l Appeals Nos 273 and 274 of 1955
Appeals from the judgment and order dated December 10 1954 of the Patna High Court in Appeals from Original Decree Nos 309 and 310 of 1954
L K Jha J C Sinha section Mustafi and R R Biswas for the appellants
Lal Narayan Sinha Bajrang Sahai and R C Prasad for the respondents 1960
September 19
The Judgment of the Court was delivered by section K DAS J
These two appeals on a certificate granted by the High Court of Patna are from the judgment and decree of the said High Court dated December 10 1954
By the said judgment and decree the High Court dismissed two appeals which arose out of two suits Title Suit No 42 of 1950 and Title Suit No 23 of 1952 which were tried together and dismissed with costs by the learned Subordinate Judge of Deoghar
The plaintiffs of those two suits are the appellants before us
One of the appellants Thakur Manmohan Deo was the holder of a ghatwali tenure commonly known as the Rohini ghatwali situate within the subdivision of Deoghar in the district of the Santa Parjanas
The other appellant Tikaitni Faldani Kumari was the holder of the Pathrole ghatwali also situate in the same sub division
Both these ghatwali tenures were formerly known as Birbhum ghatwalis and were governed by Bengal Regulation XXIX of 1814
In the year 1950 was enacted the Bihar Land Reforms Act 697 1950 Bihar Act 30 of 1950 hereinafter called the Act
The Act came into force on September 25 1950
The validity of the Act was challenged in the Patna High Court on grounds of a violation of certain fundamental rights and the High Court held it to be unconstitutional on those grounds
The Constitution First Amendment Act 1951 was enacted on June 18 1951 and in appeals from the decision of the Patna High Court this Court held in The State of Bihar vs Maharajadhiraja Sir Kameshwar Singh of Darbhanga 1 that the Act was not unconstitutional or void on the grounds alleged except with regard to the provisions in section 4b and section 23f thereof The validity of the Act is therefore no longer open to question on those grounds though in one of the suits out of which these two appeals have arisen it was contended that the Act was ultra vires the Constitution
The principal issue in the two suits which now survives is issue No 3 which said Do the provisions of the Bihar Land Reforms Act 1950 purport to acquire the plaintiffs  ghatwalis  If so are they ultra vires in their application to such ghatwalis  This issue was decided against the appellants by the learned Subordinate Judge and the decision of the learned Subordinate Judge was upheld on appeal by the High Court of Patna in its judgment and decree dated December 10 1954 from which decision these two appeals have come to us
Three main points have been urged on behalf of the appellants
The first point is one of construction and the appellants contend that on a proper construction of the relevant provisions of the Act it does not apply to ghatwali tenures like the Rohini and Pathrole ghatwalis
Secondly it is contended that if the provisions of the Act apply to the appellants  ghatwali tenures then the State legislature was not competent to enact it because ghatwali tenures like the Rohini and Pathrole ghatwalis were of a quasi military nature and if the Act applies to them it must be held to relate to items 1 and 2 of the Union List List I and therefore outside the competence of the State 1 698 legislature
The third contention is that the Act does not purport to repeal Bengal Regulation XXIX of 1814 and in as much as the said Regulation deals With special tenures the special law enacted with regard to such tenures would not be affected by the general law with regard to land reforms as embodied in the Act
We shall deal with these three conten tions in the order in which we have stated them
But before we do so it is necessary to explain briefly the nature of these ghatwali tenures
We may quote here some of the provisions of Bengal Regulation XXIX of 1814
The Regulation says in section 1 that lands held by the class of persons denominated ghatwals in the district of Birbhum form a peculiar tenure to which the provisions of the existing Regulations are not expressly applicable it then states that according to the former usages and constitution of the country this class of persons are entitled to hold their lands generation after generation in perpetuity subject nevertheless to the payment of a fixed and established rent to the zamindar of Birbhum and to the performance of certain duties for the maintenance of the public peace and support of the police
The Regulation then lays down certain rules to give stability to the arrangement established among the ghatwals and these rules are contained in sections 2 3 4 and 5
It would be enough if we quote sections 2 3 and a part of section 5
 section 2
A settlement having lately been made on the part of the Government with the ghatwals in the district of Birbhum it is hereby declared that they and their descendants in perpetuity shall be maintained in possession of the lands so long as they shall respectively pay the revenue at present assessed upon them and that they shall not be liable to any enhancement of rent so long as they shall punctually discharge the same and fulfill the other obligations of their tenure
section 3
The ghatwali lands shall be considered as at present to form a part of the zamindari  of Birbhum but the rent of ghatwals shall be paid direct to the Assistant Collector stationed at Suri or to 699 such other public officer as the Board of Revenue may direct to receive the rents
section 5
Should any of the ghatwals at any time fail to discharge their stipulated rents it shall be competent for the State Government to cause the ghatwali tenure of such defaulter to be sold by public sale in satisfaction of the arrears due from him in like manner and under the same rules as lands held immediately of Government or to make over the tenure of such defaulter to any person whom the State Government may approve on the condition of making good the arrears due or to transfer it by grants assessed with the same revenue or with an increased or reduced assessment as to the Government may appear meet or to dispose of it in such other form and manner as shall be judged by the State Government proper
 In a number of decisions of the Privy Council the nature of these tenures has been explained and in Satya Narayan Singh vs Satya Niranjan Chakravarti 1 Lord Sumner thus summarised the position at pages 198 199 of the report In the Santal Parganas there are for practical purposes three classes of ghatwali tenures a Government ghatwalis created by the ruling power b Government ghatwalis which since their creation and generally at the time of the Permanent Settlement have been included in a zamindari estate and formed into a unit in its assessment and c zamindari ghatwalis created by the zamindar or his predecessor and alienable with his consent
The second of these classes is really a branch of the first
The matter may however be looked at broadly
In itself ghatwal  is a term meaning an office held by a particular person from time to time who is bound to the performance of its duties with a consideration to be enjoyed in return by the incumbent of the office
Within this meaning the utmost variety of conditions may exist
There may be a mere personal contract of employment for wages which takes the form of the use of land or an actual estate in land heritable and 1 ILR 3 Pat
700 perpetual but conditional upon services certain or services to be demanded
The office may be public or private important or the reverse
The ghatwal the guard of the pass may be the bulwark of a whole country side against invaders he may be merely a sentry against petty marauders he may be no more than a kind of gamekeeper protecting the crops from the ravages of wild animals
Ghatwali duties may be divided into police duties and quasi military duties though both classes have lost much of their importance and the latter in any strict form are but rarely rendered
Again the duties of the office may be such as demanded personal competence for that discharge they may on the other hand be such as can be discharged vicariously by the creation of shikmi tenures and by the appointment and maintenance of a subordinate force or they may be such as in their nature only require to be provided for in bulk
It is plain that where a grant is forthcoming to a man and his heirs as ghatwal or is to be presumed to have been made though it may have been since been lost personal performance of the ghatwali services is not essential so long as the grantee is responsible for them and procures them to be rendered Shib Lall Singh vs Moorad Khan 1
So much for the ghatwal
The superior who appoints him may also in the varying circumstances of the Organisation of Hindostan be the ruling power over the country at large the landholder responsible by custom for the maintenance of security and order within his estates or simply the private person to whom the maintenance of watchmen is in the case of an extensive property important enough to require the creation of a regular office
 It is not disputed before us that the Rohini and Pathrole ghatwalis are Government ghatwalis and admittedly they are governed by Regulation XXIX of 1814
The question now is does the Act apply to these ghatwalis  It is necessary now to read some of the provisions of the Act
Section 2 is the definition section cl
o whereof defines a  proprietor cl
q 1 701 defines a tenure  and cl
r defines a  tenure holder 
The definition of the two expressions tenure and tenure holder was amended by Bihar Act 20 of 1954
The amendments were made with retrospective effect and the amending Act said that the amendments shall be deemed always to have been substituted
Now the three clauses o q and r of section 2 are in these terms  section 2o  Proprietor  means a person holding in trust or owning for his own benefit an estate or part of an estate and includes the heirs and successors interest of a proprietor and where a proprietor is a minor or of unsound mind or an idiot his guardian committee or other legal curator q tenure means the interest of a tenure
holder or an under tenure holder and includes i a ghatwali tenure ii a tenure created for the maintenance of any person and commonly known as kharposh babuana etc and iii a share in or of a tenure but does not include a Mundari Khunt Kattidari tenancy within the meaning of the Chota Nagpur Tenancy Act 1908 or a bhuinhairi tenure prepared and confirmed under the Chota Nagpur Tenures Act 1869 r  tenure holder  means a person who has acquired from a proprietor or from any other tenure holder a right to hold land for the purpose of collecting rent or bringing it under cultivation by establishing tenants on it and includes i the successors in interest of persons who have acquired such right ii a person who holds such right in trust iii a holder of a tenure created for the maintenance of any person iv a gbatwal and the successors in interest of a ghatwal and v where a tenure holder is a minor or of unsound mind or an idiot his guardian committee or other legal curator
 The definition clauses q and r state in express terms 702 that tenure  includes a ghatwali tenure and  tenure holder  includes a ghatwal  and the successors in interest of a ghatwal
The argument on behalf of the appellants is that the definition clauses should be so construed as to include zamindari ghatwalis only and not Government ghatwalis
Firstly it is pointed out that cl
r in its substantive part says that a tenure holder  means a person who has acquired from a proprietor or from any other tenure holder a right to hold land for the purpose of collecting rent or bringing it under cultivation by establishing tenants on it this part it is submitted cannot apply to a Government ghatwal because a Government ghatwal does not acquire from a proprietor or from any other tenure holder a right to hold land for any of the two purposes mentioned therein
In this connection our attention has been drawn to el
o which defines a proprietor  and it is further pointed out that as stated by Lord Sumner Government ghatwals were either created by the ruling power or were since their creation and generally at the time of the Permanent Settlement included in a zamindari estate and formed into a unit in its assessment therefore it is argued that Government ghatwalis did not acquire any right from a proprietor or any other tenure holder
Secondly it
is Submitted that sub cl
i of el
q and sub cl
iv of cl
r must be read in the light of the sub
stantive part of the two clauses even though the subclauses state in express terms that a tenure  includes a ghatwali tenure and a tenure holder  includes a ghatwal
It is pointed out that a zamindari ghatwal acquires his interest from a proprietor and the substantive part of clauses q and r may apply to a zamindari ghatwal and his tenure but the substantive partof the two clauses cannot apply to a Government ghatwal and his tenure
We are unable to accept this line of argument as correct
Where a statute says in express terms that the expression tenure  includes a ghatwali tenure and the expression  tenure holder  includes a ghatwal and the successors in interest of a ghatwal there must be compelling reasons to out down the amplitude of the 703 two expressions
The Bihar legislature must have been aware of the distinction between Government ghatwalis and zamindari ghatwalis and if the intention was to exclude Government gbatwalis nothing could have been easier than to say in the two definition clauses that they did not include Government ghatwalis
On the contrary the legislature made no distinction between Government ghatwalis and zamindari ghatwalis but included all ghatwali tenures within the definition clauses
There are no restrictive words in the definition clauses and we see no reasons why any restriction should be read into them
It is worthy of note that the two definition clauses first state in the substantive part what the general meaning of the two expressions is and then say that the expressions shall inter alia include a ghatwali tenure and a ghatwal and the successors in interest of a ghatwal
Thus the two definition clauses are artificially extended so as to include all ghatwali tenures and all ghatwals and their successors in interest irrespective of any consideration as to whether they come within the general meaning stated in the substantive part of the two clauses
Such artificial extension of the two definition clauses is also apparent from sub cl
v of el
r and sub cl
iii of cl
Sub clause iii of el
q excludes certain tenures from the definition clause which would otherwise come within the general meaning of the expression tenure  and sub cl
v of cl
r extends the expression  tenure holder  to guardians committees and curators
When we are dealing with an artificial definition of this kind which states  means and shall include etc
 there is no room for an argument that even though the definition expressly states that something is included within a particular expression it must be excluded by reason of its not coming within the general meaning of that expression
The learned Counsel for the appellants has also called to his aid certain other provisions of the Act in support of the argument that the Act does not apply to Government ghatwalis
He has referred to section 231 704 f and section 324 of the Act
Section 23 deals with the computation of net income for the purpose of preparing a Compensation Assessment roll by deducting from the gross asset of each proprietor or tenureholder certain sums mentioned in clauses a to f
It must be stated that what was el
g of section 231 before has now become el
f because the original el
f of section 231 was held to be unconstitutional by this Court in The State of Bihar vs Maharajadhiraja Sir Kameshwar Singh of Darbhanga 1
Section 231 so far as it is relevant for our purpose states  section 231 For the purpose of preparing a Compensation Assessment roll the net income of a proprietor or a tenure holder shall be computed by deducting from the gross asset of such proprietor or tenure holder as the case may be the following namely a b c d e f any other tax or legal imposition payable in respect of such estate or tenure not expressly mentioned in clauses a to e or the value to be commuted in the prescribed manner of any services or obligations of any other form to be rendered or discharged as a condition precedent to his enjoyment of such estate or tenure 
Now the argument before us is that el
f of section 231 cannot apply to a Government ghatwal because he can still be asked to perform the services and obligations which he had undertaken by reason of the office which he held
It is submitted that the Act does not purport to abolish the ghatwali office and as the office and the tenure are inseparably connected the calculation referred to in el
f cannot be made in the case of a Government ghatwali
Our attention has also been drawn to a later decision of the Patna High Court Election Appeals nos 7 and 8 of 1958 of March 20 1959 wherein a distinction was drawn 1 705 between acquisition and resumption of a ghatwali tenure and the argument that on the acquisition of the ghatwali tenure the office lapsed was not accepted
We have been informed at the Bar that that decision is under appeal to this Court
Therefore we do not propose to say anything about the correctness or otherwise of the view expressed therein
It is enough to point out that assuming that the argument of the appellants is correct and el
f of section 231 does not apply it does not necessarily follow that the appellants  ghatwali tenures cannot be acquired by the State Government under section 3 of the Act
Section 231f provides only for the deduction of a particular item from the gross asset of the tenure holder for the purpose of computing the net income
Even if el
f does not apply the statute provides for other deductions mentioned in clauses a to e
Those clauses indisputedly apply to a ghatwali tenure and a Compensation Assessment roll can be prepared on their basis
It would not be correct to say that because a particular item of deduction does not apply in the case of a Government ghatwali such ghatwali tenure must be excluded from the ambit of the Act such a view will be inconsistent with the scheme of section 23
The scheme of section 23 is that certain deductions have to be made to compute the net income some of the items may apply in one case and some may not apply
The section does not contemplate that all the items must apply in the case of each and every proprietor or tenure holder
We now come to section 32 of the Act
Section 324 states  section 324 if the estate or tenure in respect of which the compensation is payable is held by a limited owner or the holder of life interest the Compensation Officer shall keep the amount of compensation in deposit with the Collector of the district and the Collector shall direct the payment of the interest accruing on the amount of compensation to the limited owner or the holder of the life interest during his lifetime
Such amount shall remain deposited with the Collector until the amount of compensation or 706 portion thereof after making payments if any under the proviso to this sub section is made over to any person or persons becoming absolutely entitled thereto Provided that nothing in this sub section shall be deemed to affect the right of any limited owner or the holder of a life interest to apply to the District Judge for the payment of a part of the amount of compensation to defray any expenses which may be necessary to meet any legal necessity
 It is argued that sub section
4 of section 32 is also not applicable to a Government ghatwali because the expression limited owner  occurring therein has been used in the sense in which it is understood in Hindu Law and the holder of a Government ghatwali is not a limited owner in that sense
Learned Counsel for the appellants has drawn our attention to the expression  legal necessity  occurring in the proviso to sub section
4 in support of his argument that the expression limited owner  has the technical sense ascribed to it in Hindu Law
On behalf of the respondent State it has been argued that the expressions limited owner  and legal necessity  are not used in any technical sense and may apply to persons who under the conditions on which they hold the tenure cannot alienate or divide it
Here again we consider it unnecessary to pronounce on the true scope and effect of sub section
4 of section 32
The short question before us is  are Government ghatwalis excluded from the ambit of the Act by reason of subs
4 of section 32  Let us assume without deciding that sub section
4 does not apply to ghatwali tenure
What is the result  Section 32 merely provides for the manner of payment of compensation
If sub section
4 does not apply the payment of compensation will have to be made in accordance with sub section
1 of section 32 which says  section 321
When the time within which appeals under section 27 may be made in respect of any entry in or omission from a Compensation Assessment roll has expired or where any such appeal has been made under that section and the same has been disposed of the Compensation Officer shall proceed to make payment in the manner provide in this section to the 707 proprietors tenure  holders and other persons who are shown in such Compensation Assessment roll as finally published under section 28 to be entitled to compensation of the compensation payable to them in terms of the said roll after deducting from the amount of any compensation so payable any amount which has been ordered by the Collector under clause c of section 4 or under any other section to be so deducted
 Therefore the result is not that Government ghatwalis will go out of the Act because sub section
4 does not apply
The result only is that the holders of such tenures will be paid compensation in a different manner
What rights others having a proprietary interest in a ghatwali tenure have against the compensation money does not fall for decision here
Therefore we are of the view that neither section 231f nor section 324 have the necessary and inevitable result contended for by the appellants viz that the appellants  ghatwali tenures must be excluded from the operation of the Act even though the definition clauses expressly include them
This brings us to the second point urged before us
That point can be disposed of very shortly
It is contended that if the provisions of the Act apply to Government ghatwalis then the Act falls outside the legislative competence of the State Legislature in as much as the Act then becomes legislation with regard to items 1 and 2 of the Union List
These two items are 1
Defence of India and every part thereof including preparation for defence and all such acts as may be conducive in times of war to its prosecution and after its termination to effective demobilisation
Naval military and air forces any other armed forces of the Union
 It is we think quite obvious that the Act has no con nection whatsoever with the defence of India or the armed forces of the Union
As Lord Sumner had pointed out as far back as 1923 though ghatwali duties might be divided into police duties and quasi military duties both classes find lost their importance and the latter were rarely if ever demanded
This 708 Court had observed in The State of Bihar vs Maharajadhiraja Sir Kameshwar Singh of Darbhanga and Others 1 The pith and substance of the legislation how
ever in my opinion is the transference of ownership of estates to the State Government and falls within the ambit of legislative head entry 36 of List II
There is no scheme of land reform within the frame work of the statute except that a pious hope is expressed that the commission may produce one
The Bihar Legislature was certainly competent to make the law on the subject of transference of estates and the Act as regards such transfers is constitutional per Mahajan J at p 926 of the report
We think that in pith and substance the legislation was covered by item 36 of List II as it then stood and it has no relation to items 1 and 2 of List I
Now as to the last argument founded on Regulation XXIX of 1814
In our view the Act in pith and substance related to acquisition of property and consequently no question of the repeal of Regulation XXIX of 1814 arose nor is it necessary to consider the principle that a special law relating to special tenures is not affected by a subsequent general law of land reforms
Such a principle has no application in the present case
The Act expressly includes all ghatwali tenures within its ambit and provides for the vesting of all rights therein absolutely in the State of Bihar on the issue of a notification under section 3 and under section 4 certain consequences ensue on the issue of such a notification notwithstanding anything contained is any other law for the time being in force
It is worthy of note that the Bengal Permanent Settlement Regulation 1793 Bengal Regulation 1 of 1793 did not stand in the way of acquisition of other permanently settled estates and it is difficult to see how Regulation XXIX of 1814 can stand in the way of acquisition of ghatwali tenures
The point is really covered by the decision of this Court in Raja Suriya Pat Singh vs The State of U P2 where it was observed  1 2   1078 79
709  The Crown cannot deprive a legislature of its legislative authority by the mere fact that in the exercise of its prerogative it makes a grant of land within the territory over which such legislative authority exists and no court can annul the enactment of a legislative body acting within the legitimate scope of its sovereign competence
If therefore it be found that the subject of a Crown grant is within the competence of a provincial legislature nothing can prevent that legislature from legislating about it unless the Constitution Act itself expressly prohibits legislation on the subject either absolutely or conditionally
 For the reasons given above we hold that none of the three points urged on behalf of the appellants has any substance
The appeals fail and are dismissed with costs there will be only one hearing fee
Appeals dismissed


Summary:
Under an agreement dated December 8 1933 the appellant firm was appointed managing agent of a limited company for a period of thirty years from November 9 1933
Clause 2 of the agreement provided for the remuneration of the managing agent
Some of the shareholders and directors of the company having felt that the scale of remuneration paid to the managing agent was extraordinarily excessive and unusual negotiations were started for a reduction of the remuneration and as a result the appellant and the company entered into a Supplementary Agreement on March 24 1948 whereby in consideration of the company paying a sum of Rs 750000  as compensation for releasing the company from the onerous term as to remuneration  contained in the original agreement the managing agent agreed to accept as remuneration as from September i 1946 for the remaining term of the managing agency ten per cent
of the net annual profits of the company as defined in section 87C sub section
3 of the Indian Companies Act 1938 The sum of Rs 750000 was paid by the company to the appellant in 1947
For the assessment year I948 49 the Income tax Officer treated the aforesaid sum as a revenue receipt in the hands of the appellant and taxed it as such
The appellant claimed that the sum was a payment made by the company whole in discharge of its contingent liability to pay the higher remuneration and it was therefore a capital expenditure incurred by the company and received by the appellant as a capital receipt and was as such not liable to tax
The income tax authorities maintained i that though the payment of Rs 750000 had been described as compensation the real object and consideration for the payment was the reduction of remuneration 2 that it was a lump sum payment in consideration of the variation of the terms of employment and was therefore not a capital receipt but was a revenue receipt and 3 that there was in fact no break in service and the payment was made in the course of the continuation of the service and therefore represented a revenue receipt of the managing agency business of the appellant
Held that the sum of Rs 750000 was paid by the company for securing immunity from the liability to pay higher remuneration to the appellant for the rest of the term of the managing 528 agency and was therefore a capital expenditure  and so far as the appellant was concerned it was received as compensation for the deterioration or injury to the managing agency by reason of the release of its rights to get higher remuneration and was therefore a capital receipt
The Commissioner of Income tax vs Vazir Sultan and Sons  Hunter vs Dewhuyst 1932 16 Tax Cas
605 and Glenboig Union Fiyeclay Co Ltd vs The Commissioners of Inland Revenue  relied on
Assam Bengal Cement Co Ltd vs Commissioner of Income tax 1955 i SCR 972  The Commissioner of Income tax and Excess Profits Tax vs The South India Pictures Ltd   The Commissioner of Income tax vs Jairam Valji and The Commissioner of Income tax vs Shaw Wallace and CO
1932 LR 59 IA 206 considered