Appeal No241 of 1993
From the Judgment and Order dated 9101991 of the Punjab and Haryana High Court in Civil Writ Petition No 5727 of 1991
Harish N Salve Jagdish Singh Kuhar and AK Mahajan for the Appellant
Ujagar Singh Ms Naresh Bakshi RS Yadav and GK Bansal for the Respondents
The Judgment of the Court was delivered by SC AGRAWAL J
 This appeal relates to the inter se seniority of the appellant and respondent No 3 in the punjab Superior Judicial Service hereinafter referred to as The Service 
The appellant and respondent No 3 were both appointed to the Service on May 26 1986 on the basis of selection by direct recruitment
The appellant belongs to the general category whereas respondent No 3 is a Mazhbi Sikh which is a Schedule Caste in Punjab
The recruitment to the Service is governed by Punjab Superior Judicial Service Rules 1963 hereinafter referred to as The Rules 
By Rule 8 A which was inserted in the rules by notification dated June 141977 the instructions issued by the State Government from time to time in relation to reservation of appointments or posts for Scheduled Castes and Backward Classes were made applicable for the purpose of making appointments to the posts in the Service
The orders of the State Government relating to persons belonging to Scheduled Castes in this regard which have a bearing in this appeal are as follows 1 Letter dated June 6 1974 from the Secretary to the Government of Punjab Welfare of Scheduled Castes and Backward Classes Department to all Heads of Department etc
It was communicated that it had been decided to increase the percentage of reservation in direct recruitment in all services from 20 to 25 in the case of members of Scheduled Castes and from 2 to 5 in the case of members belonging to Backward Classes
In the said letter it was also indicated 599 that the vacancies to be reserved for the members of Scheduled Castes in a lot of 100 vacancies would be at the points specified below 1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 8 1 85 89 93 and 97 and so on
It was also directed that the Roster already existing would not be abondoned but would now be maintained in continuation from the vacancy in the existing Roster last filled up according to the new pattern of reservation that has been prescribed in the earlier paragraphs in the said letter
2 Circular dated November 191974 relates to carrying forward of reservation for members of Scheduled CastesBackward Classes
It was directed that the reservation should be carried forward from vacancy to vacancy in the same block until a Scheduled Caste or a Backward Class person as the case may be is appointed or promoted in the same block
It was further directed that if all the vacancies in any block determined on the basis of prescribed Roster are filled up by other category person due to non availability of Scheduled Castes or Backward Classes persons the reservation should be carried forward to the subsequent blocks
The said letter required that the reservation should be carried forward from vacancy to vacancy in each block and from block to block until the carried forward vacancies are filled up by the members of the Scheduled Castes or Backward Classes
It was also provided that only one reserved vacancy out of the carried forward vacancies should be filled in a block of appropriate Roster in addition to the normal reserved point of the block
3 Letter dated May 5 1975 from the Secretary to the Government Punjab Welfare of Scheduled Castes  Backward Classes Department addressed to all Heads of Departments etc
It was communicated that the Government have decided that henceforth 50 vacancies of the quota reserved for Scheduled Casstes should be offered to Balmikis and Mazhbi Sikhs if available as a first preference from amongst the Scheduled Castes candidates
4 Letter dated
April 8 1980 addressed by the Under Secretary to the Government of Punjab Welfare Department Reservation Cell to all Heads of Departments etc
The position with regard to the implementation of instructions regarding reservation for Mazhbi Sikhs and Balmikis under the letter dated May 5 1975 was clarified as follows i Combined merit list can be disturbed while giving appointment 600 to the candidate belonging to Balmikis and Mazhbi Sikhs
ii On the basis of 50 reservation the first reserved vacancy can be offered to Balmikis and Mazhbi Sikhs although his name may be below in the merit list
iiiOn the basis of 50 reservation Balmikis and Mazhbi Sikhs 1 3 5 and so on reserved vacancies shall go to the candidates of these castes if available and 24 6 and so on reserved vacancies shall go to other Scheduled Castes candidates
It is clarified here that these instructions are to be implemented when the names of the candidates of Balmikis and Mazhbi Sikhs are included in the merit list after selection
If no candidate belonging to these communities has been selected or less candidate selected then the reserved vacancy should be filled up from amongst the other Scheduled Castes candidates meaning thereby no reserve vacancy reserved for Balmkis and Mazhbi Sikhs should be carried forward After the introduction of Rule 8 A in the Rules four persons were appointed by way of direct recruitment to the Service in the year 1979
One out of them Shri Balwant Rai belonged to a Scheduled Caste other than Balmikis or Mazhbi Sikhs
Thereafter in 1981 one post fell vacant but no person belonging to a Scheduled Caste could be selected and the candidate belonging to general category was appointed against the said post
In the year 1982 selection was made for two posts but only one person could be selected and he also belonged to the general category and no person belonging to a Scheduled Caste was available for appointment
In 1986 six persons including the appellant and respondent No3 were appointed on the basis of direct recruitment
Out of those six persons four belonged to the general category and two belonged to Scheduled Caste
One of the two persons was Shri GS Sarma who belonged to a Scheduled Caste other then Balmikis or Mazhbi Sikhs
In the merit list for the said selection the appellant was placed at No 1 Shri GS Sarma was at No 2 and respondent No 3 was at No 5
As per the Roster Shri GS Samra was placed at Point No7 the appellant at Point No8 and respondent No 3 at Point No 9
After joining the Service Shri GS Samra resigned from the same and had ceased to be a member of the Service prior to April 1 1988
In the tentative seniority list of the members of the Service as on April 1 601 1988 the appellant was placed at Serial No 52 and respondent No 3 was placed at Serial No53
Respondent No3 submitted a representation against his placement in the seniority list and claimed that he should be placed against the post reserved for Scheduled Caste at Serial No 5 in the Roster and on that basis he should be given the seniority of the year of 198 1
He also submitted that since he is a Mazhbi Sikh he is entitled to preference over Shri GS Samra who belonged to a Scheduled Caste other than Balmikis and Mazhbi Sikhs and he claimed that he should have been placed at Point No7 in the Roster and Shri GS Samra should have been placed at Point No 9 and on that basis also respondent No 3 is senior to the appellant
Representation was also invited from the appellant
in this regard
After considering the said representations the High Court on its administrative side decided that the respondent No 3 was entitled to be placed above Shri GS Samra in view of the Circular Letter dated May 5 1975 and that he should have been placed against Point No 7 in the roster and Shri GS Samra should have been placed against Point No9 in the Roster
On that basis the seniority list was revised and respondent No3 was placed at Serial No 52 while the appellant were placed at Serial No 53
Feeling aggrieved by the revision in the seniority the appellant filed a writ petition in the High Court which was dismissed by the High Court by judgment and order October 9 199 1
This appeal is directed against the said judgment of the High Court
There is no dispute that appellant has been rightly assigned Point No 8
If Respondent No 3 has to be assigned Point No7 as found by the High Court then he would be senior to the appellant but if Respondent No 3 is assigned Point No 9 then appellant would be senior to Respondent No 3 It is therefore necessary to determine whether respondent No 3 is entitled to be placed at Point No 7 in the Roster in place of Shri GS Samra who should be placed at Point No9 or that the respondent no3 should be assigned Point No9 of the Roster
The said question requires consideration of the various orders relating to reservation for Scheduled Castes to which reference has been made earlier
As indicated earlier by letter dated June 6 1974 points 1 5 9 13 17 21 25 29 33 3741 45 49 53 57 6 1 65 69 73 77 81 85 89 93 and 97 in the Roster are reserved for members of Scheduled Castes
By letter dated May 5 1975 50 of the vacancies of the quota reserved for Scheduled Castes are required to be offered to Balmikis and Mazhbi Sikhs if available as a first preference from amongst the Scheduled Castes candidates
In view of the clarifications contained in the letter dated April 8 1980 on the basis of 50 reservation the first reserved vacancy can be offered to Balmikis and Mazhbi Sikhs although his name may be below in the merit list and on the basis of 50 reservation amongst the vacancies reserved for Scheduled Caste vacancies 1 3 5 and so on would go to Balmikis and Mazhbi Sikhs if available and reserved vacancies 2 4 6 and so on would go to other Scheduled 602 Castes candidates
It has also been clarified that if no candidate belonging to the communities of Balmikis and Mazhbi Sikhs was selected or less number of candidates were selected then the reserved vacancies should be filled up amongst the other Scheduled Castes candidates and that no vacancy reserved for Balmikis and Mazhbi Sikhs should be carried forward
In view of the aforesaid clarifications out of the posts reserved for Scheduled Castes in the Roster there was reservation for Balmikis and Mazhbi Sikhs on the posts against the following points in the Roster 1 9 17 25 33 41 49 57 65 73 81 89 and 97
There was reservation for members of Scheduled Castes other than Balmikis and Mazhbi Sikhs on the posts against the following points in the Roster 5 13 21 29 37 45 53 61 69 77 85 and 93
The learned counsel for the appellant has urged that since these orders relating to reservation for Scheduled Castes became applicable to the Service with effect from June 14 1977 when Rule 8 A was inserted all appointments to the Service after June 14 1977 have to be made in accordance with these orders
The submission is that the first appointment by direct recruitment of a person belonging to the Scheduled Castes was of Shri Balwant Rai made in 1979
That was at point No 1 in the Roster
That should have gone to a Balmiki or a Mazhbi Sikh but since no person belonging to those communities was available Shri Balwant Rai who belongs to a Scheduled Caste other than Balmikis and Mazhbi Sikhs was appointed
It has been further urged that in view of the clarification contained in the letter dated April 8
1980 a vacancy reserved for Balmikis and Mazhbi Sikhs is not required to be carried forward and the Balmikis and Mazhbi Sikhs cannot claim reservation in respect of the next vacancy at Point No 5 which was reserved for Scheduled Castes other than Balmikis and Mazhbi Sikhs and they can only claim the vacancy that was reserved for Balmikis or Mazhbi Sikhs at point No9
It was submitted that Shri GS Samra who belonged to a Scheduled Caste other than Balmikis and Mazhbi Sikhs was entitled to be appointed against the reserved vacancy at Point No5 reserved for a candidate belonging to a Scheduled Caste other than Balmikis and mazhbi Sikhs but since at the time of selections that were made in the years 1981 and 1982 no person belonging to a Scheduled Caste was available
The vacancy at Point No 5 reserved for Scheduled Castes was carried forward to point No 7 and Shri GS Samra had to be adjusted at point No7 in the Roster
The submission is that respondent No 3 being a Mazhbi Sikh could not claim to be placed at point No 7 in the Roster against a vacancy which was reserved for a candidate belonging to a Scheduled Castes other than Balmikis and 603 Mazhbi Sikhs and he could be only placed against the vacancy at point No9 in the Roster
The learned counsel for the respondent No3 on the other hand has urged that in view of the order dated May 5 1975 50 vacancies of the quota reserved for Scheduled Castes have to be offered to Balmikis and Mazhbi Sikhs and since Shri Balwant Rai belonging to a Scheduled Caste other than Balmikis and Mazhbi Sikhs had been appointed in 1979 the next post should go to Balmikis and Mazhbi Sikhs and on that basis respondent No3 was entitled to be appointed against the second post at point No 7 of the Roster and Shri GS Samra could only be appointed against third post at point No9 in the roster
In the alternative it was urged that the order dated April 8 1980 could only have prospective operation with effect from the date of issue of the said order and the sub roster indicated by the said order could be given effect to only from that date and on that basis the first post reserved for Scheduled Castes should go to Balmikis or Mazhbi Sikhs and on that basis also respondent No3 was entitled to be placed against point No7 in the 100point roster and Shri GS Samra against point No9 in the said roster
From a parusal of the letter dated April 81980 we find that it gives clarifications on certain doubts that had been created by some Departments in the matter of implementation of the instructions contained in the earlier letter dated May 51975
Since the said letter dated April 81980 is only clarificatory in nature there is no question of its having an operation independent of the instructions contained in the letter dated May 5 1975 and the clarifications contained in the letter dated April 8 1980 have to be read as a part of the instructions contained in the earlier letter dated May 5 1975
In this context it may be stated that according to the principles of statutory construction a statute which is explanatory or clarificatory of the earlier enactment is usually held to be restrospective
See Craies on Statute Law 7th Ed p 58
It must therefore be held that all appointments against vacancies reserved for Scheduled Castes made after May 5 1975 after May 14 1977 in so far as the Service is concerned have to be made in accordance with the instructions as contained in the letter dated May 5 1975 as clarified by letter dated April 8 1980
On that view the appointment of Shri Balwant Rai in 1979 has to be treated to be an appointment made under the said instructions and operation of these instructions cannot be postponed till April 8 1980
If the matter is considered in this light then the sub roster as indicated in the letter dated April 8 1980 would have to be applied in respect of the post on which Shri Balwant Rai was appointed in 1979 and the said appointment has to be regarded as having been made against the vacancy at point No 1
in the the roster which was reserved for Balmikis or Mazhbi Sikhs but since no Balmiki or Mazhbi 604 Sikh was selected for that post the said vacancy was assigned to Shri Balwant Rai who belonged to a scheduled Caste other than a Balmiki or Mazhbi Sikh
The said vacancy which was reserved for Balmikis or Mazhbi Sikhs could not be carried forward in view of the directions contained in the letter dated April 8 1980
The next post reserved for Scheduled Castes at point No 5 in the roster was meant for a person belonging to a Scheduled Caste other than Balmikis and Mazhbi Sikhs
In the selections that were made in 1981 and 1982 no person belonging to a Scheduled Caste was selected and therefore posts at Points nos
5 and 6 in the Roster became available to candidates in the general category and the vacancy at Point no5 reserved for Scheduled Castes was carried forward to point No7 In 1986 two persons belonging to Scheduled Castes namely Shri GS Samra and respondent No3 were selected
Shri GS Samra belonged to a Scheduled Caste other than Balmiki and Mazhbi Sikh whereas respondent No 3 was a Mazhbi Sikh
Since the post at point No5 which had been carried forward to point No7 was reserved for a candidate belonging to a Scheduled Caste other than Balmiki or Mazhbi Sikh it had to be assigned to Shri GS Samra falling in that category and respondent No 3 who was a azhbi Sikh could only be appointed against the reserved vacancy at point No9 in the Roster
Respondent No 3 can not claim that the vacancy at Point No7 should be assigned to him
If respondent No3 is adjusted against the vacancy at Point No 9 in the Roster he has to be placed in seniority below the appellant who was appointed against point No 8 in the Roster
In the judgment under appeal the High Court has placed reliance on the instructions dated March 6 1961 and the decision of this Court in Jagjit Singh vs State of Punjab  The instructions dated March 6 1961 deal with a situation where the services of a Government Servant belonging to Scheduled CastesTribes and Backward Classes are terminated and a resultant vacant occurred
It has been directed as under With a view to safeguard the interests of the members of the Scheduled CastesTribes and Backward Classes it has been decided that if the services of a Government Servant belonging to Scheduled CastesTribes or Backward Classes are terminated the resultant vacancy should not be included in the normal pool of vacancies to be filled in accordance with the Block System but should be filled up on ad hoc basis from the candidates belonging to these castes and classes
In other words the intention is that the posts vacated by members of Scheduled CastesTribes and Backward classes should remain earmarked and be filled up by members belonging to these Classes
 605 In Jagjit Singh s case this Court was dealing with appointments to the Punjab Civil Service Executive Branch
These selection was made for appointment against 12 vacancies in the said Service and other vacancies in the Allied Services
Two of the vacancies in the Punjab Civil Service were reserved for Scheduled Castes candidates
Three persons were selected from among the members of Scheduled Castes
The appellant in the said appeal was at third place in the merit list of the Scheduled Castes candidates
The first two candidates on the merit list were appointed and the appellant was appointed on the post of A Class Tehsildar in one of the Allied Services
Subsequently one of the two candidates who had been appointed to the Punjab Civil Service resigned his office and a question arose as to whether the appellant was entitled to be appointed to the Punjab Civil Service against the vacancy arising on account of resignation of the Scheduled Castes candidate who had been appointed earlier
The appellant laid his claim for such appointment on the basis of the instructions contained in the circular of March 6 196 1
The said claim of the appellant was upheld by this Court and it was held that the resultant vacancy caused by resignation of one of the Scheduled Castes candidate should have gone to the appellant
The Circular dated March 6 1961 and the decision in Jagjit Singh vs State of Punjab supra do not have a bearing on the question in controversy in the instant case because here there is no dispute that the respondent No3 has been appointed against the post reserved for members of Scheduled Castes and the question is about the inter se placement of two persons appointed against vacancies reserved for Scheduled Caste candidates
The Circular dated March 6 1961 does not deal with the said question and it has to be dealt with on the basis of the instructions contained in the orders dated May 5 1975 and April 8 1980
For the reasons aforementioned the appeal is allowed the judgment and the order of the High Court dated October 9 1991 is set aside
The Civil Writ Petition filed by the appellant in the High Court is allowed and it is declared that respondent No3 can only be treated to have been appointed against the vacancy at Point no9 in the Roster and on that basis he must be placed below the appellant in the seniority list
Respondent No2 is directed to revise the seniority list of the members of the Service accordingly
The appellant would be entitled to conse quential benefits if any accruing to him as a result of such revision in the seniority
The parties are left to bear their own costs
NVK Appeal allowed


Summary:
A partnership firm consisting of three partners was engaged inter alia in the business of manufacturing and sale of beedies under the brand name Mangalore Prakash Beedies
On May 201972 a private limited company called prakash beedies Ltd the assessee appellant was incorporated
One of its objects was to take over the business of the aforesaid firms which it did under an agreement dated 15 July 1972 whereby the firms sold its rights and assets to the company
For the use of the trade name a royalty at 10p
for every 1000 beedies was to be paid by the company to the firm
This payment was made ever year by the assesse on account of royalty
The three partners of the firms were also directors of the company
The relevant assessment years were 1974 75 and 1975 76
The facts in the other appeals are similar
The assessee claimed deduction of the amount paid by it as royalty
The ITO allowed the deductions as claimed
The CIT in stio motu proceedings disallow the aforesaid deductions
On appeal the tribunal restored the order of the ITO
On reference the High Court answered in fanour of the revenue as the three directors of the assessee company were also partners in the firm
It held that in law a firm is merely a collection or association of individuals for carrying on a business
Merely because the firm is an assessable entity under the Income Tax Act it does not follow that it is a juristic or legal entity
It must therefore be held that the payments to the firm were in reality made to the 607 directors thus attracting section 40 c
Before this Court it was contended for the assessee that payment to a firm is not ipso fact payment to the partners directly or indirectly
In any event the payments were made to the three persons not in their capacity of directors qua directors
but in consideration of a valuable right parted by them in favour of the assessee company
section 40c was never intended to take in such payments
They relied on the budget speech of the Finance Minister and argued that the principle of interpretation noscitor a sociis must be applied to the words remuneration benefit or amenity
The genuineness or validity of the agreement the factum of payments as royalty and that the brand name carries significant business value was not disputed
The question before this Court was whether the royalty payments fail within section 40c
Allowing the appeal this Court HELD  1
Even assuming that the payments to firm were payments to partners the said payments did not fall within section 40c
The payment  were made In consideration of a valuable right parted by the firmpartners directors of the assessee company in favour of the assessee
So long as the agreement whereunder the said payments were made is not held to be a mere device or a mere screen the said payments cannot be treated as payments made to the directors qua directors
613 H 614 A The payments were made by way of consideration for allowing the to use a valuable right belonging to them viz the brand name
Such a payment may be liable to be scrutinised under sub section
2 of section 40 A but it certainly did not fall within the four corners of section 40c
614 A TT Pvt Ltd vs ITO Bangalore  approved
CIT Patiale vs Avon Cycles p Ltd and India Jute Co Ltd vs CIT  referred to 2
The power vested in the ITO is to determine whether any expenditure of allowance is excessive or unreasonable having regard to the legitimate business needs of the company and the benefit derived by the assessee or 608 accruing therefrom
Any payment to a relative of a director or other persons mentioned in clause c will necessarily be examined applying the above test and if it is found that they are unwarranted unreasonable or excessive they will be disallowed
Such a situation does not arise herein
615 C CIT Bombay vs Ms Indian Engineering and Commercial Corporation p Ltd 1983 distinguished
JT 683