard to a co sharer was upheld on the consideration that if an outsider is introduced as a co sharer in a property it will make common management extremely difficult and destroy the benefits of ownership in common.

The right of pre emp tion vested in a tenant was sustained on the ground that 1 and reform legislations in regard to the tiller of the soil to obtain proprietary right in the soil with a view to ensuring his continuance in possession of the land and consequently of his livelihood without threat or disturbance from the superior proprietor.

The right of pre emption granted to a tenant was taken as another instance of a legislation aimed at protecting the tenant 's interest in the land.

Holding that the co sharers and the tenants constitut ed a distinct class by themselves, the right of pre emption conferred on them was upheld as reasonable and in public interest.

In taking this view strong reliance was placed on the ratio of the decision of this court in Bhau Ram vs

B. Baijnath Singh, ; wherein the vires of a provision of the Rewa State Pre emption Act which conferred a right of pre emption based on vicinage and the right of preemption conferred on co sharers and the Punjab Pre emption Act, 1913 were challenged on the ground of infraction of Article 19(1) (f) of the Constitu tion.

In that case it was held that a right of pre emption by vicinage offended Article 19(1) (f) of the Constitution but a similar right conferred on co sharers was intra vires Article 19(1)(1) of the Constitution.

In that case also this Court held that the right of pre emption vested in co shar ers was a reasonable restriction on the right to hold, acquire or dispose of property conferred by Article 19(1)(1) of the Constitution.

In Atam Prakash s case, this Court, therefore, held that what was said about the right of pre emption granted to co sharers in relation to Article 19(1)(1) of the Constitution applied with equal force to justify the classification in relation to Articles 14 and 15 of the Constitution.

After the surgery, section 15 underwent at the hands of this Court removing the offending pans in Atarn Prakash 's case, what survives of section 15 is that in the case of sale of agricultural land and village immovable property by a sole owner, the tenant alone can exercise the right of pre emption.

Where the sale is of a share out of joint land or property, and is, not made by all the co sharers jointly, only the other co sharers and the tenants can exercise the right of pre emption.

Where the sale is of a land or proper ty owned jointly and is made by all the co sharers jointly, the right to pre empt survives to the tenants only.

Since in the present case, we are concerned with sale by a single co sharer and not 125 by all the co sharers jointly, the remaining part of section 15(1)(b), with which we are concerned, reads as under: "15(b).

Persons in whom right of pre emption vests in respect of sales of agricultural land and village immovable property (1) The right of pre emption in respect of agricultural land and village immovable property shall vest Co) where the sale is of a share out of joint land or property and is not made by all the co sharers jointly XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX Fourthly, in the other co sharers; Fifthly, in the tenants who hold under tenancy of the vendor or vendors the land or property sold or a part thereof." Counsel for the appellant submitted that since the suit land belonged to more than one co sharer and had not been sold jointly by all the co sharers, he, as a co sharer, was entitled to claim the right of pre emption under clause 'fourthly ' of section 15(1)(b).

A similar question came up before this Court in Jagdish & Ors.

vs Nathi Mal Kejriwal & 0rs.

; , ; wherein a two judge Bench of this Court negatived the contention in the follow ing words: "In order to understand the meaning of the words 'other co sharers ' in Section 15(1)(b) we have to read the Act as it stood before the decision in Atam Prakash 's case ; (supra).

It is seen that the expression 'other co sharers ' in clause 'Fourthly ' of Section 15(1)(b) of the Act refers to only those co sharers who do not fail under clause 'First ' or 'Secondly ' or 'Thirdly ' of Section 15(1)(b) of the Act.

Since the petitioners admittedly fall either under clause 'First ' or under clause 'Secondly ' of Section 15(1)(b) of the Act they are clearly outside the scope of clause 'Fourthly '.

Therefore, the petition ers cannot claim the right of pre emption under clause 'Fourthly ' We do not, therefore, find any substance in this contention. " In the present case also the appellant seeks to exercise the right of pre emption as a co sharer i.e. father 's broth er 's son of the vendors.

His contention is that he falls within the expression other co sharers ' in clause 'Fourthly ' of section 15(1)(b) and is, therefore, entitled to exercisee the right of pre emption conferred on him by that provision.

The courts below 126 have negatived this contention solely on the ground that it cannot stand after the pronouncement of this Court in the case of Jagdish (supra).

Counsel for the appellant, however, contended that the interpretation placed by the two judge Bench on the expression 'other co sharers ' in section 15(1)(b) requires reconsideration as it leads to certain anomalous situation e.g. a sister who is a co sharer can claim pre emption while her brother cannot or a daughter 's daughter of the vendor can claim pre emption but not the son.

The history of the Punjab Pre emption law may be kept in mind to understand the purport of clause 'Fourthly ' of section 15(1)(b) of the Act.

Under the Punjab Pre emption Act, 1905, the corresponding provision, section 12, con ferred a right of pre emption, in the case of a sale of a share of such land or properly held jointly, firstly, in the lineal discendents of the vendor in male line in order of succession; secondly, in the co sharers, if any, who are agnates, in order of succession; thirdly, in the persons described in sub clause (a) i.e. in persons who but for such sale would be entitled to inherit the properly in the event of his or their decease, in order of succession and fourth ly, in the co sharers jointly or severally.

It will be noticed that priority for the exercise of the right owes statutorily fixed and even in the case of those falling within the same class, the exercise of right was regulated by the use of the expression, 'in order of succession '.

The 1905 Act was repealed and replaced by the 1913 Act.

Accord ing to section 15 of this Act before its amendment in1960, in the case of sale of a share out of joint land or proper ty, the right of preemption was conferred firstly on the lineal descendents of the vendor in order of succession; secondly, in the co sharers, if any, who are agnates, in order of succession; thirdly in persons not included under firstly or secondly above, in order of succession, who but for such sale would be entitled, on death of the vendor, to inherit the land or property sold and fourthly, in the co sharers.

Section 15 after its amendment in 1960 provided that where the sale is of a share out of the joint land or property and is not by all the co sharers jointly, the right of pre emption was vested, first, in the sons or daughters or son 's son or daughter 's sons of the vendor or vendors; Secondly, in the brothers or brother 's sons of the vendor or vendors; Thirdly, in the father 's brother or father 's broth er 's sons of the vendor or vendors Fourthly, in the other co sharers and Fifthly n the tenants.

Read in the context, it becomes clear that the legislature desired to confer the right of pre emption on specified family members of the vendor or vendors in the first three clauses of section 15(1)(b) and with a view to covering all the remaining co sharers not specifically mentioned the preceding clauses it used the expression 'other co sharers ' in the fourth clause which was meant to serve as a residuary clause to ensure 127 that, no co sharer is left out.

Since this Court found certain intrinsic contradictions in the list of relatives covered by the first three clauses, it saw no justification for the classification contained in the said provision conferring a right based on consanguinity and, therefore, struck down those clauses:as discriminatory and violative of Articles 14 and 15 of the Constitution.

At the same time it upheld the right conferred on co sharers for reasons stated earlier.

Thus the purport of Atam Prakash 's case (supra) was that while co sharers were entitled to pre empt, the confer ment of that right on certain kinsfolk based on the rule of consanguinity being a relic of the feudal past could not be tolerated.

This Court never intended to exclude any speci fied co owners from the scope of clause fourthly of section 15(1)(b) of the Act.

Once conferment of the right of pre emption in favour of co sharers was considered to be a reasonable restriction on the right to hold, acquire and dispose of property under Article 19(1) (f), the same re striction was held to be valid when tested on the touchstone of Articles 14 or 15 of the Constitution.

We find it diffi cult to hold that the purport of the of Court 's decision in Attam Prakash 's case was to deny the right of pre emption to those relative or relatives of the vendor or vendors who were specified in the erstwhile first three clauses of section 15(1)(b) even if they happen to be co sharers.

The expression 'other co sharers ' was used in the fourth clause of the said provision to ensure that no co sharer was left out or omitted and not to deny the right to kinstolk coshar ers covered by the preceding clauses.

If the preceding clauses were not erased from the statute book as unconstitu tional the kinsfolk would have exercised the right in the order of preference, for which no justification was found.

The relations in the first three clauses of section 15(1)(b) may or may not be co sharers, The use of the expression 'other ' in clause fourthly conveys the possibility of their being co sharer also.

What this Court disapproved as offen sive to Articles 14 and 15 is the classification based on consanguinity and not on co ownership.

The right of pre emption to co sharers is held to be intra vires the Consti tution Therefore, it is difficult to hold that this Court intended to deny the right of pre emption of those kinsfolk even if they happened to be co sharers.

That would clearly be discriminatory.

With respect, therefore, we find it difficult to approve of the interpretation placed on clause `fourthly '; of section 15(1)Co) of the Act by this Court in Jagdish 's case.

We think on a proper construction of that clause after the preceding clauses were held to be unconsti tutional the word 'other ' preceding.

the word 'co sharer ' is rendered redundant.

We, therefore, do not approve the ratio of Jagdish 's case and overrule the same.

In the result the appeal succeeds, '[he decision of all the three courts below dismissing the appellant 's suit is set aside and the suit is decreed.

128 We direct that on the appellant plaintiff depositing the entire amount of sale price together with the amount needed for the stamp duty for the execution of the conveyance in his favour within three months from today, the purchaser respondent No. 1 shah within one month of such deposit execute a conveyance of the land, i.e. his share therein derived from his vendors, in favour of the appellant and shall deliver possession thereof to the appellant.

If the respondent No. 1 fails to do so, the Court shall appoint a Commissioner who shall execute the conveyance on behalf of the respondent No. 1 and the Court shall put the appellant in possession of the suit land.

There will be no order as to costs throughout.

V.P.R. Appeal allowed.

Summary: The appellant seeking to exercise the right of pre emption as a co sharer, i.e. father 's brother 's son of the vendors, contended that he fell within the expression 'other co sharers ' in clause 'Fourthly ' of section 15(1)(b) of the Punjab pre emption Act, 1913 and was, therefore, entitled to exercise the right of pre emption.

Summary: The courts below negatived his contention following the decision of this Court in Jagdish & Ors.

Summary: vs Nathi Mal Kej riwal & Ors.

Summary: ; , In this appeal filed by special leave, the appellant submitted that since the suit land belonged to more than one co sharer and had not been sold jointly by all the co shar ers, he, as a co sharer, as entitled to claim the right of pre emption under clause 'fourthly 'of section 15(1)(b) and that in Jagdish 's case, the interpretation placed on the expression 'other co shar ers ' in section 15(1)(b) required reconsideration.

Summary: Allowing the appeal, this Court, HELD: 1.

Summary: According to section 15 of the Act before its amendment in 1960, in the case of sale of share out of joint land or property, the right of pre emption was conferred firstly on the lineal descendants of the vendor in order of succession; secondly, in the co sharers, if any, who are agnates, in order of succession; thirdly, in persons not included under firstly or secondly above, in order of suc cession, who but for such sale would be entitled, on death of the 120 vendor, to inherit the land or property sold and fourthly, in the cosharers.

Summary: [126 E F] 2.

Summary: Section 15 after its amendment in 1960 provided that where the sale is of a share out of the joint land or property and is not by all the co sharers jointly, the right of pre emption was vested, first, in the sons or daughters or son 's son or daughter 's sons of the vendor or vendors; Secondly, in the brothers or brother 's sons of the vendor or vendors; Thirdly, in the father 's brother or father 's broth er 's sons of the vendor or vendors; Fourthly, in the other cosharers and Fifthly, in the tenants.

Summary: [126 F G] 3.

Summary: The legislature desired to confer the right of pre emption on specified family members of the vendor or vendors in the first three clauses of section 15(1)(b) and with a view to covering all the remaining co sharers not specifi cally mentioned in the preceding clauses it used the expres sion 'other co sharers ' in the fourth clause which was meant to serve as a residuary clause to ensure that no cosharer is left out.

Summary: [126 G 127 A] 4.

Summary: The expression 'other co sharers ' was used in the fourth clause of the said provision to ensure that no co sharer was left out or omitted and not to deny the right to kinsfolk co sharers covered by the preceding clauses.

Summary: If the preceding clauses were not erased from the statute book as unconstitutional the kinsfolk would have exercised the right in the order of preference, for which no justification was found.

Summary: The relations in the first three clauses of section 15(1)(b) may or may not be co sharers.

Summary: The use of the ex pression 'other ' in clause fourthly conveys the possibility of their being cosharer also.

Summary: [127 D F] 5.

Summary: The purport of Atam Prakash 's case was that while cosharers were entitled to pre empt, the conferment of that right on certain kinsfolk based on the rule of consanguinity being a relic of the feudal past could not be tolerated.

Summary: This Court never intended to exclude any specified co owners from the scope of clause fourthly of section 15(1)(b) of the Act.

Summary: Once conferment of the right of preemption in favour of co sharers was considered to be a reasonable restriction on the right to hold, acquire and dispose of property under Article 19(1)(f), the same restriction was held to be valid when tested on the touchstone of Articles 14 or 15 of the Constitution.

Summary: [127 B D] 121 6.

Summary: What this Court disapproved as offensive to Articles 14 and 15 is the classification based on consanguinity and not on co ownership.

Summary: The right of pre emption to co sharers is held to be intra vires the Constitution.

Summary: Therefore, it is difficult to hold that this Court intended to deny the right of pre emption of those kinsfolk even if they happened to be co sharers, That would clearly be discriminatory.

Summary: [127 F G] 7.

Summary: The interpretation placed on clause 'fourthly ' of section 15(1)(b) of the Act by this court in Jagdish 's case was not correct on a proper construction of that clause after the preceding clause were held to be unconstitutional, the word 'other ' preceding the word 'co sharer ' is rendered redundant.

Summary: [127 G] Ram Sarup vs Munshi & Ors., ; = ; ; Atam Prakash vs State of Haryana & Ors., ; = ; ; Bhau Ram vs

Summary: B. Baijnath Singh, = ; , referred to.

Summary: Jagdish & Ors.

Summary: vs Nathi Mal Kejriwal & Ors., ; , over ruled.


ivil Misc.

Petition No. 15001 of 1989.

AND I.A. No. 1 of 1989 in S.L.P. No. 12288 of 1984.

From the Judgment and Order dated 20.4.1984 of the Andhra Pradesh High Court Appeal No. 472 of 1976.

K. Mahadeva Reddy, Ms. Manjul Gupta, T.V.S.N. Chari and A. Subba Rao for the Petitioner.

K. Ram Kumar, S.A. Ahmed, Tanweer Abdul and Mohan Pandey for the Respondents.

The following Order of the Court was delivered: 540 The special leave petition under Article 136 of the Constitution is directed against the affirming judgment of the Andhra Pradesh High Court in a suit for title and injunction.

In view of the fact that a petition of compromise in respect of the entire subject matter of litigation has been filed in this Court it is unnecessary to refer to the facts leading to the litigation.

We shall, therefore, confine the discussion to matters pertinent to the compromise.

Subbamma adopted one K.V Seshiah.

Seshiah married two wives.

Through the first wife he had a son born to him by name Sudarshan Gupta and through the second another son by name Anand Babu.

In February, 1985, during the pendency of the special leave petition the adoptive mother died.

Sudarshan and Anand Babu led claim to the entire property of Subbamma exclusively to each of them under two different wills said to be by subbamma and each contended that the other will was a forged one.

With the death of the adoptive mother, Seshiah led claim to the entire property as heir.

While each of the parties had taken such stand in the litigation a compromise was brought about on 21.8.1987 between the father and his two sons and the same was filed in this Court.

The terms of the compromise stipulated payment of Rs. 1 lakh by the father to each of his two sons in lieu of relinquishment of their interest.

When the matter was listed before the Court for recording of the compromise, Sudarshan Gupta, second respondent herein, maintained that he had not been paid Rs.1 lakh as stipulated and he had no intention to accept the compromise.

The question as to recording of the compromise was taken up by the Court and parties have been heard.

One of the stipulation in the compromise deed which has admittedly been signed by the father and his two sons stipulates: "The petitioner has given to the second and third respondents (the two sons) an amount of Rs. 1 lakh each and the second and third respondents have received the same." In the face of such a statement in the compromise deed signed by the parties the second respondent had disputed the fact of payment and has, in the meantime, alienated about 81 acres of property which constitutes the subject matter of dispute to third parties.

The alienees 541 have now been brought on record unders order of this Court.

We have heard counsel for the original parties as also the alienees.

The alienations are for about a purported consideration of Rs. 4 lakhs.

The sale deeds indicate that a sum of Rs. 1 lakh had been received earlier and a net amount of Rs.77,124 out of the consideration money under these documents has been paid before the registering authority.

The alienees have admittedly been in possession of the property from the date of the sales which is more than three years ' old by now.

Admittedly, the transfers are pendente lite.

In fact, if the compromise is valid and binding the alienor respondent No. 2 had no interest in the property to part with in view of the stipulation in the compromise that on receipt of Rs. 1 lakh he relinquished his entire interest in the property.

The alienees have made an attempt to hold out that there were agreements for sale prior to the compromise for which there is no acceptable evidence.

We think we have to find that the alienees had no interest in the property prior to the compromise and we must hold that the sale deeds are subsequent to 21.8.1987.

Mr Ram Kumar who appeared for the second respondent, apart from maintaining that his client has not received the sum of Rs.1 lakh has not been able to point out any justification as to why the compromise should not be acted upon and on the basis of it the litigation may not be disposed of.

The factum of compromise is not in dispute.

Respondent No. 2 and his counsel Mr. Ram Kumar have accepted the fact that the parties have signed the compromise petition which contain terms which they had accepted and all parties have accepted the document of compromise to be genuine.

Counsel for the alienees has taken the stand that the said alienations are valid and the transferees have become owners of the property and has even maintained that there have been improvements of the property by the alienees.

He sought to rely on certain decisions which on being referred to were found to be totally inapplicable to the facts of the case.

On the other hand, we find that a similar question arose before the Orissa High Court in the case of Bhoja Govinda Maikap & Anr.

vs Janaki Dei & Ors., AIR (1980) Ori.

108 where the power of the Court under Order 23, rule 3 of the Code of Civil Procedure in the face of an objection of one of the parties to the compromise was considered.

Relying upon several authorities of different High Courts and one of the Privy Council referred to in the decision, the High 542 Court held that once the Court was satisfied that there was a compromise it was for the Court to record the same and no option lay before the Court to act otherwise.

We are in accord with the principle indicated in the said decision and are of the view that as the compromise petition is genuine and lawful the same has to be acted upon.

We direct that the compromise petition shall be accepted and in terms thereof the suit shall be disposed of and the terms of the compromise shall form part of the order to be drawn up in this Court for disposing of the special leave petition.

With a view to settling all equities between the parties and with the consent of Seshiah who is present in Court, and counsel for the sons and after hearing the Advocate for the alienees, we make the following directions: 1.

Seshaiah shall pay a sum of Rs. 1 lakh more to Sudarshan Gupta within eight weeks from today.

This amount shall be deposited in the Registry of this Court within the time indicated and Sudarshan Gupta shall be free to withdraw the amount.

Rs 77,124 being the amount paid by the alienees before the Sub Registrar in respect of the sale deeds shall be deposited within the same period in the Trial Court and the alienees of the different sale deeds would be entitled to withdraw the amounts on the basis of the record made by the Sub Registrar on each of the sale deeds.

The alienees have no right created under the alleged sale deeds.

Their possession is without authority of law.

Ordinarily, they would have been liable to account for mesne profits.

In view of the fact that there was the allegation of payment of Rs. 1 lakh to Sudarshan Gupta which we have not investigated and to meet the further allegation that some improvements have been made to the property which too we have not gone into, we direct that the mesne profits shall be set off against the same.

Under orders of this Court security has been furnished for mesne profits.

In view of the aforesaid direction, the security furnished in the Trial Court shall stand discharged and the alienees will have no liability to account for mesne profits.

We declare and clarify that none of the sale deeds is valid and none of the alienees has any interest in the aforesaid property.

543 4.

The alienees shall deliver vacant possession of the property by 30th of April, 1991, to Seshiah and in the event of failure to do so the Trial Court is directed by our present order to deliver vacant possession of the entire property in suit including those which are covered by the sale deeds in favour of the alienees to Seshiah within one month therefrom.

If necessary, the Trial Court may appoint a Commissioner and take police help for executing this order and such cost shall ultimately be borne by the defaulting alienees but may initially be met by Seshiah.

There would be no order for costs.

Summary: Respondent No. 1 adopted petitioner appellant, who married two wives and through the first wife he had a son, the respondent No. 2 and through the second, another son, the respondent No. 3.

Summary: During the pendency of the special leave petition the adoptive mother of appellant died.

Summary: Respondent 2 and 3 laid claim to the entire property of respondent No. 1 exclusively under two different wills said to be by the respondent No. 1 and each contended that the other will was a forged one.

Summary: On the death of the adoptive mother, the appellant laid claim to her entire property as heir.

Summary: While each of the parties had taken such stand, in the litigation a compromise was brought about on 21.8.1987 between the appellant and his two sons, the respondents 2 and 3 and the same was filed in this Court and in terms of the compromise the appellant, to make payment of Rs. 1 lakh to each of his two sons in lieu of relinquishment of their interest.

Summary: When the matter was listed for recording the compromise, the respondent No. 2 contended that as he had not been paid Rs. 1 lakh as stipulated in the compromise, in the meanwhile he had alienated about 81 acres of the suit properties to the third parties.

Summary: The alienees had been also impleaded as parties under the orders of this Court.

Summary: Disposing of the petition, this Court, HELD: 1.

Summary: Once the Court was satisfied that there was a compromise it was for the Court to record the same and no option lay before the Court to act otherwise.

Summary: [542A B] 539 2.

Summary: As the compromise petition in the instant case is genuine nd lawful the same has to be acted upon.

Summary: [542B] 3.

Summary: It is directed that the compromise petition shall be accepted and in terms thereof the suit shall be disposed of and the terms of the compromise shall form part of the order to be drawn up in this Court for disposing of the special leave petition.

Summary: [542B C] 4.

Summary: With a view to settling all equities between the parties, directed that the appellant to pay a sum of Rs.1 lakh more to respondent No. 2 within eight weeks.

Summary: Rs. 77,124 being the amount paid by the alienees before the Sub Registrar in respect of the sale deeds shall be deposited.

Summary: [542C E] 5.

Summary: Their possession is without authority of law and clarified that none of the sale deeds is valid.

Summary: [542F H] 6.

Summary: The alienees shall deliver vacant possession of the property by 30th of April, 1991, and in the event of failure to do so the Trial Court directed to deliver vacant possession.

Summary: [543A B] Bhoja Govinda Maikap & Anr.

Summary: vs Janaki Dei & Ors., , approved.