ivil Appeal No 1416 of 1975
From the Judgment and Order dated 212
1974 of the Madhya Pradesh High Court in MP No 565 of 1974
Sakesh Kumar and SK Agnihotri for the Appellants
SS Khanduja YP Dhingra and BK Satija for the Respondents
J This is an instance of how a resourceful mind can find ingenious method to circumvent the law
The first respondent in this case is the Home Decorators  Finance P Ltd of which the second respondent is the Managing Director
The appellant Government collects enter tainment tax under the Entertainment Duty and Advertisement Tax Act 1936 hereinafter referred to as the Act  from the organisers of the entertainment programmes whenever the entries to such programmes are charged
The entertainment tax is recovered at the rate of 36 per cent of the fee charged
In order to evade this tax the respondents evolved a stratagem and organised two 1002 performances called Mahendar Kapoor Nite in a local audi torium namely Manas Bhawan Hall Wright Town Jabalpur on 7th and 8th July 1974
Although the Articles and the Memo randum of Association of the 1st Respondent did not permit them to do so with a view both to bring the said programmes within the scope of the Articles of Association and to evade the payment of the tax the respondents issued advertise ments of the programmes in a local newspaper giving out that the programmes were being arranged to encourage savings
The scheme was that all those who wanted to attend the programme will become members of a group which they called Nav Nirman Group by paying an admission fee of Rs2 which was non refundable and a membership subscription of Rs 10 which was refundable after 10 years
The advertisements also stated that since there was an overwhelming demand the performance would be staged on two dates namely the 7th and 8th July 1974 and that the membership forms would be available at the site on the dates concerned and that the entry to the pro gramme would be strictly on the production of the invitation card as well as the membership card
It appears that on July 7 1974 and July 8 1974 as many as 3189 and 4649 gullible persons respectively fell victims and paid both the admis sion fee as well as the membership subscription
The re spondents collected both the membership forms as well as the receipts for payment from the said persons at the time of giving them the entry to the programme
The result was that the persons concerned were left neither with the membership form nor with the receipts for the money they had paid
Needless to say that although the promise was that such performances would be repeated for 10 years hence and the members concerned would have an entry to the programmes on the basis of the membership cards neither the membership cards were issued nor the admission fee or the membership subscription were returned to the members nor the perform ances were staged
In effect the respondents made good with the money they had collected ostensibly for promoting sav ings
Thus both the members of the public were defrauded of their moneys as well the State Government of their taxreve nue
The District Excise Officer who was also the Enter tainment Tax Collector under the said Act sensing the ploy had however taken precaution to check on both the said dates the receipts and the amounts received by the respond ents and had dexterously prepared a panchnama at the spot
He determined the amount of tax recoverable on the said collections and issued to the respondents two separate 1003 notices on July 9 1974 demanding the tax along with the dutysurcharge thereon for the collections made on 7th and 8th July 1974 respectively
The total amount so demanded by both the notices was Rs3542976
The respondents challenged the notices by a writ petition under Article 226 of the Constitution before the High Court
The High Court by the impugned decision held that the assessment of the tax made by the Officer was arbitrary because firstly there was no allegation that the invitation cards which were issued were sold and secondly the subscription fee of Rs 10 recovered from each member was not divided by 10 which it was necessary to do for the entertainment tax could be collected only on Re 1 per year for the next 10 years
The High Court therefore allowed the writ petition and quashed the notices
It also appears that the respondents had paid Rs5000 in part payment of the amount demanded under the notices
The High Court therefore also directed the appellants to refund the said amount as being exacted from the respondents
We are afraid 
the High Court completely missed the crucial point and therefore mis directed itself
The admitted facts as stated above were that the respondents had collected in all Rs 12 from each of the members out of which Rs2 were non refundable being the so called admission fee and Rs 10 were refundable only after 10 years
The members were not issued the membership cards nor were they left either with any trace of their membership forms or receipts for the payments they had made
Instead they were handed over entrance slips during interval which were col lected at the door
The result was that even if the mem bers were to claim an entry for programmes if any in future they would not have been able to do so
As it hap pened further in fact no programmes were ever staged at any time thereafter
The so called Nav Nirman Group did not have any legal existence
It was an amorphous body
The rules and regulations framed for the said body further showed some interesting features as follows For the purpose of Prizes there shall be Five Sub groups of one lakh members each
After every Sub group of one lakh members there shall be total 4280 prizes divided into 20 half yearly draws and valuing total amount of Rs5 lakhs
The date of the First Draw will be announced through News papers
Every member irrespective of whether he has received any 1004 prizes or not shall be entitled to the refund of his deposit of Rs 10 after the maturity of the duration of the group ie 10 years along with a bonus of Rs2 on surren der of the official Receipt cum Membership Evidence issued by the Company
Duration of the Group shall be commenced from the date of the 1st Draw
x x x x x x For the purposes of Bumper Draw there shall be 50 SubGroups of 10000 continued members each and after every such sub group there shall carry various valuable prizes to the tune of about Rs250000
Members of incomplete subgroup of 10000 continued members shall be given an extra bonus of Rs25 in the shape of articles the list of which shall be declared nearing maturity of the Group instead of partici pating in Bumper Draw
X X X X X X Every member will be issued a receipt while being admitted as a member and the number of such receipt shall be his membership Number also
No separate pass book will be is sued
The receipt itself shall be treated as final and conclusive evidence of membership
X X X X X X After the completion of 1st sub group one lakh members the First Draw shall be conducted but in case total membership of the sub group does not attain the target necessary to form the sub group before date of the draw which shall be announced through Newspapers then the remaining membership number of the sub group shall be treated as the Company s membership numbers and any prizebenefit accruing through these numbers as a result of the draw shall remain the Company s property
The Company may allot such membership numbers subsequently to the new applicants for the remaining period with the subsequent benefits only
The same rule shall apply to every further sub group of one lakh members
X X X X X X 1005 Membership of the Group for 10 years and cannot be cancelled or withdrawn by the member before maturity of the Group
Prizes and Film Star show are added incentive and not Part of the Scheme and are not binding on the Company under circumstance beyond control
X X X X X X The management may change any article of the declared prize looking to the time and circumstances prevailing at the time of the particular draw
X X X X X X The management of the Company reserves the right to add alter or amend the rules and regulations as and when neces sary for the efficient and proper conduCt of the group as well as in compliance with the Government rules and regula tions which may come in force hereafter and the same shall be binding on all the members
 It will be apparent from the Scheme that it was not meant for promoting music
It was a pure business preposition meant to collect money and earn profits and it was to be used as a device to evade the entertainment duty
The re ceipts andor the invitation cards were nothing but tickets for the show and only for one show and were collected at the door
In the circumstances whatever be the description given to the receiptscards they were liable to the enter tainment duty
The impugned notices were therefore proper ly issued by the appellants
We are therefore unable to accept the reasoning of the High Court that Rs 10 collected by the respondents were the membership subscription or that the duty could not have been collected at a time on Rs 10
Hence we allow the appeal and set aside the impugned decision with costs
TNA Appeal allowed


Summary:
The Indian Independence Act 1947 had set up two inde pendent dominions known as India  and Pakistan 
A Bound ary Commission was appointed to determine the boundaries of the two dominions As a result of its Award certain areas of India became after the partition enclaves in East Pakistan
Similarly certain East Pakistan enclaves were found in India
Dehagram and Angarpota were two such Pakis tani enclaves in India
In view of the Award Berubari Union No 12 was treated as part of the Province of West Bengal
Near about 1952 Pakistan alleged that under the Award the Berubari Union should really have formed part of East Bengal
Eventually in 1958 the Prime Ministers of India and Pakistan entered into an agreement settling certain boundary disputes
The agreement inter alia provided for the division of Berubari Union No 12 between India and Pakistan and exchange of Indian enclaves in Pakistan and Pakistan enclaves in India
Doubts arose regarding the implementation of the 1958 agreement
Therefore in exercise of the powers conferred upon him by clause 1 of Article 143 of the Constitution the President of India referred the matter to the Supreme Court
In the light of the opinion rendered by the Supreme Court in Re The Berubari Union and Exchange of Enclaves 250 the Constitution Ninth Amendment Act 1960 was passed to give effect to the transfer of the terri tories as envisaged in the 1958 agreement
25 By an official notification 17th January 1961 had been appointed as the day for the transfer of the territories of India by way of exchange with the territories of Pakistan in the western region
No further appointed day was notified so far as the eastern border of India was concerned
In 1966 writ petitions challenging the validity of the transfer of territories as stipulated in the Ninth Amendment were dismissed by this Court in Ram Kishore Sen  Ors
vs Union of India  On or about the 16th May 1974 an agreement was entered into between the Prime Ministers of India and Bangladesh
This agreement inter alia provided that India will retain half of Berubari Union No 12 which under the 1958 agree ment was to be transferred to Pakistan and in exchange Bangladesh will retain the Dahagram and Angarpota enclaves
The agreement further provided that India will lease in perpetuity to Bangladesh a small area near Tin Bigha  for the purpose of connecting Dahagram and Angarpota with Pan bari Mouza of Bangladesh
The 1974 agreement however re mained unimplemented
Thereafter in October 1982 an understanding was reached between the two governments in respect of lease in perpetu ity  by India of the said area near Tin Bigha  to enable the Bangladesh government to exercise her sovereignty over Dahagram and Angarpota
It was further agreed that the 1982 agreement would be an integral part of the earlier agreement of 1974
It was also agreed that the sovereignty over the leased area shall continue to vest in India
Clause 9 of the 1982 agreement provided that India would have no jurisdiction over Bangladesh nationals in respect of any offence committed in the area and the same shall be dealt with by the Bangladesh law enforcing agency only
In 1983 Writ Petitions were filed in the Calcutta High Court challenging the validity of the agreement
The learned Single Judge dismissed the writ petitions Sugandhra Roy vs Union of India AIR 1983 Cal
The learned Single Judge held that i Ninth Amendment in so far as it related to exchange of the enclaves in eastern India had not come into being ii implementation of the agreements of 1974 and 1982 did not involve cession of any Indian territory to Bangladesh iii no exclusive or legal possession of Tin Bigha was being transferred 26 to Bangladesh iv there was no question of transfer of sovereignty of India wholly or partially in respect of the said area v certain privileges only had been conferred on Bangladesh and its nationals under the said agreement which otherwise they would not have vi as Dahagram and Angarpo ta would remain as parts of Bangladesh territory the agree ments were necessary to enable Bangladesh to exercise its sovereignty in full over the said enclaves and vii in spite of the said agreements India would retain sovereignty ownership and control over Tin Bigha
Regarding clause 9 of the 1982 agreement the learned Single Judge held that the conferment of this power under the agreement to Bangladesh and abdication of any such power by India by itself did not amount to transfer of sover eignty in respect of the area
The learned Single Judge however noted that merely by virtue of the agreement and without any amendment of the existing Indian law it might not be legally possible to take away existing jurisdiction of the law enforcing agencies of India or the Indian courts
An appeal was filed before the Division Bench
It was contended before the Division Bench that i the 1974 agree ment specifically provided that the same would be suitably ratified but it had not been ratified ii in the absence of any ratification of the agreement of 1974 India and Bangladesh could not enter into the subsequent agreement in 1982 on the basis of the agreement of 1974 iii by reason of the agreement of 1958 between India and Pakistan which was sanctioned by the Ninth amendment to the constitution there was automatic exchange of the Pakistani enclaves in the eastern part of India with the Indian enclaves in east ern Pakistan iv neither India nor Bangladesh had formally terminated the treaty of 1958 and as such in so far as the provisions of the said agreement of 1958 concern Berubari union No 12 and the Cooch Behar enclaves including Daha gram and Angarpota they could not be given a go by in the manner purported to have been done and a further amendment to the Constitution was necessary and v the use of the expression residual jurisdiction  in clause 9 of the agree ment of 1962 indicated that Indian only retained residual sovereignty over the area and the defacto arid real sover eignty in the area had been surrendered to Bangladesh
The Division Bench repelled these contentions
The Bench however was of the view that the agreements of 1974 and 1982 providing for exchange of territories would have to be noted in the relevant schedules to the Constitution before any appointed day could be notified in 27 respect of the territories to be transferred to Bangladesh
According to the Division Bench this was necessary in order to retain Berubari in India
Disposing of the appeal this Court
HELD 1 The Division Bench came to the correct conclu sion that in so far as the eastern border of India was concerned the Ninth Constitutional amendment had not become part of the Constitution as no appointed day had been noti fied and in that view of the matter the decision to allow Bangladesh to retain Dahagram and Angarpota under the 1974 and 1982 agreements did not amount to cession of Indian territory in favour of Bangladesh
45A B AK Roy etc
vs Union of India  Anr 1982 2 SCR 272 Maganbhai Ishwarbhai Patel vs Union of India  A nr   referred to
2 The Division Bench was pre eminently right in arriv ing at the conclusion that there was no automatic transfer of Dahagram and Angarpota to India under the 1958 agreement in the absence of a notified appointed day and consequently both defacto and dejure these enclaves remained part of East Pakistan and subsequently Bangladesh
44G H 3 The Division Bench had held that the agreements of 1974 and 1982 did not amount to cession of territory or abandonment of sovereignty
If that is the position no constitutional amendment was required for the arrangements entered into either by the agreement of 1974 or 1982
The Division Bench was therefore in error in expressing a con trary view
44B C 4 In that view of the matter the agreements of 1974 and 1982 did not require to be suitably notified or included in the official gazette
Therefore there was no cause to direct the legislature to amend or pass suitable laws
52B State of Himachal Pradesh vs Umed Ram Sharma   State of Himachal Pradesh vs A parent of a Stu dent of Medical College Simla  Ors 1985 3 SCR 676 referred to
5 The expression lease in perpetuity  has to be understood in the context of and with reference to the objects of the agreement
The object of the lease was to allow access to Bangladesh to Dahagram and 28 Angarpota for the purpose of exercise of her sovereignty over and in the said areas
Having examined the rights in the agreements these do not amount to lease or surrender of sovereignty as understood in the international law
47B D Associated Hotels of India Ltd vs
RN Kapoor   referred to
6 The Division Bench rightly held that the recital in a deed could not operate as an estoppel against the specific terms and conditions thereof
On a construction of the agreements the Division Bench came to the correct conclu sion that the agreements of 1974 and 1982 together in their entirety must be judged
47F 7 An agreement between two countries might be ratified not only by a subsequent formal agreement but by actual implementation or by conduct and read properly the subse quent agreement did ratify the previous agreement
46G H 8 The Division Bench rightly held that under the said agreements specific and limited rights were being granted to Bangladesh
Such rights were not exclusive and the aggre gation thereof would not amount to a lease as is commonly understood in favour of Bangladesh
49D E 9 Certain restrictions had been imposed on India over its absolute sovereignty in the area to serve the purpose in favour of and in the interest of Bangladesh
These are however self imposed restrictions
On a proper construction of the agreements of 1974 and 1982 and the individual clauses it cannot be said that as a result of the said agreement India had surrendered its sovereignty over the said area of Teen Bigha in favour of Bangladesh or that Bangladesh has become the sovereign over the said territory to the exclusion of India
49G H 10 Sovereignty is a quality of right
It is a bundle of rights
It depends on the facts and the circumstances of each case
Apart from anything else the specific clause in the agreement of 1982 that sovereignty over the area shall continue to vest in India stands in the way of a contrary construction
50A B Panama Canal s case Hudson Cases  Ors
Materials on international Law 3rd Edition 1951 pp 222 3 distin guished
29 11 Sovereignty  has been defined as the supreme authority  in an independent political society
It is essen tial indivisible and illimitable
However it is now con sidered and accepted as both divisible and limitable
Sover eignty is limited externally by the possibility of a general resistance Internal sovereignty is paramount power over all action and is limited by the nature of the power itself
41E F 12 In the present and modern context sovereignty has and must have a more restrictive meaning than it had in the earlier centuries when on the emergence of individual na tional States no limits on the power of States were ac knowledged
Any State in the modern times has to acknowledge and accept customary restraints on its sovereignty inasmuch as no State can exist independently and without reference to other States
Under the general international law the con cept of interdependence of States has come to be accepted
Even without the said agreements of 1974 and 1982 so long as Dahagram and Angarpota remain part of Bangladesh the latter under the general international law and customs would have a right to access to the said enclose through the territory of India
50C E 13 Amicable and peaceable settlement of boundary disputes are in the interests of the international communi ty
The older and absolute ideas of sovereignty and inde pendence has thus necessarily to be modified in the dawn of the 21st century
A perpetual right to passage and other incidental rights given to Bangladesh for the limited pur pose for exercising the sovereignty over her own two en claves within the territory of India andor if imposed restrictions on itself by India does not tantamount to transfer of interests in India 52E F